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

Annual report pursuant to Section 13 and 15(d)

ACQUISITIONS

ACQUISITIONS

12 Months Ended

Dec. 31, 2015

NOTE 20. ACQUISITIONS

In September 2013, we announced our intention to acquire the equity that we do not already own in most of our partially-owned North American distributors over a three to five year period.

The Distribution segment joint venture acquisitions for the years ended December 31, 2015, 2014 and 2013 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⁾	Gain Recognized⁽¹⁾		Goodwill Acquired		Intangibles Recognized⁽²⁾		Net Sales Previous Fiscal Year Ended⁽³⁾
2015
Cummins Crosspoint LLC	08/03/15	50%	$	28	$	36	$	65	⁽⁴⁾	COMB	$	10	$	7	$	2	$	258
Cummins Atlantic LLC	08/03/15	51%	20		28		49		⁽⁴⁾	COMB	8		5		6		245
Cummins Central Power LLC	06/29/15	20.01%	8		—		8			EQUITY	—		—		—		—
2014
Cummins Bridgeway LLC	11/03/14	54%	$	32	$	45	$	77		COMB	$	13	$	4	$	15	$	331
Cummins NPower LLC	09/29/14	50%	39		34		73			COMB	15		7		8		374
Cummins Power South LLC	09/29/14	50%	19		16		35			COMB	7		8		1		239
Cummins Eastern Canada LP	08/04/14	50%	30		32		62			COMB	18		5		4		228
Cummins Power Systems LLC	05/05/14	30%	14		—		14			EQUITY	—		—		—		—
Cummins Southern Plains LLC (Southern Plains)	03/31/14	50%	44		48		92			COMB	13		1		11		433
Cummins Mid-South LLC (Mid-South)	02/14/14	62.2%	57		61		118			COMB	7		4		8		368
2013
Cummins Western Canada LP	12/31/13	35%	$	32	$	—	$	32		EQUITY	$	—	$	—	$	—	$	—
Cummins Rocky Mountain LLC (Rocky Mountain)	05/06/13	67%	62		74		136			COMB	5		10		8		384
Cummins Northwest LLC	07/01/13	20.01%	4		—		4			EQUITY	—		—		—		—
Cummins Northwest LLC ⁽⁵⁾	01/31/13	50%	18		—		18			COMB	7		3		2		137

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⁽¹⁾

All results from acquired entities were included in Distribution segment results subsequent to the acquisition date. Previously consolidated entities were accounted for as equity transactions (EQUITY). Newly consolidated entities were accounted for as business combinations (COMB) with gains recognized based on the requirement to remeasure our pre-existing ownership to fair value in accordance with GAAP and are included in the Consolidated Statements of Income as "Other income, net."


⁽²⁾	Intangible assets acquired in business combinations were mostly customer related, the majority of which will be amortized over a period of up to five years from the date of the acquisition.


⁽³⁾	Sales amounts are not fully incremental to our consolidated sales as the amount would be reduced by the elimination of sales to the previously unconsolidated entity.


⁽⁴⁾	The "Total Purchase Consideration" represents the total amount that will or is estimated to be paid to complete the acquisition. In some instances a portion of the acquisition payment has not yet been made and will be paid in future periods in accordance with the purchase contract. The total outstanding consideration at December 31, 2015, was $2 million.

⁽⁵⁾

Prior to our decision to acquire the remaining interest in our North American distributors, we acquired the remaining ownership interest in Northwest and immediately formed a new partnership with a new distributor principal and sold 20.01 percent to the new distributor principal. We retained a new ownership in Northwest of 79.99 percent. We subsequently repurchased the remaining outstanding interest under the new contract in July 2013.

The final purchase price allocations for the largest acquisitions for 2014 and 2013 were as follows:



In millions	Southern Plains			Mid-South			Rocky Mountain
Accounts receivable	$	63		$	71		$	48
Inventory	59			70			100
Fixed assets	47			37			34
Intangible assets	11			8			8
Goodwill	1			4			10
Other current assets	8			10			8
Current liabilities	(53		)	(43		)	(41		)
Other long-term liability	—			(4		)	—
Total business valuation	136			153			167
Fair value of pre-existing interest	(44		)	(35		)	(31		)
Total purchase consideration	$	92		$	118		$	136

North American distributor acquisitions excluded from the table were deemed immaterial individually and in the aggregate for additional disclosure.