Cummins Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

OPERATING SEGMENTS (Tables)

OPERATING SEGMENTS (Tables)

9 Months Ended

Sep. 30, 2018

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		Electrified Power			Total Segments		Intersegment Eliminations ⁽¹⁾			Total
Three months ended September 30, 2018
External sales	$	2,082	$	1,927	$	1,297	$	636	$	1		$	5,943	$	—		$	5,943
Intersegment sales	644		4		457		471		1			1,577		(1,577		)	—
Total sales	2,726		1,931		1,754		1,107		2			7,520		(1,577		)	5,943
Research, development and engineering expenses	74		5		71		57		22			229		—			229
Equity, royalty and interest income from investees	55		9		12		14		—			90		—			90
Interest income	3		4		1		1		—			9		—			9
Segment EBITDA	405		155		288		163		(30		)	981		2			983
Depreciation and amortization ⁽²⁾	46		27		44		29		2			148		—			148

Three months ended October 1, 2017
External sales	$	1,783	$	1,748	$	1,139	$	615	$	—		$	5,285	$	—		$	5,285
Intersegment sales	553		5		394		441		—			1,393		(1,393		)	—
Total sales	2,336		1,753		1,533		1,056		—			6,678		(1,393		)	5,285
Research, development and engineering expenses	83		6		63		61		—			213		—			213
Equity, royalty and interest income from investees	58		11		12		14		—			95		—			95
Interest income	1		2		—		1		—			4		—			4
Segment EBITDA	276		120		259		111		—			766		22			788
Depreciation and amortization ⁽²⁾	47		29		42		30		—			148		—			148

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⁽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 30, 2018 and October 1, 2017.

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		Electrified Power			Total Segments		Intersegment Eliminations ⁽¹⁾			Total
Nine months ended September 30, 2018
External sales	$	5,945	$	5,762	$	4,012	$	1,922	$	4		$	17,645	$	—		$	17,645
Intersegment sales	1,923		16		1,382		1,505		1			4,827		(4,827		)	—
Total sales	7,868		5,778		5,394		3,427		5			22,472		(4,827		)	17,645
Research, development and engineering expenses	229		15		195		174		45			658		—			658
Equity, royalty and interest income from investees	189		33		42		51		—			315		—			315
Interest income	8		9		4		5		—			26		—			26
Segment EBITDA	1,053		423		752		491		(61		)	2,658		(78		)	2,580
Depreciation and amortization⁽²⁾	142		81		137		91		4			455		—			455

Nine months ended October 1, 2017
External sales	$	4,951	$	5,101	$	3,183	$	1,717	$	—		$	14,952	$	—		$	14,952
Intersegment sales	1,715		19		1,148		1,238		—			4,120		(4,120		)	—
Total sales	6,666		5,120		4,331		2,955		—			19,072		(4,120		)	14,952
Research, development and engineering expenses	200		14		171		161		—			546		—			546
Equity, royalty and interest income from investees	186		35		40		40		—			301		—			301
Interest income	4		4		1		2		—			11		—			11
Segment EBITDA	872		377		703		286		—			2,238		19			2,257
Depreciation and amortization⁽²⁾	137		90		117		87		—			431		—			431

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⁽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 30, 2018 and October 1, 2017.

⁽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 Income as "Interest expense." The amortization of debt discount and deferred costs was $1 million and $2 million for the nine month periods ended September 30, 2018 and October 1, 2017, 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 Income is shown in the table below:



	Three months ended				Nine months ended
In millions	September 30, 2018		October 1, 2017		September 30, 2018		October 1, 2017
Total EBITDA	$	983	$	788	$	2,580	$	2,257
Less:
Depreciation and amortization	148		148		455		431
Interest expense	30		18		82		57
Income before income taxes	$	805	$	622	$	2,043	$	1,769