Cummins Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

OPERATING SEGMENTS (Tables)

OPERATING SEGMENTS (Tables)

12 Months Ended

Dec. 31, 2019

Financial information regarding reportable operating segments

Restructuring actions were included in our segment and non-segment operating results as follows:



In millions	Years ended December 31, 2019
Engine	$	18
Distribution	37
Components	20
Power Systems	12
New Power	1
Non-segment	31
Restructuring actions	$	119

Summarized financial information regarding our reportable operating segments at December 31, is shown in the table below:



In millions	Engine		Distribution		Components		Power Systems		New Power			Total Segments		Intersegment Eliminations ⁽¹⁾			Total
2019
External sales	$	7,570	$	8,040	$	5,253	$	2,670	$	38		$	23,571	$	—		$	23,571
Intersegment sales	2,486		31		1,661		1,790		—			5,968		(5,968		)	—
Total sales	10,056		8,071		6,914		4,460		38			29,539		(5,968		)	23,571
Research, development and engineering expenses	337		28		300		230		106			1,001		—			1,001
Equity, royalty and interest income from investees	200		52		40		38		—			330		—			330
Interest income	15		15		8		8		—			46		—			46
Segment EBITDA (excluding restructuring actions)	1,472		693		1,117		524		(148		)	3,658		73			3,731
Restructuring actions⁽²⁾	18		37		20		12		1			88		31			119
Segment EBITDA	1,454		656		1,097		512		(149		)	3,570		42			3,612
Depreciation and amortization ⁽³⁾	202		115		222		118		12			669		—			669
Net assets	1,094		2,536		2,911		2,245		472			9,258		—			9,258
Investments and advances to equity investees	575		296		193		171		2			1,237		—			1,237
Capital expenditures	240		136		191		107		26			700		—			700
2018
External sales	$	8,002	$	7,807	$	5,331	$	2,625	$	6		$	23,771	$	—		$	23,771
Intersegment sales	2,564		21		1,835		2,001		1			6,422		(6,422		)	—
Total sales	10,566		7,828		7,166		4,626		7			30,193		(6,422		)	23,771
Research, development and engineering expenses	311		20		272		230		69			902		—			902
Equity, royalty and interest income from investees	238		46		54		56		—			394		—			394
Interest income	11		13		5		6		—			35		—			35
Segment EBITDA	1,446		563		1,030		614		(90		)	3,563		(87		)	3,476
Depreciation and amortization ⁽³⁾	190		109		185		119		6			609		—			609
Net assets	1,265		2,677		2,878		2,262		138			9,220		—			9,220
Investments and advances to equity investees	561		278		206		177		—			1,222		—			1,222
Capital expenditures	254		133		182		129		11			709		—			709

(Table continued on next page)



In millions	Engine		Distribution		Components		Power Systems		New Power		Total Segments		Intersegment Eliminations ⁽¹⁾			Total
2017
External sales	$	6,661	$	7,029	$	4,363	$	2,375	$	—	$	20,428	$	—		$	20,428
Intersegment sales	2,292		29		1,526		1,683		—		5,530		(5,530		)	—
Total sales	8,953		7,058		5,889		4,058		—		25,958		(5,530		)	20,428
Research, development and engineering expenses	280		19		241		214		—		754		—			754
Equity, royalty and interest income from investees ⁽⁴⁾	219		44		40		54		—		357		—			357
Interest income	6		6		3		3		—		18		—			18
Segment EBITDA	1,143		500		917		411		—		2,971		55			3,026
Depreciation and amortization ⁽³⁾	184		116		163		117		—		580		—			580
Net assets	1,180		2,446		2,811		2,137		—		8,574		—			8,574
Investments and advances to equity investees	531		267		194		164		—		1,156		—			1,156
Capital expenditures	188		101		127		90		—		506		—			506

____________________________________________________


⁽¹⁾	Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. The year ended December 31, 2019, includes a $31 million restructuring charge related to corporate functions. There were no significant unallocated corporate expenses for the years ended December 31, 2018 and 2017.


⁽²⁾	See Note 4 "RESTRUCTURING ACTIONS," for additional information.

⁽³⁾

Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Consolidated Statements of Net Income as "Interest expense." The amortization of debt discount and deferred costs were $3 million, $2 million and $3 million for the years ended 2019, 2018 and 2017, respectively. A portion of depreciation expense is included in "Research, development and engineering expense."


⁽⁴⁾	U.S. tax legislation passed in December 2017 decreased our equity earnings at certain equity investees, negatively impacting our "Equity, royalty and interest income from investees" by $23 million, $4 million and $12 million for the Engine, Distribution and Components segments, respectively. See Note 5, "INCOME TAXES," for additional information.

Reconciliation of segment information

A reconciliation of our segment information to the corresponding amounts in the Consolidated Statements of Net Income is shown in the table below:



	Years ended December 31,
In millions	2019		2018		2017
Total EBITDA	$	3,612	$	3,476	$	3,026
Less:
Depreciation and amortization	669		$	609	580
Interest expense	109		$	114	$	81
Income before income taxes	$	2,834	$	2,753	$	2,365

Reconciliation of segment information from net assets to total assets

A reconciliation of our segment net assets to the corresponding amounts in the Consolidated Balance Sheets is shown in the table below:



	December 31,
In millions	2019		2018		2017
Net assets for operating segments	$	9,258	$	9,220	$	8,574
Cash, cash equivalents and marketable securities	1,470		1,525		1,567
Brammo Inc. assets	—		—		72		⁽¹⁾
Net liabilities deducted in arriving at net assets ⁽²⁾	8,498		7,836		7,398
Pension and OPEB adjustments excluded from net assets	67		68		156
Deferred tax assets not allocated to segments	441		410		306
Deferred debt costs not allocated to segments	3		3		2
Total assets	$	19,737	$	19,062	$	18,075

____________________________________________________


⁽¹⁾	Assets associated with the Brammo Inc. acquisition were presented as a reconciling item as Brammo Inc. had not yet been assigned to a reportable segment at December 31, 2017. See Note 21, "ACQUISITIONS," for additional information.

⁽²⁾

Liabilities deducted in arriving at net assets include certain accounts payable, accrued expenses, long-term liabilities and other items.

Long-lived assets attributed to geographic areas

Long-lived segment assets by geographic area were as follows:



	December 31,
In millions	2019		2018		2017
United States	$	3,555	$	3,174	$	3,157
China	893		823		795
India	616		577		563
United Kingdom	370		337		339
Netherlands	253		234		221
Mexico	175		171		136
Canada	139		114		116
Brazil	106		104		149
Other international countries	489		329		293
Total long-lived assets	$	6,596	$	5,863	$	5,769