DOCUMENT COVER Document
DOCUMENT COVER Document | 9 Months Ended |
Sep. 27, 2020$ / sharesshares | |
Cover [Abstract] | |
Document Type | 10-Q |
Document Period End Date | Sep. 27, 2020 |
Entity File Number | 1-4949 |
Entity Registrant Name | CUMMINS INC. |
Entity Incorporation, State or Country Code | IN |
Entity Tax Identification Number | 35-0257090 |
Entity Address, Address Line One | 500 Jackson Street |
Entity Address, Address Line Two | Box 3005 |
Entity Address, City or Town | Columbus |
Entity Address, State or Province | IN |
Entity Address, Postal Zip Code | 47202-3005 |
City Area Code | 812 |
Local Phone Number | 377-5000 |
Title of 12(b) Security | Common stock, $2.50 par value |
Trading Symbol | CMI |
Security Exchange Name | NYSE |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Small Business | false |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding | shares | 148,006,581 |
Common Stock, Par or Stated Value Per Share | $ / shares | $ 2.50 |
Entity Central Index Key | 0000026172 |
Current Fiscal Year End Date | --12-31 |
Document Fiscal Year Focus | 2020 |
Document Fiscal Period Focus | Q3 |
Document Quarterly Report | true |
Amendment Flag | false |
Document Transition Report | false |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 27, 2020 | Sep. 29, 2019 | Sep. 27, 2020 | Sep. 29, 2019 | ||
Income Statement [Abstract] | |||||
NET SALES (a) (Note 3) | [1] | $ 5,118 | $ 5,768 | $ 13,981 | $ 17,993 |
Cost of sales | 3,769 | 4,274 | 10,448 | 13,326 | |
GROSS MARGIN | 1,349 | 1,494 | 3,533 | 4,667 | |
OPERATING EXPENSES AND INCOME | |||||
Selling, general and administrative expenses | 533 | 600 | 1,549 | 1,822 | |
Research, development and engineering expenses | 224 | 242 | 651 | 730 | |
Equity, royalty and interest income from investees (Note 5) | 98 | 68 | 342 | 256 | |
Other operating expense, net | (20) | (21) | (35) | (25) | |
OPERATING INCOME | 670 | 699 | 1,640 | 2,346 | |
Interest income | 4 | 14 | 15 | 38 | |
Interest expense | 25 | 26 | 71 | 87 | |
Other income, net | 37 | 68 | 119 | 174 | |
INCOME BEFORE INCOME TAXES | 686 | 755 | 1,703 | 2,471 | |
Income tax expense (Note 6) | 182 | 139 | 402 | 501 | |
CONSOLIDATED NET INCOME | 504 | 616 | 1,301 | 1,970 | |
Less: Net income (loss) attributable to noncontrolling interests | 3 | (6) | 13 | 10 | |
Net Income (Loss) Available to Common Stockholders, Basic | $ 501 | $ 622 | $ 1,288 | $ 1,960 | |
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. | |||||
Basic (in dollars per share) | $ 3.39 | $ 3.99 | $ 8.69 | $ 12.50 | |
Diluted (in dollars per share) | $ 3.36 | $ 3.97 | $ 8.65 | $ 12.45 | |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | |||||
Basic (in shares) | 147.9 | 155.9 | 148.3 | 156.8 | |
Dilutive effect of stock compensation awards (in shares) | 1 | 0.7 | 0.6 | 0.6 | |
Diluted (in shares) | 148.9 | 156.6 | 148.9 | 157.4 | |
Sales to nonconsolidated equity investees | $ 311 | $ 280 | $ 906 | $ 882 | |
[1] | (a) Includes sales to nonconsolidated equity investees of $311 million and $906 million for the three and nine months ended September 27, 2020, compared with $280 million and $882 million for the comparable periods in 2019. |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 27, 2020 | Sep. 29, 2019 | Sep. 27, 2020 | Sep. 29, 2019 | |
Statement of Comprehensive Income [Abstract] | ||||
CONSOLIDATED NET INCOME | $ 504 | $ 616 | $ 1,301 | $ 1,970 |
Other comprehensive income (loss), net of tax (Note 13) | ||||
Change in pension and other postretirement defined benefit plans | 16 | 6 | 34 | 2 |
Foreign currency translation adjustments | 111 | (182) | (62) | (197) |
Unrealized gain (loss) on derivatives | 18 | (29) | (63) | (40) |
Total other comprehensive income (loss), net of tax | 145 | (205) | (91) | (235) |
COMPREHENSIVE INCOME | 649 | 411 | 1,210 | 1,735 |
Less: Comprehensive income (loss) attributable to noncontrolling interests | 13 | (11) | 1 | 8 |
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC. | $ 636 | $ 422 | $ 1,209 | $ 1,727 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) shares in Millions, $ in Millions | Sep. 27, 2020 | Dec. 31, 2019 | |||
Statement of Financial Position [Abstract] | |||||
Common stock, par value (in dollars per share) | $ 2.50 | ||||
Common stock, shares authorized | 500 | ||||
Common stock, shares issued | 222.5 | 222.4 | |||
Treasury stock, shares | 74.4 | 71.7 | |||
Common stock held by employee benefits trust, shares | 0 | 0.2 | |||
Current assets | |||||
Cash and cash equivalents | $ 2,967 | $ 1,129 | |||
Marketable securities (Note 7) | 345 | 341 | |||
Total cash, cash equivalents and marketable securities | 3,312 | 1,470 | |||
Accounts and notes receivable, net | |||||
Trade and other | 3,291 | 3,387 | |||
Nonconsolidated equity investees | 337 | 283 | |||
Inventories (Note 8) | 3,470 | 3,486 | |||
Prepaid expenses and other current assets | 652 | 761 | |||
Total current assets | 11,062 | 9,387 | |||
Long-term assets | |||||
Property, plant and equipment | 8,753 | 8,699 | |||
Accumulated depreciation | (4,666) | (4,454) | |||
Property, plant and equipment, net | 4,087 | 4,245 | |||
Investments and advances related to equity method investees | 1,418 | 1,237 | |||
Goodwill | 1,288 | 1,286 | |||
Other intangible assets, net | 990 | 1,003 | |||
Pension assets | 1,010 | 1,001 | |||
Other assets | 1,713 | 1,578 | |||
Total assets | 21,568 | 19,737 | |||
Current liabilities | |||||
Accounts payable (principally trade) | 2,597 | 2,534 | |||
Loans payable (Note 9) | [1] | 129 | 100 | ||
Commercial paper (Note 9) | 316 | [2] | 660 | [3] | |
Accrued compensation, benefits and retirement costs | 433 | 560 | |||
Current portion of accrued product warranty (Note 10) | 646 | 803 | |||
Current portion of deferred revenue (Note 3) | 540 | 533 | |||
Other accrued expenses (Note 11) | 990 | 1,039 | |||
Current maturities of long-term debt (Note 9) | 58 | 31 | |||
Total current liabilities | 5,709 | 6,260 | |||
Long-term liabilities | |||||
Long-term debt (Note 9) | 3,609 | 1,576 | |||
Pensions and other postretirement benefits | 571 | 591 | |||
Accrued product warranty (Note 10) | 635 | 645 | |||
Deferred revenue (Note 3) | 837 | 821 | |||
Other liabilities (Note 11) | 1,566 | 1,379 | |||
Total liabilities | 12,927 | 11,272 | |||
Commitments and contingencies (Note 12) | |||||
Cummins Inc. shareholders' equity | |||||
Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.4 shares issued | 2,385 | 2,346 | |||
Retained earnings | 15,118 | 14,416 | |||
Treasury stock, at cost, 74.4 and 71.7 shares | (7,696) | (7,225) | |||
Common stock held by employee benefits trust, at cost, 0.0 and 0.2 shares | 0 | (2) | |||
Accumulated other comprehensive loss (Note 13) | (2,107) | (2,028) | |||
Total Cummins Inc. shareholders' equity | 7,700 | 7,507 | |||
Noncontrolling interests | 941 | 958 | |||
Total equity | 8,641 | 8,465 | |||
Total liabilities and equity | $ 21,568 | $ 19,737 | |||
[1] | (1) Loans payable consist primarily of notes payable to various domestic and international financial institutions. It is not practicable to aggregate these notes and calculate a quarterly weighted-average interest rate. | ||||
[2] | (2) The weighted-average interest rate, inclusive of all brokerage fees, was 0.03 percent at September 27, 2020. This includes $116 million of borrowings under the EUR program that were at a negative weighted-average interest rate of 0.27 percent and $200 million of borrowings under the U.S. program at a weighted-average rate of 0.20 percent. | ||||
[3] | (3) The weighted-average interest rate, inclusive of all brokerage fees, was 1.82 percent at December 31, 2019. All borrowings were at positive interest rates. |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Sep. 27, 2020 | Sep. 29, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Consolidated net income | $ 1,301 | $ 1,970 |
Adjustments to reconcile consolidated net income to net cash provided by operating activities | ||
Depreciation and amortization | 499 | 493 |
Deferred income taxes | (7) | (14) |
Equity in income of investees, net of dividends | (136) | (44) |
Pension and OPEB expense (Note 4) | 81 | 56 |
Pension contributions and OPEB payments (Note 4) | (102) | (130) |
Stock-based compensation expense | 22 | 37 |
Restructuring payments (Note 14) | (100) | 0 |
Gain on corporate owned life insurance | (50) | (64) |
Foreign currency remeasurement and transaction exposure | (7) | (54) |
Changes in current assets and liabilities, net of acquisitions | ||
Accounts and notes receivable | 47 | (101) |
Inventories | (50) | (62) |
Other current assets | 73 | 48 |
Accounts payable | 109 | (3) |
Accrued expenses | (236) | (74) |
Changes in other liabilities | 208 | 168 |
Other, net | (72) | 117 |
Net cash provided by operating activities | 1,580 | 2,343 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Capital expenditures | (268) | (395) |
Investments in internal use software | (33) | (50) |
Investments in and advances to equity investees | (30) | (16) |
Acquisitions of businesses, net of cash acquired (Note 15) | 0 | (237) |
Investments in marketable securities—acquisitions | (422) | (367) |
Investments in marketable securities—liquidations (Note 7) | 408 | 296 |
Cash flows from derivatives not designated as hedges | (15) | (86) |
Other, net | 23 | 26 |
Net cash used in investing activities | (337) | (829) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from borrowings (Note 9) | 1,999 | 10 |
Net (payments) borrowings of commercial paper | (344) | 122 |
Payments on borrowings and finance lease obligations | (41) | (47) |
Net borrowings under short-term credit agreements | 6 | 53 |
Distributions to noncontrolling interests | (26) | (33) |
Dividend payments on common stock | (582) | (562) |
Repurchases of common stock | (550) | (806) |
Other, net | 102 | 65 |
Net cash provided by (used in) financing activities | 564 | (1,198) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 31 | (59) |
Net increase in cash and cash equivalents | 1,838 | 257 |
Cash and cash equivalents at beginning of year | 1,129 | 1,303 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 2,967 | $ 1,560 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) $ in Millions | Total | Cumulative Effect, Period of Adoption, Adjustment | Common Stock | Additional Paid-in Capital | Retained Earnings | Retained EarningsCumulative Effect, Period of Adoption, Adjustment | Treasury Stock | Common Stock Held in Trust | Accumulated Other Comprehensive Loss | Total Cummins Inc. Shareholders' Equity | Total Cummins Inc. Shareholders' EquityCumulative Effect, Period of Adoption, Adjustment | Noncontrolling Interests |
Statement of Stockholders' Equity [Abstract] | ||||||||||||
CASH DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share) | $ 3.591 | |||||||||||
BALANCE AT BEGINNING OF PERIOD at Dec. 31, 2018 | $ 8,259 | $ 556 | $ 1,715 | $ 12,917 | $ (6,028) | $ (5) | $ (1,807) | $ 7,348 | $ 911 | |||
Increase (Decrease) in Shareholders' Equity | ||||||||||||
CONSOLIDATED NET INCOME | 1,970 | 1,960 | 1,960 | 10 | ||||||||
Other comprehensive income, net of tax (Note 13) | (235) | (233) | (233) | (2) | ||||||||
Issuance of common stock | 2 | 2 | 2 | |||||||||
Employee benefits trust activity | 28 | 26 | 2 | 28 | ||||||||
Repurchases of common stock | (806) | (806) | (806) | |||||||||
Cash dividends on common stock | (562) | (562) | (562) | |||||||||
Distributions to noncontrolling interests | (33) | (33) | ||||||||||
Stock-based awards | 48 | (2) | 50 | 48 | ||||||||
Other shareholder transactions | 82 | 25 | 25 | 57 | ||||||||
BALANCE AT END OF PERIOD at Sep. 29, 2019 | $ 8,753 | 556 | 1,766 | 14,315 | (6,784) | (3) | (2,040) | 7,810 | 943 | |||
Statement of Stockholders' Equity [Abstract] | ||||||||||||
CASH DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share) | $ 1.311 | |||||||||||
BALANCE AT BEGINNING OF PERIOD at Jun. 30, 2019 | $ 9,196 | 556 | 1,751 | 13,897 | (6,082) | (4) | (1,840) | 8,278 | 918 | |||
Increase (Decrease) in Shareholders' Equity | ||||||||||||
CONSOLIDATED NET INCOME | 616 | 622 | 622 | (6) | ||||||||
Other comprehensive income, net of tax (Note 13) | (205) | (200) | (200) | (5) | ||||||||
Employee benefits trust activity | 7 | 6 | 1 | 7 | ||||||||
Repurchases of common stock | (706) | (706) | (706) | |||||||||
Cash dividends on common stock | (204) | (204) | (204) | |||||||||
Distributions to noncontrolling interests | (20) | (20) | ||||||||||
Stock-based awards | 5 | 1 | 4 | 5 | ||||||||
Other shareholder transactions | 64 | 8 | 8 | 56 | ||||||||
BALANCE AT END OF PERIOD at Sep. 29, 2019 | 8,753 | 556 | 1,766 | 14,315 | (6,784) | (3) | (2,040) | 7,810 | 943 | |||
BALANCE AT END OF PERIOD at Dec. 31, 2019 | $ 8,465 | $ (4) | 556 | 1,790 | 14,416 | $ (4) | (7,225) | (2) | (2,028) | 7,507 | $ (4) | 958 |
Increase (Decrease) in Shareholders' Equity | ||||||||||||
Accounting Standards Update [Extensible List] | us-gaap:AccountingStandardsUpdate201613Member | |||||||||||
CASH DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share) | $ 3.933 | |||||||||||
CONSOLIDATED NET INCOME | $ 1,301 | 1,288 | 1,288 | 13 | ||||||||
Other comprehensive income, net of tax (Note 13) | (91) | (79) | (79) | (12) | ||||||||
Issuance of common stock | 10 | 10 | 10 | |||||||||
Employee benefits trust activity | 29 | 27 | 2 | 29 | ||||||||
Repurchases of common stock | (550) | (550) | (550) | |||||||||
Cash dividends on common stock | (582) | (582) | (582) | |||||||||
Distributions to noncontrolling interests | (26) | (26) | ||||||||||
Stock-based awards | 78 | (1) | 79 | 78 | ||||||||
Other shareholder transactions | 11 | 3 | 3 | 8 | ||||||||
BALANCE AT END OF PERIOD at Sep. 27, 2020 | $ 8,641 | 556 | 1,829 | 15,118 | (7,696) | 0 | (2,107) | 7,700 | 941 | |||
Statement of Stockholders' Equity [Abstract] | ||||||||||||
CASH DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share) | $ 1.311 | |||||||||||
BALANCE AT BEGINNING OF PERIOD at Jun. 28, 2020 | $ 8,130 | 556 | 1,797 | 14,811 | (7,729) | (1) | (2,242) | 7,192 | 938 | |||
Increase (Decrease) in Shareholders' Equity | ||||||||||||
CONSOLIDATED NET INCOME | 504 | 501 | 501 | 3 | ||||||||
Other comprehensive income, net of tax (Note 13) | 145 | 135 | 135 | 10 | ||||||||
Employee benefits trust activity | 6 | 5 | 1 | 6 | ||||||||
Cash dividends on common stock | (194) | (194) | (194) | |||||||||
Distributions to noncontrolling interests | (13) | (13) | ||||||||||
Stock-based awards | 46 | 13 | 33 | 46 | ||||||||
Other shareholder transactions | 17 | 14 | 14 | 3 | ||||||||
BALANCE AT END OF PERIOD at Sep. 27, 2020 | $ 8,641 | $ 556 | $ 1,829 | $ 15,118 | $ (7,696) | $ 0 | $ (2,107) | $ 7,700 | $ 941 |
NATURE OF OPERATIONS
NATURE OF OPERATIONS | 9 Months Ended |
Sep. 27, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF OPERATIONS | NOTE 1. NATURE OF OPERATIONS Cummins Inc. (“Cummins,” “we,” “our” or “us”) was founded in 1919 as Cummins Engine Company, a corporation in Columbus, Indiana, and one of the first diesel engine manufacturers. In 2001, we changed our name to Cummins Inc. We are a global power leader that designs, manufactures, distributes and services diesel, natural gas, electric and hybrid powertrains and powertrain-related components including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems, automated transmissions, electric power generation systems, batteries, electrified power systems, hydrogen generation and fuel cell products. We sell our products to original equipment manufacturers (OEMs), distributors, dealers and other customers worldwide. We serve our customers through a network of approximately 600 wholly-owned, joint venture and independent distributor locations and over 7,600 Cummins certified dealer locations in more than 190 countries and territories. |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 27, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of presentation | NOTE 2. BASIS OF PRESENTATION Interim Condensed Financial Statements The unaudited Condensed Consolidated Financial Statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of operations, financial position and cash flows. All such adjustments are of a normal recurring nature. The Condensed Consolidated Financial Statements were prepared in accordance with accounting principles in the United States of America (GAAP) pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP were condensed or omitted as permitted by such rules and regulations. These interim condensed financial statements should be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 . Our interim period financial results for the three and nine month periods presented are not necessarily indicative of results to be expected for any other interim period or for the entire year. The year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Reclassifications Certain amounts for prior year periods were reclassified to conform to the current year presentation. COVID-19 The outbreak of the coronavirus disease of 2019 (COVID-19) spread throughout the world and became a global pandemic with the resultant economic impacts evolving into a worldwide recession. The pandemic triggered a significant downturn in our markets globally, which continued to unfavorably impact market conditions through the end of the third quarter and these challenging market conditions could continue for an extended period of time. In an effort to contain the spread of COVID-19, maintain the well-being of our employees and stakeholders, match the reduced demand from our customers and in accordance with governmental requirements, we closed or partially shut down certain office, manufacturing, distribution and technical center facilities around the world in March 2020. Although most of our manufacturing, distribution and technical center facilities re-opened early in the second quarter of 2020, many operated at reduced capacities and most of our global office buildings remained closed through the third quarter. Use of Estimates in Preparation of Financial Statements Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts presented and disclosed in our Condensed Consolidated Financial Statements . Significant estimates and assumptions in these Condensed Consolidated Financial Statements require the exercise of judgment. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates. The global market downturn, closures and limitations on movement related to COVID-19 are expected to be temporary, however, the duration of the production and supply chain disruptions, and related financial impacts, cannot be estimated at this time. This uncertainty could have an impact on certain estimates used in the preparation of our third quarter financial results. Reporting Period Our reporting period usually ends on the Sunday closest to the last day of the quarterly calendar period. The third quarters of 2020 and 2019 ended on September 27 and September 29, respectively. Our fiscal year ends on December 31, regardless of the day of the week on which December 31 falls. Weighted-Average Diluted Shares Outstanding The weighted-average diluted common shares outstanding exclude the anti-dilutive effect of certain stock options. The options excluded from diluted earnings per share were as follows: Three months ended Nine months ended September 27, September 29, September 27, September 29, Options excluded 2,405 874,604 858,651 631,042 |
REVENUE RECOGNITION LONG-TERM C
REVENUE RECOGNITION LONG-TERM CONTRACTS AND DEFERRED AND UNBILLED REVENUE | 9 Months Ended |
Sep. 27, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Revenue from Contract with Customer | NOTE 3. REVENUE RECOGNITION Long-term Contracts Most of our contracts are for a period of less than one year. We have certain long-term maintenance agreements, construction contracts and extended warranty coverage arrangements that span a period in excess of one year. The aggregate amount of the transaction price for long-term maintenance agreements and construction contracts allocated to performance obligations that had not been satisfied as of September 27, 2020, was $900 million. We expect to recognize the related revenue of $172 million over the next 12 months and $728 million over periods up to 10 years. See Note 10, "PRODUCT WARRANTY LIABILITY," for additional disclosures on extended warranty coverage arrangements. Our other contracts generally are for a duration of less than one year, include payment terms that correspond to the timing of costs incurred when providing goods and services to our customers or represent sales-based royalties. Deferred and Unbilled Revenue The following is a summary of our unbilled and deferred revenue and related activity: In millions September 27, December 31, Unbilled revenue $ 79 $ 68 Deferred revenue, primarily extended warranty 1,377 1,354 We recognized revenue of $84 million and $290 million for the three and nine months ended September 27, 2020, compared with $79 million and $282 million for the comparable periods in 2019, that was included in the deferred revenue balance at the beginning of each year. We did not record any impairment losses on our unbilled revenues during the three and nine months ended September 27, 2020 or September 29, 2019. Disaggregation of Revenue Consolidated Revenue The table below presents our consolidated sales by geographic area. Net sales attributed to geographic areas were based on the location of the customer. Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, United States $ 2,805 $ 3,414 $ 7,522 $ 10,461 China 705 481 2,037 1,698 India 166 185 406 643 Other international 1,442 1,688 4,016 5,191 Total net sales $ 5,118 $ 5,768 $ 13,981 $ 17,993 Segment Revenue Engine segment external sales by market were as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Heavy-duty truck $ 486 $ 635 $ 1,226 $ 2,112 Medium-duty truck and bus 389 525 1,177 1,765 Light-duty automotive 502 451 975 1,216 Total on-highway 1,377 1,611 3,378 5,093 Off-highway 240 211 755 786 Total sales $ 1,617 $ 1,822 $ 4,133 $ 5,879 Distribution segment external sales by region were as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, North America $ 1,126 $ 1,373 $ 3,409 $ 4,139 Asia Pacific 195 224 577 667 Europe 153 135 424 380 China 74 82 242 264 Africa and Middle East 47 60 136 170 India 42 46 101 142 Russia 41 33 126 113 Latin America 37 48 108 134 Total sales $ 1,715 $ 2,001 $ 5,123 $ 6,009 Distribution segment external sales by product line were as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Parts $ 719 $ 796 $ 2,155 $ 2,464 Power generation 415 466 1,166 1,292 Service 303 376 926 1,109 Engines 278 363 876 1,144 Total sales $ 1,715 $ 2,001 $ 5,123 $ 6,009 Components segment external sales by business were as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Emission solutions $ 612 $ 660 $ 1,576 $ 2,144 Filtration 260 249 715 771 Turbo technologies 163 151 463 522 Automated transmissions 90 146 215 451 Electronics and fuel systems 76 47 223 167 Total sales $ 1,201 $ 1,253 $ 3,192 $ 4,055 Power Systems segment external sales by product line were as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Power generation $ 334 $ 372 $ 827 $ 1,060 Industrial 167 227 477 704 Generator technologies 66 84 191 266 Total sales $ 567 $ 683 $ 1,495 $ 2,030 |
REVENUE RECOGNITION DISAGGREGAT
REVENUE RECOGNITION DISAGGREGATION OF REVENUES | 9 Months Ended |
Sep. 27, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Revenue from Contract with Customer | NOTE 3. REVENUE RECOGNITION Long-term Contracts Most of our contracts are for a period of less than one year. We have certain long-term maintenance agreements, construction contracts and extended warranty coverage arrangements that span a period in excess of one year. The aggregate amount of the transaction price for long-term maintenance agreements and construction contracts allocated to performance obligations that had not been satisfied as of September 27, 2020, was $900 million. We expect to recognize the related revenue of $172 million over the next 12 months and $728 million over periods up to 10 years. See Note 10, "PRODUCT WARRANTY LIABILITY," for additional disclosures on extended warranty coverage arrangements. Our other contracts generally are for a duration of less than one year, include payment terms that correspond to the timing of costs incurred when providing goods and services to our customers or represent sales-based royalties. Deferred and Unbilled Revenue The following is a summary of our unbilled and deferred revenue and related activity: In millions September 27, December 31, Unbilled revenue $ 79 $ 68 Deferred revenue, primarily extended warranty 1,377 1,354 We recognized revenue of $84 million and $290 million for the three and nine months ended September 27, 2020, compared with $79 million and $282 million for the comparable periods in 2019, that was included in the deferred revenue balance at the beginning of each year. We did not record any impairment losses on our unbilled revenues during the three and nine months ended September 27, 2020 or September 29, 2019. Disaggregation of Revenue Consolidated Revenue The table below presents our consolidated sales by geographic area. Net sales attributed to geographic areas were based on the location of the customer. Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, United States $ 2,805 $ 3,414 $ 7,522 $ 10,461 China 705 481 2,037 1,698 India 166 185 406 643 Other international 1,442 1,688 4,016 5,191 Total net sales $ 5,118 $ 5,768 $ 13,981 $ 17,993 Segment Revenue Engine segment external sales by market were as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Heavy-duty truck $ 486 $ 635 $ 1,226 $ 2,112 Medium-duty truck and bus 389 525 1,177 1,765 Light-duty automotive 502 451 975 1,216 Total on-highway 1,377 1,611 3,378 5,093 Off-highway 240 211 755 786 Total sales $ 1,617 $ 1,822 $ 4,133 $ 5,879 Distribution segment external sales by region were as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, North America $ 1,126 $ 1,373 $ 3,409 $ 4,139 Asia Pacific 195 224 577 667 Europe 153 135 424 380 China 74 82 242 264 Africa and Middle East 47 60 136 170 India 42 46 101 142 Russia 41 33 126 113 Latin America 37 48 108 134 Total sales $ 1,715 $ 2,001 $ 5,123 $ 6,009 Distribution segment external sales by product line were as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Parts $ 719 $ 796 $ 2,155 $ 2,464 Power generation 415 466 1,166 1,292 Service 303 376 926 1,109 Engines 278 363 876 1,144 Total sales $ 1,715 $ 2,001 $ 5,123 $ 6,009 Components segment external sales by business were as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Emission solutions $ 612 $ 660 $ 1,576 $ 2,144 Filtration 260 249 715 771 Turbo technologies 163 151 463 522 Automated transmissions 90 146 215 451 Electronics and fuel systems 76 47 223 167 Total sales $ 1,201 $ 1,253 $ 3,192 $ 4,055 Power Systems segment external sales by product line were as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Power generation $ 334 $ 372 $ 827 $ 1,060 Industrial 167 227 477 704 Generator technologies 66 84 191 266 Total sales $ 567 $ 683 $ 1,495 $ 2,030 |
PENSION AND OTHER POSTRETIREMEN
PENSION AND OTHER POSTRETIREMENT BENEFITS | 9 Months Ended |
Sep. 27, 2020 | |
Retirement Benefits [Abstract] | |
PENSION AND OTHER POSTRETIREMENT BENEFITS | NOTE 4. PENSIONS AND OTHER POSTRETIREMENT BENEFITS We sponsor funded and unfunded domestic and foreign defined benefit pension and other postretirement benefit (OPEB) plans. Contributions to these plans were as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Defined benefit pension contributions $ 11 $ 33 $ 77 $ 110 OPEB payments, net 9 5 25 20 Defined contribution pension plans 18 23 70 80 During the remainder of 2020, we anticipate making $7 million in additional defined benefit pension contributions in the U.K. and $7 million in contributions to our U.S. non-qualified benefit plans. These contributions may be made from trusts or company funds either to increase pension assets or to make direct benefit payments to plan participants. We expect our 2020 annual net periodic pension cost to approximate $102 million. The components of net periodic pension and OPEB costs under our plans were as follows: Pension U.S. Plans U.K. Plans OPEB Three months ended In millions September 27, September 29, September 27, September 29, September 27, September 29, Service cost $ 33 $ 29 $ 8 $ 6 $ — $ — Interest cost 24 27 8 10 2 3 Expected return on plan assets (49) (47) (19) (16) — — Amortization of prior service cost — — 1 — — — Recognized net actuarial loss 10 4 9 3 — — Net periodic benefit cost $ 18 $ 13 $ 7 $ 3 $ 2 $ 3 Pension U.S. Plans U.K. Plans OPEB Nine months ended In millions September 27, September 29, September 27, September 29, September 27, September 29, Service cost $ 100 $ 87 $ 22 $ 19 $ — $ — Interest cost 71 81 26 32 5 8 Expected return on plan assets (146) (142) (56) (52) — — Amortization of prior service cost 1 1 2 1 — — Recognized net actuarial loss 30 12 26 9 — — Net periodic benefit cost $ 56 $ 39 $ 20 $ 9 $ 5 $ 8 |
EQUITY, ROYALTY AND INTEREST IN
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES | 9 Months Ended |
Sep. 27, 2020 | |
Equity Method Investments and Joint Ventures [Abstract] | |
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES | NOTE 5. EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Net Income for the reporting periods was as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Manufacturing entities Beijing Foton Cummins Engine Co., Ltd. $ 30 $ 15 $ 81 $ 56 Dongfeng Cummins Engine Company, Ltd. 20 10 54 40 Chongqing Cummins Engine Company, Ltd. 7 10 27 32 All other manufacturers 22 (1) 21 100 (1)(2) 76 Distribution entities Komatsu Cummins Chile, Ltda. 6 6 23 19 All other distributors 1 1 1 — Cummins share of net income 86 63 286 223 Royalty and interest income 12 5 56 33 Equity, royalty and interest income from investees $ 98 $ 68 $ 342 $ 256 (1) Includes impairment charges of $10 million and $13 million for the three and nine months ended September 27, 2020, respectively, for a joint venture in the Power Systems segment. (2) Includes $37 million in adjustments related to tax changes within India's 2020-2021 Union Budget of India (India Tax Law Change) passed in March 2020. See NOTE 6, "INCOME TAXES" for additional information on India Tax Law Change. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 27, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Tax Disclosure | NOTE 6. INCOME TAXES Our effective tax rates for the three and nine months ended September 27, 2020, were 26.5 percent and 23.6 percent, respectively. The three months ended September 27, 2020, contained unfavorable discrete items of $31 million, or $0.21 per share, consisting of $17 million of changes in tax reserves, $8 million of provision to return adjustments relating to tax returns filed for 2019 and $6 million of net other discrete items. The nine months ended September 27, 2020, contained $27 million, or $0.18 per share, of unfavorable net discrete tax items, primarily due to $34 million of unfavorable changes in tax reserves and $8 million of provision to return adjustments, partially offset by $15 million of favorable tax changes within India's 2020-2021 Union Budget of India (India Tax Law Change) passed in March of 2020. The India Tax Law Change eliminated the dividend distribution tax and replaced it with a lower rate withholding tax as the burden shifted from the dividend payor to the dividend recipient for a net favorable income statement impact of $35 million. The India Tax Law Change resulted in the following adjustments to the Condensed Consolidated Statements of Net Income for the nine months ended September 27, 2020: In millions Favorable (Unfavorable) Equity, royalty and interest income from investees $ 37 Income tax expense (1) 17 Less: Net income attributable to noncontrolling interests (19) Net income statement impact $ 35 (1) The adjustment to "Income tax expense" includes $15 million of discrete items. Our effective tax rates for the three and nine months ended September 29, 2019, were 18.4 percent and 20.3 percent, respectively. The three months ended September 29, 2019, contained favorable discrete items of $23 million, or $0.14 per share, of favorable net discrete tax items, primarily due to withholding taxes and provision to return adjustments. The nine months ended September 27, 2020, contained $30 million, or $0.19 per share, of favorable net discrete tax items, primarily due to withholding taxes and provision to return adjustments. |
MARKETABLE SECURITIES
MARKETABLE SECURITIES | 9 Months Ended |
Sep. 27, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
MARKETABLE SECURITIES | NOTE 7. MARKETABLE SECURITIES A summary of marketable securities, all of which were classified as current, was as follows: September 27, December 31, In millions Cost Gross unrealized gains/(losses) (1) Estimated Cost Gross unrealized gains/(losses) (1) Estimated Equity securities Debt mutual funds $ 167 $ 5 $ 172 $ 180 $ 3 $ 183 Certificates of deposit 151 — 151 133 — 133 Equity mutual funds 18 3 21 19 4 23 Bank debentures — — — 1 — 1 Debt securities 1 — 1 1 — 1 Total marketable securities $ 337 $ 8 $ 345 $ 334 $ 7 $ 341 (1) Unrealized gains and losses for debt securities are recorded in other comprehensive income while unrealized gains and losses for equity securities are recorded in "Other income, net" in our Condensed Consolidated Statements of Net Income . All debt securities are classified as available-for-sale. All marketable securities presented use a Level 2 fair value measure. The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 securities, and there were no transfers between Level 2 or 3 during the nine months ended September 27, 2020 or the year ended December 31, 2019. A description of the valuation techniques and inputs used for our Level 2 fair value measures is as follows: • Debt mutual funds — The fair value measures for the vast majority of these investments are the daily net asset values published on a regulated governmental website. Daily quoted prices are available from the issuing brokerage and are used on a test basis to corroborate this Level 2 input. • Certificates of deposit and bank debentures — These investments provide us with a contractual rate of return and generally range in maturity from three months to five years. The counterparties to these investments are reputable financial institutions with investment grade credit ratings. Since these instruments are not tradable and must be settled directly by us with the respective financial institution, our fair value measure is the financial institution's month-end statement. • Equity mutual funds — The fair value measures for these investments are the net asset values published by the issuing brokerage. Daily quoted prices are available from reputable third-party pricing services and are used on a test basis to corroborate this Level 2 input measure. • Debt securities — The fair value measures for these securities are broker quotes received from reputable firms. These securities are infrequently traded on a national exchange and these values are used on a test basis to corroborate our Level 2 input measure. The proceeds from sales and maturities of marketable securities were as follows: Nine months ended In millions September 27, September 29, Proceeds from sales of marketable securities $ 283 $ 179 Proceeds from maturities of marketable securities 125 117 Investments in marketable securities - liquidations $ 408 $ 296 |
INVENTORIES
INVENTORIES | 9 Months Ended |
Sep. 27, 2020 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | NOTE 8. INVENTORIES Inventories are stated at the lower of cost or market. Inventories included the following: In millions September 27, December 31, Finished products $ 2,182 $ 2,214 Work-in-process and raw materials 1,416 1,395 Inventories at FIFO cost 3,598 3,609 Excess of FIFO over LIFO (128) (123) Total inventories $ 3,470 $ 3,486 |
DEBT
DEBT | 9 Months Ended |
Sep. 27, 2020 | |
Debt Disclosure [Abstract] | |
DEBT | NOTE 9. DEBT Loans Payable and Commercial Paper Loans payable, commercial paper and the related weighted-average interest rates were as follows: In millions September 27, December 31, Loans payable (1) $ 129 $ 100 Commercial paper 316 (2) 660 (3) (1) Loans payable consist primarily of notes payable to various domestic and international financial institutions. It is not practicable to aggregate these notes and calculate a quarterly weighted-average interest rate. (2) The weighted-average interest rate, inclusive of all brokerage fees, was 0.03 percent at September 27, 2020. This includes $116 million of borrowings under the EUR program that were at a negative weighted-average interest rate of 0.27 percent and $200 million of borrowings under the U.S. program at a weighted-average rate of 0.20 percent. (3) The weighted-average interest rate, inclusive of all brokerage fees, was 1.82 percent at December 31, 2019. All borrowings were at positive interest rates. We can issue up to $3.5 billion of unsecured, short-term promissory notes (commercial paper) pursuant to the Board of Directors (the Board) authorized commercial paper programs. The programs facilitate the private placement of unsecured short-term debt through third-party brokers. We intend to use the net proceeds from the commercial paper borrowings for general corporate purposes. On April 14, 2020, we were approved for the Federal Reserve Bank of New York’s Commercial Paper Funding Facility (CPFF) program to assure access to the commercial paper funding markets during volatile credit market conditions. The CPFF was intended to provide a liquidity backstop to U.S. issuers of commercial paper through a special purpose vehicle (SPV). The facility allows us, based on our current short-term credit rating, to issue three-month unsecured commercial paper at a rate equal to a +110 basis point spread over the three-month overnight index swap rate on the date of issuance. The maximum amount of commercial paper that we may issue at any time through this program is $1.5 billion less the total principal amount of all other outstanding commercial paper that we have issued. We retain full access to our Board authorized $3.5 billion commercial paper program, as reduced by any amounts issued under this facility. The SPV is currently scheduled to cease purchasing commercial paper on March 17, 2021. At September 27, 2020, there were no outstanding borrowings under the CPFF program. Revolving Credit Facilities On August 19, 2020, we entered into an amended and restated 364-day credit agreement that allows us to borrow up to $1.5 billion of unsecured funds at any time prior to August 18, 2021. This credit agreement amends and restates the prior $1.5 billion 364-day credit facility that matured on August 19, 2020. On August 24, 2020, we terminated our 364-day credit facility that had been entered into on May 1, 2020, concurrent with the $2 billion bond issuance on August 24, 2020, described below. We have access to committed credit facilities that total $3.5 billion, including the new $1.5 billion 364-day facility that expires August 18, 2021 and our $2.0 billion five-year facility that expires on August 22, 2023. We maintain credit facilities at the current or higher aggregate amounts by renewing or replacing these facilities at or before expiration. These revolving credit facilities are maintained primarily to provide backup liquidity for our commercial paper borrowings and for general corporate purposes. At September 27, 2020, the $316 million of outstanding commercial paper effectively reduced the $3.5 billion of revolving credit capacity to $3.2 billion. At September 27, 2020, we also had an additional $191 million available for borrowings under our international and other domestic credit facilities. Long-term Debt On August 24, 2020, we issued $2 billion aggregate principal amount of senior unsecured notes consisting of $500 million aggregate principal amount of 0.75% senior unsecured notes due in 2025, $850 million aggregate principal amount of 1.50% senior unsecured notes due in 2030 and $650 million aggregate principal amount of 2.60% senior unsecured notes due in 2050. We received net proceeds of $1.98 billion. The senior unsecured notes pay interest semi-annually on March 1 and September 1, commencing on March 1, 2021. The indenture governing the senior unsecured notes contains covenants that, among other matters, limit (i) our ability to consolidate or merge into, or sell, assign, convey, lease, transfer or otherwise dispose of all or substantially all of our and our subsidiaries' assets to another person, (ii) our and certain of our subsidiaries' ability to create or assume liens and (iii) our and certain of our subsidiaries' ability to engage in sale and leaseback transactions. A summary of long-term debt was as follows: In millions Interest Rate September 27, December 31, Long-term debt Senior notes, due 2023 (1) 3.65% $ 500 $ 500 Senior notes, due 2025 0.75% 500 — Debentures, due 2027 6.75% 58 58 Debentures, due 2028 7.125% 250 250 Senior notes, due 2030 1.50% 850 — Senior notes, due 2043 4.875% 500 500 Senior notes, due 2050 2.60% 650 — Debentures, due 2098 (2) 5.65% 165 165 Other debt 130 59 Unamortized discount and deferred issuance costs (73) (50) Fair value adjustments due to hedge on indebtedness 50 35 Finance leases 87 90 Total long-term debt 3,667 1,607 Less: Current maturities of long-term debt 58 31 Long-term debt $ 3,609 $ 1,576 (1) In June and July 2020, we settled our February 2014 interest rate swap. See "Interest Rate Risk" below for additional information. (2) The effective interest rate is 7.48%. Principal payments required on long-term debt during the next five years are as follows: In millions 2020 2021 2022 2023 2024 Principal payments $ 38 $ 51 $ 29 $ 525 $ 22 Interest Rate Risk In the first half of 2020, we entered into additional interest rate lock agreements to reduce the variability of the cash flows of the interest payments on a total of $500 million of fixed rate debt forecast to be issued in 2023 to replace our senior notes at maturity. We recorded a net gain of $17 million and net loss of $52 million in "Other comprehensive income" for the three and nine months ended September 27, 2020, respectively. In June and July of 2020, we settled our February 2014 interest rate swap, which previously converted our $500 million debt issue, due in 2023, from fixed rate to floating rate based on a LIBOR spread. We will amortize the $24 million gain realized upon settlement over the remaining three Fair Value of Debt Based on borrowing rates currently available to us for bank loans with similar terms and average maturities, considering our risk premium, the fair values and carrying values of total debt, including current maturities, were as follows: In millions September 27, December 31, Fair value of total debt (1) $ 4,532 $ 2,706 Carrying value of total debt 4,112 2,367 (1) The fair value of debt is derived from Level 2 inputs. |
PRODUCT WARRANTY LIABILITY
PRODUCT WARRANTY LIABILITY | 9 Months Ended |
Sep. 27, 2020 | |
Product Warranties Disclosures [Abstract] | |
PRODUCT WARRANTY LIABILITY | NOTE 10. PRODUCT WARRANTY LIABILITY A tabular reconciliation of the product warranty liability, including the deferred revenue related to our extended warranty coverage and accrued product campaigns, was as follows: Nine months ended In millions September 27, September 29, Balance, beginning of year $ 2,389 $ 2,208 Provision for base warranties issued 277 360 Deferred revenue on extended warranty contracts sold 172 254 Provision for product campaigns issued 27 163 Payments made during period (424) (431) Amortization of deferred revenue on extended warranty contracts (169) (174) Changes in estimates for pre-existing product warranties (41) (16) Foreign currency translation and other (6) (9) Balance, end of period $ 2,225 $ 2,355 We recognized supplier recoveries of $5 million and $16 million for the three and nine months ended September 27, 2020, compared with $3 million and $64 million for the comparable periods in 2019. Warranty related deferred revenues and warranty liabilities on our Condensed Consolidated Balance Sheets were as follows: In millions September 27, December 31, Balance Sheet Location Deferred revenue related to extended coverage programs Current portion $ 249 $ 227 Current portion of deferred revenue Long-term portion 695 714 Deferred revenue Total $ 944 $ 941 Product warranty Current portion $ 646 $ 803 Current portion of accrued product warranty Long-term portion 635 645 Accrued product warranty Total $ 1,281 $ 1,448 Total warranty accrual $ 2,225 $ 2,389 Engine System Campaign Accrual During 2017, the California Air Resources Board (CARB) and the U.S. Environmental Protection Agency (EPA) selected certain of our pre-2013 model year engine systems for additional emissions testing. Some of these engine systems failed CARB and EPA tests as a result of degradation of an aftertreatment component. In the second quarter of 2018, we reached agreement with the CARB and EPA regarding our plans to address the affected populations. From the fourth quarter of 2017 through the second quarter of 2018, we recorded charges for the expected costs of field campaigns to repair these engine systems. The campaigns launched in the third quarter of 2018 are being completed in phases across the affected population. The total engine system campaign charge, excluding supplier recoveries, was $410 million. At September 27, 2020, the remaining accrual balance was $157 million. |
SUPPLEMENTAL BALANCE SHEET DATA
SUPPLEMENTAL BALANCE SHEET DATA | 9 Months Ended |
Sep. 27, 2020 | |
Balance Sheet Related Disclosures [Abstract] | |
SUPPLEMENTAL BALANCE SHEET DATA | NOTE 11. SUPPLEMENTAL BALANCE SHEET DATA Other accrued expenses included the following: In millions September 27, 2020 December 31, 2019 Marketing accruals $ 220 $ 176 Other taxes payable 203 228 Current portion of operating lease liabilities 133 131 Income taxes payable 102 52 Other 332 452 Other accrued expenses $ 990 $ 1,039 Other liabilities included the following: In millions September 27, 2020 December 31, 2019 Operating lease liabilities $ 322 $ 370 Deferred income taxes 301 306 One-time transition tax 293 293 Accrued compensation 185 206 Mark-to-market valuation on interest rate locks 81 12 Other long-term liabilities 384 192 Other liabilities $ 1,566 $ 1,379 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 27, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 12. COMMITMENTS AND CONTINGENCIES We are subject to numerous lawsuits and claims arising out of the ordinary course of our business, including actions related to product liability; personal injury; the use and performance of our products; warranty matters; product recalls; patent, trademark or other intellectual property infringement; contractual liability; the conduct of our business; tax reporting in foreign jurisdictions; distributor termination; workplace safety; and environmental matters. We also have been identified as a potentially responsible party at multiple waste disposal sites under U.S. federal and related state environmental statutes and regulations and may have joint and several liability for any investigation and remediation costs incurred with respect to such sites. We have denied liability with respect to many of these lawsuits, claims and proceedings and are vigorously defending such lawsuits, claims and proceedings. We carry various forms of commercial, property and casualty, product liability and other forms of insurance; however, such insurance may not be applicable or adequate to cover the costs associated with a judgment against us with respect to these lawsuits, claims and proceedings. We do not believe that these lawsuits are material individually or in the aggregate. While we believe we have also established adequate accruals pursuant to GAAP for our expected future liability with respect to pending lawsuits, claims and proceedings, where the nature and extent of any such liability can be reasonably estimated based upon then presently available information, there can be no assurance that the final resolution of any existing or future lawsuits, claims or proceedings will not have a material adverse effect on our business, results of operations, financial condition or cash flows. We conduct significant business operations in Brazil that are subject to the Brazilian federal, state and local labor, social security, tax and customs laws. While we believe we comply with such laws, they are complex, subject to varying interpretations and we are often engaged in litigation regarding the application of these laws to particular circumstances. On April 29, 2019, we announced that we were conducting a formal internal review of our emissions certification process and compliance with emission standards for our pick-up truck applications, following conversations with the EPA and CARB regarding certification of our engines in model year 2019 RAM 2500 and 3500 trucks. This review is being conducted with external advisors to ensure the certification and compliance processes for all of our pick-up truck applications are consistent with our internal policies, engineering standards and applicable laws. In addition, we voluntarily disclosed our formal internal review to the regulators and to other government agencies, the Department of Justice (DOJ) and the SEC, and have been working cooperatively with them to ensure a complete and thorough review. During conversations with the EPA and CARB about the effectiveness of our pick-up truck applications, the regulators raised concerns that certain aspects of our emissions systems may reduce the effectiveness of our emissions control systems and thereby act as defeat devices. As a result, our internal review focuses, in part, on the regulators’ concerns. We are working closely with the regulators to enhance our emissions systems to improve the effectiveness of all of our pick-up truck applications and to fully address the regulators’ requirements. Based on discussions with the regulators, we have developed a new calibration for the engines in model year 2019 RAM 2500 and 3500 trucks that has been included in all engines shipped since September 2019. During our discussions, the regulators have asked us to look at other model years and other engines, though the primary focus of our review has been the model year 2019 RAM. We are also fully cooperating with the DOJ's and the SEC's information requests and inquiries. Due to the continuing nature of our formal review, our ongoing cooperation with our regulators and other government agencies, and the presence of many unknown facts and circumstances, we cannot predict the final outcome of this review and these regulatory and agency processes, and we cannot provide assurance that the matter will not have a materially adverse impact on our results of operations and cash flows. Guarantees and Commitments Periodically, we enter into guarantee arrangements, including guarantees of non-U.S. distributor financings, residual value guarantees on equipment under operating leases and other miscellaneous guarantees of joint ventures or third-party obligations. At September 27, 2020, the maximum potential loss related to these guarantees was $40 million. We have arrangements with certain suppliers that require us to purchase minimum volumes or be subject to monetary penalties. At September 27, 2020, if we were to stop purchasing from each of these suppliers, the aggregate amount of the penalty would be approximately $37 million. Most of these arrangements enable us to secure supplies of critical components. We do not currently anticipate paying any penalties under these contracts. We enter into physical forward contracts with suppliers of platinum and palladium to purchase certain volumes of the commodities at contractually stated prices for various periods, which generally fall within two years. At September 27, 2020, the total commitments under these contracts were $30 million. These arrangements enable us to guarantee the prices of these commodities, which otherwise are subject to market volatility. We have guarantees with certain customers that require us to satisfactorily honor contractual or regulatory obligations, or compensate for monetary losses related to nonperformance. These performance bonds and other performance-related guarantees were $94 million at September 27, 2020. Indemnifications Periodically, we enter into various contractual arrangements where we agree to indemnify a third-party against certain types of losses. Common types of indemnities include: • product liability and license, patent or trademark indemnifications; • asset sale agreements where we agree to indemnify the purchaser against future environmental exposures related to the asset sold; and • any contractual agreement where we agree to indemnify the counterparty for losses suffered as a result of a misrepresentation in the contract. We regularly evaluate the probability of having to incur costs associated with these indemnities and accrue for expected losses that are probable. Because the indemnifications are not related to specified known liabilities and due to their uncertain nature, we are unable to estimate the maximum amount of the potential loss associated with these indemnifications. |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 9 Months Ended |
Sep. 27, 2020 | |
Equity [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | NOTE 13. ACCUMULATED OTHER COMPREHENSIVE LOSS Following are the changes in accumulated other comprehensive income (loss) by component for the three months ended: In millions Change in Foreign Unrealized gain Total Noncontrolling Total Balance at June 28, 2020 $ (716) $ (1,436) $ (90) $ (2,242) Other comprehensive income before reclassifications Before-tax amount — 101 23 124 $ 10 $ 134 Tax benefit (expense) — — (5) (5) — (5) After-tax amount — 101 18 119 10 129 Amounts reclassified from accumulated other comprehensive income (loss) (1) 16 — — 16 — 16 Net current period other comprehensive income (loss) 16 101 18 135 $ 10 $ 145 Balance at September 27, 2020 $ (700) $ (1,335) $ (72) $ (2,107) Balance at June 30, 2019 $ (675) $ (1,156) $ (9) $ (1,840) Other comprehensive income (loss) before reclassifications Before-tax amount — (177) (39) (216) $ (5) $ (221) Tax benefit (expense) — — 8 8 — 8 After-tax amount — (177) (31) (208) (5) (213) Amounts reclassified from accumulated other comprehensive income (loss) (1) 6 — 2 8 — 8 Net current period other comprehensive income (loss) 6 (177) (29) (200) $ (5) $ (205) Balance at September 29, 2019 $ (669) $ (1,333) $ (38) $ (2,040) (1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure. Following are the changes in accumulated other comprehensive income (loss) by component for the nine months ended: In millions Change in Foreign Unrealized gain Total Noncontrolling Total Balance at December 31, 2019 $ (734) $ (1,285) $ (9) $ (2,028) Other comprehensive income (loss) before reclassifications Before-tax amount (19) (54) (75) (148) $ (12) $ (160) Tax benefit (expense) 5 4 16 25 — 25 After-tax amount (14) (50) (59) (123) (12) (135) Amounts reclassified from accumulated other comprehensive loss (1) 48 — (4) 44 — 44 Net current period other comprehensive income (loss) 34 (50) (63) (2) (79) $ (12) $ (91) Balance at September 27, 2020 $ (700) $ (1,335) $ (72) $ (2,107) Balance at December 31, 2018 $ (671) $ (1,138) $ 2 $ (1,807) Other comprehensive income (loss) before reclassifications Before-tax amount (22) (194) (47) (263) $ (2) $ (265) Tax benefit (expense) 5 (1) 11 15 — 15 After-tax amount (17) (195) (36) (248) (2) (250) Amounts reclassified from accumulated other comprehensive loss (1) 19 — (4) 15 — 15 Net current period other comprehensive income (loss) 2 (195) (40) (233) $ (2) $ (235) Balance at September 29, 2019 $ (669) $ (1,333) $ (38) $ (2,040) (1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure. (2) Primarily related to interest rate lock activity. See the Interest Rate Risk section in NOTE 9 "DEBT" for additional information. |
ACQUISITION
ACQUISITION | 9 Months Ended |
Sep. 27, 2020 | |
Business Combinations [Abstract] | |
Mergers, Acquisitions and Dispositions Disclosures | NOTE 15. ACQUISITION The Hydrogenics Corporation acquisition for the nine months ended September 29, 2019 was as follows: Entity Acquired (Dollars in millions) Date of Acquisition Additional Percent Interest Acquired Payments to Former Owners Total Purchase Consideration Type of Acquisition (1) Goodwill Acquired Intangibles Recognized (2) Net Sales Previous Fiscal Year Ended 2019 Hydrogenics Corporation 9/09/19 81% $ 235 $ 235 COMB $ 161 $ 161 $ 34 (1) The newly consolidated entity was accounted for as business combinations (COMB) and was included in the New Power segment on the date of acquisition. (2) Intangible assets acquired in the business combination were mostly technology and customer related, the majority of which will be amortized over a period of up to 20 years from the date of the acquisition. Hydrogenics Corporation On September 9, 2019, we acquired an 81 percent interest in Hydrogenics Corporation for total consideration of $235 million. The Hydrogen Company, a wholly-owned subsidiary of L’Air Liquide, S.A., maintains a 19 percent noncontrolling interest in Hydrogenics Corporation of $56 million, based on the publicly traded share price of Hydrogenics at the acquisition date, which was representative of its fair value. We accounted for the transaction as a business combination and included it in the New Power segment in the third quarter of 2019. We assigned this business to our New Power reporting unit, which included both our electrified power and fuel cell businesses, for goodwill impairment purposes. As of December 31, 2019, our purchase accounting was complete. The intangible assets will be amortized over periods ranging from 3 to 20 years. The final purchase price allocation was as follows: In millions Inventory $ 21 Other current assets 25 Intangible assets Technology assets 96 Customer relationships 29 In-process research and development 35 Other intangible assets 1 Goodwill 161 Other assets 18 Current liabilities (53) Other liabilities (42) Total business valuation 291 Less: Noncontrolling interest 56 Total purchase consideration $ 235 Technology assets represent the value of both the existing fuel cells and generation equipment. These assets were valued using the relief-from-royalty method, which is a combination of the income approach and market approach that values a subject asset based on an estimate of the relief from the royalty expense that would be incurred if the subject asset were licensed from a third-party. Key assumptions are expected revenue, the royalty rate, the estimated remaining useful life and the discount rate. This value is considered a level 3 measurement under the GAAP fair value hierarchy. Customer relationship assets represent the value of the long-term strategic relationship the business has with its significant customers. The assets were valued using an income approach, specifically the multi-period excess earnings method, which identifies an estimated stream of revenues and expenses for a particular group of assets from which deductions of portions of the projected economic benefits, attributable to assets other than the subject asset (contributory assets), are deducted in order to isolate the prospective earnings of the subject asset. Key assumptions are expected revenue, related expenses, the estimated remaining useful life and the discount rate. These assets are each being amortized over 15 to 20 years. Annual amortization of the intangible assets for the next five years was expected to approximate $8 million. In-process research and development assets represent acquired research and development assets that have been initiated, achieved material progress, but have not yet resulted in a technologically feasible or commercially viable project. These assets were valued using the relief-from-royalty method, as described above. These assets will not be amortized until they have been completed, but will be tested annually for impairment until that time. |
RESTRUCTURING ACTIONS AND OTHER
RESTRUCTURING ACTIONS AND OTHER CHARGES | 9 Months Ended |
Sep. 27, 2020 | |
Restructuring and Related Activities [Abstract] | |
Restructuring and Related Activities Disclosure | NOTE 14. RESTRUCTURING ACTIONS In November 2019, we announced our intentions to reduce our global workforce in response to the continued deterioration in our global markets in the second half of 2019, as well as expected reductions in orders in most U.S. and international markets in 2020. In the fourth quarter of 2019, we began executing restructuring actions, primarily in the form of voluntary and involuntary employee separation programs. To the extent these programs involve voluntary separations, a liability is generally recorded at the time offers to employees are accepted. To the extent these programs provide separation benefits in accordance with pre-existing agreements or policies, a liability is recorded once the amount is probable and reasonably estimable. We incurred a charge of $119 million ($90 million after-tax) in the fourth quarter of 2019 for these actions which impacted approximately 2,300 employees. The voluntary actions were completed by December 31, 2019 and the involuntary actions were completed by June 28, 2020. The table below summarizes the activity and balance of accrued restructuring, which is included in "Other accrued expenses" in our Condensed Consolidated Balance Sheets : In millions Restructuring Accrual Balance at December 31, 2019 $ 116 Cash payments (100) Change in estimate (6) Balance at September 27, 2020 $ 10 |
OPERATING SEGMENTS
OPERATING SEGMENTS | 9 Months Ended |
Sep. 27, 2020 | |
Segment Reporting [Abstract] | |
OPERATING SEGMENTS | NOTE 16. OPERATING SEGMENTS Operating segments under GAAP are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (CODM), or decision-making group, in deciding how to allocate resources and in assessing performance. Our CODM is the President and Chief Operating Officer. Our reportable operating segments consist of Engine, Distribution, Components, Power Systems and New Power. This reporting structure is organized according to the products and markets each segment serves. The Engine segment produces engines (15 liters and smaller) and associated parts for sale to customers in on-highway and various off-highway markets. Our engines are used in trucks of all sizes, buses and recreational vehicles, as well as in various industrial applications, including construction, agriculture, power generation systems and other off-highway applications. The Distribution segment includes wholly-owned and partially-owned distributorships engaged in wholesaling engines, generator sets and service parts, as well as performing service and repair activities on our products and maintaining relationships with various OEMs throughout the world. The Components segment sells filtration products, aftertreatment systems, turbochargers, electronics, fuel systems and automated transmissions. The Power Systems segment is an integrated power provider, which designs, manufactures and sells engines (16 liters and larger) for industrial applications (including mining, oil and gas, marine and rail), standby and prime power generator sets, alternators and other power components. The New Power segment designs, manufactures, sells and supports electrified power systems ranging from fully electric to hybrid along with innovative components and subsystems, including battery, fuel cell and hydrogen production technologies. We continue to serve all our markets as they adopt electrification and alternative power technologies, meeting the needs of our OEM partners and end customers. We use EBITDA (defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests) as the primary basis for the CODM to evaluate the performance of each of our reportable operating segments. We believe EBITDA is a useful measure of our operating performance as it assists investors and debt holders in comparing our performance on a consistent basis without regard to financing methods, capital structure, income taxes or depreciation and amortization methods, which can vary significantly depending upon many factors. Segment amounts exclude certain expenses not specifically identifiable to segments. The accounting policies of our operating segments are the same as those applied in our Condensed Consolidated Financial Statements. We prepared the financial results of our operating segments on a basis that is consistent with the manner in which we internally disaggregate financial information to assist in making internal operating decisions. We allocate certain common costs and expenses, primarily corporate functions, among segments differently than we would for stand-alone financial information prepared in accordance with GAAP. These include certain costs and expenses of shared services, such as information technology, human resources, legal, finance and supply chain management. We do not allocate gains or losses of corporate owned life insurance to individual segments. EBITDA may not be consistent with measures used by other companies. Summarized financial information regarding our reportable operating segments for the three months ended is shown in the table below: In millions Engine Distribution Components Power Systems New Power Total Segments Intersegment Eliminations (1) Total Three months ended September 27, 2020 External sales $ 1,617 $ 1,715 $ 1,201 $ 567 $ 18 $ 5,118 $ — $ 5,118 Intersegment sales 495 6 340 414 — 1,255 (1,255) — Total sales 2,112 1,721 1,541 981 18 6,373 (1,255) 5,118 Research, development and engineering expenses 72 9 64 53 26 224 — 224 Equity, royalty and interest income (loss) from investees 74 13 13 — (2) 98 — 98 Interest income 1 1 1 1 — 4 — 4 EBITDA 382 182 261 101 (40) 886 (10) 876 Depreciation and amortization (2) 51 30 47 32 5 165 — 165 Three months ended September 29, 2019 External sales $ 1,822 $ 2,001 $ 1,253 $ 683 $ 9 $ 5,768 $ — $ 5,768 Intersegment sales 594 3 397 443 — 1,437 (1,437) — Total sales 2,416 2,004 1,650 1,126 9 7,205 (1,437) 5,768 Research, development and engineering expenses 79 7 73 58 25 242 — 242 Equity, royalty and interest income from investees 34 12 9 13 — 68 — 68 Interest income 5 4 2 3 — 14 — 14 EBITDA 341 186 286 158 (36) 935 23 958 Depreciation and amortization (2) 50 29 67 29 2 177 — 177 (1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended September 27, 2020 and September 29, 2019. (2) Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." A portion of depreciation expense is included in "Research, development and engineering expenses." Summarized financial information regarding our reportable operating segments for the nine months ended is shown in the table below: In millions Engine Distribution Components Power Systems New Power Total Segments Intersegment Eliminations (1) Total Nine months ended September 27, 2020 External sales $ 4,133 $ 5,123 $ 3,192 $ 1,495 $ 38 $ 13,981 $ — $ 13,981 Intersegment sales 1,560 17 1,001 1,147 — 3,725 (3,725) — Total sales 5,693 5,140 4,193 2,642 38 17,706 (3,725) 13,981 Research, development and engineering expenses 217 20 187 148 79 651 — 651 Equity, royalty and interest income (loss) from investees 236 45 46 18 (3) 342 — 342 Interest income 6 3 3 3 — 15 — 15 EBITDA 897 500 681 269 (121) 2,226 45 2,271 Depreciation and amortization (2) 155 91 142 96 13 497 — 497 Nine months ended September 29, 2019 External sales $ 5,879 $ 6,009 $ 4,055 $ 2,030 $ 20 $ 17,993 $ — $ 17,993 Intersegment sales 1,893 24 1,302 1,376 — 4,595 (4,595) — Total sales 7,772 6,033 5,357 3,406 20 22,588 (4,595) 17,993 Research, development and engineering expenses 245 21 223 171 70 730 — 730 Equity, royalty and interest income from investees 152 35 30 39 — 256 — 256 Interest income 13 12 6 7 — 38 — 38 EBITDA 1,195 529 908 469 (98) 3,003 46 3,049 Depreciation and amortization (2) 151 86 160 88 6 491 — 491 (1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the nine months ended September 27, 2020 and September 29, 2019. (2) Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." The amortization of debt discount and deferred costs was $2 million and $2 million for the nine months ended September 27, 2020 and September 29, 2019, respectively. A portion of depreciation expense is included in "Research, development and engineering expenses." A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Net Income is shown in the table below: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Total EBITDA $ 876 $ 958 $ 2,271 $ 3,049 Less: Depreciation and amortization 165 177 497 491 Interest expense 25 26 71 87 Income before income taxes $ 686 $ 755 $ 1,703 $ 2,471 |
RECENTLY ADOPTED AND RECENTLY I
RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 27, 2020 | |
Accounting Standards Update and Change in Accounting Principle [Abstract] | |
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS | NOTE 17. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS In August 2018, the Financial Accounting Standards Board (FASB) issued a new standard that aligns the accounting for implementation costs incurred in a cloud computing arrangement accounted for as a service contract with the model currently used for internal use software costs. Under the new standard, costs that meet certain criteria will be required to be capitalized on the balance sheet and subsequently amortized over the term of the hosting arrangement. We adopted the standard on January 1, 2020, on a prospective basis as allowed by the standard. The adoption is not expected to have a material impact on our Condensed Consolidated Financial Statements . On January 1, 2020, we adopted the new FASB standard related to accounting for credit losses on financial instruments. This standard introduces new guidance for accounting for credit losses on instruments including trade receivables and held-to-maturity debt securities. The standard requires entities to record a cumulative effect adjustment to the statement of financial position. We recorded a net decrease to opening retained earnings of $4 million, net of tax, as of January 1, 2020, due to the cumulative impact of adopting the new standard. The impact to any individual financial statement line item as a result of applying the new standard, as compared to the old standard, was not material for the nine months ended September 27, 2020. In March 2020, the FASB amended its standard to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendment allows entities to elect not to apply certain modification accounting requirements to contracts affected by reference rate reform if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. These expedients would apply to interest rate locks. The guidance was effective upon issuance and expires after December 31, 2022. The amendment did not have an effect on our Condensed Consolidated Financial Statements at September 27, 2020. We are still evaluating which contracts will be impacted by reference rate reform, but the expedients will allow us to make permitted changes prior to the expiration of the amendments without resulting in an impact to our Consolidated Financial Statements . |
BASIS OF PRESENTATION (Tables)
BASIS OF PRESENTATION (Tables) | 9 Months Ended |
Sep. 27, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Options excluded from diluted earnings per share | The options excluded from diluted earnings per share were as follows: Three months ended Nine months ended September 27, September 29, September 27, September 29, Options excluded 2,405 874,604 858,651 631,042 |
REVENUE RECOGNITION LONGTERM CO
REVENUE RECOGNITION LONGTERM CONTRACTS AND DEFERRED AND UNBILLED REVENUE (Tables) | 9 Months Ended |
Sep. 27, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Contract with Customer, Contract Asset, Contract Liability, and Receivable | The following is a summary of our unbilled and deferred revenue and related activity: In millions September 27, December 31, Unbilled revenue $ 79 $ 68 Deferred revenue, primarily extended warranty 1,377 1,354 |
REVENUE RECOGNITION DISAGGREG_2
REVENUE RECOGNITION DISAGGREGATION OF REVENUES (Tables) | 9 Months Ended |
Sep. 27, 2020 | |
Disaggregation of Revenue [Line Items] | |
Revenue from External Customers by Geographic Areas | The table below presents our consolidated sales by geographic area. Net sales attributed to geographic areas were based on the location of the customer. Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, United States $ 2,805 $ 3,414 $ 7,522 $ 10,461 China 705 481 2,037 1,698 India 166 185 406 643 Other international 1,442 1,688 4,016 5,191 Total net sales $ 5,118 $ 5,768 $ 13,981 $ 17,993 |
Engine | |
Disaggregation of Revenue [Line Items] | |
Revenue from External Customers by Market | Engine segment external sales by market were as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Heavy-duty truck $ 486 $ 635 $ 1,226 $ 2,112 Medium-duty truck and bus 389 525 1,177 1,765 Light-duty automotive 502 451 975 1,216 Total on-highway 1,377 1,611 3,378 5,093 Off-highway 240 211 755 786 Total sales $ 1,617 $ 1,822 $ 4,133 $ 5,879 |
Distribution | |
Disaggregation of Revenue [Line Items] | |
Revenue from External Customers by Geographic Areas | Distribution segment external sales by region were as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, North America $ 1,126 $ 1,373 $ 3,409 $ 4,139 Asia Pacific 195 224 577 667 Europe 153 135 424 380 China 74 82 242 264 Africa and Middle East 47 60 136 170 India 42 46 101 142 Russia 41 33 126 113 Latin America 37 48 108 134 Total sales $ 1,715 $ 2,001 $ 5,123 $ 6,009 |
Revenue from External Customers by Products and Services | Distribution segment external sales by product line were as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Parts $ 719 $ 796 $ 2,155 $ 2,464 Power generation 415 466 1,166 1,292 Service 303 376 926 1,109 Engines 278 363 876 1,144 Total sales $ 1,715 $ 2,001 $ 5,123 $ 6,009 |
Components | |
Disaggregation of Revenue [Line Items] | |
Revenue from External Customers by Products and Services | Components segment external sales by business were as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Emission solutions $ 612 $ 660 $ 1,576 $ 2,144 Filtration 260 249 715 771 Turbo technologies 163 151 463 522 Automated transmissions 90 146 215 451 Electronics and fuel systems 76 47 223 167 Total sales $ 1,201 $ 1,253 $ 3,192 $ 4,055 |
Power Systems | |
Disaggregation of Revenue [Line Items] | |
Revenue from External Customers by Products and Services | Power Systems segment external sales by product line were as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Power generation $ 334 $ 372 $ 827 $ 1,060 Industrial 167 227 477 704 Generator technologies 66 84 191 266 Total sales $ 567 $ 683 $ 1,495 $ 2,030 |
PENSION AND OTHER POSTRETIREM_2
PENSION AND OTHER POSTRETIREMENT BENEFITS (Tables) | 9 Months Ended |
Sep. 27, 2020 | |
Retirement Benefits [Abstract] | |
Schedule Benefit Plans Disclosures Cash Contributions | We sponsor funded and unfunded domestic and foreign defined benefit pension and other postretirement benefit (OPEB) plans. Contributions to these plans were as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Defined benefit pension contributions $ 11 $ 33 $ 77 $ 110 OPEB payments, net 9 5 25 20 Defined contribution pension plans 18 23 70 80 |
Components of net periodic pension and other postretirement benefit cost | The components of net periodic pension and OPEB costs under our plans were as follows: Pension U.S. Plans U.K. Plans OPEB Three months ended In millions September 27, September 29, September 27, September 29, September 27, September 29, Service cost $ 33 $ 29 $ 8 $ 6 $ — $ — Interest cost 24 27 8 10 2 3 Expected return on plan assets (49) (47) (19) (16) — — Amortization of prior service cost — — 1 — — — Recognized net actuarial loss 10 4 9 3 — — Net periodic benefit cost $ 18 $ 13 $ 7 $ 3 $ 2 $ 3 Pension U.S. Plans U.K. Plans OPEB Nine months ended In millions September 27, September 29, September 27, September 29, September 27, September 29, Service cost $ 100 $ 87 $ 22 $ 19 $ — $ — Interest cost 71 81 26 32 5 8 Expected return on plan assets (146) (142) (56) (52) — — Amortization of prior service cost 1 1 2 1 — — Recognized net actuarial loss 30 12 26 9 — — Net periodic benefit cost $ 56 $ 39 $ 20 $ 9 $ 5 $ 8 |
EQUITY, ROYALTY AND INTEREST _2
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES (Tables) | 9 Months Ended |
Sep. 27, 2020 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Equity, royalty and interest income from investees | Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Net Income for the reporting periods was as follows: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Manufacturing entities Beijing Foton Cummins Engine Co., Ltd. $ 30 $ 15 $ 81 $ 56 Dongfeng Cummins Engine Company, Ltd. 20 10 54 40 Chongqing Cummins Engine Company, Ltd. 7 10 27 32 All other manufacturers 22 (1) 21 100 (1)(2) 76 Distribution entities Komatsu Cummins Chile, Ltda. 6 6 23 19 All other distributors 1 1 1 — Cummins share of net income 86 63 286 223 Royalty and interest income 12 5 56 33 Equity, royalty and interest income from investees $ 98 $ 68 $ 342 $ 256 (1) Includes impairment charges of $10 million and $13 million for the three and nine months ended September 27, 2020, respectively, for a joint venture in the Power Systems segment. (2) Includes $37 million in adjustments related to tax changes within India's 2020-2021 Union Budget of India (India Tax Law Change) passed in March 2020. See NOTE 6, "INCOME TAXES" for additional information on India Tax Law Change. |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Sep. 27, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Income Tax Expense (Benefit) | The India Tax Law Change resulted in the following adjustments to the Condensed Consolidated Statements of Net Income for the nine months ended September 27, 2020: In millions Favorable (Unfavorable) Equity, royalty and interest income from investees $ 37 Income tax expense (1) 17 Less: Net income attributable to noncontrolling interests (19) Net income statement impact $ 35 (1) The adjustment to "Income tax expense" includes $15 million of discrete items. |
MARKETABLE SECURITIES (Tables)
MARKETABLE SECURITIES (Tables) | 9 Months Ended |
Sep. 27, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
Summary of marketable securities | A summary of marketable securities, all of which were classified as current, was as follows: September 27, December 31, In millions Cost Gross unrealized gains/(losses) (1) Estimated Cost Gross unrealized gains/(losses) (1) Estimated Equity securities Debt mutual funds $ 167 $ 5 $ 172 $ 180 $ 3 $ 183 Certificates of deposit 151 — 151 133 — 133 Equity mutual funds 18 3 21 19 4 23 Bank debentures — — — 1 — 1 Debt securities 1 — 1 1 — 1 Total marketable securities $ 337 $ 8 $ 345 $ 334 $ 7 $ 341 (1) Unrealized gains and losses for debt securities are recorded in other comprehensive income while unrealized gains and losses for equity securities are recorded in "Other income, net" in our Condensed Consolidated Statements of Net Income . |
Schedule of proceeds from sales and maturities | The proceeds from sales and maturities of marketable securities were as follows: Nine months ended In millions September 27, September 29, Proceeds from sales of marketable securities $ 283 $ 179 Proceeds from maturities of marketable securities 125 117 Investments in marketable securities - liquidations $ 408 $ 296 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Sep. 27, 2020 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories are stated at the lower of cost or market. Inventories included the following: In millions September 27, December 31, Finished products $ 2,182 $ 2,214 Work-in-process and raw materials 1,416 1,395 Inventories at FIFO cost 3,598 3,609 Excess of FIFO over LIFO (128) (123) Total inventories $ 3,470 $ 3,486 |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Sep. 27, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Short-term Debt | Loans payable, commercial paper and the related weighted-average interest rates were as follows: In millions September 27, December 31, Loans payable (1) $ 129 $ 100 Commercial paper 316 (2) 660 (3) (1) Loans payable consist primarily of notes payable to various domestic and international financial institutions. It is not practicable to aggregate these notes and calculate a quarterly weighted-average interest rate. (2) The weighted-average interest rate, inclusive of all brokerage fees, was 0.03 percent at September 27, 2020. This includes $116 million of borrowings under the EUR program that were at a negative weighted-average interest rate of 0.27 percent and $200 million of borrowings under the U.S. program at a weighted-average rate of 0.20 percent. (3) The weighted-average interest rate, inclusive of all brokerage fees, was 1.82 percent at December 31, 2019. All borrowings were at positive interest rates. |
Summary of long-term debt | A summary of long-term debt was as follows: In millions Interest Rate September 27, December 31, Long-term debt Senior notes, due 2023 (1) 3.65% $ 500 $ 500 Senior notes, due 2025 0.75% 500 — Debentures, due 2027 6.75% 58 58 Debentures, due 2028 7.125% 250 250 Senior notes, due 2030 1.50% 850 — Senior notes, due 2043 4.875% 500 500 Senior notes, due 2050 2.60% 650 — Debentures, due 2098 (2) 5.65% 165 165 Other debt 130 59 Unamortized discount and deferred issuance costs (73) (50) Fair value adjustments due to hedge on indebtedness 50 35 Finance leases 87 90 Total long-term debt 3,667 1,607 Less: Current maturities of long-term debt 58 31 Long-term debt $ 3,609 $ 1,576 (1) In June and July 2020, we settled our February 2014 interest rate swap. See "Interest Rate Risk" below for additional information. (2) The effective interest rate is 7.48%. |
Principal repayments on long-term debt | Principal payments required on long-term debt during the next five years are as follows: In millions 2020 2021 2022 2023 2024 Principal payments $ 38 $ 51 $ 29 $ 525 $ 22 |
Fair value and carrying value of total debt | Based on borrowing rates currently available to us for bank loans with similar terms and average maturities, considering our risk premium, the fair values and carrying values of total debt, including current maturities, were as follows: In millions September 27, December 31, Fair value of total debt (1) $ 4,532 $ 2,706 Carrying value of total debt 4,112 2,367 (1) The fair value of debt is derived from Level 2 inputs. |
PRODUCT WARRANTY LIABILITY (Tab
PRODUCT WARRANTY LIABILITY (Tables) | 9 Months Ended |
Sep. 27, 2020 | |
Product Warranties Disclosures [Abstract] | |
Summary of activity in the product warranty account | A tabular reconciliation of the product warranty liability, including the deferred revenue related to our extended warranty coverage and accrued product campaigns, was as follows: Nine months ended In millions September 27, September 29, Balance, beginning of year $ 2,389 $ 2,208 Provision for base warranties issued 277 360 Deferred revenue on extended warranty contracts sold 172 254 Provision for product campaigns issued 27 163 Payments made during period (424) (431) Amortization of deferred revenue on extended warranty contracts (169) (174) Changes in estimates for pre-existing product warranties (41) (16) Foreign currency translation and other (6) (9) Balance, end of period $ 2,225 $ 2,355 |
Warranty related deferred revenue and the long-term portion of the warranty liability | Warranty related deferred revenues and warranty liabilities on our Condensed Consolidated Balance Sheets were as follows: In millions September 27, December 31, Balance Sheet Location Deferred revenue related to extended coverage programs Current portion $ 249 $ 227 Current portion of deferred revenue Long-term portion 695 714 Deferred revenue Total $ 944 $ 941 Product warranty Current portion $ 646 $ 803 Current portion of accrued product warranty Long-term portion 635 645 Accrued product warranty Total $ 1,281 $ 1,448 Total warranty accrual $ 2,225 $ 2,389 |
SUPPLEMENTAL BALANCE SHEET DA_2
SUPPLEMENTAL BALANCE SHEET DATA (Tables) | 9 Months Ended |
Sep. 27, 2020 | |
Balance Sheet Related Disclosures [Abstract] | |
Accrued Expenses | Other accrued expenses included the following: In millions September 27, 2020 December 31, 2019 Marketing accruals $ 220 $ 176 Other taxes payable 203 228 Current portion of operating lease liabilities 133 131 Income taxes payable 102 52 Other 332 452 Other accrued expenses $ 990 $ 1,039 |
Other Noncurrent Liabilities | Other liabilities included the following: In millions September 27, 2020 December 31, 2019 Operating lease liabilities $ 322 $ 370 Deferred income taxes 301 306 One-time transition tax 293 293 Accrued compensation 185 206 Mark-to-market valuation on interest rate locks 81 12 Other long-term liabilities 384 192 Other liabilities $ 1,566 $ 1,379 |
ACCUMULATED OTHER COMPREHENSI_2
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 9 Months Ended |
Sep. 27, 2020 | |
Equity [Abstract] | |
Changes in accumulated other comprehensive income (loss) by component | Following are the changes in accumulated other comprehensive income (loss) by component for the three months ended: In millions Change in Foreign Unrealized gain Total Noncontrolling Total Balance at June 28, 2020 $ (716) $ (1,436) $ (90) $ (2,242) Other comprehensive income before reclassifications Before-tax amount — 101 23 124 $ 10 $ 134 Tax benefit (expense) — — (5) (5) — (5) After-tax amount — 101 18 119 10 129 Amounts reclassified from accumulated other comprehensive income (loss) (1) 16 — — 16 — 16 Net current period other comprehensive income (loss) 16 101 18 135 $ 10 $ 145 Balance at September 27, 2020 $ (700) $ (1,335) $ (72) $ (2,107) Balance at June 30, 2019 $ (675) $ (1,156) $ (9) $ (1,840) Other comprehensive income (loss) before reclassifications Before-tax amount — (177) (39) (216) $ (5) $ (221) Tax benefit (expense) — — 8 8 — 8 After-tax amount — (177) (31) (208) (5) (213) Amounts reclassified from accumulated other comprehensive income (loss) (1) 6 — 2 8 — 8 Net current period other comprehensive income (loss) 6 (177) (29) (200) $ (5) $ (205) Balance at September 29, 2019 $ (669) $ (1,333) $ (38) $ (2,040) (1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure. Following are the changes in accumulated other comprehensive income (loss) by component for the nine months ended: In millions Change in Foreign Unrealized gain Total Noncontrolling Total Balance at December 31, 2019 $ (734) $ (1,285) $ (9) $ (2,028) Other comprehensive income (loss) before reclassifications Before-tax amount (19) (54) (75) (148) $ (12) $ (160) Tax benefit (expense) 5 4 16 25 — 25 After-tax amount (14) (50) (59) (123) (12) (135) Amounts reclassified from accumulated other comprehensive loss (1) 48 — (4) 44 — 44 Net current period other comprehensive income (loss) 34 (50) (63) (2) (79) $ (12) $ (91) Balance at September 27, 2020 $ (700) $ (1,335) $ (72) $ (2,107) Balance at December 31, 2018 $ (671) $ (1,138) $ 2 $ (1,807) Other comprehensive income (loss) before reclassifications Before-tax amount (22) (194) (47) (263) $ (2) $ (265) Tax benefit (expense) 5 (1) 11 15 — 15 After-tax amount (17) (195) (36) (248) (2) (250) Amounts reclassified from accumulated other comprehensive loss (1) 19 — (4) 15 — 15 Net current period other comprehensive income (loss) 2 (195) (40) (233) $ (2) $ (235) Balance at September 29, 2019 $ (669) $ (1,333) $ (38) $ (2,040) (1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure. (2) Primarily related to interest rate lock activity. See the Interest Rate Risk section in NOTE 9 "DEBT" for additional information. |
ACQUISITION ACQUISITION (Tables
ACQUISITION ACQUISITION (Tables) | 9 Months Ended |
Sep. 27, 2020 | |
Business Combinations [Abstract] | |
Schedule of Business Acquisitions, by Acquisition | The Hydrogenics Corporation acquisition for the nine months ended September 29, 2019 was as follows: Entity Acquired (Dollars in millions) Date of Acquisition Additional Percent Interest Acquired Payments to Former Owners Total Purchase Consideration Type of Acquisition (1) Goodwill Acquired Intangibles Recognized (2) Net Sales Previous Fiscal Year Ended 2019 Hydrogenics Corporation 9/09/19 81% $ 235 $ 235 COMB $ 161 $ 161 $ 34 (1) The newly consolidated entity was accounted for as business combinations (COMB) and was included in the New Power segment on the date of acquisition. (2) Intangible assets acquired in the business combination were mostly technology and customer related, the majority of which will be amortized over a period of up to 20 years from the date of the acquisition. |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The final purchase price allocation was as follows: In millions Inventory $ 21 Other current assets 25 Intangible assets Technology assets 96 Customer relationships 29 In-process research and development 35 Other intangible assets 1 Goodwill 161 Other assets 18 Current liabilities (53) Other liabilities (42) Total business valuation 291 Less: Noncontrolling interest 56 Total purchase consideration $ 235 |
RESTRUCTURING ACTIONS AND OTH_2
RESTRUCTURING ACTIONS AND OTHER CHARGES (Tables) | 9 Months Ended |
Sep. 27, 2020 | |
Restructuring and Related Activities [Abstract] | |
Restructuring and Related Costs | The table below summarizes the activity and balance of accrued restructuring, which is included in "Other accrued expenses" in our Condensed Consolidated Balance Sheets : In millions Restructuring Accrual Balance at December 31, 2019 $ 116 Cash payments (100) Change in estimate (6) Balance at September 27, 2020 $ 10 |
OPERATING SEGMENTS (Tables)
OPERATING SEGMENTS (Tables) | 9 Months Ended |
Sep. 27, 2020 | |
Segment Reporting [Abstract] | |
Financial information regarding reportable operating segments | Summarized financial information regarding our reportable operating segments for the three months ended is shown in the table below: In millions Engine Distribution Components Power Systems New Power Total Segments Intersegment Eliminations (1) Total Three months ended September 27, 2020 External sales $ 1,617 $ 1,715 $ 1,201 $ 567 $ 18 $ 5,118 $ — $ 5,118 Intersegment sales 495 6 340 414 — 1,255 (1,255) — Total sales 2,112 1,721 1,541 981 18 6,373 (1,255) 5,118 Research, development and engineering expenses 72 9 64 53 26 224 — 224 Equity, royalty and interest income (loss) from investees 74 13 13 — (2) 98 — 98 Interest income 1 1 1 1 — 4 — 4 EBITDA 382 182 261 101 (40) 886 (10) 876 Depreciation and amortization (2) 51 30 47 32 5 165 — 165 Three months ended September 29, 2019 External sales $ 1,822 $ 2,001 $ 1,253 $ 683 $ 9 $ 5,768 $ — $ 5,768 Intersegment sales 594 3 397 443 — 1,437 (1,437) — Total sales 2,416 2,004 1,650 1,126 9 7,205 (1,437) 5,768 Research, development and engineering expenses 79 7 73 58 25 242 — 242 Equity, royalty and interest income from investees 34 12 9 13 — 68 — 68 Interest income 5 4 2 3 — 14 — 14 EBITDA 341 186 286 158 (36) 935 23 958 Depreciation and amortization (2) 50 29 67 29 2 177 — 177 (1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended September 27, 2020 and September 29, 2019. (2) Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." A portion of depreciation expense is included in "Research, development and engineering expenses." Summarized financial information regarding our reportable operating segments for the nine months ended is shown in the table below: In millions Engine Distribution Components Power Systems New Power Total Segments Intersegment Eliminations (1) Total Nine months ended September 27, 2020 External sales $ 4,133 $ 5,123 $ 3,192 $ 1,495 $ 38 $ 13,981 $ — $ 13,981 Intersegment sales 1,560 17 1,001 1,147 — 3,725 (3,725) — Total sales 5,693 5,140 4,193 2,642 38 17,706 (3,725) 13,981 Research, development and engineering expenses 217 20 187 148 79 651 — 651 Equity, royalty and interest income (loss) from investees 236 45 46 18 (3) 342 — 342 Interest income 6 3 3 3 — 15 — 15 EBITDA 897 500 681 269 (121) 2,226 45 2,271 Depreciation and amortization (2) 155 91 142 96 13 497 — 497 Nine months ended September 29, 2019 External sales $ 5,879 $ 6,009 $ 4,055 $ 2,030 $ 20 $ 17,993 $ — $ 17,993 Intersegment sales 1,893 24 1,302 1,376 — 4,595 (4,595) — Total sales 7,772 6,033 5,357 3,406 20 22,588 (4,595) 17,993 Research, development and engineering expenses 245 21 223 171 70 730 — 730 Equity, royalty and interest income from investees 152 35 30 39 — 256 — 256 Interest income 13 12 6 7 — 38 — 38 EBITDA 1,195 529 908 469 (98) 3,003 46 3,049 Depreciation and amortization (2) 151 86 160 88 6 491 — 491 (1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the nine months ended September 27, 2020 and September 29, 2019. (2) Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." The amortization of debt discount and deferred costs was $2 million and $2 million for the nine months ended September 27, 2020 and September 29, 2019, respectively. A portion of depreciation expense is included in "Research, development and engineering expenses." |
Reconciliation of segment information | A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Net Income is shown in the table below: Three months ended Nine months ended In millions September 27, September 29, September 27, September 29, Total EBITDA $ 876 $ 958 $ 2,271 $ 3,049 Less: Depreciation and amortization 165 177 497 491 Interest expense 25 26 71 87 Income before income taxes $ 686 $ 755 $ 1,703 $ 2,471 |
NATURE OF OPERATIONS (Details)
NATURE OF OPERATIONS (Details) | 9 Months Ended |
Sep. 27, 2020locationcountry | |
Nature of Operations | |
Company Owned and Independent Distributor Locations Number | 600 |
Dealer Locations Number | 7,600 |
Countries and Territories Number | country | 190 |
BASIS OF PRESENTATION (Details)
BASIS OF PRESENTATION (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 27, 2020 | Sep. 29, 2019 | Sep. 27, 2020 | Sep. 29, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Options excluded (in shares) | 2,405 | 874,604 | 858,651 | 631,042 |
REVENUE RECOGNITION LONGTERM _2
REVENUE RECOGNITION LONGTERM CONTRACTS AND DEFERRED AND UNBILLED REVENUE (Details 1) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 27, 2020 | Sep. 29, 2019 | Sep. 27, 2020 | Sep. 29, 2019 | Dec. 31, 2019 | |
Revenue from Contract with Customer [Abstract] | |||||
Revenue, Remaining Performance Obligation, Amount | $ 900 | $ 900 | |||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |||||
Unbilled revenue | 79 | 79 | $ 68 | ||
Deferred revenue, primarily extended warranty | 1,377 | 1,377 | $ 1,354 | ||
Contract with Customer, Liability, Revenue Recognized | 84 | $ 79 | 290 | $ 282 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-09-28 | |||||
Revenue from Contract with Customer [Abstract] | |||||
Revenue, Remaining Performance Obligation, Amount | $ 172 | $ 172 | |||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |||||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 12 months | 12 months | |||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-09-28 | |||||
Revenue from Contract with Customer [Abstract] | |||||
Revenue, Remaining Performance Obligation, Amount | $ 728 | $ 728 | |||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |||||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 10 years | 10 years |
REVENUE RECOGNITION DISAGGREG_3
REVENUE RECOGNITION DISAGGREGATION OF REVENUES (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 27, 2020 | Sep. 29, 2019 | Sep. 27, 2020 | Sep. 29, 2019 | ||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | [1] | $ 5,118 | $ 5,768 | $ 13,981 | $ 17,993 |
Heavy-duty truck (EBU market) | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 486 | 635 | 1,226 | 2,112 | |
Medium-duty truck and bus (EBU market) | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 389 | 525 | 1,177 | 1,765 | |
Light-duty automotive (EBU market) | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 502 | 451 | 975 | 1,216 | |
On-highway (EBU market) | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 1,377 | 1,611 | 3,378 | 5,093 | |
Off-highway (EBU market) | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 240 | 211 | 755 | 786 | |
Parts (DBU product line) | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 719 | 796 | 2,155 | 2,464 | |
Power Generation (DBU product line) | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 415 | 466 | 1,166 | 1,292 | |
Service (DBU product line) | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 303 | 376 | 926 | 1,109 | |
Engines (DBU product line) | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 278 | 363 | 876 | 1,144 | |
Emission solutions (CBU business) | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 612 | 660 | 1,576 | 2,144 | |
Filtration (CBU business) | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 260 | 249 | 715 | 771 | |
Turbo technologies (CBU business) | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 163 | 151 | 463 | 522 | |
Automated Transmissions (CBU business) | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 90 | 146 | 215 | 451 | |
Electronics and Fuel systems (CBU business) | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 76 | 47 | 223 | 167 | |
Power Generation (PSBU product line) | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 334 | 372 | 827 | 1,060 | |
Industrial (PSBU product line) | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 167 | 227 | 477 | 704 | |
Generator technologies (PSBU product line) | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 66 | 84 | 191 | 266 | |
Engine | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 2,112 | 2,416 | 5,693 | 7,772 | |
Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 1,721 | 2,004 | 5,140 | 6,033 | |
Components | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 1,541 | 1,650 | 4,193 | 5,357 | |
Power Systems | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 981 | 1,126 | 2,642 | 3,406 | |
External Sales | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 5,118 | 5,768 | 13,981 | 17,993 | |
External Sales | Engine | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 1,617 | 1,822 | 4,133 | 5,879 | |
External Sales | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 1,715 | 2,001 | 5,123 | 6,009 | |
External Sales | Components | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 1,201 | 1,253 | 3,192 | 4,055 | |
External Sales | Power Systems | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 567 | 683 | 1,495 | 2,030 | |
UNITED STATES | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 2,805 | 3,414 | 7,522 | 10,461 | |
CHINA | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 705 | 481 | 2,037 | 1,698 | |
CHINA | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 74 | 82 | 242 | 264 | |
INDIA | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 166 | 185 | 406 | 643 | |
INDIA | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 42 | 46 | 101 | 142 | |
OTHER INTERNATIONAL | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 1,442 | 1,688 | 4,016 | 5,191 | |
NORTH AMERICA | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 1,126 | 1,373 | 3,409 | 4,139 | |
ASIA PACIFIC | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 195 | 224 | 577 | 667 | |
EUROPE | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 153 | 135 | 424 | 380 | |
AFRICA AND MIDDLE EAST | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 47 | 60 | 136 | 170 | |
RUSSIA | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | 41 | 33 | 126 | 113 | |
LATIN AMERICA | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
NET SALES (a) (Note 3) | $ 37 | $ 48 | $ 108 | $ 134 | |
[1] | (a) Includes sales to nonconsolidated equity investees of $311 million and $906 million for the three and nine months ended September 27, 2020, compared with $280 million and $882 million for the comparable periods in 2019. |
PENSION AND OTHER POSTRETIREM_3
PENSION AND OTHER POSTRETIREMENT BENEFITS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 27, 2020 | Sep. 29, 2019 | Sep. 27, 2020 | Sep. 29, 2019 | Sep. 28, 2020 | |
Pension and other postretirement benefits | |||||
Defined contribution pension plans | $ 18 | $ 23 | $ 70 | $ 80 | |
Pension Plan | |||||
Pension and other postretirement benefits | |||||
Defined Benefit Plan, Plan Assets, Contributions by Employer | 11 | 33 | 77 | 110 | |
Other Postretirement Benefits Plan | |||||
Pension and other postretirement benefits | |||||
Defined Benefit Plan, Plan Assets, Contributions by Employer | 9 | 5 | 25 | 20 | |
Components of Net Periodic Benefit Cost | |||||
Service cost | 0 | 0 | 0 | 0 | |
Interest cost | 2 | 3 | 5 | 8 | |
Expected return on plan assets | 0 | 0 | 0 | 0 | |
Amortization of prior service cost | 0 | 0 | 0 | 0 | |
Recognized net actuarial loss | 0 | 0 | 0 | 0 | |
Net periodic benefit cost | 2 | 3 | 5 | 8 | |
Estimate | Pension Plan | |||||
Pension and other postretirement benefits | |||||
Net periodic pension cost | $ 102 | ||||
UNITED STATES | Pension Plan | |||||
Components of Net Periodic Benefit Cost | |||||
Service cost | 33 | 29 | 100 | 87 | |
Interest cost | 24 | 27 | 71 | 81 | |
Expected return on plan assets | (49) | (47) | (146) | (142) | |
Amortization of prior service cost | 0 | 0 | 1 | 1 | |
Recognized net actuarial loss | 10 | 4 | 30 | 12 | |
Net periodic benefit cost | 18 | 13 | 56 | 39 | |
UNITED STATES | Estimate | Pension Plan | |||||
Pension and other postretirement benefits | |||||
Defined Benefit Plan, Expected Future Employer Contributions, Remainder of Fiscal Year | 7 | ||||
UNITED KINGDOM | Pension Plan | |||||
Components of Net Periodic Benefit Cost | |||||
Service cost | 8 | 6 | 22 | 19 | |
Interest cost | 8 | 10 | 26 | 32 | |
Expected return on plan assets | (19) | (16) | (56) | (52) | |
Amortization of prior service cost | 1 | 0 | 2 | 1 | |
Recognized net actuarial loss | 9 | 3 | 26 | 9 | |
Net periodic benefit cost | $ 7 | $ 3 | $ 20 | $ 9 | |
UNITED KINGDOM | Estimate | Pension Plan | |||||
Pension and other postretirement benefits | |||||
Defined Benefit Plan, Expected Future Employer Contributions, Remainder of Fiscal Year | $ 7 |
EQUITY, ROYALTY AND INTEREST _3
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 27, 2020 | Sep. 29, 2019 | Sep. 27, 2020 | Sep. 29, 2019 | |||
Equity, royalty and interest income from investees | ||||||
Equity, royalty and interest income (loss) from investees | $ 98 | $ 68 | $ 342 | $ 256 | ||
Impairment of Equity Method Investment | 10 | 13 | ||||
Ministry of Finance, India | ||||||
Equity, royalty and interest income from investees | ||||||
Equity, royalty and interest income (loss) from investees | 37 | |||||
Beijing Foton Cummins Engine Company | ||||||
Equity, royalty and interest income from investees | ||||||
Equity, royalty and interest income (loss) from investees | 30 | 15 | 81 | 56 | ||
Dongfeng Cummins Engine Company Ltd | ||||||
Equity, royalty and interest income from investees | ||||||
Equity, royalty and interest income (loss) from investees | 20 | 10 | 54 | 40 | ||
Chongqing Cummins Engine Company, Ltd. | ||||||
Equity, royalty and interest income from investees | ||||||
Equity, royalty and interest income (loss) from investees | 7 | 10 | 27 | 32 | ||
All other manufacturers | ||||||
Equity, royalty and interest income from investees | ||||||
Equity, royalty and interest income (loss) from investees | 22 | [1] | 21 | 100 | [1],[2] | 76 |
Komatsu Cummins Chile, Ltda. (Distribution) | ||||||
Equity, royalty and interest income from investees | ||||||
Equity, royalty and interest income (loss) from investees | 6 | 6 | 23 | 19 | ||
All other distributors | ||||||
Equity, royalty and interest income from investees | ||||||
Equity, royalty and interest income (loss) from investees | 1 | 1 | 1 | 0 | ||
Cummin's Share of Equity Earnings | ||||||
Equity, royalty and interest income from investees | ||||||
Equity, royalty and interest income (loss) from investees | 86 | 63 | 286 | 223 | ||
Royalty and interest income | ||||||
Equity, royalty and interest income from investees | ||||||
Equity, royalty and interest income (loss) from investees | $ 12 | $ 5 | $ 56 | $ 33 | ||
[1] | (1) Includes impairment charges of $10 million and $13 million for the three and nine months ended September 27, 2020, respectively, for a joint venture in the Power Systems segment. | |||||
[2] | (2) Includes $37 million in adjustments related to tax changes within India's 2020-2021 Union Budget of India (India Tax Law Change) passed in March 2020. See NOTE 6, "INCOME TAXES" for additional information on India Tax Law Change. |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 27, 2020 | Sep. 29, 2019 | Sep. 27, 2020 | Sep. 29, 2019 | ||
Operating Loss Carryforwards [Line Items] | |||||
Effective tax rate (as a percent) | 26.50% | 18.40% | 23.60% | 20.30% | |
Discrete Tax Expense (Benefit) | $ (31) | $ 23 | $ (27) | $ 30 | |
Income (Loss) from Continuing Operations, Per Diluted Share | $ 0.21 | $ 0.14 | $ 0.18 | $ 0.19 | |
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability | $ 17 | $ 34 | |||
Income Tax Provision to Return Adjustment | 8 | 8 | |||
Other Discrete Tax Expenses | 6 | ||||
Net Income (Loss) Available to Common Stockholders, Basic | 501 | $ 622 | 1,288 | $ 1,960 | |
Equity, royalty and interest income (loss) from investees | 98 | 68 | 342 | 256 | |
Income Tax Expense (Benefit) | (182) | (139) | (402) | (501) | |
Net Income (Loss) Attributable to Noncontrolling Interest | $ (3) | $ 6 | (13) | $ (10) | |
Ministry of Finance, India | |||||
Operating Loss Carryforwards [Line Items] | |||||
Discrete Tax Expense (Benefit) | 15 | ||||
Net Income (Loss) Available to Common Stockholders, Basic | 35 | ||||
Equity, royalty and interest income (loss) from investees | 37 | ||||
Income Tax Expense (Benefit) | [1] | 17 | |||
Net Income (Loss) Attributable to Noncontrolling Interest | $ (19) | ||||
[1] | (1) The adjustment to "Income tax expense" includes $15 million of discrete items. |
MARKETABLE SECURITIES (Details)
MARKETABLE SECURITIES (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 27, 2020 | Sep. 27, 2020 | Sep. 29, 2019 | Dec. 31, 2019 | ||
Schedule of Available-for-sale Securities | |||||
Debt Securities, Available-for-sale, Amortized Cost | $ 1 | $ 1 | $ 1 | ||
Debt Securities, Available for sale, Unrealized Gain (Loss) | [1] | 0 | 0 | 0 | |
Debt Securities, Available-for-sale | 1 | 1 | 1 | ||
Total Marketable Securities, Amortized Cost Basis | 337 | 337 | 334 | ||
Total Marketable Securities, Accumulated Gross Unrealized Gain (Loss), before Tax | [1] | 8 | 8 | 7 | |
Total Marketable Securities, Estimated Fair Value | 345 | 345 | 341 | ||
Proceeds from Sale of Marketable Securities | 283 | $ 179 | |||
Proceeds from Maturity of Marketable Securities | 125 | 117 | |||
Proceeds from sales and maturities of marketable securities | 408 | $ 296 | |||
Debt Mutual Funds | |||||
Schedule of Available-for-sale Securities | |||||
Equity Securities, cost | 167 | 167 | 180 | ||
Equity Securities, Unrealized Gain (Loss) | [1] | 5 | 3 | ||
Equity Securities, Fair Value | 172 | 172 | 183 | ||
Certificates of deposit | |||||
Schedule of Available-for-sale Securities | |||||
Equity Securities, cost | 151 | 151 | 133 | ||
Equity Securities, Unrealized Gain (Loss) | [1] | 0 | 0 | ||
Equity Securities, Fair Value | 151 | 151 | 133 | ||
Equity mutual funds | |||||
Schedule of Available-for-sale Securities | |||||
Equity Securities, cost | 18 | 18 | 19 | ||
Equity Securities, Unrealized Gain (Loss) | [1] | 3 | 4 | ||
Equity Securities, Fair Value | 21 | 21 | 23 | ||
Bank debentures | |||||
Schedule of Available-for-sale Securities | |||||
Equity Securities, cost | 0 | 0 | 1 | ||
Equity Securities, Unrealized Gain (Loss) | [1] | 0 | 0 | ||
Equity Securities, Fair Value | $ 0 | $ 0 | $ 1 | ||
Minimum | Certificates of deposit | |||||
Schedule of Available-for-sale Securities | |||||
Maturities of Bank Debentures Description | three months | ||||
Maximum | Certificates of deposit | |||||
Schedule of Available-for-sale Securities | |||||
Maturities of Bank Debentures Description | five years | ||||
[1] | (1) Unrealized gains and losses for debt securities are recorded in other comprehensive income while unrealized gains and losses for equity securities are recorded in "Other income, net" in our Condensed Consolidated Statements of Net Income . |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Millions | Sep. 27, 2020 | Dec. 31, 2019 |
Inventory Disclosure [Abstract] | ||
Finished products | $ 2,182 | $ 2,214 |
Work-in-process and raw materials | 1,416 | 1,395 |
Inventories at FIFO cost | 3,598 | 3,609 |
Excess of FIFO over LIFO | (128) | (123) |
Total inventories | $ 3,470 | $ 3,486 |
DEBT (Details)
DEBT (Details) $ in Millions | Aug. 24, 2020USD ($) | Sep. 27, 2020USD ($)Rate | Sep. 29, 2019USD ($) | Sep. 27, 2020USD ($)Rate | Sep. 29, 2019USD ($) | Aug. 19, 2020USD ($) | Dec. 31, 2019USD ($)Rate | Aug. 21, 2019USD ($) | Aug. 22, 2018USD ($) | ||||
Short-term Debt [Line Items] | |||||||||||||
Loans payable | [1] | $ 129 | $ 129 | $ 100 | |||||||||
Commercial paper | 316 | [2] | 316 | [2] | 660 | [3] | |||||||
Line of Credit Facility, Maximum Borrowing Capacity | 3,500 | 3,500 | $ 2,000 | ||||||||||
Line of Credit Facility, Remaining Borrowing Capacity | 3,200 | 3,200 | |||||||||||
Long-term debt | |||||||||||||
Unsecured Debt | $ 2,000 | ||||||||||||
Proceeds from Issuance of Debt | $ 1,980 | ||||||||||||
Other Long-term Debt | 130 | 130 | 59 | ||||||||||
Unamortized discount and deferred issuance costs | (73) | (73) | (50) | ||||||||||
Fair value adjustment due to hedge on indebtedness | 50 | 50 | 35 | ||||||||||
Finance Lease, Liability | 87 | 87 | 90 | ||||||||||
Total long-term debt | 3,667 | 3,667 | 1,607 | ||||||||||
Current maturities of long-term debt | 58 | 58 | 31 | ||||||||||
Long-term debt | 3,609 | 3,609 | 1,576 | ||||||||||
Unrealized gain (loss) on derivatives | 18 | $ (29) | (63) | $ (40) | |||||||||
Principal payments | |||||||||||||
2020 | 38 | 38 | |||||||||||
2021 | 51 | 51 | |||||||||||
2022 | 29 | 29 | |||||||||||
2023 | 525 | 525 | |||||||||||
2024 | 22 | 22 | |||||||||||
Fair value | |||||||||||||
Fair value of total debt | [4] | 4,532 | 4,532 | 2,706 | |||||||||
Carrying value of total debt | 4,112 | 4,112 | $ 2,367 | ||||||||||
Long-term Debt, Other Disclosures [Abstract] | |||||||||||||
Interest Rate Lock, Notional Amount | 500 | 500 | |||||||||||
Deferred Gain (Loss) on Discontinuation of Interest Rate Fair Value Hedge | $ 24 | 24 | |||||||||||
Amortization Period of Deferred Gain (Loss) on Discontinuation of Interest Rate Fair Value Hedge | 3 years | ||||||||||||
EUROPE | |||||||||||||
Short-term Debt [Line Items] | |||||||||||||
Commercial paper | $ 116 | 116 | |||||||||||
UNITED STATES | |||||||||||||
Short-term Debt [Line Items] | |||||||||||||
Commercial paper | $ 200 | $ 200 | |||||||||||
Commercial Paper | |||||||||||||
Short-term Debt [Line Items] | |||||||||||||
Short-term Debt, Weighted Average Interest Rate, at Point in Time | Rate | 0.03% | 0.03% | 1.82% | ||||||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 3,500 | $ 3,500 | |||||||||||
Commercial Paper | EUROPE | |||||||||||||
Short-term Debt [Line Items] | |||||||||||||
Short-term Debt, Weighted Average Interest Rate, at Point in Time | Rate | (0.27%) | (0.27%) | |||||||||||
Commercial Paper | UNITED STATES | |||||||||||||
Short-term Debt [Line Items] | |||||||||||||
Short-term Debt, Weighted Average Interest Rate, at Point in Time | Rate | 0.20% | 0.20% | |||||||||||
CPFF Program | |||||||||||||
Short-term Debt [Line Items] | |||||||||||||
Commercial paper | $ 0 | $ 0 | |||||||||||
Line of Credit Facility, Maximum Borrowing Capacity | 1,500 | $ 1,500 | |||||||||||
Debt instrument, Basis Spread on Variable Rate (not a percentage) | 110 | ||||||||||||
International and Other Lines of Credit | |||||||||||||
Short-term Debt [Line Items] | |||||||||||||
Line of Credit Facility, Remaining Borrowing Capacity | 191 | $ 191 | |||||||||||
Interest Rate Lock | |||||||||||||
Long-term debt | |||||||||||||
Unrealized gain (loss) on derivatives | 17 | (52) | |||||||||||
Senior notes, due 2023(1) | |||||||||||||
Long-term debt | |||||||||||||
Unsecured Debt | [5] | $ 500 | $ 500 | $ 500 | |||||||||
Debt instrument interest rate (as a percent) | Rate | [5] | 3.65% | 3.65% | ||||||||||
Senior notes, due 2025 | |||||||||||||
Long-term debt | |||||||||||||
Unsecured Debt | $ 500 | $ 500 | |||||||||||
Debt instrument interest rate (as a percent) | Rate | 0.75% | 0.75% | |||||||||||
Debentures, due 2027 | |||||||||||||
Long-term debt | |||||||||||||
Unsecured Debt | $ 58 | $ 58 | 58 | ||||||||||
Debt instrument interest rate (as a percent) | Rate | 6.75% | 6.75% | |||||||||||
Debentures, due 2028 | |||||||||||||
Long-term debt | |||||||||||||
Unsecured Debt | $ 250 | $ 250 | 250 | ||||||||||
Debt instrument interest rate (as a percent) | Rate | 7.125% | 7.125% | |||||||||||
Senior notes, due 2030 | |||||||||||||
Long-term debt | |||||||||||||
Unsecured Debt | $ 850 | $ 850 | |||||||||||
Debt instrument interest rate (as a percent) | Rate | 1.50% | 1.50% | |||||||||||
Senior notes, due 2043 | |||||||||||||
Long-term debt | |||||||||||||
Unsecured Debt | $ 500 | $ 500 | 500 | ||||||||||
Debt instrument interest rate (as a percent) | Rate | 4.875% | 4.875% | |||||||||||
Senior notes, due 2050 | |||||||||||||
Long-term debt | |||||||||||||
Unsecured Debt | $ 650 | $ 650 | |||||||||||
Debt instrument interest rate (as a percent) | Rate | 2.60% | 2.60% | |||||||||||
Debentures, due 2098(2) | |||||||||||||
Long-term debt | |||||||||||||
Unsecured Debt | [6] | $ 165 | $ 165 | $ 165 | |||||||||
Debt instrument interest rate (as a percent) | Rate | [6] | 5.65% | 5.65% | ||||||||||
Effective interest rate (as a percent) | Rate | 7.48% | 7.48% | |||||||||||
1-year revolving credit agreement | |||||||||||||
Short-term Debt [Line Items] | |||||||||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 1,500 | $ 1,500 | |||||||||||
[1] | (1) Loans payable consist primarily of notes payable to various domestic and international financial institutions. It is not practicable to aggregate these notes and calculate a quarterly weighted-average interest rate. | ||||||||||||
[2] | (2) The weighted-average interest rate, inclusive of all brokerage fees, was 0.03 percent at September 27, 2020. This includes $116 million of borrowings under the EUR program that were at a negative weighted-average interest rate of 0.27 percent and $200 million of borrowings under the U.S. program at a weighted-average rate of 0.20 percent. | ||||||||||||
[3] | (3) The weighted-average interest rate, inclusive of all brokerage fees, was 1.82 percent at December 31, 2019. All borrowings were at positive interest rates. | ||||||||||||
[4] | (1) The fair value of debt is derived from Level 2 inputs. | ||||||||||||
[5] | (1) In June and July 2020, we settled our February 2014 interest rate swap. See "Interest Rate Risk" below for additional information. | ||||||||||||
[6] | (2) The effective interest rate is 7.48%. |
PRODUCT WARRANTY LIABILITY (Det
PRODUCT WARRANTY LIABILITY (Details 1) Warranty Footnote Disclosure - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 27, 2020 | Sep. 29, 2019 | Sep. 27, 2020 | Sep. 29, 2019 | Dec. 31, 2019 | |
Product Warranties Disclosures [Abstract] | |||||
Balance, beginning of year | $ 2,389 | $ 2,208 | |||
Provision for base warranties issued | 277 | 360 | |||
Deferred revenue on extended warranty contracts sold | 172 | 254 | |||
Provision for product campaigns issued | 27 | 163 | |||
Payments made during period | (424) | (431) | |||
Amortization of deferred revenue on extended warranty contracts | (169) | (174) | |||
Changes in estimates for pre-existing product warranties | (41) | (16) | |||
Foreign currency translation and other | (6) | (9) | |||
Balance, end of period | $ 2,225 | $ 2,355 | 2,225 | 2,355 | |
Supplier recoveries | 5 | $ 3 | 16 | $ 64 | |
Product Warranty Liability | |||||
Current portion of warranty related deferred revenue | 540 | 540 | $ 533 | ||
Long term portion of warranty related deferred revenue | 837 | 837 | 821 | ||
Deferred Revenue Related to extended coverage, Total | 944 | 944 | 941 | ||
Current portion of accrued product warranty | 646 | 646 | 803 | ||
Long-term portion of accrued product warranty | 635 | 635 | 645 | ||
Standard Product Warranty Accrual | 1,281 | 1,281 | 1,448 | ||
Current portion of deferred revenue | |||||
Product Warranty Liability | |||||
Current portion of warranty related deferred revenue | 249 | 249 | 227 | ||
Deferred revenue | |||||
Product Warranty Liability | |||||
Long term portion of warranty related deferred revenue | 695 | 695 | 714 | ||
Current portion of accrued product warranty | |||||
Product Warranty Liability | |||||
Current portion of accrued product warranty | 646 | 646 | 803 | ||
Accrued product warranty | |||||
Product Warranty Liability | |||||
Long-term portion of accrued product warranty | $ 635 | $ 635 | $ 645 |
PRODUCT WARRANTY LIABILITY (D_2
PRODUCT WARRANTY LIABILITY (Details 2) Engine System Campaign - USD ($) $ in Millions | 24 Months Ended | |
Dec. 30, 2018 | Sep. 27, 2020 | |
Guarantees and Product Warranties [Abstract] | ||
Provision for product campaigns issued | $ 410 | |
Engine System Campaign Accrual, Present Value | $ 157 |
SUPPLEMENTAL BALANCE SHEET DA_3
SUPPLEMENTAL BALANCE SHEET DATA (Details) - USD ($) $ in Millions | Sep. 27, 2020 | Dec. 31, 2019 |
Balance Sheet Related Disclosures [Abstract] | ||
Marketing accruals | $ 220 | $ 176 |
Other taxes payable | 203 | 228 |
Current portion of operating lease liabilities | 133 | 131 |
Income taxes payable | 102 | 52 |
Other Accrued Liabilities, Current | 332 | 452 |
Other accrued expenses | 990 | 1,039 |
Operating lease liabilities | 322 | 370 |
Deferred income taxes | 301 | 306 |
One-time transition tax | 293 | 293 |
Accrued compensation | 185 | 206 |
Mark-to-market valuation on interest rate locks | 81 | 12 |
Other Accrued Liabilities, Noncurrent | 384 | 192 |
Other liabilities | $ 1,566 | $ 1,379 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) $ in Millions | 3 Months Ended |
Sep. 27, 2020USD ($) | |
Guarantee Obligations | |
Guarantor obligations, maximum potential loss | $ 40 |
Long-term purchase commitment, penalty exposure | 37 |
Total commitments under commodity contracts | 30 |
Performance Bonds and Other Performance Guarantees | $ 94 |
Maximum | |
Guarantee Obligations | |
Forward Contract, Term | two years |
ACCUMULATED OTHER COMPREHENSI_3
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||||
Sep. 27, 2020 | Sep. 29, 2019 | Sep. 27, 2020 | Sep. 29, 2019 | |||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||||||
Balance at the beginning of the period | $ (2,028) | |||||||
Before tax amount | $ 134 | $ (221) | (160) | $ (265) | ||||
Tax benefit (expense) | (5) | 8 | 25 | 15 | ||||
After tax amount | 129 | (213) | (135) | (250) | ||||
Amounts reclassified from accumulated other comprehensive income (loss)(1) | 16 | [1] | 8 | [1] | 44 | [2] | 15 | [2] |
Net current period other comprehensive income (loss) | 145 | (205) | (91) | (235) | ||||
Balance at the end of the period | (2,107) | (2,107) | ||||||
Change in pensions and other postretirement defined benefit plans | ||||||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||||||
Balance at the beginning of the period | (716) | (675) | (734) | (671) | ||||
Before tax amount | 0 | 0 | (19) | (22) | ||||
Tax benefit (expense) | 0 | 0 | 5 | 5 | ||||
After tax amount | 0 | 0 | (14) | (17) | ||||
Amounts reclassified from accumulated other comprehensive income (loss)(1) | 16 | [1] | 6 | [1] | 48 | [2] | 19 | [2] |
Net current period other comprehensive income (loss) | 16 | 6 | 34 | 2 | ||||
Balance at the end of the period | (700) | (669) | (700) | (669) | ||||
Foreign currency translation adjustment | ||||||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||||||
Balance at the beginning of the period | (1,436) | (1,156) | (1,285) | (1,138) | ||||
Before tax amount | 101 | (177) | (54) | (194) | ||||
Tax benefit (expense) | 0 | 0 | 4 | (1) | ||||
After tax amount | 101 | (177) | (50) | (195) | ||||
Amounts reclassified from accumulated other comprehensive income (loss)(1) | 0 | [1] | 0 | [1] | 0 | [2] | 0 | [2] |
Net current period other comprehensive income (loss) | 101 | (177) | (50) | (195) | ||||
Balance at the end of the period | (1,335) | (1,333) | (1,335) | (1,333) | ||||
Unrealized gain (loss) on derivatives | ||||||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||||||
Balance at the beginning of the period | (90) | (9) | (9) | 2 | ||||
Before tax amount | 23 | (39) | (75) | (47) | ||||
Tax benefit (expense) | (5) | 8 | 16 | 11 | ||||
After tax amount | 18 | (31) | (59) | (36) | ||||
Amounts reclassified from accumulated other comprehensive income (loss)(1) | 0 | [1] | 2 | [1] | (4) | [2] | (4) | [2] |
Net current period other comprehensive income (loss) | 18 | (29) | (63) | [3] | (40) | |||
Balance at the end of the period | (72) | (38) | (72) | (38) | ||||
Total attributable to Cummins Inc. | ||||||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||||||
Balance at the beginning of the period | (2,242) | (1,840) | (2,028) | (1,807) | ||||
Before tax amount | 124 | (216) | (148) | (263) | ||||
Tax benefit (expense) | (5) | 8 | 25 | 15 | ||||
After tax amount | 119 | (208) | (123) | (248) | ||||
Amounts reclassified from accumulated other comprehensive income (loss)(1) | 16 | [1] | 8 | [1] | 44 | [2] | 15 | [2] |
Net current period other comprehensive income (loss) | 135 | (200) | (79) | (233) | ||||
Balance at the end of the period | (2,107) | (2,040) | (2,107) | (2,040) | ||||
Noncontrolling interests | ||||||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||||||
Before tax amount | 10 | (5) | (12) | (2) | ||||
Tax benefit (expense) | 0 | 0 | 0 | 0 | ||||
After tax amount | 10 | (5) | (12) | (2) | ||||
Amounts reclassified from accumulated other comprehensive income (loss)(1) | 0 | [1] | 0 | [1] | 0 | [2] | ||
Net current period other comprehensive income (loss) | $ 10 | $ (5) | $ (12) | $ (2) | ||||
[1] | (1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure. | |||||||
[2] | (1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure. | |||||||
[3] | (2) Primarily related to interest rate lock activity. See the Interest Rate Risk section in NOTE 9 "DEBT" for additional information. |
ACQUISITION (Details)
ACQUISITION (Details) - USD ($) $ in Millions | Sep. 09, 2019 | Dec. 31, 2018 | Sep. 27, 2020 | Dec. 31, 2019 |
Business Acquisition [Line Items] | ||||
Goodwill | $ 1,288 | $ 1,286 | ||
Hydrogenics Corporation | ||||
Business Acquisition [Line Items] | ||||
Business Acquisition, Percentage of Voting Interests Acquired | 81.00% | |||
Payments to Acquire Businesses, Gross | $ 235 | |||
Business Combination, Consideration Transferred | 235 | |||
Goodwill | 161 | |||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill | 161 | |||
Business Acquisition, Revenue Reported by Acquired Entity for Last Annual Period | $ 34 | |||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Inventory | 21 | |||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets | 25 | |||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Noncurrent Assets | 18 | |||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities | (53) | |||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities | (42) | |||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net | 291 | |||
Business Combination, Acquisition of Less than 100 Percent, Noncontrolling Interest, Fair Value | $ 56 | |||
Hydrogenics Corporation | L'Air Liquide, S.A. | ||||
Business Acquisition [Line Items] | ||||
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners | 19.00% | |||
Technology-Based Intangible Assets | Hydrogenics Corporation | ||||
Business Acquisition [Line Items] | ||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill | $ 96 | |||
Customer Relationships | Hydrogenics Corporation | ||||
Business Acquisition [Line Items] | ||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill | 29 | |||
Intellectual Property | Hydrogenics Corporation | ||||
Business Acquisition [Line Items] | ||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill | 35 | |||
Other Intangible Assets | Hydrogenics Corporation | ||||
Business Acquisition [Line Items] | ||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill | $ 1 | |||
Minimum | Hydrogenics Corporation | ||||
Business Acquisition [Line Items] | ||||
Finite-Lived Intangible Asset, Useful Life | 3 years | |||
Minimum | Customer Relationships | Hydrogenics Corporation | ||||
Business Acquisition [Line Items] | ||||
Finite-Lived Intangible Asset, Useful Life | 15 years | |||
Maximum | Hydrogenics Corporation | ||||
Business Acquisition [Line Items] | ||||
Finite-Lived Intangible Asset, Useful Life | 20 years | |||
Amortization of Intangible Assets | $ 8 | |||
Maximum | Customer Relationships | Hydrogenics Corporation | ||||
Business Acquisition [Line Items] | ||||
Finite-Lived Intangible Asset, Useful Life | 20 years |
RESTRUCTURING ACTIONS AND OTH_3
RESTRUCTURING ACTIONS AND OTHER CHARGES (Details) $ in Millions | 3 Months Ended | 9 Months Ended | |
Dec. 31, 2019USD ($)employee | Sep. 27, 2020USD ($) | Sep. 29, 2019USD ($) | |
Restructuring and Related Activities [Abstract] | |||
Severance Costs | $ 119 | ||
Restructuring Charges, Net of Tax | $ 90 | ||
Restructuring and Related Cost, Number of Positions Eliminated | employee | 2,300 | ||
Restructuring Reserve, beginning of period | $ 116 | ||
Payments for Restructuring | (100) | $ 0 | |
Restructuring Reserve, Accrual Adjustment | (6) | ||
Restructuring Reserve, end of period | $ 116 | $ 10 |
OPERATING SEGMENTS (Details)
OPERATING SEGMENTS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||||||
Sep. 27, 2020 | Sep. 29, 2019 | Sep. 27, 2020 | Sep. 29, 2019 | ||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | [1] | $ 5,118 | $ 5,768 | $ 13,981 | $ 17,993 | ||||
Research, development and engineering expenses | 224 | 242 | 651 | 730 | |||||
Equity, royalty and interest income (loss) from investees | 98 | 68 | 342 | 256 | |||||
Interest income | 4 | 14 | 15 | 38 | |||||
EBITDA | 876 | 958 | 2,271 | 3,049 | |||||
Depreciation and amortization | 165 | [2] | 177 | [2] | 497 | [3] | 491 | [3] | |
Less: Interest expense | 25 | 26 | 71 | 87 | |||||
INCOME BEFORE INCOME TAXES | 686 | 755 | 1,703 | 2,471 | |||||
Amortization of Debt Discount (Premium) | 2 | 2 | |||||||
Engine | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 2,112 | 2,416 | 5,693 | 7,772 | |||||
Research, development and engineering expenses | 72 | 79 | 217 | 245 | |||||
Equity, royalty and interest income (loss) from investees | 74 | 34 | 236 | 152 | |||||
Interest income | 1 | 5 | 6 | 13 | |||||
EBITDA | 382 | 341 | 897 | 1,195 | |||||
Depreciation and amortization | 51 | [2] | 50 | [2] | 155 | [3] | 151 | [3] | |
Distribution | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 1,721 | 2,004 | 5,140 | 6,033 | |||||
Research, development and engineering expenses | 9 | 7 | 20 | 21 | |||||
Equity, royalty and interest income (loss) from investees | 13 | 12 | 45 | 35 | |||||
Interest income | 1 | 4 | 3 | 12 | |||||
EBITDA | 182 | 186 | 500 | 529 | |||||
Depreciation and amortization | 30 | [2] | 29 | [2] | 91 | [3] | 86 | [3] | |
Components | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 1,541 | 1,650 | 4,193 | 5,357 | |||||
Research, development and engineering expenses | 64 | 73 | 187 | 223 | |||||
Equity, royalty and interest income (loss) from investees | 13 | 9 | 46 | 30 | |||||
Interest income | 1 | 2 | 3 | 6 | |||||
EBITDA | 261 | 286 | 681 | 908 | |||||
Depreciation and amortization | 47 | [2] | 67 | [2] | 142 | [3] | 160 | [3] | |
Power Systems | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 981 | 1,126 | 2,642 | 3,406 | |||||
Research, development and engineering expenses | 53 | 58 | 148 | 171 | |||||
Equity, royalty and interest income (loss) from investees | 0 | 13 | 18 | 39 | |||||
Interest income | 1 | 3 | 3 | 7 | |||||
EBITDA | 101 | 158 | 269 | 469 | |||||
Depreciation and amortization | 32 | [2] | 29 | [2] | 96 | [3] | 88 | [3] | |
New Power | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 18 | 9 | 38 | 20 | |||||
Research, development and engineering expenses | 26 | 25 | 79 | 70 | |||||
Equity, royalty and interest income (loss) from investees | (2) | 0 | (3) | 0 | |||||
Interest income | 0 | 0 | 0 | 0 | |||||
EBITDA | (40) | (36) | (121) | (98) | |||||
Depreciation and amortization | 5 | [2] | 2 | [2] | 13 | [3] | 6 | [3] | |
Total Segments | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 6,373 | 7,205 | 17,706 | 22,588 | |||||
Research, development and engineering expenses | 224 | 242 | 651 | 730 | |||||
Equity, royalty and interest income (loss) from investees | 98 | 68 | 342 | 256 | |||||
Interest income | 4 | 14 | 15 | 38 | |||||
EBITDA | 886 | 935 | 2,226 | 3,003 | |||||
Depreciation and amortization | 165 | [2] | 177 | [2] | 497 | [3] | 491 | [3] | |
Intersegment Eliminations | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | (1,255) | [4] | (1,437) | [4] | (3,725) | [5] | (4,595) | [5] | |
Non-segment items | |||||||||
Segment reporting | |||||||||
EBITDA | (10) | [4] | 23 | [4] | 45 | [5] | 46 | [5] | |
External Sales | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 5,118 | 5,768 | 13,981 | 17,993 | |||||
External Sales | Engine | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 1,617 | 1,822 | 4,133 | 5,879 | |||||
External Sales | Distribution | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 1,715 | 2,001 | 5,123 | 6,009 | |||||
External Sales | Components | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 1,201 | 1,253 | 3,192 | 4,055 | |||||
External Sales | Power Systems | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 567 | 683 | 1,495 | 2,030 | |||||
External Sales | New Power | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 18 | 9 | 38 | 20 | |||||
External Sales | Total Segments | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 5,118 | 5,768 | 13,981 | 17,993 | |||||
Intersegment sales | Engine | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 495 | 594 | 1,560 | 1,893 | |||||
Intersegment sales | Distribution | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 6 | 3 | 17 | 24 | |||||
Intersegment sales | Components | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 340 | 397 | 1,001 | 1,302 | |||||
Intersegment sales | Power Systems | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 414 | 443 | 1,147 | 1,376 | |||||
Intersegment sales | New Power | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 0 | 0 | 0 | 0 | |||||
Intersegment sales | Total Segments | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | 1,255 | 1,437 | 3,725 | 4,595 | |||||
Intersegment sales | Intersegment Eliminations | |||||||||
Segment reporting | |||||||||
NET SALES (a) (Note 3) | $ (1,255) | [4] | $ (1,437) | [4] | $ (3,725) | [5] | $ (4,595) | [5] | |
[1] | (a) Includes sales to nonconsolidated equity investees of $311 million and $906 million for the three and nine months ended September 27, 2020, compared with $280 million and $882 million for the comparable periods in 2019. | ||||||||
[2] | (2) Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." A portion of depreciation expense is included in "Research, development and engineering expenses." | ||||||||
[3] | (2) Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." The amortization of debt discount and deferred costs was $2 million and $2 million for the nine months ended September 27, 2020 and September 29, 2019, respectively. A portion of depreciation expense is included in "Research, development and engineering expenses." | ||||||||
[4] | (1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended September 27, 2020 and September 29, 2019. | ||||||||
[5] | (1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the nine months ended September 27, 2020 and September 29, 2019. |
RECENTLY ADOPTED AND RECENTLY_2
RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) $ in Millions | 9 Months Ended | |||||
Sep. 27, 2020 | Jun. 28, 2020 | Dec. 31, 2019 | Sep. 29, 2019 | Jun. 30, 2019 | Dec. 31, 2018 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Total equity | $ 8,641 | $ 8,130 | $ 8,465 | $ 8,753 | $ 9,196 | $ 8,259 |
Cumulative Effect, Period of Adoption, Adjustment | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Total equity | $ (4) | |||||
ASU 2018-15 Intangibles Goodwill and Other - Internal-Use Software | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
New Accounting Pronouncement or Change in Accounting Principle, Description | In August 2018, the Financial Accounting Standards Board (FASB) issued a new standard that aligns the accounting for implementation costs incurred in a cloud computing arrangement accounted for as a service contract with the model currently used for internal use software costs. Under the new standard, costs that meet certain criteria will be required to be capitalized on the balance sheet and subsequently amortized over the term of the hosting arrangement. We adopted the standard on January 1, 2020, on a prospective basis as allowed by the standard. The adoption is not expected to have a material impact on our Condensed Consolidated Financial Statements. | |||||
ASU 2016-13 Measurement of Credit Losses on Financial Instruments | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
New Accounting Pronouncement or Change in Accounting Principle, Description | On January 1, 2020, we adopted the new FASB standard related to accounting for credit losses on financial instruments. This standard introduces new guidance for accounting for credit losses on instruments including trade receivables and held-to-maturity debt securities. The standard requires entities to record a cumulative effect adjustment to the statement of financial position. We recorded a net decrease to opening retained earnings of $4 million, net of tax, as of January 1, 2020, due to the cumulative impact of adopting the new standard. The impact to any individual financial statement line item as a result of applying the new standard, as compared to the old standard, was not material for the nine months ended September 27, 2020. | |||||
ASU 2020-04 Reference Rate Reform | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
New Accounting Pronouncement or Change in Accounting Principle, Description | In March 2020, the FASB amended its standard to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendment allows entities to elect not to apply certain modification accounting requirements to contracts affected by reference rate reform if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. These expedients would apply to interest rate locks. The guidance was effective upon issuance and expires after December 31, 2022. The amendment did not have an effect on our Condensed Consolidated Financial Statements at September 27, 2020. We are still evaluating which contracts will be impacted by reference rate reform, but the expedients will allow us to make permitted changes prior to the expiration of the amendments without resulting in an impact to our Consolidated Financial Statements. |