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, 2016

NOTE 18. ACQUISITIONS

In 2016, we completed the acquisition of the last two partially-owned North American distributors. The joint venture acquisitions for the years ended December 31, 2016, 2015 and 2014 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⁾
2016
Wuxi Cummins Turbo Technologies Co. Ltd	12/05/16	45	%	$	86	$	—	$	86		EQUITY	$	—	$	—	$	—	$	—
Cummins Pacific LLC (Pacific)	10/04/16	50	%	30		67		99		⁽⁴⁾	COMB	15		4		8		391
Cummins Northeast LLC	01/01/16	35	%	12		—		12			EQUITY	—		—		—		—
2015
Cummins Crosspoint LLC	08/03/15	50%		$	29	$	36	$	65		COMB	$	10	$	7	$	2	$	258
Cummins Atlantic LLC	08/03/15	51%		21		28		49			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

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⁽¹⁾

All results from acquired entities were included in 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, 2016, was $2 million.

The final purchase price allocations for the large acquisitions in 2016 and 2014 were as follows:



In millions	Pacific			Southern Plains			Mid-South
Accounts receivable	$	65		$	63		$	71
Inventory	35			59			70
Fixed assets	56			47			37
Intangible assets	8			11			8
Goodwill	4			1			4
Other current assets	10			8			10
Current liabilities	(46		)	(53		)	(43		)
Other long-term liability	—			—			(4		)
Total business valuation	132			136			153
Fair value of pre-existing interest	(33		)	(44		)	(35		)
Total purchase consideration	$	99		$	92		$	118

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