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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Cummins Inc | NYSE:CMI | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
6.02 | 2.13% | 288.51 | 289.8429 | 282.11 | 282.89 | 629,243 | 20:07:24 |
|
Indiana
(State of Incorporation)
|
|
35-0257090
(IRS Employer Identification No.)
|
Large accelerated filer
x
|
|
Accelerated filer
o
|
|
Non-accelerated filer
o
|
|
Smaller reporting company
o
|
|
|
|
Page
|
|
|
|
|
Condensed Consolidated Statements of Income for the three and six months ended July 3, 2016 and June 28, 2015
|
|
|
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 3, 2016 and June 28, 2015
|
|
|
Condensed Consolidated Balance Sheets at July 3, 2016 and December 31, 2015
|
|
|
Condensed Consolidated Statements of Cash Flows for the six months ended July 3, 2016 and June 28, 2015
|
|
|
Condensed Consolidated Statements of Changes in Equity for the six months ended July 3, 2016 and June 28, 2015
|
|
|
||
|
|
|
|
||
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
In millions
|
|
July 3,
2016 |
|
June 28,
2015 |
|
July 3,
2016 |
|
June 28,
2015 |
||||||||
CONSOLIDATED NET INCOME
|
|
$
|
427
|
|
|
$
|
496
|
|
|
$
|
760
|
|
|
$
|
900
|
|
Other comprehensive (loss) income, net of tax (Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments
|
|
(213
|
)
|
|
145
|
|
|
(270
|
)
|
|
(31
|
)
|
||||
Unrealized (loss) gain on derivatives
|
|
(6
|
)
|
|
8
|
|
|
(27
|
)
|
|
8
|
|
||||
Change in pension and other postretirement defined benefit plans
|
|
9
|
|
|
15
|
|
|
18
|
|
|
28
|
|
||||
Unrealized gain on marketable securities
|
|
1
|
|
|
1
|
|
|
1
|
|
|
—
|
|
||||
Total other comprehensive (loss) income, net of tax
|
|
(209
|
)
|
|
169
|
|
|
(278
|
)
|
|
5
|
|
||||
COMPREHENSIVE INCOME
|
|
218
|
|
|
665
|
|
|
482
|
|
|
905
|
|
||||
Less: Comprehensive income attributable to noncontrolling interests
|
|
15
|
|
|
20
|
|
|
27
|
|
|
40
|
|
||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC.
|
|
$
|
203
|
|
|
$
|
645
|
|
|
$
|
455
|
|
|
$
|
865
|
|
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
||||||||
In millions, except par value
|
|
July 3,
2016 |
|
December 31,
2015 |
||||
ASSETS
|
|
|
|
|
|
|
||
Current assets
|
|
|
|
|
|
|
||
Cash and cash equivalents
|
|
$
|
1,045
|
|
|
$
|
1,711
|
|
Marketable securities (Note 6)
|
|
235
|
|
|
100
|
|
||
Total cash, cash equivalents and marketable securities
|
|
1,280
|
|
|
1,811
|
|
||
Accounts and notes receivable, net
|
|
|
|
|
||||
Trade and other
|
|
2,811
|
|
|
2,640
|
|
||
Nonconsolidated equity investees
|
|
212
|
|
|
180
|
|
||
Inventories (Note 7)
|
|
2,778
|
|
|
2,707
|
|
||
Prepaid expenses and other current assets
|
|
549
|
|
|
609
|
|
||
Total current assets
|
|
7,630
|
|
|
7,947
|
|
||
Long-term assets
|
|
|
|
|
|
|
||
Property, plant and equipment
|
|
7,432
|
|
|
7,322
|
|
||
Accumulated depreciation
|
|
(3,729
|
)
|
|
(3,577
|
)
|
||
Property, plant and equipment, net
|
|
3,703
|
|
|
3,745
|
|
||
Investments and advances related to equity method investees
|
|
1,073
|
|
|
975
|
|
||
Goodwill
|
|
481
|
|
|
482
|
|
||
Other intangible assets, net
|
|
328
|
|
|
328
|
|
||
Pension assets
|
|
764
|
|
|
735
|
|
||
Other assets
|
|
1,041
|
|
|
922
|
|
||
Total assets
|
|
$
|
15,020
|
|
|
$
|
15,134
|
|
|
|
|
|
|
||||
LIABILITIES
|
|
|
|
|
|
|
||
Current liabilities
|
|
|
|
|
|
|
||
Accounts payable (principally trade)
|
|
$
|
1,825
|
|
|
$
|
1,706
|
|
Loans payable (Note 8)
|
|
19
|
|
|
24
|
|
||
Commercial paper (Note 8)
|
|
200
|
|
|
—
|
|
||
Accrued compensation, benefits and retirement costs
|
|
353
|
|
|
409
|
|
||
Current portion of accrued product warranty (Note 9)
|
|
335
|
|
|
359
|
|
||
Current portion of deferred revenue
|
|
433
|
|
|
403
|
|
||
Other accrued expenses
|
|
947
|
|
|
863
|
|
||
Current maturities of long-term debt (Note 8)
|
|
38
|
|
|
39
|
|
||
Total current liabilities
|
|
4,150
|
|
|
3,803
|
|
||
Long-term liabilities
|
|
|
|
|
|
|
||
Long-term debt (Note 8)
|
|
1,614
|
|
|
1,576
|
|
||
Postretirement benefits other than pensions
|
|
328
|
|
|
349
|
|
||
Pensions
|
|
299
|
|
|
298
|
|
||
Other liabilities and deferred revenue
|
|
1,434
|
|
|
1,358
|
|
||
Total liabilities
|
|
$
|
7,825
|
|
|
$
|
7,384
|
|
|
|
|
|
|
||||
Commitments and contingencies (Note 10)
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
EQUITY
|
|
|
|
|
||||
Cummins Inc. shareholders’ equity
|
|
|
|
|
|
|
||
Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.4 shares issued
|
|
$
|
2,196
|
|
|
$
|
2,178
|
|
Retained earnings
|
|
10,716
|
|
|
10,322
|
|
||
Treasury stock, at cost, 53.7 and 47.2 shares
|
|
(4,422
|
)
|
|
(3,735
|
)
|
||
Common stock held by employee benefits trust, at cost, 0.7 and 0.9 shares
|
|
(9
|
)
|
|
(11
|
)
|
||
Accumulated other comprehensive loss (Note 11)
|
|
(1,620
|
)
|
|
(1,348
|
)
|
||
Total Cummins Inc. shareholders’ equity
|
|
6,861
|
|
|
7,406
|
|
||
Noncontrolling interests
|
|
334
|
|
|
344
|
|
||
Total equity
|
|
$
|
7,195
|
|
|
$
|
7,750
|
|
Total liabilities and equity
|
|
$
|
15,020
|
|
|
$
|
15,134
|
|
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
||||||||
|
|
Six months ended
|
||||||
In millions
|
|
July 3,
2016 |
|
June 28,
2015 |
||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
||
Consolidated net income
|
|
$
|
760
|
|
|
$
|
900
|
|
Adjustments to reconcile consolidated net income to net cash provided by operating activities
|
|
|
|
|
|
|
||
Restructuring payments (Note 12)
|
|
(42
|
)
|
|
—
|
|
||
Loss contingency (Note 10)
|
|
39
|
|
|
—
|
|
||
Depreciation and amortization
|
|
259
|
|
|
254
|
|
||
Deferred income taxes
|
|
2
|
|
|
(63
|
)
|
||
Equity in income of investees, net of dividends
|
|
(87
|
)
|
|
(68
|
)
|
||
Pension contributions in excess of expense (Note 3)
|
|
(82
|
)
|
|
(122
|
)
|
||
Other post-retirement benefits payments in excess of expense (Note 3)
|
|
(17
|
)
|
|
(15
|
)
|
||
Stock-based compensation expense
|
|
20
|
|
|
17
|
|
||
Translation and hedging activities
|
|
(45
|
)
|
|
27
|
|
||
Changes in current assets and liabilities, net of acquisitions
|
|
|
|
|
|
|||
Accounts and notes receivable
|
|
(252
|
)
|
|
(426
|
)
|
||
Inventories
|
|
(101
|
)
|
|
(127
|
)
|
||
Other current assets
|
|
189
|
|
|
18
|
|
||
Accounts payable
|
|
139
|
|
|
97
|
|
||
Accrued expenses
|
|
(209
|
)
|
|
(21
|
)
|
||
Changes in other liabilities and deferred revenue
|
|
129
|
|
|
133
|
|
||
Other, net
|
|
32
|
|
|
(35
|
)
|
||
Net cash provided by operating activities
|
|
734
|
|
|
569
|
|
||
|
|
|
|
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
||
Capital expenditures
|
|
(189
|
)
|
|
(247
|
)
|
||
Investments in internal use software
|
|
(27
|
)
|
|
(22
|
)
|
||
Investments in and advances to equity investees
|
|
(17
|
)
|
|
(17
|
)
|
||
Acquisitions of businesses, net of cash acquired
|
|
(1
|
)
|
|
(15
|
)
|
||
Investments in marketable securities—acquisitions (Note 6)
|
|
(379
|
)
|
|
(173
|
)
|
||
Investments in marketable securities—liquidations (Note 6)
|
|
237
|
|
|
155
|
|
||
Cash flows from derivatives not designated as hedges
|
|
(21
|
)
|
|
5
|
|
||
Other, net
|
|
6
|
|
|
14
|
|
||
Net cash used in investing activities
|
|
(391
|
)
|
|
(300
|
)
|
||
|
|
|
|
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
||
Proceeds from borrowings
|
|
109
|
|
|
12
|
|
||
Net borrowings of commercial paper (Note 8)
|
|
200
|
|
|
—
|
|
||
Payments on borrowings and capital lease obligations
|
|
(133
|
)
|
|
(31
|
)
|
||
Distributions to noncontrolling interests
|
|
(24
|
)
|
|
(14
|
)
|
||
Dividend payments on common stock
|
|
(333
|
)
|
|
(280
|
)
|
||
Repurchases of common stock
|
|
(695
|
)
|
|
(514
|
)
|
||
Other, net
|
|
(16
|
)
|
|
(2
|
)
|
||
Net cash used in financing activities
|
|
(892
|
)
|
|
(829
|
)
|
||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
|
(117
|
)
|
|
19
|
|
||
Net decrease in cash and cash equivalents
|
|
(666
|
)
|
|
(541
|
)
|
||
Cash and cash equivalents at beginning of year
|
|
1,711
|
|
|
2,301
|
|
||
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$
|
1,045
|
|
|
$
|
1,760
|
|
In millions
|
Common
Stock |
|
Additional
Paid-in Capital |
|
Retained
Earnings |
|
Treasury
Stock |
|
Common
Stock Held in Trust |
|
Accumulated
Other Comprehensive Loss |
|
Total
Cummins Inc. Shareholders’ Equity |
|
Noncontrolling
Interests |
|
Total
Equity |
||||||||||||||||||
BALANCE AT DECEMBER 31, 2014
|
$
|
556
|
|
|
$
|
1,583
|
|
|
$
|
9,545
|
|
|
$
|
(2,844
|
)
|
|
$
|
(13
|
)
|
|
$
|
(1,078
|
)
|
|
$
|
7,749
|
|
|
$
|
344
|
|
|
$
|
8,093
|
|
Net income
|
|
|
|
|
|
|
858
|
|
|
|
|
|
|
|
|
|
|
|
858
|
|
|
42
|
|
|
900
|
|
|||||||||
Other comprehensive (loss) income, net of t
ax (Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
7
|
|
|
(2
|
)
|
|
5
|
|
|||||||||
Issuance of shares
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|||||||||
Employee benefits trust activity
|
|
|
|
16
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
17
|
|
|
—
|
|
|
17
|
|
|||||||||
Acquisition of shares
|
|
|
|
|
|
|
|
|
|
(514
|
)
|
|
|
|
|
|
|
|
(514
|
)
|
|
—
|
|
|
(514
|
)
|
|||||||||
Cash dividends on common stock
|
|
|
|
|
|
|
(280
|
)
|
|
|
|
|
|
|
|
|
|
|
(280
|
)
|
|
—
|
|
|
(280
|
)
|
|||||||||
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(25
|
)
|
|
(25
|
)
|
|||||||||
Stock based awards
|
|
|
|
(4
|
)
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|||||||||
Other shareholder transactions
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
1
|
|
|
11
|
|
|||||||||
BALANCE AT JUNE 28, 2015
|
$
|
556
|
|
|
$
|
1,608
|
|
|
$
|
10,123
|
|
|
$
|
(3,350
|
)
|
|
$
|
(12
|
)
|
|
$
|
(1,071
|
)
|
|
$
|
7,854
|
|
|
$
|
360
|
|
|
$
|
8,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
BALANCE AT DECEMBER 31, 2015
|
$
|
556
|
|
|
$
|
1,622
|
|
|
$
|
10,322
|
|
|
$
|
(3,735
|
)
|
|
$
|
(11
|
)
|
|
$
|
(1,348
|
)
|
|
$
|
7,406
|
|
|
$
|
344
|
|
|
$
|
7,750
|
|
Net income
|
|
|
|
|
|
|
727
|
|
|
|
|
|
|
|
|
|
|
|
727
|
|
|
33
|
|
|
760
|
|
|||||||||
Other comprehensive (loss) income, net of tax (Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(272
|
)
|
|
(272
|
)
|
|
(6
|
)
|
|
(278
|
)
|
|||||||||
Issuance of shares
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|||||||||
Employee benefits trust activity
|
|
|
|
14
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
16
|
|
|
—
|
|
|
16
|
|
|||||||||
Acquisition of shares (Note 2)
|
|
|
|
|
|
|
|
|
|
(695
|
)
|
|
|
|
|
|
|
|
(695
|
)
|
|
—
|
|
|
(695
|
)
|
|||||||||
Cash dividends on common stock
|
|
|
|
|
|
|
(333
|
)
|
|
|
|
|
|
|
|
|
|
|
(333
|
)
|
|
—
|
|
|
(333
|
)
|
|||||||||
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(31
|
)
|
|
(31
|
)
|
|||||||||
Stock based awards
|
|
|
|
(6
|
)
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|||||||||
Other shareholder transactions
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
(6
|
)
|
|
—
|
|
|||||||||
BALANCE AT JULY 3, 2016
|
$
|
556
|
|
|
$
|
1,640
|
|
|
$
|
10,716
|
|
|
$
|
(4,422
|
)
|
|
$
|
(9
|
)
|
|
$
|
(1,620
|
)
|
|
$
|
6,861
|
|
|
$
|
334
|
|
|
$
|
7,195
|
|
|
Three months ended
|
|
Six months ended
|
||||||||
|
July 3,
2016 |
|
June 28,
2015 |
|
July 3,
2016 |
|
June 28,
2015 |
||||
Options excluded
|
1,262,469
|
|
|
490,085
|
|
|
1,475,068
|
|
|
414,982
|
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
In millions
|
|
July 3,
2016 |
|
June 28,
2015 |
|
July 3,
2016 |
|
June 28,
2015 |
||||||||
Defined benefit pension plans
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Voluntary contribution
|
|
$
|
37
|
|
|
$
|
36
|
|
|
$
|
85
|
|
|
$
|
72
|
|
Mandatory contribution
|
|
6
|
|
|
6
|
|
|
18
|
|
|
82
|
|
||||
Defined benefit pension contributions
|
|
$
|
43
|
|
|
$
|
42
|
|
|
$
|
103
|
|
|
$
|
154
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other postretirement plans
|
|
$
|
15
|
|
|
$
|
12
|
|
|
$
|
28
|
|
|
$
|
25
|
|
|
|
|
|
|
|
|
|
|
||||||||
Defined contribution pension plans
|
|
$
|
14
|
|
|
$
|
17
|
|
|
$
|
35
|
|
|
$
|
42
|
|
|
|
Pension
|
|
|
|
|
||||||||||||||||||
|
|
U.S. Plans
|
|
U.K. Plans
|
|
Other Postretirement Benefits
|
||||||||||||||||||
|
|
Three months ended
|
||||||||||||||||||||||
In millions
|
|
July 3,
2016 |
|
June 28,
2015 |
|
July 3,
2016 |
|
June 28,
2015 |
|
July 3,
2016 |
|
June 28,
2015 |
||||||||||||
Service cost
|
|
$
|
23
|
|
|
$
|
20
|
|
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
|
28
|
|
|
26
|
|
|
13
|
|
|
14
|
|
|
4
|
|
|
4
|
|
||||||
Expected return on plan assets
|
|
(51
|
)
|
|
(48
|
)
|
|
(19
|
)
|
|
(22
|
)
|
|
—
|
|
|
—
|
|
||||||
Recognized net actuarial loss
|
|
7
|
|
|
12
|
|
|
4
|
|
|
8
|
|
|
2
|
|
|
1
|
|
||||||
Net periodic benefit cost
|
|
$
|
7
|
|
|
$
|
10
|
|
|
$
|
4
|
|
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
5
|
|
|
|
Pension
|
|
|
|
|
||||||||||||||||||
|
|
U.S. Plans
|
|
U.K. Plans
|
|
Other Postretirement Benefits
|
||||||||||||||||||
|
|
Six months ended
|
||||||||||||||||||||||
In millions
|
|
July 3,
2016 |
|
June 28,
2015 |
|
July 3,
2016 |
|
June 28,
2015 |
|
July 3,
2016 |
|
June 28,
2015 |
||||||||||||
Service cost
|
|
$
|
46
|
|
|
$
|
40
|
|
|
$
|
11
|
|
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
|
56
|
|
|
51
|
|
|
26
|
|
|
28
|
|
|
8
|
|
|
8
|
|
||||||
Expected return on plan assets
|
|
(102
|
)
|
|
(95
|
)
|
|
(38
|
)
|
|
(45
|
)
|
|
—
|
|
|
—
|
|
||||||
Recognized net actuarial loss
|
|
14
|
|
|
23
|
|
|
8
|
|
|
17
|
|
|
3
|
|
|
2
|
|
||||||
Net periodic benefit cost
|
|
$
|
14
|
|
|
$
|
19
|
|
|
$
|
7
|
|
|
$
|
13
|
|
|
$
|
11
|
|
|
$
|
10
|
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
In millions
|
|
July 3,
2016 |
|
June 28,
2015 |
|
July 3,
2016 |
|
June 28,
2015 |
||||||||
Distribution Entities
|
|
|
|
|
|
|
|
|
||||||||
Komatsu Cummins Chile, Ltda.
|
|
$
|
8
|
|
|
$
|
8
|
|
|
$
|
18
|
|
|
$
|
15
|
|
North American distributors
|
|
6
|
|
|
8
|
|
|
11
|
|
|
18
|
|
||||
All other distributors
|
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||
Manufacturing Entities
|
|
|
|
|
|
|
|
|
|
|
||||||
Beijing Foton Cummins Engine Co., Ltd.
|
|
22
|
|
|
22
|
|
|
40
|
|
|
29
|
|
||||
Dongfeng Cummins Engine Company, Ltd.
|
|
15
|
|
|
15
|
|
|
22
|
|
|
29
|
|
||||
Chongqing Cummins Engine Company, Ltd.
|
|
9
|
|
|
11
|
|
|
17
|
|
|
23
|
|
||||
All other manufacturers
|
|
16
|
|
|
21
|
|
|
32
|
|
|
28
|
|
||||
Cummins share of net income
|
|
77
|
|
|
85
|
|
|
141
|
|
|
143
|
|
||||
Royalty and interest income
|
|
11
|
|
|
9
|
|
|
19
|
|
|
19
|
|
||||
Equity, royalty and interest income from investees
|
|
$
|
88
|
|
|
$
|
94
|
|
|
$
|
160
|
|
|
$
|
162
|
|
|
|
July 3, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
In millions
|
|
Cost
|
|
Gross unrealized
gains/(losses) |
|
Estimated
fair value |
|
Cost
|
|
Gross unrealized
gains/(losses) |
|
Estimated
fair value |
||||||||||||
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Level 2
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Bank debentures
|
|
$
|
116
|
|
|
$
|
(7
|
)
|
|
$
|
109
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Debt mutual funds
|
|
114
|
|
|
(1
|
)
|
|
113
|
|
|
88
|
|
|
—
|
|
|
88
|
|
||||||
Equity mutual funds
|
|
11
|
|
|
—
|
|
|
11
|
|
|
11
|
|
|
(1
|
)
|
|
10
|
|
||||||
Government debt securities
|
|
2
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||||
Total marketable securities
|
|
$
|
243
|
|
|
$
|
(8
|
)
|
|
$
|
235
|
|
|
$
|
101
|
|
|
$
|
(1
|
)
|
|
$
|
100
|
|
•
|
Bank debentures
— These investments provide us with a contractual rate of return and generally range in maturity from
three months
to
one year
. The counter-parties 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 institutions’ month-end statement.
|
•
|
Debt mutual funds
— The fair value measure for these investments is the daily net asset value 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.
|
•
|
Equity mutual funds
— The fair value measure for these investments is the net asset value 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.
|
•
|
Government debt securities-non-U.S.
— The fair value measure for these securities are broker quotes received from reputable firms. These securities are infrequently traded on a national stock exchange and these values are used on a test basis to corroborate our Level 2 input measure.
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
In millions
|
|
July 3,
2016 |
|
June 28,
2015 |
|
July 3,
2016 |
|
June 28,
2015 |
||||||||
Proceeds from sales and maturities of marketable securities
|
|
$
|
202
|
|
|
$
|
84
|
|
|
$
|
237
|
|
|
$
|
155
|
|
Gross realized gains from the sale of marketable securities
(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Contractual Maturity
|
|
(in millions)
|
||
1 year or less
|
|
$
|
223
|
|
1 - 5 years
|
|
—
|
|
|
5 - 10 years
|
|
1
|
|
|
Total
|
|
$
|
224
|
|
In millions
|
|
July 3,
2016 |
|
December 31,
2015 |
||||
Finished products
|
|
$
|
1,776
|
|
|
$
|
1,796
|
|
Work-in-process and raw materials
|
|
1,106
|
|
|
1,022
|
|
||
Inventories at FIFO cost
|
|
2,882
|
|
|
2,818
|
|
||
Excess of FIFO over LIFO
|
|
(104
|
)
|
|
(111
|
)
|
||
Total inventories
|
|
$
|
2,778
|
|
|
$
|
2,707
|
|
|
|
July 3, 2016
|
|
December 31, 2015
|
||||||||||
Dollars in millions
|
|
Amount
|
|
Weighted Average Interest Rate
|
|
Amount
|
|
Weighted Average Interest Rate
|
||||||
Loans payable
(1)
|
|
$
|
19
|
|
|
|
|
$
|
24
|
|
|
|
||
Commercial paper
(2)
|
|
200
|
|
|
0.45
|
%
|
(3)
|
—
|
|
|
—
|
|
||
Total loans payable and commercial paper
|
|
$
|
219
|
|
|
|
|
$
|
24
|
|
|
|
In millions
|
|
July 3,
2016 |
|
December 31,
2015 |
||||
Long-term debt
|
|
|
|
|
|
|
||
Senior notes, 3.65%, due 2023
|
|
$
|
500
|
|
|
$
|
500
|
|
Debentures, 6.75%, due 2027
|
|
58
|
|
|
58
|
|
||
Debentures, 7.125%, due 2028
|
|
250
|
|
|
250
|
|
||
Senior notes, 4.875%, due 2043
|
|
500
|
|
|
500
|
|
||
Debentures, 5.65%, due 2098 (effective interest rate 7.48%)
|
|
165
|
|
|
165
|
|
||
Other debt
|
|
64
|
|
|
55
|
|
||
Unamortized discount
|
|
(57
|
)
|
|
(57
|
)
|
||
Fair value adjustments due to hedge on indebtedness
|
|
86
|
|
|
63
|
|
||
Capital leases
|
|
86
|
|
|
81
|
|
||
Total long-term debt
|
|
1,652
|
|
|
1,615
|
|
||
Less: Current maturities of long-term debt
|
|
38
|
|
|
39
|
|
||
Long-term debt
|
|
$
|
1,614
|
|
|
$
|
1,576
|
|
|
|
Required Principal Payments
|
||||||||||||||||||
In millions
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
||||||||||
Principal payments
|
|
$
|
18
|
|
|
$
|
27
|
|
|
$
|
38
|
|
|
$
|
24
|
|
|
$
|
7
|
|
In millions
|
|
July 3,
2016 |
|
December 31,
2015 |
||||
Fair value of total debt
(1)
|
|
$
|
2,202
|
|
|
$
|
1,821
|
|
Carrying value of total debt
|
|
1,871
|
|
|
1,639
|
|
In millions
|
|
July 3,
2016 |
|
June 28,
2015 |
||||
Balance, beginning of year
|
|
$
|
1,404
|
|
|
$
|
1,283
|
|
Provision for warranties issued
|
|
181
|
|
|
233
|
|
||
Deferred revenue on extended warranty contracts sold
|
|
116
|
|
|
131
|
|
||
Payments
|
|
(199
|
)
|
|
(191
|
)
|
||
Amortization of deferred revenue on extended warranty contracts
|
|
(98
|
)
|
|
(88
|
)
|
||
Changes in estimates for pre-existing warranties
|
|
12
|
|
|
19
|
|
||
Foreign currency translation
|
|
(5
|
)
|
|
(3
|
)
|
||
Balance, end of period
|
|
$
|
1,411
|
|
|
$
|
1,384
|
|
In millions
|
|
July 3,
2016 |
|
Balance Sheet Location
|
||
Deferred revenue related to extended coverage programs
|
|
|
|
|
|
|
Current portion
|
|
$
|
203
|
|
|
Current portion of deferred revenue
|
Long-term portion
|
|
532
|
|
|
Other liabilities and deferred revenue
|
|
Total
|
|
$
|
735
|
|
|
|
|
|
|
|
|
||
Long-term portion of warranty liability
|
|
$
|
341
|
|
|
Other liabilities and deferred revenue
|
•
|
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 counter-party for losses suffered as a result of a misrepresentation in the contract.
|
|
|
Three months ended
|
||||||||||||||||||||||||||
In millions
|
|
Change in
pensions and other postretirement defined benefit plans |
|
Foreign
currency translation adjustment |
|
Unrealized gain
(loss) on marketable securities |
|
Unrealized gain
(loss) on derivatives |
|
Total
attributable to Cummins Inc. |
|
Noncontrolling
interests |
|
Total other comprehensive income (loss)
|
||||||||||||||
Balance at March 29, 2015
|
|
$
|
(656
|
)
|
|
$
|
(587
|
)
|
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
|
$
|
(1,245
|
)
|
|
|
|
|
|
|
||
Other comprehensive income before reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Before tax amount
|
|
—
|
|
|
153
|
|
|
—
|
|
|
9
|
|
|
162
|
|
|
$
|
(6
|
)
|
|
$
|
156
|
|
|||||
Tax expense
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(2
|
)
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
|||||||
After tax amount
|
|
—
|
|
|
152
|
|
|
—
|
|
|
7
|
|
|
159
|
|
|
(6
|
)
|
|
153
|
|
|||||||
Amounts reclassified from accumulated other comprehensive income
(1)(2)
|
|
15
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
1
|
|
|
16
|
|
|||||||
Net current period other comprehensive (loss) income
|
|
15
|
|
|
152
|
|
|
—
|
|
|
7
|
|
|
174
|
|
|
$
|
(5
|
)
|
|
$
|
169
|
|
|||||
Balance at June 28, 2015
|
|
$
|
(641
|
)
|
|
$
|
(435
|
)
|
|
$
|
(1
|
)
|
|
$
|
6
|
|
|
$
|
(1,071
|
)
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance at April 3, 2016
|
|
$
|
(645
|
)
|
|
$
|
(753
|
)
|
|
$
|
(2
|
)
|
|
$
|
(17
|
)
|
|
$
|
(1,417
|
)
|
|
|
|
|
|
|
||
Other comprehensive income before reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Before tax amount
|
|
—
|
|
|
(207
|
)
|
|
1
|
|
|
(10
|
)
|
|
(216
|
)
|
|
$
|
(6
|
)
|
|
$
|
(222
|
)
|
|||||
Tax benefit
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|||||||
After tax amount
|
|
—
|
|
|
(207
|
)
|
|
1
|
|
|
(8
|
)
|
|
(214
|
)
|
|
(6
|
)
|
|
(220
|
)
|
|||||||
Amounts reclassified from accumulated other comprehensive income
(1)(2)
|
|
9
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
11
|
|
|
—
|
|
|
11
|
|
|||||||
Net current period other comprehensive (loss) income
|
|
9
|
|
|
(207
|
)
|
|
1
|
|
|
(6
|
)
|
|
(203
|
)
|
|
$
|
(6
|
)
|
|
$
|
(209
|
)
|
|||||
Balance at July 3, 2016
|
|
$
|
(636
|
)
|
|
$
|
(960
|
)
|
|
$
|
(1
|
)
|
|
$
|
(23
|
)
|
|
$
|
(1,620
|
)
|
|
|
|
|
|
|
|
|
Six months ended
|
||||||||||||||||||||||||||
In millions
|
|
Change in
pensions and other postretirement defined benefit plans |
|
Foreign
currency translation adjustment |
|
Unrealized gain
(loss) on marketable securities |
|
Unrealized gain
(loss) on derivatives |
|
Total
attributable to Cummins Inc. |
|
Noncontrolling
interests |
|
Total other comprehensive income (loss)
|
||||||||||||||
Balance at December 31, 2014
|
|
$
|
(669
|
)
|
|
$
|
(406
|
)
|
|
$
|
(1
|
)
|
|
$
|
(2
|
)
|
|
$
|
(1,078
|
)
|
|
|
|
|
|
|
||
Other comprehensive income before reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Before tax amount
|
|
(3
|
)
|
|
(51
|
)
|
|
1
|
|
|
10
|
|
|
(43
|
)
|
|
$
|
(2
|
)
|
|
$
|
(45
|
)
|
|||||
Tax benefit (expense)
|
|
1
|
|
|
22
|
|
|
—
|
|
|
(2
|
)
|
|
21
|
|
|
—
|
|
|
21
|
|
|||||||
After tax amount
|
|
(2
|
)
|
|
(29
|
)
|
|
1
|
|
|
8
|
|
|
(22
|
)
|
|
(2
|
)
|
|
(24
|
)
|
|||||||
Amounts reclassified from accumulated other comprehensive income
(1)(2)
|
|
30
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
29
|
|
|
—
|
|
|
29
|
|
|||||||
Net current period other comprehensive income (loss)
|
|
28
|
|
|
(29
|
)
|
|
—
|
|
|
8
|
|
|
7
|
|
|
$
|
(2
|
)
|
|
$
|
5
|
|
|||||
Balance at June 28, 2015
|
|
$
|
(641
|
)
|
|
$
|
(435
|
)
|
|
$
|
(1
|
)
|
|
$
|
6
|
|
|
$
|
(1,071
|
)
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance at December 31, 2015
|
|
$
|
(654
|
)
|
|
$
|
(696
|
)
|
|
$
|
(2
|
)
|
|
$
|
4
|
|
|
$
|
(1,348
|
)
|
|
|
|
|
|
|
||
Other comprehensive income before reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Before tax amount
|
|
—
|
|
|
(265
|
)
|
|
1
|
|
|
(36
|
)
|
|
(300
|
)
|
|
$
|
(6
|
)
|
|
$
|
(306
|
)
|
|||||
Tax benefit
|
|
—
|
|
|
1
|
|
|
—
|
|
|
6
|
|
|
7
|
|
|
—
|
|
|
7
|
|
|||||||
After tax amount
|
|
—
|
|
|
(264
|
)
|
|
1
|
|
|
(30
|
)
|
|
(293
|
)
|
|
(6
|
)
|
|
(299
|
)
|
|||||||
Amounts reclassified from accumulated other comprehensive income
(1)(2)
|
|
18
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
21
|
|
|
—
|
|
|
21
|
|
|||||||
Net current period other comprehensive income (loss)
|
|
18
|
|
|
(264
|
)
|
|
1
|
|
|
(27
|
)
|
|
(272
|
)
|
|
$
|
(6
|
)
|
|
$
|
(278
|
)
|
|||||
Balance at July 3, 2016
|
|
$
|
(636
|
)
|
|
$
|
(960
|
)
|
|
$
|
(1
|
)
|
|
$
|
(23
|
)
|
|
$
|
(1,620
|
)
|
|
|
|
|
|
|
In millions
|
|
Three months ended
|
|
Six months ended
|
|
|
||||||||||||
(Gain)/Loss Components
|
|
July 3,
2016 |
|
June 28,
2015 |
|
July 3,
2016 |
|
June 28,
2015 |
|
Statement of Income Location
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Change in pension and other postretirement defined benefit plans
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Recognized actuarial loss
|
|
$
|
13
|
|
|
$
|
21
|
|
|
$
|
26
|
|
|
$
|
43
|
|
|
(1)
|
Tax effect
|
|
(4
|
)
|
|
(6
|
)
|
|
(8
|
)
|
|
(13
|
)
|
|
Income tax expense
|
||||
Net change in pensions and other postretirement defined benefit plans
|
|
9
|
|
|
15
|
|
|
18
|
|
|
30
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Realized (gain) on marketable securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
Other income (expense), net
|
||||
Tax effect
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
Income tax expense
|
||||
Net realized loss (gain) on marketable securities
|
|
—
|
|
|
1
|
|
|
—
|
|
|
(1
|
)
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Realized (gain) loss on derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency forward contracts
|
|
4
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
Net sales
|
||||
Tax effect
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
Income tax expense
|
||||
Net realized loss on derivatives
|
|
2
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total reclassifications for the period
|
|
$
|
11
|
|
|
$
|
16
|
|
|
$
|
21
|
|
|
$
|
29
|
|
|
|
In millions
|
Year ended December 31, 2015
(1)
|
||
Power Systems
|
26
|
|
|
Distribution
|
23
|
|
|
Engine
|
17
|
|
|
Components
|
13
|
|
|
Non-segment
|
11
|
|
|
Restructuring actions and other charges
|
$
|
90
|
|
In millions
|
|
|
||
Balance at December 31, 2015
|
|
$
|
60
|
|
Cash payments for 2015 actions
|
|
(42
|
)
|
|
Balance at July 3, 2016
|
|
$
|
18
|
|
In millions
|
|
Engine
|
|
Distribution
|
|
Components
|
|
Power Systems
|
|
Non-segment
Items
(1)
|
|
Total
|
||||||||||||
Three months ended July 3, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
External sales
|
|
$
|
1,504
|
|
|
$
|
1,538
|
|
|
$
|
933
|
|
|
$
|
553
|
|
|
$
|
—
|
|
|
$
|
4,528
|
|
Intersegment sales
|
|
498
|
|
|
6
|
|
|
346
|
|
|
368
|
|
|
(1,218
|
)
|
|
—
|
|
||||||
Total sales
|
|
2,002
|
|
|
1,544
|
|
|
1,279
|
|
|
921
|
|
|
(1,218
|
)
|
|
4,528
|
|
||||||
Depreciation and amortization
(2)
|
|
41
|
|
|
29
|
|
|
32
|
|
|
29
|
|
|
—
|
|
|
131
|
|
||||||
Research, development and engineering expenses
|
|
53
|
|
|
3
|
|
|
51
|
|
|
48
|
|
|
—
|
|
|
155
|
|
||||||
Equity, royalty and interest income from investees
|
|
46
|
|
|
19
|
|
|
12
|
|
|
11
|
|
|
—
|
|
|
88
|
|
||||||
Interest income
|
|
3
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
6
|
|
||||||
Segment EBIT
|
|
206
|
|
(3)
|
87
|
|
|
190
|
|
|
90
|
|
|
18
|
|
|
591
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Three months ended June 28, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
External sales
|
|
$
|
1,834
|
|
|
$
|
1,487
|
|
|
$
|
1,017
|
|
|
$
|
677
|
|
|
$
|
—
|
|
|
$
|
5,015
|
|
Intersegment sales
|
|
491
|
|
|
8
|
|
|
380
|
|
|
420
|
|
|
(1,299
|
)
|
|
—
|
|
||||||
Total sales
|
|
2,325
|
|
|
1,495
|
|
|
1,397
|
|
|
1,097
|
|
|
(1,299
|
)
|
|
5,015
|
|
||||||
Depreciation and amortization
(2)
|
|
47
|
|
|
25
|
|
|
28
|
|
|
26
|
|
|
—
|
|
|
126
|
|
||||||
Research, development and engineering expenses
|
|
53
|
|
|
3
|
|
|
57
|
|
|
53
|
|
|
—
|
|
|
166
|
|
||||||
Equity, royalty and interest income from investees
|
|
51
|
|
|
21
|
|
|
8
|
|
|
14
|
|
|
—
|
|
|
94
|
|
||||||
Interest income
|
|
2
|
|
|
1
|
|
|
1
|
|
|
2
|
|
|
—
|
|
|
6
|
|
||||||
Segment EBIT
|
|
278
|
|
|
113
|
|
|
223
|
|
|
127
|
|
|
(20
|
)
|
|
721
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Six months ended July 3, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
External sales
|
|
$
|
2,993
|
|
|
$
|
2,996
|
|
|
$
|
1,830
|
|
|
$
|
1,000
|
|
|
$
|
—
|
|
|
$
|
8,819
|
|
Intersegment sales
|
|
985
|
|
|
11
|
|
|
686
|
|
|
729
|
|
|
(2,411
|
)
|
|
—
|
|
||||||
Total sales
|
|
3,978
|
|
|
3,007
|
|
|
2,516
|
|
|
1,729
|
|
|
(2,411
|
)
|
|
8,819
|
|
||||||
Depreciation and amortization
(2)
|
|
80
|
|
|
57
|
|
|
63
|
|
|
58
|
|
|
—
|
|
|
258
|
|
||||||
Research, development and engineering expenses
|
|
110
|
|
|
7
|
|
|
107
|
|
|
97
|
|
|
—
|
|
|
321
|
|
||||||
Equity, royalty and interest income from investees
|
|
82
|
|
|
37
|
|
|
20
|
|
|
21
|
|
|
—
|
|
|
160
|
|
||||||
Interest income
|
|
5
|
|
|
2
|
|
|
2
|
|
|
3
|
|
|
—
|
|
|
12
|
|
||||||
Segment EBIT
|
|
403
|
|
(3)
|
174
|
|
|
353
|
|
|
136
|
|
|
9
|
|
|
1,075
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Six months ended June 28, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
External sales
|
|
$
|
3,523
|
|
|
$
|
2,956
|
|
|
$
|
1,948
|
|
|
$
|
1,297
|
|
|
$
|
—
|
|
|
$
|
9,724
|
|
Intersegment sales
|
|
947
|
|
|
15
|
|
|
748
|
|
|
802
|
|
|
(2,512
|
)
|
|
—
|
|
||||||
Total sales
|
|
4,470
|
|
|
2,971
|
|
|
2,696
|
|
|
2,099
|
|
|
(2,512
|
)
|
|
9,724
|
|
||||||
Depreciation and amortization
(2)
|
|
93
|
|
|
52
|
|
|
54
|
|
|
54
|
|
|
—
|
|
|
253
|
|
||||||
Research, development and engineering expenses
|
|
122
|
|
|
6
|
|
|
118
|
|
|
115
|
|
|
—
|
|
|
361
|
|
||||||
Equity, royalty and interest income from investees
|
|
74
|
|
|
41
|
|
|
17
|
|
|
30
|
|
|
—
|
|
|
162
|
|
||||||
Interest income
|
|
4
|
|
|
2
|
|
|
2
|
|
|
3
|
|
|
—
|
|
|
11
|
|
||||||
Segment EBIT
|
|
478
|
|
|
201
|
|
|
418
|
|
|
228
|
|
|
(42
|
)
|
|
1,283
|
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
In millions
|
|
July 3,
2016 |
|
June 28,
2015 |
|
July 3,
2016 |
|
June 28,
2015 |
||||||||
Total segment EBIT
|
|
$
|
591
|
|
|
$
|
721
|
|
|
$
|
1,075
|
|
|
$
|
1,283
|
|
Less: Interest expense
|
|
16
|
|
|
17
|
|
|
35
|
|
|
31
|
|
||||
Income before income taxes
|
|
$
|
575
|
|
|
$
|
704
|
|
|
$
|
1,040
|
|
|
$
|
1,252
|
|
•
|
a sustained slowdown or significant downturn in our markets;
|
•
|
a downturn in the North American truck industry;
|
•
|
a major customer experiencing financial distress;
|
•
|
changes in the engine outsourcing practices of significant customers;
|
•
|
any significant problems in our new engine platforms;
|
•
|
a further slowdown in infrastructure development;
|
•
|
unpredictability in the adoption, implementation and enforcement of emission standards around the world;
|
•
|
foreign currency exchange rate changes;
|
•
|
the actions of, and income from, joint ventures and other investees that we do not directly control;
|
•
|
the integration of our previously partially-owned United States and Canadian distributors;
|
•
|
our plan to grow through strategic acquisitions and related uncertainties of entering into such transactions;
|
•
|
challenges or unexpected costs in completing restructuring and cost reduction initiatives;
|
•
|
supply shortages and supplier financial risk, particularly from any of our single-sourced suppliers;
|
•
|
variability in material and commodity costs;
|
•
|
product recalls;
|
•
|
the development of new technologies;
|
•
|
competitor pricing activity;
|
•
|
increasing competition, including increased global competition among our customers in emerging markets;
|
•
|
exposure to potential security breaches or other disruptions to our information technology systems and data security;
|
•
|
political, economic and other risks from operations in numerous countries;
|
•
|
changes in taxation;
|
•
|
global legal and ethical compliance costs and risks;
|
•
|
aligning our capacity and production with our demand;
|
•
|
product liability claims;
|
•
|
increasingly stringent environmental laws and regulations;
|
•
|
the price and availability of energy;
|
•
|
the performance of our pension plan assets and volatility of discount rates;
|
•
|
labor relations;
|
•
|
changes in actuarial and accounting standards;
|
•
|
our sales mix of products;
|
•
|
protection and validity of our patent and other intellectual property rights;
|
•
|
technological implementation and cost/financial risks in our increasing use of large, multi-year contracts;
|
•
|
the cyclical nature of some of our markets;
|
•
|
the outcome of pending and future litigation and governmental proceedings;
|
•
|
continued availability of financing, financial instruments and financial resources in the amounts, at the times and on the terms required to support our future business; and
|
•
|
other risk factors described in our Form 10-K, Part I, Item 1A under the caption “Risk Factors.”
|
|
|
Three months ended
|
||||||||||||||||||||||||||
Operating Segments
|
|
July 3, 2016
|
|
June 28, 2015
|
|
Percent change
|
||||||||||||||||||||||
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
2016 vs. 2015
|
||||||||||||||
In millions
|
|
Sales
|
|
of Total
|
|
EBIT
|
|
Sales
(1)
|
|
of Total
|
|
EBIT
(1)
|
|
Sales
|
|
EBIT
|
||||||||||||
Engine
|
|
$
|
2,002
|
|
|
44
|
%
|
|
$
|
206
|
|
|
$
|
2,325
|
|
|
46
|
%
|
|
$
|
278
|
|
|
(14
|
)%
|
|
(26
|
)%
|
Distribution
|
|
1,544
|
|
|
34
|
%
|
|
87
|
|
|
1,495
|
|
|
30
|
%
|
|
113
|
|
|
3
|
%
|
|
(23
|
)%
|
||||
Components
|
|
1,279
|
|
|
28
|
%
|
|
190
|
|
|
1,397
|
|
|
28
|
%
|
|
223
|
|
|
(8
|
)%
|
|
(15
|
)%
|
||||
Power Systems
|
|
921
|
|
|
21
|
%
|
|
90
|
|
|
1,097
|
|
|
22
|
%
|
|
127
|
|
|
(16
|
)%
|
|
(29
|
)%
|
||||
Intersegment eliminations
|
|
(1,218
|
)
|
|
(27
|
)%
|
|
—
|
|
|
(1,299
|
)
|
|
(26
|
)%
|
|
—
|
|
|
(6
|
)%
|
|
—
|
|
||||
Non-segment
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
NM
|
|
||||
Total
|
|
$
|
4,528
|
|
|
100
|
%
|
|
$
|
591
|
|
|
$
|
5,015
|
|
|
100
|
%
|
|
$
|
721
|
|
|
(10
|
)%
|
|
(18
|
)%
|
|
|
Six months ended
|
||||||||||||||||||||||||||
Operating Segments
|
|
July 3, 2016
|
|
June 28, 2015
|
|
Percent change
|
||||||||||||||||||||||
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
2016 vs. 2015
|
||||||||||||||
In millions
|
|
Sales
|
|
of Total
|
|
EBIT
|
|
Sales
(1)
|
|
of Total
|
|
EBIT
(1)
|
|
Sales
|
|
EBIT
|
||||||||||||
Engine
|
|
$
|
3,978
|
|
|
45
|
%
|
|
$
|
403
|
|
|
$
|
4,470
|
|
|
46
|
%
|
|
$
|
478
|
|
|
(11
|
)%
|
|
(16
|
)%
|
Distribution
|
|
3,007
|
|
|
34
|
%
|
|
174
|
|
|
2,971
|
|
|
30
|
%
|
|
201
|
|
|
1
|
%
|
|
(13
|
)%
|
||||
Components
|
|
2,516
|
|
|
28
|
%
|
|
353
|
|
|
2,696
|
|
|
28
|
%
|
|
418
|
|
|
(7
|
)%
|
|
(16
|
)%
|
||||
Power Systems
|
|
1,729
|
|
|
20
|
%
|
|
136
|
|
|
2,099
|
|
|
22
|
%
|
|
228
|
|
|
(18
|
)%
|
|
(40
|
)%
|
||||
Intersegment eliminations
|
|
(2,411
|
)
|
|
(27
|
)%
|
|
—
|
|
|
(2,512
|
)
|
|
(26
|
)%
|
|
—
|
|
|
(4
|
)%
|
|
—
|
|
||||
Non-segment
|
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
(42
|
)
|
|
—
|
|
|
NM
|
|
||||
Total
|
|
$
|
8,819
|
|
|
100
|
%
|
|
$
|
1,075
|
|
|
$
|
9,724
|
|
|
100
|
%
|
|
$
|
1,283
|
|
|
(9
|
)%
|
|
(16
|
)%
|
|
•
|
We expect demand for pick-up trucks in North America to remain strong.
|
•
|
We expect demand in India to improve in most end-markets as its economy continues to improve.
|
•
|
We expect to realize annualized savings from the 2015 restructuring actions of approximately $160 million.
|
•
|
We expect industry production of heavy-duty trucks in North America to decline.
|
•
|
We expect power generation markets to remain weak.
|
•
|
We believe weak economic conditions in Brazil will continue to negatively impact demand across our businesses.
|
•
|
Foreign currency volatility could continue to put pressure on our revenues and earnings.
|
•
|
We expect market demand to remain weak in the oil and gas markets as the result of low crude oil prices.
|
•
|
We expect demand for equipment in global mining markets to remain weak.
|
•
|
We may close or restructure additional manufacturing facilities as we evaluate the appropriate size and structure of our manufacturing capacity, which could result in additional charges.
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
||||||||||||||||||||||
|
|
July 3,
2016 |
|
June 28,
2015 |
|
(Unfavorable)
|
|
July 3,
2016 |
|
June 28,
2015 |
|
(Unfavorable)
|
||||||||||||||||||
In millions (except per share amounts)
|
|
|
Amount
|
|
Percent
|
|
|
|
Amount
|
|
Percent
|
|||||||||||||||||||
NET SALES
|
$
|
4,528
|
|
|
$
|
5,015
|
|
|
$
|
(487
|
)
|
|
(10
|
)%
|
|
$
|
8,819
|
|
|
$
|
9,724
|
|
|
$
|
(905
|
)
|
|
(9
|
)%
|
|
Cost of sales
|
3,331
|
|
|
3,683
|
|
|
352
|
|
|
10
|
%
|
|
6,566
|
|
|
7,197
|
|
|
631
|
|
|
9
|
%
|
|||||||
GROSS MARGIN
|
1,197
|
|
|
1,332
|
|
|
(135
|
)
|
|
(10
|
)%
|
|
2,253
|
|
|
2,527
|
|
|
(274
|
)
|
|
(11
|
)%
|
|||||||
OPERATING EXPENSES AND INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Selling, general and administrative expenses
|
524
|
|
|
537
|
|
|
13
|
|
|
2
|
%
|
|
1,014
|
|
|
1,054
|
|
|
40
|
|
|
4
|
%
|
|||||||
Research, development and engineering expenses
|
155
|
|
|
166
|
|
|
11
|
|
|
7
|
%
|
|
321
|
|
|
361
|
|
|
40
|
|
|
11
|
%
|
|||||||
Equity, royalty and interest income from investees
|
88
|
|
|
94
|
|
|
(6
|
)
|
|
(6
|
)%
|
|
160
|
|
|
162
|
|
|
(2
|
)
|
|
(1
|
)%
|
|||||||
Other operating expense, net
|
(39
|
)
|
|
—
|
|
|
(39
|
)
|
|
NM
|
|
|
(41
|
)
|
|
(3
|
)
|
|
(38
|
)
|
|
NM
|
|
|||||||
OPERATING INCOME
|
567
|
|
|
723
|
|
|
(156
|
)
|
|
(22
|
)%
|
|
1,037
|
|
|
1,271
|
|
|
(234
|
)
|
|
(18
|
)%
|
|||||||
Interest income
|
6
|
|
|
6
|
|
|
—
|
|
|
—
|
%
|
|
12
|
|
|
11
|
|
|
1
|
|
|
9
|
%
|
|||||||
Interest expense
|
16
|
|
|
17
|
|
|
1
|
|
|
6
|
%
|
|
35
|
|
|
31
|
|
|
(4
|
)
|
|
(13
|
)%
|
|||||||
Other income (expense), net
|
18
|
|
|
(8
|
)
|
|
26
|
|
|
NM
|
|
|
26
|
|
|
1
|
|
|
25
|
|
|
NM
|
|
|||||||
INCOME BEFORE INCOME TAXES
|
575
|
|
|
704
|
|
|
(129
|
)
|
|
(18
|
)%
|
|
1,040
|
|
|
1,252
|
|
|
(212
|
)
|
|
(17
|
)%
|
|||||||
Income tax expense
|
148
|
|
|
208
|
|
|
60
|
|
|
29
|
%
|
|
280
|
|
|
352
|
|
|
72
|
|
|
20
|
%
|
|||||||
CONSOLIDATED NET INCOME
|
427
|
|
|
496
|
|
|
(69
|
)
|
|
(14
|
)%
|
|
760
|
|
|
900
|
|
|
(140
|
)
|
|
(16
|
)%
|
|||||||
Less: Net income attributable to noncontrolling interests
|
21
|
|
|
25
|
|
|
4
|
|
|
16
|
%
|
|
33
|
|
|
42
|
|
|
9
|
|
|
21
|
%
|
|||||||
NET INCOME ATTRIBUTABLE TO CUMMINS INC.
|
$
|
406
|
|
|
$
|
471
|
|
|
$
|
(65
|
)
|
|
(14
|
)%
|
|
$
|
727
|
|
|
$
|
858
|
|
|
$
|
(131
|
)
|
|
(15
|
)%
|
|
Diluted Earnings Per Common Share Attributable to Cummins Inc.
|
$
|
2.40
|
|
|
$
|
2.62
|
|
|
$
|
(0.22
|
)
|
|
(8
|
)%
|
|
$
|
4.26
|
|
|
$
|
4.76
|
|
|
$
|
(0.50
|
)
|
|
(11
|
)%
|
|
|
Three months ended
|
|
Favorable/
(Unfavorable)
|
|
Six months ended
|
|
Favorable/
(Unfavorable) |
||||||||||
|
|
July 3,
2016 |
|
June 28,
2015 |
|
|
July 3,
2016 |
|
June 28,
2015 |
|
||||||||
Percent of sales
|
|
|
|
Percentage Points
|
|
|
|
Percentage Points
|
||||||||||
Gross margin
|
|
26.4
|
%
|
|
26.6
|
%
|
|
(0.2
|
)
|
|
25.5
|
%
|
|
26.0
|
%
|
|
(0.5
|
)
|
Selling, general and administrative expenses
|
|
11.6
|
%
|
|
10.7
|
%
|
|
(0.9
|
)
|
|
11.5
|
%
|
|
10.8
|
%
|
|
(0.7
|
)
|
Research, development and engineering expenses
|
|
3.4
|
%
|
|
3.3
|
%
|
|
(0.1
|
)
|
|
3.6
|
%
|
|
3.7
|
%
|
|
0.1
|
|
•
|
Engine segment sales
decrease
d
14 percent
primarily due to lower demand in North American on-highway markets and lower demand in all North American off-highway markets, partially offset by increased sales in the light-duty automotive markets.
|
•
|
Power Systems segment sales
decrease
d
16 percent
primarily due to lower demand in all product lines and decreased sales in most regions with the largest declines in China, North America, Asia (excluding China) and the Middle East.
|
•
|
Components segment sales
decrease
d
8 percent
primarily due to lower demand in all lines of businesses, mostly in North American on-highway markets, partially offset by higher demand in China.
|
•
|
Foreign currency fluctuations unfavorably impacted sales by approximately
2 percent
primarily in the
Chinese renminbi, Brazilian real, Indian rupee, Australian dollar and British pound
.
|
•
|
Engine segment sales
decrease
d
11 percent
primarily due to lower demand in North American on-highway markets and lower demand in most global off-highway markets, partially offset by increased sales in the light-duty automotive markets.
|
•
|
Power Systems segment sales
decrease
d
18 percent
primarily due to lower demand in all product lines and decreased sales in most regions with the largest declines in China, North America, Asia (excluding China), Latin America and the Middle East, partially offset by increased sales in Western Europe.
|
•
|
Foreign currency fluctuations unfavorably impacted sales by approximately
2 percent
primarily in the Brazilian real, Chinese renminbi, Indian rupee, Australian dollar, Canadian dollar, British pound and South African rand.
|
•
|
Components segment sales
decrease
d
7 percent
primarily due to lower demand in all lines of business, mostly in North American on-highway products, partially offset by higher demand in China.
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
In millions
|
|
July 3,
2016 |
|
June 28,
2015 |
|
July 3,
2016 |
|
June 28,
2015 |
||||||||
Loss contingency
|
|
$
|
(39
|
)
|
|
$
|
—
|
|
|
$
|
(39
|
)
|
|
$
|
—
|
|
Loss on write off of assets
|
|
(4
|
)
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
||||
Amortization of intangible assets
|
|
(2
|
)
|
|
(5
|
)
|
|
(5
|
)
|
|
(11
|
)
|
||||
Royalty income, net
|
|
6
|
|
|
5
|
|
|
13
|
|
|
10
|
|
||||
Other, net
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(2
|
)
|
||||
Total other operating expense, net
|
|
$
|
(39
|
)
|
|
$
|
—
|
|
|
$
|
(41
|
)
|
|
$
|
(3
|
)
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
In millions
|
|
July 3,
2016 |
|
June 28,
2015 |
|
July 3,
2016 |
|
June 28,
2015 |
||||||||
Change in cash surrender value of corporate owned life insurance
|
|
$
|
15
|
|
|
$
|
(8
|
)
|
|
$
|
23
|
|
|
$
|
2
|
|
Dividend income
|
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
||||
Bank charges
|
|
(1
|
)
|
|
(2
|
)
|
|
(4
|
)
|
|
(4
|
)
|
||||
Foreign currency loss, net
|
|
(8
|
)
|
|
(3
|
)
|
|
(11
|
)
|
|
(5
|
)
|
||||
Other, net
|
|
11
|
|
|
4
|
|
|
16
|
|
|
6
|
|
||||
Total other income (expense), net
|
|
$
|
18
|
|
|
$
|
(8
|
)
|
|
$
|
26
|
|
|
$
|
1
|
|
|
|
Three months ended
|
||||||||||
|
|
July 3, 2016
|
|
June 28, 2015
|
||||||||
In millions
|
|
Translation adjustment
|
|
Primary currency driver vs. U.S. dollar
|
|
Translation adjustment
|
|
Primary currency driver vs. U.S. dollar
|
||||
Wholly owned subsidiaries
|
|
$
|
(193
|
)
|
|
British pound, Chinese renminbi offset by Brazilian real
|
|
$
|
152
|
|
|
British pound
|
Equity method investments
|
|
(14
|
)
|
|
Chinese renminbi, Indian rupee offset by Japanese yen
|
|
—
|
|
|
|
||
Consolidated subsidiaries with a non-controlling interest
|
|
(6
|
)
|
|
Indian rupee, Chinese renminbi
|
|
(7
|
)
|
|
Indian rupee
|
||
Total
|
|
$
|
(213
|
)
|
|
|
|
$
|
145
|
|
|
|
|
|
Six months ended
|
||||||||||
|
|
July 3, 2016
|
|
June 28, 2015
|
||||||||
In millions
|
|
Translation adjustment
|
|
Primary currency driver vs. U.S. dollar
|
|
Translation adjustment
|
|
Primary currency driver vs. U.S. dollar
|
||||
Wholly owned subsidiaries
|
|
$
|
(255
|
)
|
|
British pound, Chinese renminbi offset by Brazilian real
|
|
$
|
(29
|
)
|
|
Brazilian real offset by British pound
|
Equity method investments
|
|
(9
|
)
|
|
Chinese renminbi, Indian rupee offset by Japanese yen, Mexican peso
(1)
|
|
—
|
|
|
|
||
Consolidated subsidiaries with a non-controlling interest
|
|
(6
|
)
|
|
Indian rupee, Chinese renminbi
|
|
(2
|
)
|
|
Indian rupee
|
||
Total
|
|
$
|
(270
|
)
|
|
|
|
$
|
(31
|
)
|
|
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
||||||||||||||||||||||
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
||||||||||||||||||
In millions
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
||||||||||||||
External sales
(1)
|
|
$
|
1,504
|
|
|
$
|
1,834
|
|
|
$
|
(330
|
)
|
|
(18
|
)%
|
|
$
|
2,993
|
|
|
$
|
3,523
|
|
|
$
|
(530
|
)
|
|
(15
|
)%
|
Intersegment sales
(1)
|
|
498
|
|
|
491
|
|
|
7
|
|
|
1
|
%
|
|
985
|
|
|
947
|
|
|
38
|
|
|
4
|
%
|
||||||
Total sales
|
|
2,002
|
|
|
2,325
|
|
|
(323
|
)
|
|
(14
|
)%
|
|
3,978
|
|
|
4,470
|
|
|
(492
|
)
|
|
(11
|
)%
|
||||||
Depreciation and amortization
|
|
41
|
|
|
47
|
|
|
6
|
|
|
13
|
%
|
|
80
|
|
|
93
|
|
|
13
|
|
|
14
|
%
|
||||||
Research, development and engineering expenses
|
|
53
|
|
|
53
|
|
|
—
|
|
|
—
|
%
|
|
110
|
|
|
122
|
|
|
12
|
|
|
10
|
%
|
||||||
Equity, royalty and interest income from investees
|
|
46
|
|
|
51
|
|
|
(5
|
)
|
|
(10
|
)%
|
|
82
|
|
|
74
|
|
|
8
|
|
|
11
|
%
|
||||||
Interest income
|
|
3
|
|
|
2
|
|
|
1
|
|
|
50
|
%
|
|
5
|
|
|
4
|
|
|
1
|
|
|
25
|
%
|
||||||
Segment EBIT
|
|
206
|
|
|
278
|
|
|
(72
|
)
|
|
(26
|
)%
|
|
403
|
|
|
478
|
|
|
(75
|
)
|
|
(16
|
)%
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
Percentage Points
|
|
|
|
|
|
|
|
Percentage Points
|
||||||||||||||
Segment EBIT as a percentage of total sales
|
|
10.3
|
%
|
|
12.0
|
%
|
|
|
|
|
(1.7
|
)
|
|
10.1
|
%
|
|
10.7
|
%
|
|
|
|
|
(0.6
|
)
|
•
|
Heavy-duty truck -
We manufacture diesel engines that range from 310 to 600 horsepower serving global heavy-duty truck customers worldwide, primarily in North America.
|
•
|
Medium-duty truck and bus -
We manufacture diesel engines ranging from 200 to 450 horsepower serving medium-duty truck and bus customers worldwide, with key markets including North America, Latin America, Europe and Mexico. We also provide diesel and natural gas engines for school buses, transit buses and shuttle buses worldwide, with key markets including North America, Europe, Latin America and Asia, and diesel engines for Class A motor homes (RVs), primarily in North America.
|
•
|
Light-duty automotive (Pickup and Light Commercial Vehicle (LCV)) -
We manufacture 105 to 385 horsepower diesel engines, including engines for the pickup truck market for Chrysler and Nissan in North America, and LCV markets in Europe, Latin America and Asia.
|
•
|
Off-highway -
We provide diesel engines that range from 60 to 755 horsepower to key global markets including construction, mining, rail, defense, agriculture, marine, and oil and gas equipment and also to the power generation business for standby, mobile and distributed power generation solutions throughout the world.
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
||||||||||||||||||||||
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
||||||||||||||||||
In millions
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
||||||||||||||
Heavy-duty truck
|
|
$
|
622
|
|
|
$
|
875
|
|
|
$
|
(253
|
)
|
|
(29
|
)%
|
|
$
|
1,253
|
|
|
$
|
1,632
|
|
|
$
|
(379
|
)
|
|
(23
|
)%
|
Medium-duty truck and bus
|
|
600
|
|
|
674
|
|
|
(74
|
)
|
|
(11
|
)%
|
|
1,149
|
|
|
1,282
|
|
|
(133
|
)
|
|
(10
|
)%
|
||||||
Light-duty automotive
|
|
394
|
|
|
354
|
|
|
40
|
|
|
11
|
%
|
|
827
|
|
|
735
|
|
|
92
|
|
|
13
|
%
|
||||||
Total on-highway
|
|
1,616
|
|
|
1,903
|
|
|
(287
|
)
|
|
(15
|
)%
|
|
3,229
|
|
|
3,649
|
|
|
(420
|
)
|
|
(12
|
)%
|
||||||
Off-highway
|
|
386
|
|
|
422
|
|
|
(36
|
)
|
|
(9
|
)%
|
|
749
|
|
|
821
|
|
|
(72
|
)
|
|
(9
|
)%
|
||||||
Total sales
|
|
$
|
2,002
|
|
|
$
|
2,325
|
|
|
$
|
(323
|
)
|
|
(14
|
)%
|
|
$
|
3,978
|
|
|
$
|
4,470
|
|
|
$
|
(492
|
)
|
|
(11
|
)%
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
||||||||||||||||
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
||||||||||||
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
||||||||
Heavy-duty
|
|
20,700
|
|
|
32,800
|
|
|
(12,100
|
)
|
|
(37
|
)%
|
|
40,400
|
|
|
61,500
|
|
|
(21,100
|
)
|
|
(34
|
)%
|
Mid-range
|
|
62,300
|
|
|
66,600
|
|
|
(4,300
|
)
|
|
(6
|
)%
|
|
117,700
|
|
|
127,800
|
|
|
(10,100
|
)
|
|
(8
|
)%
|
Light-duty
|
|
57,100
|
|
|
53,400
|
|
|
3,700
|
|
|
7
|
%
|
|
118,800
|
|
|
104,600
|
|
|
14,200
|
|
|
14
|
%
|
Total unit shipments
|
|
140,100
|
|
|
152,800
|
|
|
(12,700
|
)
|
|
(8
|
)%
|
|
276,900
|
|
|
293,900
|
|
|
(17,000
|
)
|
|
(6
|
)%
|
•
|
Heavy-duty truck engine sales
decrease
d
$253 million
primarily due to lower demand in North American heavy-duty truck markets with decreased engine shipments of 46 percent.
|
•
|
Medium-duty truck and bus sales
decrease
d
$74 million
primarily due to lower demand in global medium-duty truck markets with decreased engine shipments of 19 percent, primarily in North America, Mexico and Brazil.
|
•
|
Off-highway sales
decrease
d
$36 million
primarily due to decreased engine shipments to all industrial markets in North America, partially offset by increased unit shipments of 37 percent in international construction markets.
|
•
|
Heavy-duty truck engine sales
decrease
d
$379 million
primarily due to lower demand in North American heavy-duty truck markets with decreased engine shipments of 40 percent.
|
•
|
Medium-duty truck and bus sales
decrease
d
$133 million
primarily due to lower demand in global medium-duty truck markets with decreased engine shipments of 18 percent, primarily in North America and Brazil.
|
•
|
Off-highway sales
decrease
d
$72 million
primarily due to decreased engine shipments in most global industrial markets, partially offset by increased unit shipments of 20 percent in international construction markets.
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||||||
|
|
July 3, 2016 vs. June 28, 2015
|
|
July 3, 2016 vs. June 28, 2015
|
||||||||||||||||
|
|
Favorable/(Unfavorable) Change
|
|
Favorable/(Unfavorable) Change
|
||||||||||||||||
In millions
|
|
Amount
|
|
Percent
|
|
Percentage point
change as a percent of total sales |
|
Amount
|
|
Percent
|
|
Percentage point
change as a percent of total sales |
||||||||
Gross margin
|
|
$
|
(56
|
)
|
|
(13
|
)%
|
|
0.3
|
|
|
$
|
(108
|
)
|
|
(13
|
)%
|
|
(0.3
|
)
|
Selling, general and administrative expenses
|
|
24
|
|
|
14
|
%
|
|
—
|
|
|
50
|
|
|
15
|
%
|
|
0.4
|
|
||
Research, development and engineering expenses
|
|
—
|
|
|
—
|
%
|
|
(0.3
|
)
|
|
12
|
|
|
10
|
%
|
|
(0.1
|
)
|
||
Equity, royalty and interest income from investees
|
|
(5
|
)
|
|
(10
|
)%
|
|
0.1
|
|
|
8
|
|
|
11
|
%
|
|
0.4
|
|
||
Loss contingency
(1)
|
|
(39
|
)
|
|
NM
|
|
|
NM
|
|
|
(39
|
)
|
|
NM
|
|
|
NM
|
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
||||||||||||||||||||||
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
||||||||||||||||||
In millions
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
||||||||||||||
External sales
|
|
$
|
1,538
|
|
|
$
|
1,487
|
|
|
$
|
51
|
|
|
3
|
%
|
|
$
|
2,996
|
|
|
$
|
2,956
|
|
|
$
|
40
|
|
|
1
|
%
|
Intersegment sales
|
|
6
|
|
|
8
|
|
|
(2
|
)
|
|
(25
|
)%
|
|
11
|
|
|
15
|
|
|
(4
|
)
|
|
(27
|
)%
|
||||||
Total sales
|
|
1,544
|
|
|
1,495
|
|
|
49
|
|
|
3
|
%
|
|
3,007
|
|
|
2,971
|
|
|
36
|
|
|
1
|
%
|
||||||
Depreciation and amortization
|
|
29
|
|
|
25
|
|
|
(4
|
)
|
|
(16
|
)%
|
|
57
|
|
|
52
|
|
|
(5
|
)
|
|
(10
|
)%
|
||||||
Research, development and engineering expenses
|
|
3
|
|
|
3
|
|
|
—
|
|
|
—
|
%
|
|
7
|
|
|
6
|
|
|
(1
|
)
|
|
(17
|
)%
|
||||||
Equity, royalty and interest income from investees
|
|
19
|
|
|
21
|
|
|
(2
|
)
|
|
(10
|
)%
|
|
37
|
|
|
41
|
|
|
(4
|
)
|
|
(10
|
)%
|
||||||
Interest income
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
%
|
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
%
|
||||||
Segment EBIT
|
|
87
|
|
|
113
|
|
|
(26
|
)
|
|
(23
|
)%
|
|
174
|
|
|
201
|
|
|
(27
|
)
|
|
(13
|
)%
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
Percentage Points
|
|
|
|
|
|
Percentage Points
|
||||||||||||||||||
Segment EBIT as a percentage of total sales
|
|
5.6
|
%
|
|
7.6
|
%
|
|
|
|
|
(2.0
|
)
|
|
5.8
|
%
|
|
6.8
|
%
|
|
|
|
|
(1.0
|
)
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
||||||||||||||||||||||
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
||||||||||||||||||
In millions
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
||||||||||||||
North & Central America
|
|
$
|
985
|
|
|
$
|
930
|
|
|
$
|
55
|
|
|
6
|
%
|
|
$
|
1,940
|
|
|
$
|
1,909
|
|
|
$
|
31
|
|
|
2
|
%
|
Europe, CIS and China
|
|
198
|
|
|
197
|
|
|
1
|
|
|
1
|
%
|
|
384
|
|
|
353
|
|
|
31
|
|
|
9
|
%
|
||||||
Asia Pacific
|
|
187
|
|
|
187
|
|
|
—
|
|
|
—
|
%
|
|
356
|
|
|
364
|
|
|
(8
|
)
|
|
(2
|
)%
|
||||||
Africa
|
|
59
|
|
|
55
|
|
|
4
|
|
|
7
|
%
|
|
107
|
|
|
105
|
|
|
2
|
|
|
2
|
%
|
||||||
India
|
|
46
|
|
|
42
|
|
|
4
|
|
|
10
|
%
|
|
87
|
|
|
79
|
|
|
8
|
|
|
10
|
%
|
||||||
Middle East
|
|
41
|
|
|
53
|
|
|
(12
|
)
|
|
(23
|
)%
|
|
82
|
|
|
97
|
|
|
(15
|
)
|
|
(15
|
)%
|
||||||
South America
|
|
28
|
|
|
31
|
|
|
(3
|
)
|
|
(10
|
)%
|
|
51
|
|
|
64
|
|
|
(13
|
)
|
|
(20
|
)%
|
||||||
Total sales
|
|
$
|
1,544
|
|
|
$
|
1,495
|
|
|
$
|
49
|
|
|
3
|
%
|
|
$
|
3,007
|
|
|
$
|
2,971
|
|
|
$
|
36
|
|
|
1
|
%
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
||||||||||||||||||||||
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
||||||||||||||||||
In millions
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
||||||||||||||
Parts
(1)
|
|
$
|
642
|
|
|
$
|
598
|
|
|
$
|
44
|
|
|
7
|
%
|
|
$
|
1,290
|
|
|
$
|
1,171
|
|
|
$
|
119
|
|
|
10
|
%
|
Power generation
|
|
326
|
|
|
272
|
|
|
54
|
|
|
20
|
%
|
|
601
|
|
|
570
|
|
|
31
|
|
|
5
|
%
|
||||||
Service
|
|
297
|
|
|
307
|
|
|
(10
|
)
|
|
(3
|
)%
|
|
596
|
|
|
591
|
|
|
5
|
|
|
1
|
%
|
||||||
Engines
|
|
279
|
|
|
318
|
|
|
(39
|
)
|
|
(12
|
)%
|
|
520
|
|
|
639
|
|
|
(119
|
)
|
|
(19
|
)%
|
||||||
Total sales
|
|
$
|
1,544
|
|
|
$
|
1,495
|
|
|
$
|
49
|
|
|
3
|
%
|
|
$
|
3,007
|
|
|
$
|
2,971
|
|
|
$
|
36
|
|
|
1
|
%
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
||||||||||||||||||||||
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
||||||||||||||||||
In millions
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
||||||||||||||
External sales
(1)
|
|
$
|
933
|
|
|
$
|
1,017
|
|
|
$
|
(84
|
)
|
|
(8
|
)%
|
|
$
|
1,830
|
|
|
$
|
1,948
|
|
|
$
|
(118
|
)
|
|
(6
|
)%
|
Intersegment sales
(1)
|
|
346
|
|
|
380
|
|
|
(34
|
)
|
|
(9
|
)%
|
|
686
|
|
|
748
|
|
|
(62
|
)
|
|
(8
|
)%
|
||||||
Total sales
|
|
1,279
|
|
|
1,397
|
|
|
(118
|
)
|
|
(8
|
)%
|
|
2,516
|
|
|
2,696
|
|
|
(180
|
)
|
|
(7
|
)%
|
||||||
Depreciation and amortization
|
|
32
|
|
|
28
|
|
|
(4
|
)
|
|
(14
|
)%
|
|
63
|
|
|
54
|
|
|
(9
|
)
|
|
(17
|
)%
|
||||||
Research, development and engineering expenses
|
|
51
|
|
|
57
|
|
|
6
|
|
|
11
|
%
|
|
107
|
|
|
118
|
|
|
11
|
|
|
9
|
%
|
||||||
Equity, royalty and interest income from investees
|
|
12
|
|
|
8
|
|
|
4
|
|
|
50
|
%
|
|
20
|
|
|
17
|
|
|
3
|
|
|
18
|
%
|
||||||
Interest income
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
%
|
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
%
|
||||||
Segment EBIT
|
|
190
|
|
|
223
|
|
|
(33
|
)
|
|
(15
|
)%
|
|
353
|
|
|
418
|
|
|
(65
|
)
|
|
(16
|
)%
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
Percentage Points
|
|
|
|
|
|
Percentage Points
|
||||||||||||||||||
Segment EBIT as a percentage of total sales
|
|
14.9
|
%
|
|
16.0
|
%
|
|
|
|
|
(1.1
|
)
|
|
14.0
|
%
|
|
15.5
|
%
|
|
|
|
|
(1.5
|
)
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
||||||||||||||||||||||
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
||||||||||||||||||
In millions
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
||||||||||||||
Emission solutions
|
|
$
|
624
|
|
|
$
|
679
|
|
|
$
|
(55
|
)
|
|
(8
|
)%
|
|
$
|
1,231
|
|
|
$
|
1,292
|
|
|
$
|
(61
|
)
|
|
(5
|
)%
|
Turbo technologies
|
|
276
|
|
|
307
|
|
|
(31
|
)
|
|
(10
|
)%
|
|
541
|
|
|
608
|
|
|
(67
|
)
|
|
(11
|
)%
|
||||||
Filtration
|
|
262
|
|
|
266
|
|
|
(4
|
)
|
|
(2
|
)%
|
|
514
|
|
|
521
|
|
|
(7
|
)
|
|
(1
|
)%
|
||||||
Fuel systems
|
|
117
|
|
|
145
|
|
|
(28
|
)
|
|
(19
|
)%
|
|
230
|
|
|
275
|
|
|
(45
|
)
|
|
(16
|
)%
|
||||||
Total sales
|
|
$
|
1,279
|
|
|
$
|
1,397
|
|
|
$
|
(118
|
)
|
|
(8
|
)%
|
|
$
|
2,516
|
|
|
$
|
2,696
|
|
|
$
|
(180
|
)
|
|
(7
|
)%
|
•
|
Emission solutions sales
decrease
d
$55 million
primarily due to lower demand in North American on-highway markets, partially offset by higher demand in Western Europe and China.
|
•
|
Turbo technologies sales
decrease
d
$31 million
primarily due to lower demand in North American on-highway markets.
|
•
|
Fuel systems sales
decrease
d
$28 million
primarily due to lower demand in the North American on-highway markets.
|
•
|
Foreign currency fluctuations unfavorably impacted sales results primarily in the Chinese renminbi, Brazilian real and British pound.
|
•
|
Turbo technologies sales
decrease
d
$67 million
primarily due to lower demand in North American on-highway markets.
|
•
|
Emission solutions sales
decrease
d
$61 million
primarily due to lower demand in North American on-highway markets, partially offset by higher demand in China and Western Europe.
|
•
|
Fuel systems sales
decrease
d
$45 million
primarily due to lower demand in the North American on-highway markets, partially offset by higher demand in China.
|
•
|
Foreign currency fluctuations unfavorably impacted sales results primarily in the Chinese renminbi, Brazilian real and British pound.
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||||||
|
|
July 3, 2016 vs. June 28, 2015
|
|
July 3, 2016 vs. June 28, 2015
|
||||||||||||||||
|
|
Favorable/(Unfavorable) Change
|
|
Favorable/(Unfavorable) Change
|
||||||||||||||||
In millions
|
|
Amount
|
|
Percent
|
|
Percentage point
change as a percent of total sales |
|
Amount
|
|
Percent
|
|
Percentage point
change as a percent of total sales |
||||||||
Gross margin
|
|
$
|
(31
|
)
|
|
(9
|
)%
|
|
(0.2
|
)
|
|
$
|
(59
|
)
|
|
(9
|
)%
|
|
(0.6
|
)
|
Selling, general and administrative expenses
|
|
(10
|
)
|
|
(12
|
)%
|
|
(1.3
|
)
|
|
(15
|
)
|
|
(9
|
)%
|
|
(1.0
|
)
|
||
Research, development and engineering expenses
|
|
6
|
|
|
11
|
%
|
|
0.1
|
|
|
11
|
|
|
9
|
%
|
|
0.1
|
|
||
Equity, royalty and interest income from investees
|
|
4
|
|
|
50
|
%
|
|
0.3
|
|
|
3
|
|
|
18
|
%
|
|
0.2
|
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
||||||||||||||||||||||
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
||||||||||||||||||
In millions
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
||||||||||||||
External sales
(1)
|
|
$
|
553
|
|
|
$
|
677
|
|
|
$
|
(124
|
)
|
|
(18
|
)%
|
|
$
|
1,000
|
|
|
$
|
1,297
|
|
|
$
|
(297
|
)
|
|
(23
|
)%
|
Intersegment sales
(1)
|
|
368
|
|
|
420
|
|
|
(52
|
)
|
|
(12
|
)%
|
|
729
|
|
|
802
|
|
|
(73
|
)
|
|
(9
|
)%
|
||||||
Total sales
|
|
921
|
|
|
1,097
|
|
|
(176
|
)
|
|
(16
|
)%
|
|
1,729
|
|
|
2,099
|
|
|
(370
|
)
|
|
(18
|
)%
|
||||||
Depreciation and amortization
|
|
29
|
|
|
26
|
|
|
(3
|
)
|
|
(12
|
)%
|
|
58
|
|
|
54
|
|
|
(4
|
)
|
|
(7
|
)%
|
||||||
Research, development and engineering expenses
|
|
48
|
|
|
53
|
|
|
5
|
|
|
9
|
%
|
|
97
|
|
|
115
|
|
|
18
|
|
|
16
|
%
|
||||||
Equity, royalty and interest income from investees
|
|
11
|
|
|
14
|
|
|
(3
|
)
|
|
(21
|
)%
|
|
21
|
|
|
30
|
|
|
(9
|
)
|
|
(30
|
)%
|
||||||
Interest income
|
|
1
|
|
|
2
|
|
|
(1
|
)
|
|
(50
|
)%
|
|
3
|
|
|
3
|
|
|
—
|
|
|
—
|
%
|
||||||
Segment EBIT
|
|
90
|
|
|
127
|
|
|
(37
|
)
|
|
(29
|
)%
|
|
136
|
|
|
228
|
|
|
(92
|
)
|
|
(40
|
)%
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
Percentage Points
|
|
|
|
|
|
Percentage Points
|
||||||||||||||||||
Segment EBIT as a percentage of total sales
|
|
9.8
|
%
|
|
11.6
|
%
|
|
|
|
|
(1.8
|
)
|
|
7.9
|
%
|
|
10.9
|
%
|
|
|
|
|
(3.0
|
)
|
•
|
Power generation -
We design, manufacture, sell and support generators ranging from 2 kilowatts to 3.5 megawatts, as well as paralleling systems and transfer switches, for applications such as residential, commercial, industrial, data centers, health care, telecommunications and waste water treatment plants. We also provide turnkey solutions for distributed generation and energy management applications using natural gas or biogas as a fuel. We also serves global rental accounts for diesel and gas generator sets.
|
•
|
Industrial -
We design, manufacture, sell and support diesel and natural gas high-horsepower engines up to 5,500 horsepower for a wide variety of equipment in the mining, rail, defense, oil and gas, and commercial marine applications throughout the world. Across these markets, we have major customers in North America, Europe, Middle East, Africa, China, Korea, Japan, Latin America, India, Russia, Southeast Asia, South Pacific and Mexico.
|
•
|
Generator technologies -
We design, manufacture, sell and support A/C generator/alternator products for internal consumption and for external generator set assemblers. Our products are sold under the Stamford, AVK and Markon brands and range in output from 3 kilovolt-amperes (kVA) to 12,000 kVA.
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
||||||||||||||||||||||
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
||||||||||||||||||
In millions
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
||||||||||||||
Power generation
|
|
$
|
597
|
|
|
$
|
710
|
|
|
$
|
(113
|
)
|
|
(16
|
)%
|
|
$
|
1,117
|
|
|
$
|
1,334
|
|
|
$
|
(217
|
)
|
|
(16
|
)%
|
Industrial
|
|
240
|
|
|
295
|
|
|
(55
|
)
|
|
(19
|
)%
|
|
455
|
|
|
575
|
|
|
(120
|
)
|
|
(21
|
)%
|
||||||
Generator technologies
|
|
84
|
|
|
92
|
|
|
(8
|
)
|
|
(9
|
)%
|
|
157
|
|
|
190
|
|
|
(33
|
)
|
|
(17
|
)%
|
||||||
Total sales
|
|
$
|
921
|
|
|
$
|
1,097
|
|
|
$
|
(176
|
)
|
|
(16
|
)%
|
|
$
|
1,729
|
|
|
$
|
2,099
|
|
|
$
|
(370
|
)
|
|
(18
|
)%
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
||||||||||||||||
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 3,
|
|
June 28,
|
|
(Unfavorable)
|
||||||||||||
Units
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
||||||||
Power generation
|
|
2,200
|
|
|
2,500
|
|
|
(300
|
)
|
|
(12
|
)%
|
|
4,000
|
|
|
4,700
|
|
|
(700
|
)
|
|
(15
|
)%
|
Industrial
|
|
1,100
|
|
|
1,200
|
|
|
(100
|
)
|
|
(8
|
)%
|
|
2,100
|
|
|
2,500
|
|
|
(400
|
)
|
|
(16
|
)%
|
Total engine shipments
|
|
3,300
|
|
|
3,700
|
|
|
(400
|
)
|
|
(11
|
)%
|
|
6,100
|
|
|
7,200
|
|
|
(1,100
|
)
|
|
(15
|
)%
|
•
|
Power generation sales
decrease
d
$113 million
in most regions with the largest declines in demand primarily in the Middle East, China and Africa, partially offset by higher demand in Western Europe.
|
•
|
Industrial sales
decrease
d
$55 million
primarily due to lower demand in North America (mainly oil and gas markets) and China (mainly marine markets).
|
•
|
Foreign currency fluctuations unfavorably impacted sales results primarily in the Indian rupee, British pound and Chinese renminbi.
|
•
|
Power generation sales
decrease
d
$217 million
in most regions with the largest declines in demand primarily in China, Middle East, Latin America, Africa and Asia (excluding China), partially offset by higher demand in Western Europe.
|
•
|
Industrial sales
decrease
d
$120 million
primarily due to lower demand in North America (mainly oil and gas markets) and China (mainly marine and mining markets).
|
•
|
Foreign currency fluctuations unfavorably impacted sales results primarily in the Indian rupee, Brazilian real and British pound.
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||||||
|
|
July 3, 2016 vs. June 28, 2015
|
|
July 3, 2016 vs. June 28, 2015
|
||||||||||||||||
|
|
Favorable/(Unfavorable) Change
|
|
Favorable/(Unfavorable) Change
|
||||||||||||||||
In millions
|
|
Amount
|
|
Percent
|
|
Percentage point
change as a percent of total sales |
|
Amount
|
|
Percent
|
|
Percentage point
change as a percent of total sales |
||||||||
Gross margin
|
|
$
|
(70
|
)
|
|
(24
|
)%
|
|
(2.6
|
)
|
|
$
|
(157
|
)
|
|
(28
|
)%
|
|
(3.4
|
)
|
Selling, general and administrative expenses
|
|
22
|
|
|
18
|
%
|
|
0.2
|
|
|
46
|
|
|
19
|
%
|
|
0.2
|
|
||
Research, development and engineering expenses
|
|
5
|
|
|
9
|
%
|
|
(0.4
|
)
|
|
18
|
|
|
16
|
%
|
|
(0.1
|
)
|
||
Equity, royalty and interest income from investees
|
|
(3
|
)
|
|
(21
|
)%
|
|
(0.1
|
)
|
|
(9
|
)
|
|
(30
|
)%
|
|
(0.2
|
)
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
In millions
|
|
July 3,
2016 |
|
June 28,
2015 |
|
July 3,
2016 |
|
June 28,
2015 |
||||||||
Total EBIT
|
|
$
|
573
|
|
|
$
|
741
|
|
|
$
|
1,066
|
|
|
$
|
1,325
|
|
Non-segment EBIT
(1)
|
|
18
|
|
|
(20
|
)
|
|
9
|
|
|
(42
|
)
|
||||
Total segment EBIT
|
|
591
|
|
|
721
|
|
|
1,075
|
|
|
1,283
|
|
||||
Less: Interest expense
|
|
16
|
|
|
17
|
|
|
35
|
|
|
31
|
|
||||
Income before income taxes
|
|
$
|
575
|
|
|
$
|
704
|
|
|
$
|
1,040
|
|
|
$
|
1,252
|
|
Dollars in millions
|
|
July 3,
2016 |
|
December 31,
2015 |
||||
Working capital
(1)
|
|
$
|
3,480
|
|
|
$
|
4,144
|
|
Current ratio
|
|
1.84
|
|
|
2.09
|
|
||
Accounts and notes receivable, net
|
|
$
|
3,023
|
|
|
$
|
2,820
|
|
Days’ sales in receivables
|
|
60
|
|
|
55
|
|
||
Inventories
|
|
$
|
2,778
|
|
|
$
|
2,707
|
|
Inventory turnover
|
|
4.7
|
|
|
4.9
|
|
||
Accounts payable (principally trade)
|
|
$
|
1,825
|
|
|
$
|
1,706
|
|
Days' payable outstanding
|
|
50
|
|
|
48
|
|
||
Total debt
|
|
$
|
1,871
|
|
|
$
|
1,639
|
|
Total debt as a percent of total capital
(2)
|
|
20.6
|
%
|
|
17.5
|
%
|
|
|
Six months ended
|
|
|
||||||||
In millions
|
|
July 3,
2016 |
|
June 28,
2015 |
|
Change
|
||||||
Net cash provided by operating activities
|
|
$
|
734
|
|
|
$
|
569
|
|
|
$
|
165
|
|
Net cash used in investing activities
|
|
(391
|
)
|
|
(300
|
)
|
|
(91
|
)
|
|||
Net cash used in financing activities
|
|
(892
|
)
|
|
(829
|
)
|
|
(63
|
)
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
|
(117
|
)
|
|
19
|
|
|
(136
|
)
|
|||
Net decrease in cash and cash equivalents
|
|
$
|
(666
|
)
|
|
$
|
(541
|
)
|
|
$
|
(125
|
)
|
|
|
July 3, 2016
|
||||||||||||
In millions
|
|
Total
|
|
U.S.
|
|
International
|
|
Primary location of international balances
|
||||||
Cash and cash equivalents
|
|
$
|
1,045
|
|
|
$
|
296
|
|
|
$
|
749
|
|
|
U.K., China, Singapore
|
Marketable securities
(1)
|
|
235
|
|
|
34
|
|
|
201
|
|
|
China, India
|
|||
Total
|
|
$
|
1,280
|
|
|
$
|
330
|
|
|
$
|
950
|
|
|
|
Available credit capacity
|
|
|
|
|
|
|
|
|
||||||
Revolving credit facility
(2)
|
|
$
|
1,750
|
|
|
|
|
|
|
|
||||
International and other uncommitted domestic credit facilities
(3)
|
|
171
|
|
|
|
|
|
|
|
In millions (except per share amounts)
For each quarter ended |
|
Shares
Purchased |
|
Average Cost
Per Share |
|
Total Cost of
Repurchases |
|
Cash Paid for Shares Not Received
|
|
Remaining
Authorized Capacity (1) |
|||||||||
July 2014, $1 billion repurchase program
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
April 3
(2)
|
|
2.7
|
|
|
$
|
100.12
|
|
|
$
|
274
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
November 2015, $1 billion repurchase program
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
April 3
(2)
|
|
2.2
|
|
|
$
|
105.50
|
|
|
$
|
229
|
|
|
$
|
100
|
|
|
$
|
671
|
|
July 3
|
|
1.8
|
|
|
109.79
|
|
|
192
|
|
|
(100
|
)
|
|
579
|
|
||||
Subtotal
|
|
4.0
|
|
|
107.41
|
|
|
421
|
|
|
—
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total
|
|
6.7
|
|
|
$
|
104.41
|
|
|
$
|
695
|
|
|
$
|
—
|
|
|
|
|
|
Long-Term
|
|
Short-Term
|
|
|
Credit Rating Agency
(1)
|
|
Senior Debt Rating
|
|
Debt Rating
|
|
Outlook
|
Standard & Poor’s Rating Services
|
|
A+
|
|
A1
|
|
Stable
|
Fitch Ratings
|
|
A
|
|
F1
|
|
Stable
|
Moody’s Investors Service, Inc.
|
|
A2
|
|
P1
|
|
Stable
|
|
|
Issuer Purchases of Equity Securities
|
|||||||||||
Period
|
|
(a) Total
Number of
Shares
Purchased
(1)
|
|
(b) Average
Price Paid per Share |
|
(c) Total Number of
Shares Purchased as Part of Publicly Announced Plans or Programs |
|
(d) Maximum
Number of Shares
that May Yet Be
Purchased Under the
Plans or Programs
(2)
|
|||||
April 4 - May 8
|
|
1,689
|
|
|
$
|
115.63
|
|
|
—
|
|
|
120,690
|
|
May 9 - June 5
|
|
1,749,089
|
|
|
109.82
|
|
|
1,745,034
|
|
|
120,113
|
|
|
June 6 - July 3
|
|
7,491
|
|
|
117.10
|
|
|
—
|
|
|
114,097
|
|
|
Total
|
|
1,758,269
|
|
|
109.85
|
|
|
1,745,034
|
|
|
|
|
Cummins Inc.
|
|
|
|
||
Date:
|
August 2, 2016
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ PATRICK J. WARD
|
|
By:
|
/s/ MARSHA L. HUNT
|
|
|
Patrick J. Ward
|
|
|
Marsha L. Hunt
|
|
|
Vice President and Chief Financial Officer
|
|
|
Vice President-Corporate Controller
|
|
|
(Principal Financial Officer)
|
|
|
(Principal Accounting Officer)
|
Exhibit No.
|
|
Description of Exhibit
|
12
|
|
Calculation of Ratio of Earnings to Fixed Charges.
|
31(a)
|
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31(b)
|
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32
|
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.INS
|
|
XBRL Instance Document.
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
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