UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended October 2, 2016
Commission File Number 1-4949
CUMMINS INC.
(Exact name of registrant as specified in its charter)
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| | |
Indiana (State of Incorporation) | | 35-0257090 (IRS Employer Identification No.) |
500 Jackson Street
Box 3005
Columbus, Indiana 47202-3005
(Address of principal executive offices)
Telephone (812) 377-5000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer x | | Accelerated filer o | | Non-accelerated filer o | | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of October 2, 2016, there were 168,275,116 shares of common stock outstanding with a par value of $2.50 per share.
Website Access to Company’s Reports
Cummins maintains an internet website at www.cummins.com. Investors can obtain copies of our filings from this website free of charge as soon as reasonably practicable after they are electronically filed with, or furnished, to the Securities and Exchange Commission. Cummins is not including the information provided on the website as part of, or incorporating such information by reference into, this Quarterly Report on Form 10-Q.
CUMMINS INC. AND SUBSIDIARIES
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q
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| Condensed Consolidated Statements of Income for the three and nine months ended October 2, 2016 and September 27, 2015 | |
| Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended October 2, 2016 and September 27, 2015 | |
| Condensed Consolidated Balance Sheets at October 2, 2016 and December 31, 2015 | |
| Condensed Consolidated Statements of Cash Flows for the nine months ended October 2, 2016 and September 27, 2015 | |
| Condensed Consolidated Statements of Changes in Equity for the nine months ended October 2, 2016 and September 27, 2015 | |
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PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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| | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
In millions, except per share amounts | | October 2, 2016 | | September 27, 2015 | | October 2, 2016 | | September 27, 2015 |
NET SALES (a) | | $ | 4,187 |
| | $ | 4,620 |
| | $ | 13,006 |
| | $ | 14,344 |
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Cost of sales | | 3,108 |
| | 3,412 |
| | 9,674 |
| | 10,609 |
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GROSS MARGIN | | 1,079 |
| | 1,208 |
| | 3,332 |
| | 3,735 |
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OPERATING EXPENSES AND INCOME | | |
| | |
| | |
| | |
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Selling, general and administrative expenses | | 513 |
| | 530 |
| | 1,527 |
| | 1,584 |
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Research, development and engineering expenses | | 157 |
| | 197 |
| | 478 |
| | 558 |
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Equity, royalty and interest income from investees (Note 4) | | 74 |
| | 78 |
| | 234 |
| | 240 |
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Loss contingency (Note 10) | | 99 |
| | — |
| | 138 |
| | — |
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Other operating expense, net | | — |
| | (2 | ) | | (2 | ) | | (5 | ) |
OPERATING INCOME | | 384 |
| | 557 |
| | 1,421 |
| | 1,828 |
|
Interest income | | 6 |
| | 9 |
| | 18 |
| | 20 |
|
Interest expense (Note 8) | | 16 |
| | 16 |
| | 51 |
| | 47 |
|
Other income, net | | 8 |
| | 11 |
| | 34 |
| | 12 |
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INCOME BEFORE INCOME TAXES | | 382 |
| | 561 |
| | 1,422 |
| | 1,813 |
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Income tax expense (Note 5) | | 82 |
| | 169 |
| | 362 |
| | 521 |
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CONSOLIDATED NET INCOME | | 300 |
| | 392 |
| | 1,060 |
| | 1,292 |
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Less: Net income attributable to noncontrolling interests | | 11 |
| | 12 |
| | 44 |
| | 54 |
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NET INCOME ATTRIBUTABLE TO CUMMINS INC. | | $ | 289 |
| | $ | 380 |
| | $ | 1,016 |
| | $ | 1,238 |
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EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. | | |
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Basic | | $ | 1.72 |
| | $ | 2.15 |
| | $ | 5.99 |
| | $ | 6.92 |
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Diluted | | $ | 1.72 |
| | $ | 2.14 |
| | $ | 5.99 |
| | $ | 6.90 |
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WEIGHTED AVERAGE SHARES OUTSTANDING | | |
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Basic | | 167.8 |
| | 177.0 |
| | 169.5 |
| | 178.9 |
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Dilutive effect of stock compensation awards | | 0.4 |
| | 0.4 |
| | 0.2 |
| | 0.4 |
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Diluted | | 168.2 |
| | 177.4 |
| | 169.7 |
| | 179.3 |
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CASH DIVIDENDS DECLARED PER COMMON SHARE | | $ | 1.025 |
| | $ | 0.975 |
| | $ | 2.975 |
| | $ | 2.535 |
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____________________________________
(a) Includes sales to nonconsolidated equity investees of $275 million and $793 million and $274 million and $956 million for the three and nine months ended October 2, 2016 and September 27, 2015, respectively.
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
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| | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
In millions | | October 2, 2016 | | September 27, 2015 | | October 2, 2016 | | September 27, 2015 |
CONSOLIDATED NET INCOME | | $ | 300 |
| | $ | 392 |
| | $ | 1,060 |
| | $ | 1,292 |
|
Other comprehensive (loss) income, net of tax (Note 11) | | |
| | |
| | |
| | |
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Foreign currency translation adjustments | | (29 | ) | | (221 | ) | | (299 | ) | | (252 | ) |
Unrealized gain (loss) on derivatives | | 7 |
| | 7 |
| | (20 | ) | | 15 |
|
Change in pension and other postretirement defined benefit plans | | 13 |
| | 15 |
| | 31 |
| | 43 |
|
Unrealized gain (loss) on marketable securities | | — |
| | (1 | ) | | 1 |
| | (1 | ) |
Total other comprehensive loss, net of tax | | (9 | ) | | (200 | ) | | (287 | ) | | (195 | ) |
COMPREHENSIVE INCOME | | 291 |
| | 192 |
| | 773 |
| | 1,097 |
|
Less: Comprehensive income (loss) attributable to noncontrolling interests | | 14 |
| | (1 | ) | | 41 |
| | 39 |
|
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC. | | $ | 277 |
| | $ | 193 |
| | $ | 732 |
| | $ | 1,058 |
|
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
CUMMINS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) |
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In millions, except par value | | October 2, 2016 | | December 31, 2015 |
ASSETS | | |
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Current assets | | |
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Cash and cash equivalents | | $ | 1,251 |
| | $ | 1,711 |
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Marketable securities (Note 6) | | 250 |
| | 100 |
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Total cash, cash equivalents and marketable securities | | 1,501 |
| | 1,811 |
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Accounts and notes receivable, net | | | | |
Trade and other | | 2,680 |
| | 2,640 |
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Nonconsolidated equity investees | | 193 |
| | 180 |
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Inventories (Note 7) | | 2,820 |
| | 2,707 |
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Prepaid expenses and other current assets | | 600 |
| | 609 |
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Total current assets | | 7,794 |
| | 7,947 |
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Long-term assets | | |
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Property, plant and equipment | | 7,460 |
| | 7,322 |
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Accumulated depreciation | | (3,783 | ) | | (3,577 | ) |
Property, plant and equipment, net | | 3,677 |
| | 3,745 |
|
Investments and advances related to equity method investees | | 1,077 |
| | 975 |
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Goodwill | | 482 |
| | 482 |
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Other intangible assets, net | | 319 |
| | 328 |
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Pension assets | | 773 |
| | 735 |
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Other assets | | 1,014 |
| | 922 |
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Total assets | | $ | 15,136 |
| | $ | 15,134 |
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LIABILITIES | | |
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Current liabilities | | |
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Accounts payable (principally trade) | | $ | 1,781 |
| | $ | 1,706 |
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Loans payable (Note 8) | | 48 |
| | 24 |
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Commercial paper (Note 8) | | 273 |
| | — |
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Accrued compensation, benefits and retirement costs | | 393 |
| | 409 |
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Current portion of accrued product warranty (Note 9) | | 333 |
| | 359 |
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Current portion of deferred revenue | | 460 |
| | 403 |
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Other accrued expenses | | 985 |
| | 863 |
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Current maturities of long-term debt (Note 8) | | 35 |
| | 39 |
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Total current liabilities | | 4,308 |
| | 3,803 |
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Long-term liabilities | | |
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Long-term debt (Note 8) | | 1,593 |
| | 1,576 |
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Postretirement benefits other than pensions | | 326 |
| | 349 |
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Pensions | | 301 |
| | 298 |
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Other liabilities and deferred revenue | | 1,344 |
| | 1,358 |
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Total liabilities | | $ | 7,872 |
| | $ | 7,384 |
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Commitments and contingencies (Note 10) | |
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EQUITY | | | | |
Cummins Inc. shareholders’ equity | | |
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Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.4 shares issued | | $ | 2,209 |
| | $ | 2,178 |
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Retained earnings | | 10,833 |
| | 10,322 |
|
Treasury stock, at cost, 54.1 and 47.2 shares | | (4,468 | ) | | (3,735 | ) |
Common stock held by employee benefits trust, at cost, 0.7 and 0.9 shares | | (8 | ) | | (11 | ) |
Accumulated other comprehensive loss (Note 11) | | (1,632 | ) | | (1,348 | ) |
Total Cummins Inc. shareholders’ equity | | 6,934 |
| | 7,406 |
|
Noncontrolling interests | | 330 |
| | 344 |
|
Total equity | | $ | 7,264 |
| | $ | 7,750 |
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Total liabilities and equity | | $ | 15,136 |
| | $ | 15,134 |
|
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
CUMMINS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
| | | | | | | | |
| | Nine months ended |
In millions | | October 2, 2016 | | September 27, 2015 |
CASH FLOWS FROM OPERATING ACTIVITIES | | |
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Consolidated net income | | $ | 1,060 |
| | $ | 1,292 |
|
Adjustments to reconcile consolidated net income to net cash provided by operating activities | | |
| | |
|
Restructuring payments (Note 12) | | (53 | ) | | — |
|
Loss contingency (Note 10) | | 138 |
| | — |
|
Depreciation and amortization | | 391 |
| | 383 |
|
Gain on fair value adjustment for consolidated investees | | — |
| | (17 | ) |
Deferred income taxes | | 60 |
| | (120 | ) |
Equity in income of investees, net of dividends | | (94 | ) | | (68 | ) |
Pension contributions in excess of expense (Note 3) | | (92 | ) | | (119 | ) |
Other post-retirement benefits payments in excess of expense (Note 3) | | (16 | ) | | (18 | ) |
Stock-based compensation expense | | 28 |
| | 24 |
|
Translation and hedging activities | | (39 | ) | | 22 |
|
Changes in current assets and liabilities, net of acquisitions | | | | |
|
Accounts and notes receivable | | (112 | ) | | (163 | ) |
Inventories | | (150 | ) | | (179 | ) |
Other current assets | | 138 |
| | 133 |
|
Accounts payable | | 97 |
| | (52 | ) |
Accrued expenses | | (279 | ) | | (153 | ) |
Changes in other liabilities and deferred revenue | | 188 |
| | 219 |
|
Other, net | | 45 |
| | (53 | ) |
Net cash provided by operating activities | | 1,310 |
| | 1,131 |
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CASH FLOWS FROM INVESTING ACTIVITIES | | |
| | |
|
Capital expenditures | | (312 | ) | | (393 | ) |
Investments in internal use software | | (42 | ) | | (38 | ) |
Investments in and advances to equity investees | | (29 | ) | | (9 | ) |
Acquisitions of businesses, net of cash acquired | | (1 | ) | | (102 | ) |
Investments in marketable securities—acquisitions (Note 6) | | (447 | ) | | (175 | ) |
Investments in marketable securities—liquidations (Note 6) | | 291 |
| | 228 |
|
Cash flows from derivatives not designated as hedges | | (64 | ) | | 17 |
|
Other, net | | 14 |
| | (5 | ) |
Net cash used in investing activities | | (590 | ) | | (477 | ) |
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CASH FLOWS FROM FINANCING ACTIVITIES | | |
| | |
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Proceeds from borrowings | | 111 |
| | 24 |
|
Net borrowings of commercial paper (Note 8) | | 273 |
| | — |
|
Payments on borrowings and capital lease obligations | | (156 | ) | | (64 | ) |
Net borrowings (payments) under short-term credit agreements | | 25 |
| | (38 | ) |
Distributions to noncontrolling interests | | (42 | ) | | (35 | ) |
Dividend payments on common stock | | (505 | ) | | (452 | ) |
Repurchases of common stock | | (745 | ) | | (650 | ) |
Other, net | | (2 | ) | | — |
|
Net cash used in financing activities | | (1,041 | ) | | (1,215 | ) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | | (139 | ) | | (52 | ) |
Net decrease in cash and cash equivalents | | (460 | ) | | (613 | ) |
Cash and cash equivalents at beginning of year | | 1,711 |
| | 2,301 |
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD | | $ | 1,251 |
| | $ | 1,688 |
|
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
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In millions | Common Stock | | Additional Paid-in Capital | | Retained Earnings | | Treasury Stock | | Common Stock Held in Trust | | Accumulated Other Comprehensive Loss | | Total Cummins Inc. Shareholders’ Equity | | Noncontrolling Interests | | Total Equity |
BALANCE AT DECEMBER 31, 2014 | $ | 556 |
| | $ | 1,583 |
| | $ | 9,545 |
| | $ | (2,844 | ) | | $ | (13 | ) | | $ | (1,078 | ) | | $ | 7,749 |
| | $ | 344 |
| | $ | 8,093 |
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Net income |
|
| |
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| | 1,238 |
| |
|
| |
|
| |
|
| | 1,238 |
| | 54 |
| | 1,292 |
|
Other comprehensive (loss) income, net of tax (Note 11) |
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|
| |
|
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|
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| | (180 | ) | | (180 | ) | | (15 | ) | | (195 | ) |
Issuance of shares |
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| | 7 |
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|
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|
| |
|
| | 7 |
| | — |
| | 7 |
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Employee benefits trust activity |
|
| | 21 |
| |
|
| |
|
| | 2 |
| |
|
| | 23 |
| | — |
| | 23 |
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Acquisition of shares |
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| |
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| | (650 | ) | |
|
| |
|
| | (650 | ) | | — |
| | (650 | ) |
Cash dividends on common stock |
|
| |
|
| | (452 | ) | |
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| |
|
| |
|
| | (452 | ) | | — |
| | (452 | ) |
Distributions to noncontrolling interests |
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| |
|
| |
|
| |
|
| |
|
| |
|
| | — |
| | (46 | ) | | (46 | ) |
Stock based awards |
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| | (4 | ) | |
|
| | 8 |
| |
|
| |
|
| | 4 |
| | — |
| | 4 |
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Other shareholder transactions |
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| | 10 |
| |
|
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| |
|
| |
|
| | 10 |
| | (5 | ) | | 5 |
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BALANCE AT SEPTEMBER 27, 2015 | $ | 556 |
| | $ | 1,617 |
| | $ | 10,331 |
| | $ | (3,486 | ) | | $ | (11 | ) | | $ | (1,258 | ) | | $ | 7,749 |
| | $ | 332 |
| | $ | 8,081 |
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BALANCE AT DECEMBER 31, 2015 | $ | 556 |
| | $ | 1,622 |
| | $ | 10,322 |
| | $ | (3,735 | ) | | $ | (11 | ) | | $ | (1,348 | ) | | $ | 7,406 |
| | $ | 344 |
| | $ | 7,750 |
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Net income |
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| |
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| | 1,016 |
| |
|
| |
|
| |
|
| | 1,016 |
| | 44 |
| | 1,060 |
|
Other comprehensive (loss) income, net of tax (Note 11) |
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| |
|
| |
|
| |
|
| |
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| | (284 | ) | | (284 | ) | | (3 | ) | | (287 | ) |
Issuance of shares |
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| | 5 |
| |
|
| |
|
| |
|
| |
|
| | 5 |
| | — |
| | 5 |
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Employee benefits trust activity |
|
| | 19 |
| |
|
| |
|
| | 3 |
| |
|
| | 22 |
| | — |
| | 22 |
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Acquisition of shares (Note 2) |
|
| |
|
| |
|
| | (745 | ) | |
|
| |
|
| | (745 | ) | | — |
| | (745 | ) |
Cash dividends on common stock |
|
| |
|
| | (505 | ) | |
|
| |
|
| |
|
| | (505 | ) | | — |
| | (505 | ) |
Distributions to noncontrolling interests |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | — |
| | (49 | ) | | (49 | ) |
Stock based awards |
|
| | (7 | ) | |
|
| | 12 |
| |
|
| |
|
| | 5 |
| | — |
| | 5 |
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Other shareholder transactions |
|
| | 14 |
| |
|
| |
|
| |
|
| |
|
| | 14 |
| | (6 | ) | | 8 |
|
BALANCE AT OCTOBER 2, 2016 | $ | 556 |
| | $ | 1,653 |
| | $ | 10,833 |
| | $ | (4,468 | ) | | $ | (8 | ) | | $ | (1,632 | ) | | $ | 6,934 |
| | $ | 330 |
| | $ | 7,264 |
|
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
CUMMINS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. NATURE OF OPERATIONS
Cummins Inc. (“Cummins,” “we,” “our” or “us”) was founded in 1919 as a corporation in Columbus, Indiana, as one of the first diesel engine manufacturers. We are a global power leader that designs, manufactures, distributes and services diesel and natural gas engines and engine-related component products, including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems and electric power generation systems. We sell our products to original equipment manufacturers (OEMs), distributors and other customers worldwide. We serve our customers through a network of approximately 600 company-owned and independent distributor locations and over 7,200 dealer locations in more than 190 countries and territories.
NOTE 2. BASIS OF PRESENTATION
The unaudited Condensed Consolidated Financial Statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of operations, financial position and cash flows. All such adjustments are of a normal recurring nature. The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial information. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by such rules and regulations. Certain reclassifications have been made to prior period amounts to conform to the presentation of the current period condensed financial statements.
These interim condensed financial statements should be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2015. Our interim period financial results for the three and nine month periods presented are not necessarily indicative of results to be expected for any other interim period or for the entire year. The year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.
Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts presented and disclosed in our Condensed Consolidated Financial Statements. Significant estimates and assumptions in these Condensed Consolidated Financial Statements require the exercise of judgment and are used for, but not limited to, allowance for doubtful accounts, useful lives for depreciation and amortization, estimates of future cash flows and other assumptions associated with goodwill and long-lived asset impairment tests, determination of discount rates and other assumptions for pension and other postretirement benefit costs, warranty programs, income taxes and deferred tax valuation allowances, lease classification, contingencies and restructuring costs. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates.
Our reporting period usually ends on the Sunday closest to the last day of the quarterly calendar period. The third quarters of 2016 and 2015 ended on October 2 and September 27, respectively. Our fiscal year ends on December 31, regardless of the day of the week on which December 31 falls.
The weighted-average diluted common shares outstanding excludes the anti-dilutive effect of certain stock options since such options had an exercise price in excess of the monthly average market value of our common stock. The options excluded from diluted earnings per share for the three and nine months ended October 2, 2016 and September 27, 2015, were as follows:
|
| | | | | | | | | | | |
| Three months ended | | Nine months ended |
| October 2, 2016 | | September 27, 2015 | | October 2, 2016 | | September 27, 2015 |
Options excluded | 936,857 |
| | 950,345 |
| | 1,295,664 |
| | 593,436 |
|
In 2016, we entered into an accelerated share repurchase agreement with a third party financial institution to repurchase $500 million of our common stock under our previously announced share repurchase plans and received 4.7 million shares at an average purchase price of $105.50 per share.
NOTE 3. PENSION AND OTHER POSTRETIREMENT BENEFITS
We sponsor funded and unfunded domestic and foreign defined benefit pension and other postretirement plans. Contributions to these plans were as follows:
|
| | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
In millions | | October 2, 2016 | | September 27, 2015 | | October 2, 2016 | | September 27, 2015 |
Defined benefit pension plans | | |
| | |
| | |
| | |
|
Voluntary contribution | | $ | 16 |
| | $ | 7 |
| | $ | 101 |
| | $ | 79 |
|
Mandatory contribution | | 5 |
| | 5 |
| | 23 |
| | 87 |
|
Defined benefit pension contributions | | $ | 21 |
| | $ | 12 |
| | $ | 124 |
| | $ | 166 |
|
| | | | | | | | |
Other postretirement plans | | $ | 4 |
| | $ | 8 |
| | $ | 32 |
| | $ | 33 |
|
| | | | | | | | |
Defined contribution pension plans | | $ | 17 |
| | $ | 14 |
| | $ | 53 |
| | $ | 56 |
|
We anticipate making additional defined benefit pension contributions during the remainder of 2016 of $22 million for our U.S. and U.K pension plans. The estimated $146 million of pension contributions for the full year include voluntary contributions of approximately $103 million. These contributions may be made from trusts or company funds either to increase pension assets or to make direct benefit payments to plan participants. We expect our 2016 net periodic pension cost to approximate $42 million.
The components of net periodic pension and other postretirement benefit costs under our plans were as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Pension | | | | |
| | U.S. Plans | | U.K. Plans | | Other Postretirement Benefits |
| | Three months ended |
In millions | | October 2, 2016 | | September 27, 2015 | | October 2, 2016 | | September 27, 2015 | | October 2, 2016 | | September 27, 2015 |
Service cost | | $ | 22 |
| | $ | 20 |
| | $ | 5 |
| | $ | 7 |
| | $ | — |
| | $ | — |
|
Interest cost | | 26 |
| | 25 |
| | 13 |
| | 14 |
| | 4 |
| | 4 |
|
Expected return on plan assets | | (50 | ) | | (47 | ) | | (17 | ) | | (23 | ) | | — |
| | — |
|
Recognized net actuarial loss | | 9 |
| | 11 |
| | 3 |
| | 8 |
| | 1 |
| | 1 |
|
Net periodic benefit cost | | $ | 7 |
| | $ | 9 |
| | $ | 4 |
| | $ | 6 |
| | $ | 5 |
| | $ | 5 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Pension | | | | |
| | U.S. Plans | | U.K. Plans | | Other Postretirement Benefits |
| | Nine months ended |
In millions | | October 2, 2016 | | September 27, 2015 | | October 2, 2016 | | September 27, 2015 | | October 2, 2016 | | September 27, 2015 |
Service cost | | $ | 68 |
| | $ | 60 |
| | $ | 16 |
| | $ | 20 |
| | $ | — |
| | $ | — |
|
Interest cost | | 82 |
| | 76 |
| | 39 |
| | 42 |
| | 12 |
| | 12 |
|
Expected return on plan assets | | (152 | ) | | (142 | ) | | (55 | ) | | (68 | ) | | — |
| | — |
|
Recognized net actuarial loss | | 23 |
| | 34 |
| | 11 |
| | 25 |
| | 4 |
| | 3 |
|
Net periodic benefit cost | | $ | 21 |
| | $ | 28 |
| | $ | 11 |
| | $ | 19 |
| | $ | 16 |
| | $ | 15 |
|
NOTE 4. EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES
Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Income for the reporting periods was as follows:
|
| | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
In millions | | October 2, 2016 | | September 27, 2015 | | October 2, 2016 | | September 27, 2015 |
Distribution entities | | | | | | | | |
Komatsu Cummins Chile, Ltda. | | $ | 8 |
| | $ | 8 |
| | $ | 26 |
| | $ | 23 |
|
North American distributors | | 7 |
| | 9 |
| | 18 |
| | 27 |
|
All other distributors | | 1 |
| | 1 |
| | 2 |
| | 2 |
|
Manufacturing entities | | | | | | |
| | |
|
Beijing Foton Cummins Engine Co., Ltd. | | 19 |
| | 18 |
| | 59 |
| | 47 |
|
Chongqing Cummins Engine Company, Ltd. | | 11 |
| | 9 |
| | 28 |
| | 32 |
|
Dongfeng Cummins Engine Company, Ltd. | | 10 |
| | 11 |
| | 32 |
| | 40 |
|
All other manufacturers | | 8 |
| | 13 |
| | 40 |
| | 41 |
|
Cummins share of net income | | 64 |
| | 69 |
| | 205 |
| | 212 |
|
Royalty and interest income | | 10 |
| | 9 |
| | 29 |
| | 28 |
|
Equity, royalty and interest income from investees | | $ | 74 |
| | $ | 78 |
| | $ | 234 |
| | $ | 240 |
|
NOTE 5. INCOME TAXES
Our effective tax rate for the year is expected to approximate 25.5 percent, excluding any one-time items that may arise. Our tax rate is generally less than the 35 percent U.S. statutory income tax rate primarily due to lower tax rates on foreign income and the research tax credit.
Our effective tax rate for the three and nine months ended October 2, 2016, was 21.5 percent and 25.5 percent, respectively.
Our effective tax rate for the three and nine months ended September 27, 2015, was 30.1 percent and 28.7 percent, respectively. The tax rate for the nine months ended September 27, 2015, included an $18 million discrete tax benefit to reflect the release of reserves for uncertain tax positions related to a favorable federal audit settlement.
The decrease in the effective tax rate for the three and nine months ended October 2, 2016, versus the comparable periods in 2015 was primarily due to favorable changes in the jurisdictional mix of pre-tax income.
It is reasonably possible that our existing liabilities for uncertain tax benefits may decrease in an amount ranging from $20 million to $26 million within the next 12 months for U.S. and non-U.S. audits that are in progress.
NOTE 6. MARKETABLE SECURITIES
A summary of marketable securities, all of which are classified as current, was as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | October 2, 2016 | | December 31, 2015 |
In millions | | Cost | | Gross unrealized gains/(losses) | | Estimated fair value | | Cost | | Gross unrealized gains/(losses) | | Estimated fair value |
Available-for-sale | | |
| | |
| | |
| | |
| | |
| | |
|
Level 2(1) | | | | | | | | | | | | |
Bank debentures | | $ | 118 |
| | $ | — |
| | $ | 118 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Debt mutual funds | | 118 |
| | — |
| | 118 |
| | 88 |
| | — |
| | 88 |
|
Equity mutual funds | | 12 |
| | — |
| | 12 |
| | 11 |
| | (1 | ) | | 10 |
|
Government debt securities | | 2 |
| | — |
| | 2 |
| | 2 |
| | — |
| | 2 |
|
Total marketable securities | | $ | 250 |
| | $ | — |
| | $ | 250 |
| | $ | 101 |
| | $ | (1 | ) | | $ | 100 |
|
____________________________________
(1) The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 securities and there were no transfers between Level 2 or 3 during the first nine months of 2016 or for the year ended December 31, 2015.
A description of the valuation techniques and inputs used for our Level 2 fair value measures was as follows:
| |
• | Bank debentures— These investments provide us with a contractual rate of return and generally range in maturity from three months to one year. The counter-parties to these investments are reputable financial institutions with investment grade credit ratings. Since these instruments are not tradable and must be settled directly by us with the respective financial institution, our fair value measure is the financial institutions’ month-end statement. |
| |
• | Debt mutual funds— The fair value measure for these investments is the daily net asset value published on a regulated governmental website. Daily quoted prices are available from the issuing brokerage and are used on a test basis to corroborate this Level 2 input. |
| |
• | Equity mutual funds— The fair value measure for these investments is the net asset value published by the issuing brokerage. Daily quoted prices are available from reputable third party pricing services and are used on a test basis to corroborate this Level 2 input measure. |
| |
• | Government debt securities-non-U.S.— The fair value measure for these securities is broker quotes received from reputable firms. These securities are infrequently traded on a national stock exchange and these values are used on a test basis to corroborate our Level 2 input measure. |
The proceeds from sales and maturities of marketable securities and gross realized gains and losses from the sale of available-for-sale securities were as follows:
|
| | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
In millions | | October 2, 2016 | | September 27, 2015 | | October 2, 2016 | | September 27, 2015 |
Proceeds from sales and maturities of marketable securities | | $ | 54 |
| | $ | 73 |
| | $ | 291 |
| | $ | 228 |
|
Gross realized gains from the sale of marketable securities(1) | | — |
| | — |
| | — |
| | 1 |
|
____________________________________
(1) Gross realized losses from the sale of available-for-sale securities were immaterial.
At October 2, 2016, the fair value of available-for-sale investments in debt securities that utilize a Level 2 fair value measure is shown by contractual maturity below:
|
| | | | |
Contractual Maturity | | (In millions) |
1 year or less | | $ | 237 |
|
5 - 10 years | | 1 |
|
Total | | $ | 238 |
|
NOTE 7. INVENTORIES
Inventories are stated at the lower of cost or market. Inventories included the following:
|
| | | | | | | | |
In millions | | October 2, 2016 | | December 31, 2015 |
Finished products | | $ | 1,779 |
| | $ | 1,796 |
|
Work-in-process and raw materials | | 1,146 |
| | 1,022 |
|
Inventories at FIFO cost | | 2,925 |
| | 2,818 |
|
Excess of FIFO over LIFO | | (105 | ) | | (111 | ) |
Total inventories | | $ | 2,820 |
| | $ | 2,707 |
|
NOTE 8. DEBT
Loans Payable and Commercial Paper
Loans payable, commercial paper and the related weighted-average interest rates were as follows:
|
| | | | | | | | | | | | | | |
| | October 2, 2016 | | December 31, 2015 |
Dollars in millions | | Amount | | Weighted Average Interest Rate | | Amount | | Weighted Average Interest Rate |
Loans payable (1) | | $ | 48 |
| | | | $ | 24 |
| | |
Commercial paper (2) | | 273 |
| | 0.47 | % | (3) | — |
| | — |
|
____________________________________
(1) Loans payable consist primarily of notes payable to various domestic and international financial institutions. It is not practical to aggregate these notes and calculate a quarterly weighted-average interest rate.
(2) In February 2016, the Board of Directors authorized the issuance of up to $1.75 billion of unsecured short-term promissory notes ("commercial paper") pursuant to a commercial paper program. The program will facilitate the private placement of unsecured short-term debt through third party brokers. We intend to use the net proceeds from the commercial paper program for general corporate purposes.
(3) The weighted average interest rate is inclusive of all brokerage fees.
Long-term Debt
A summary of long-term debt was as follows:
|
| | | | | | | | |
In millions | | October 2, 2016 | | December 31, 2015 |
Long-term debt | | |
| | |
|
Senior notes, 3.65%, due 2023 | | $ | 500 |
| | $ | 500 |
|
Debentures, 6.75%, due 2027 | | 58 |
| | 58 |
|
Debentures, 7.125%, due 2028 | | 250 |
| | 250 |
|
Senior notes, 4.875%, due 2043 | | 500 |
| | 500 |
|
Debentures, 5.65%, due 2098 (effective interest rate 7.48%) | | 165 |
| | 165 |
|
Other debt | | 49 |
| | 55 |
|
Unamortized discount | | (56 | ) | | (57 | ) |
Fair value adjustments due to hedge on indebtedness | | 77 |
| | 63 |
|
Capital leases | | 85 |
| | 81 |
|
Total long-term debt | | 1,628 |
| | 1,615 |
|
Less: Current maturities of long-term debt | | 35 |
| | 39 |
|
Long-term debt | | $ | 1,593 |
| | $ | 1,576 |
|
Principal payments required on long-term debt during the next five years are as follows:
|
| | | | | | | | | | | | | | | | | | | | |
| | Required Principal Payments |
In millions | | 2016 | | 2017 | | 2018 | | 2019 | | 2020 |
Principal payments | | $ | 9 |
| | $ | 28 |
| | $ | 31 |
| | $ | 24 |
| | $ | 7 |
|
Fair Value of Debt
Based on borrowing rates currently available to us for bank loans with similar terms and average maturities, considering our risk premium, the fair value and carrying value of total debt, including current maturities, was as follows:
|
| | | | | | | | |
In millions | | October 2, 2016 | | December 31, 2015 |
Fair value of total debt(1) | | $ | 2,292 |
| | $ | 1,821 |
|
Carrying value of total debt | | 1,949 |
| | 1,639 |
|
_________________________________________________
(1) The fair value of debt is derived from Level 2 inputs.
NOTE 9. PRODUCT WARRANTY LIABILITY
A tabular reconciliation of the product warranty liability, including the deferred revenue related to our extended warranty coverage and accrued recall programs was as follows:
|
| | | | | | | | |
In millions | | October 2, 2016 | | September 27, 2015 |
Balance, beginning of year | | $ | 1,404 |
| | $ | 1,283 |
|
Provision for warranties issued | | 256 |
| | 326 |
|
Deferred revenue on extended warranty contracts sold | | 179 |
| | 217 |
|
Payments | | (291 | ) | | (282 | ) |
Amortization of deferred revenue on extended warranty contracts | | (148 | ) | | (132 | ) |
Changes in estimates for pre-existing warranties | | 22 |
| | 18 |
|
Foreign currency translation | | (6 | ) | | (10 | ) |
Balance, end of period | | $ | 1,416 |
| | $ | 1,420 |
|
Warranty related deferred revenue and the long-term portion of the warranty liability on our October 2, 2016, balance sheet were as follows:
|
| | | | | | |
In millions | | October 2, 2016 | | Balance Sheet Location |
Deferred revenue related to extended coverage programs | | |
| | |
Current portion | | $ | 210 |
| | Current portion of deferred revenue |
Long-term portion | | 537 |
| | Other liabilities and deferred revenue |
Total | | $ | 747 |
| | |
| | | | |
Long-term portion of warranty liability | | $ | 336 |
| | Other liabilities and deferred revenue |
NOTE 10. COMMITMENTS AND CONTINGENCIES
We are subject to numerous lawsuits and claims arising out of the ordinary course of our business, including actions related to product liability; personal injury; the use and performance of our products; warranty matters; patent, trademark or other intellectual property infringement; contractual liability; the conduct of our business; tax reporting in foreign jurisdictions; distributor termination; workplace safety; and environmental matters. We also have been identified as a potentially responsible party at multiple waste disposal sites under U.S. federal and related state environmental statutes and regulations and may have joint and several liability for any investigation and remediation costs incurred with respect to such sites. We have denied liability with respect to many of these lawsuits, claims and proceedings and are vigorously defending such lawsuits, claims and proceedings. We carry various forms of commercial, property and casualty, product liability and other forms of insurance; however, such insurance may not be applicable or adequate to cover the costs associated with a judgment against us with respect to these lawsuits, claims and proceedings. We do not believe that these lawsuits are material individually or in the aggregate. While we believe we have also established adequate accruals for our expected future liability with respect to pending lawsuits, claims and proceedings, where the nature and extent of any such liability can be reasonably estimated based upon then presently available information, there can be no assurance that the final resolution of any existing or future lawsuits, claims or proceedings will not have a material adverse effect on our business, results of operations, financial condition or cash flows.
We conduct significant business operations in Brazil that are subject to the Brazilian federal, state and local labor, social security, tax and customs laws. While we believe we comply with such laws, they are complex, subject to varying interpretations and we are often engaged in litigation regarding the application of these laws to particular circumstances.
Loss Contingency
Engine systems sold in the U.S. must be certified to comply with the Environmental Protection Agency (EPA) and California Air Resources Board (CARB) emission standards. EPA and CARB regulations require that in-use testing be performed on vehicles by the emission certificate holder and reported to the EPA and CARB in order to ensure ongoing compliance with these emission standards. We are the holder of this emission certificate for our engines, including engines installed in certain vehicles with one customer on which we did not also manufacture or sell the emission aftertreatment system. During 2015, a
quality issue in certain of these third party aftertreatment systems caused some of our inter-related engines to fail in-use emission testing. In the fourth quarter of 2015, the vehicle manufacturer made a request that we assist in the design and bear the financial cost of a field campaign (Campaign) to address the technical issue purportedly causing some vehicles to fail the in-use testing.
While we are not responsible for the warranty issues related to a component that we did not manufacture or sell, as the emission compliance certificate holder, we are responsible for proposing a remedy to the EPA and CARB. As a result, we have proposed actions to the agencies that we believe will address the emission failures. As the certificate holder, we expect to participate in the cost of the proposed voluntary Campaign and recorded a charge of $60 million in 2015. The Campaign design was finalized with our OEM customer, reviewed with the EPA and submitted for final approval in the second quarter of 2016, and we recorded an additional accrual of $39 million. We have concluded based upon additional in-use emission testing performed in the third quarter of 2016, that the Campaign should be expanded to include a larger population of vehicles manufactured by this one OEM. As a result, we recorded an additional accrual of $99 million in the third quarter to reflect the estimated cost of our participation in the expanded Campaign. We continue to work with our OEM customer to resolve the allocation of costs for the Campaign, including pending litigation between the parties. The Campaign is not expected to be completed for some time and our final cost could differ from the amount we have recorded.
We do not currently expect any fines or penalties from the EPA or CARB related to this matter.
The accrual related to the Campaign is included in "Other accrued expenses" in our Condensed Consolidated Balance Sheets.
Guarantees and Commitments
From time to time we enter into guarantee arrangements, including guarantees of non-U.S. distributor financings, residual value guarantees on equipment under operating leases and other miscellaneous guarantees of joint ventures or third-party obligations. At October 2, 2016, the maximum potential loss related to these guarantees was $24 million.
We have arrangements with certain suppliers that require us to purchase minimum volumes or be subject to monetary penalties. At October 2, 2016, if we were to stop purchasing from each of these suppliers, the aggregate amount of the penalty would be approximately $108 million, of which $55 million relates to a contract with a components supplier that extends to 2018. Most of these arrangements enable us to secure critical components. We do not currently anticipate paying any penalties under these contracts.
We enter into physical forward contracts with suppliers of platinum, palladium and copper to purchase minimum volumes of the commodities at contractually stated prices for various periods, not to exceed two years. At October 2, 2016, the total commitments under these contracts were $27 million. These arrangements enable us to fix the prices of these commodities, which otherwise are subject to market volatility.
We have guarantees with certain customers that require us to satisfactorily honor contractual or regulatory obligations, or compensate for monetary losses related to nonperformance. These performance bonds and other performance-related guarantees were $79 million at October 2, 2016.
Indemnifications
Periodically, we enter into various contractual arrangements where we agree to indemnify a third-party against certain types of losses. Common types of indemnities include:
| |
• | product liability and license, patent or trademark indemnifications; |
| |
• | asset sale agreements where we agree to indemnify the purchaser against future environmental exposures related to the asset sold; and |
| |
• | any contractual agreement where we agree to indemnify the counter-party for losses suffered as a result of a misrepresentation in the contract. |
We regularly evaluate the probability of having to incur costs associated with these indemnities and accrue for expected losses that are probable. Because the indemnifications are not related to specified known liabilities and due to their uncertain nature, we are unable to estimate the maximum amount of the potential loss associated with these indemnifications.
NOTE 11. ACCUMULATED OTHER COMPREHENSIVE LOSS
Following are the changes in accumulated other comprehensive (loss) income by component for the three and nine months ended:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended |
In millions | | Change in pensions and other postretirement defined benefit plans | | Foreign currency translation adjustment | | Unrealized gain (loss) on marketable securities | | Unrealized gain (loss) on derivatives | | Total attributable to Cummins Inc. | | Noncontrolling interests | | Total other comprehensive income (loss) |
Balance at June 28, 2015 | | $ | (641 | ) | | $ | (435 | ) | | $ | (1 | ) | | $ | 6 |
| | $ | (1,071 | ) | | |
| | |
|
Other comprehensive income before reclassifications | | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Before tax amount | | — |
| | (239 | ) | | (1 | ) | | 13 |
| | (227 | ) | | $ | (13 | ) | | $ | (240 | ) |
Tax benefit (expense) | | — |
| | 31 |
| | — |
| | (1 | ) | | 30 |
| | — |
| | 30 |
|
After tax amount | | — |
| | (208 | ) | | (1 | ) | | 12 |
| | (197 | ) | | (13 | ) | | (210 | ) |
Amounts reclassified from accumulated other comprehensive income(1)(2) | | 15 |
| | — |
| | — |
| | (5 | ) | | 10 |
| | — |
| | 10 |
|
Net current period other comprehensive income (loss) | | 15 |
| | (208 | ) | | (1 | ) | | 7 |
| | (187 | ) | | $ | (13 | ) | | $ | (200 | ) |
Balance at September 27, 2015 | | $ | (626 | ) | | $ | (643 | ) | | $ | (2 | ) | | $ | 13 |
| | $ | (1,258 | ) | | |
| | |
|
| | | | | | | | | | | | | | |
Balance at July 3, 2016 | | $ | (636 | ) | | $ | (960 | ) | | $ | (1 | ) | | $ | (23 | ) | | $ | (1,620 | ) | | |
| | |
|
Other comprehensive income before reclassifications | | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Before tax amount | | 5 |
| | (51 | ) | | — |
| | (4 | ) | | (50 | ) | | $ | 3 |
| | $ | (47 | ) |
Tax (expense) benefit | | (1 | ) | | 19 |
| | — |
| | 1 |
| | 19 |
| | — |
| | 19 |
|
After tax amount | | 4 |
| | (32 | ) | | — |
| | (3 | ) | | (31 | ) | | 3 |
| | (28 | ) |
Amounts reclassified from accumulated other comprehensive income(1)(2) | | 9 |
| | — |
| | — |
| | 10 |
| | 19 |
| | — |
| | 19 |
|
Net current period other comprehensive income (loss) | | 13 |
| | (32 | ) | | — |
| | 7 |
| | (12 | ) | | $ | 3 |
| | $ | (9 | ) |
Balance at October 2, 2016 | | $ | (623 | ) | | $ | (992 | ) | | $ | (1 | ) | | $ | (16 | ) | | $ | (1,632 | ) | | |
| | |
|
____________________________________
(1) Amounts are net of tax.
(2) See reclassifications out of accumulated other comprehensive (loss) income disclosure below for further details.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine months ended |
In millions | | Change in pensions and other postretirement defined benefit plans | | Foreign currency translation adjustment | | Unrealized gain (loss) on marketable securities | | Unrealized gain (loss) on derivatives | | Total attributable to Cummins Inc. | | Noncontrolling interests | | Total other comprehensive income (loss) |
Balance at December 31, 2014 | | $ | (669 | ) | | $ | (406 | ) | | $ | (1 | ) | | $ | (2 | ) | | $ | (1,078 | ) | | |
| | |
|
Other comprehensive income before reclassifications | | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Before tax amount | | (3 | ) | | (290 | ) | | — |
| | 23 |
| | (270 | ) | | $ | (15 | ) | | $ | (285 | ) |
Tax benefit (expense) | | 1 |
| | 53 |
| | — |
| | (3 | ) | | 51 |
| | — |
| | 51 |
|
After tax amount | | (2 | ) | | (237 | ) | | — |
| | 20 |
| | (219 | ) | | (15 | ) | | (234 | ) |
Amounts reclassified from accumulated other comprehensive income(1)(2) | | 45 |
| | — |
| | (1 | ) | | (5 | ) | | 39 |
| | — |
| | 39 |
|
Net current period other comprehensive income (loss) | | 43 |
| | (237 | ) | | (1 | ) | | 15 |
| | (180 | ) | | $ | (15 | ) | | $ | (195 | ) |
Balance at September 27, 2015 | | $ | (626 | ) | | $ | (643 | ) | | $ | (2 | ) | | $ | 13 |
| | $ | (1,258 | ) | | |
| | |
|
| | | | | | | | | | | | | | |
Balance at December 31, 2015 | | $ | (654 | ) | | $ | (696 | ) | | $ | (2 | ) | | $ | 4 |
| | $ | (1,348 | ) | | |
| | |
|
Other comprehensive income before reclassifications | | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Before tax amount | | 5 |
| | (316 | ) | | 1 |
| | (40 | ) | | (350 | ) | | $ | (3 | ) | | $ | (353 | ) |
Tax (expense) benefit | | (1 | ) | | 20 |
| | — |
| | 7 |
| | 26 |
| | — |
| | 26 |
|
After tax amount | | 4 |
| | (296 | ) | | 1 |
| | (33 | ) | | (324 | ) | | (3 | ) | | (327 | ) |
Amounts reclassified from accumulated other comprehensive income(1)(2) | | 27 |
| | — |
| | — |
| | 13 |
| | 40 |
| | — |
| | 40 |
|
Net current period other comprehensive income (loss) | | 31 |
| | (296 | ) | | 1 |
| | (20 | ) | | (284 | ) | | $ | (3 | ) | | $ | (287 | ) |
Balance at October 2, 2016 | | $ | (623 | ) | | $ | (992 | ) | | $ | (1 | ) | | $ | (16 | ) | | $ | (1,632 | ) | | |
| | |
|
____________________________________
(1) Amounts are net of tax.
(2) See reclassifications out of accumulated other comprehensive (loss) income disclosure below for further details.
Following are the items reclassified out of accumulated other comprehensive (loss) income and the related tax effects:
|
| | | | | | | | | | | | | | | | | | |
In millions | | Three months ended | | Nine months ended | | |
(Gain)/Loss Components | | October 2, 2016 | | September 27, 2015 | | October 2, 2016 | | September 27, 2015 | | Statement of Income Location |
| | | | | | | | | | |
Change in pensions and other postretirement defined benefit plans | | |
| | | | |
| | | | |
Recognized actuarial loss | | |