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

Quarterly report pursuant to Section 13 or 15(d)

REVENUE RECOGNITION LONG-TERM CONTRACTS AND DEFERRED AND UNBILLED REVENUE

REVENUE RECOGNITION LONG-TERM CONTRACTS AND DEFERRED AND UNBILLED REVENUE

9 Months Ended

Sep. 29, 2019

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 have not been satisfied as of September 29, 2019, was $809 million. We expect to recognize the related revenue of $180 million over the next 12 months and $629 million over periods up to 10 years. See NOTE 11, "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 cost incurred when providing goods and services to our customers or represent sale-based royalties.

Deferred and Unbilled Revenue

The following is a summary of our unbilled and deferred revenue and related activity:



In millions	September 29, 2019		December 31, 2018
Unbilled revenue	$	75	$	64
Deferred revenue, primarily extended warranty	1,314		1,156

We recognized revenue of $79 million and $282 million for the three and nine months ended September 29, 2019, compared with $71 million and $277 million for the comparable periods in 2018, 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 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 29, 2019		September 30, 2018		September 29, 2019		September 30, 2018
United States	$	3,414	$	3,407	$	10,461	$	9,829
China	481		559		1,698		1,753
India	185		240		643		722
Other international	1,688		1,737		5,191		5,341
Total net sales	$	5,768	$	5,943	$	17,993	$	17,645

Segment Revenue

Engine segment external sales by market were as follows:



	Three months ended				Nine months ended
In millions	September 29, 2019		September 30, 2018		September 29, 2019		September 30, 2018
Heavy-duty truck	$	635	$	769	$	2,112	$	2,113
Medium-duty truck and bus	525		613		1,765		1,954
Light-duty automotive	451		446		1,216		1,099
Total on-highway	1,611		1,828		5,093		5,166
Off-highway	211		254		786		779
Total sales	$	1,822	$	2,082	$	5,879	$	5,945

Distribution segment external sales by region were as follows:



	Three months ended				Nine months ended
In millions	September 29, 2019		September 30, 2018		September 29, 2019		September 30, 2018
North America	$	1,373	$	1,331	$	4,139	$	3,954
Asia Pacific	224		223		667		621
Europe	135		113		380		387
China	82		77		264		238
Africa and Middle East	60		55		170		178
Latin America	48		42		134		125
India	46		49		142		142
Russia	33		37		113		117
Total sales	$	2,001	$	1,927	$	6,009	$	5,762

Distribution segment external sales by product line were as follows:



	Three months ended				Nine months ended
In millions	September 29, 2019		September 30, 2018		September 29, 2019		September 30, 2018
Parts	$	796	$	797	$	2,464	$	2,415
Power generation	466		359		1,292		1,029
Service	376		372		1,109		1,091
Engines	363		399		1,144		1,227
Total sales	$	2,001	$	1,927	$	6,009	$	5,762

Components segment external sales by business were as follows:



	Three months ended				Nine months ended
In millions	September 29, 2019		September 30, 2018		September 29, 2019		September 30, 2018
Emission solutions	$	660	$	677	$	2,144	$	2,096
Filtration	249		242		771		756
Turbo technologies	151		173		522		571
Automated transmissions	146		150		451		408
Electronics and fuel systems	47		55		167		181
Total sales	$	1,253	$	1,297	$	4,055	$	4,012

Power Systems segment external sales by product line were as follows:



	Three months ended				Nine months ended
In millions	September 29, 2019		September 30, 2018		September 29, 2019		September 30, 2018
Power generation	$	372	$	366	$	1,060	$	1,066
Industrial	227		184		704		593
Generator technologies	84		86		266		263
Total sales	$	683	$	636	$	2,030	$	1,922