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

Quarterly report pursuant to Section 13 or 15(d)

ACQUISITION

ACQUISITION

9 Months Ended

Sep. 29, 2019

Business Combinations [Abstract]

Mergers, Acquisitions and Dispositions Disclosures

NOTE 15. ACQUISITIONS

Acquisitions for the nine months ended September 29, 2019 and September 30, 2018 were as follows:



Entity Acquired (Dollars in millions)	Date of Acquisition	Additional Percent Interest Acquired	Payments to Former Owners		Acquisition Related Debt Retirements		Total Purchase Consideration			Type of Acquisition⁽¹⁾	Goodwill Acquired		Intangibles Recognized⁽²⁾		Net Sales Previous Fiscal Year Ended
2019
Hydrogenics Corporation	09/09/19	81%	$	235	$	—	$	235		COMB	$	166	$	158	$	34
2018
Efficient Drivetrains, Inc.	08/15/18	100%	$	51	$	2	$	64	⁽³⁾	COMB	$	49	$	15	$	3
Johnson Matthey Battery Systems, Ltd.	01/31/18	100%	9		—		9			COMB	—		5		3

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⁽¹⁾Newly consolidated entities were accounted for as business combinations (COMB) and were included in the Electrified Power Segment on the date of acquisition.

⁽²⁾Intangible assets acquired in business combinations 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.

⁽³⁾The "Total Purchase Consideration" represents the total amount that will or is estimated to be paid to complete the acquisition. A portion of the acquisition payment has not yet been made and will be paid in future periods in accordance with the purchase contract.

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., will maintain a non-controlling interest in Hydrogenics. We accounted for the transaction as a business combination and included it in the Electrified Power segment in the third quarter of 2019. We have not yet assigned this business to a reporting unit for goodwill impairment purposes. The preliminary purchase price allocation was as follows:



In millions
Inventory	$	21
Other current assets	25
Intangible assets
Technology assets	94
Customer relationships	28
In-process research and development	35
Other intangible assets	1
Goodwill	166
Other assets	18
Current liabilities	(50		)
Other liabilities	(47		)
Total business valuation	291
Less: Noncontrolling interest	56
Total purchase consideration	$	235

At September 29, 2019, our purchase accounting was not complete. The above table represents our current estimate of the allocation. We are reviewing and validating the significant assumptions used to value the intangible assets and expect that these amounts could change as we finalize our allocation by the end of 2019. We expect the "Intangible assets" to be amortized over periods ranging from 3 to 20 years. We are also validating our calculations related to deferred tax assets and liabilities.

"Goodwill" was determined based on the residual difference between the fair value of consideration transferred and the value assigned to tangible and intangible assets and liabilities. The goodwill amount is provisional and subject to changes, pending the completion of the valuation of acquired assets and liabilities. The goodwill amount will not be deductible for tax purposes. Among the factors contributing to a purchase price resulting in the recognition of goodwill are the acquisition of engineering talent in the fuel cell space, the ability to be one of the forerunners in the development of clean fuel cell energy and the continued opportunity to expand our position as a global power leader.

This business was included in our September results but the amounts were not significant. Pro forma financial information was not provided as the historical financial statement activity of Hydrogenics is not material to our consolidated results.