Cummins Announces Third Quarter 2016 Results

  • Third quarter revenues of $4.2 billion, EBIT of 9.5 percent of sales,
  • GAAP1 net income of 6.9 percent of sales, Diluted EPS of $1.72
  • Expects full year 2016 revenues to be down 9 percent, unchanged
  • Full year 2016 EBIT expected to be 11.3 percent of sales, compared to prior guidance of 11.6 to 12.2 percent

COLUMBUS, Ind.--()--Cummins Inc. (NYSE: CMI) today reported results for the third quarter of 2016.

Third quarter revenues of $4.2 billion decreased 9 percent from the same quarter in 2015. Lower truck production in North America and weak international demand for power generation equipment were the most significant drivers of the decline in sales. Currency negatively impacted revenues by approximately 2 percent compared to last year, primarily due to a stronger US dollar.

Revenues in North America decreased 13 percent while international sales declined by 3 percent. Within international markets, higher revenues in China partially offset declines in the Middle East and Africa.

Earnings before interest and taxes (EBIT) were $398 million in the third quarter, or 9.5 percent of sales, and included a $99 million increase in an existing accrual for a loss contingency. EBIT in the third quarter of 2015 was $577 million or 12.5 percent of sales.

Net income attributable to Cummins was $289 million ($1.72 per diluted share). The loss contingency charge, net of its impact on compensation plans, reduced diluted earnings per share by 30 cents. The tax rate in the third quarter of 2016 was 21.5 percent. Net income in the third quarter of 2015 was $380 million ($2.14 per diluted share).

“Due to the slow pace of growth in the global economy, we continue to face weak demand in a number of our most important markets,” said Cummins Chairman and CEO Tom Linebarger. “The restructuring actions that we initiated in the fourth quarter of 2015, combined with strong execution on material cost reduction initiatives, productivity gains and improvements in product quality are all helping to mitigate the impact of weaker revenues. We are on track to deliver our goal of 25% decremental EBIT margin for the full year 2016, as a result of strong operational performance in very challenging economic conditions. We have returned $1.3 billion to shareholders so far this year, through a combination of dividends and share repurchases, consistent with our plans to return 75 percent of operating cash flow to shareholders in 2016."

Based on the current forecast, Cummins expects full year 2016 revenues to be down 9 percent, consistent with its prior guidance of down between 8 and 10 percent. Full year EBIT is expected to be 11.3 percent of sales, down from the prior forecast of 11.6 to 12.2 percent. The reduction in EBIT guidance is primarily a result of an increase in the expected costs of a loss contingency in the third quarter. As disclosed in prior quarters, the loss contingency relates to the costs of a campaign to remedy quality issues with third party aftertreatment systems, which were sourced by one of our OEM customers and are paired with our engines in the OEM vehicle.

Other recent highlights:

  • Cummins was recognized with the 2016 United States Overall Best Heavy-Duty Truck Engine Supplier Leadership Award by Frost and Sullivan
  • The Company announced that it will partner with Peterbilt Motors Company, a division of PACCAR, to develop and demonstrate technologies under the U.S. Department of Energy Supertruck II program
  • Cummins has been inducted into the Billion Dollar Roundtable for its commitment to diversity and inclusion
  • The Company returned $1.3 billion to shareholders so far this year, through a combination of dividends and share repurchases

Third quarter 2016 detail (all comparisons to same period in 2015)

Engine Segment

  • Sales - $1.9 billion, down 12 percent.
  • Segment EBIT - $89 million, or 4.8 percent of sales, compared to $217 million or 10.3 percent of sales
  • Segment EBIT reflects a $99 million increase in an existing accrual for a loss contingency
  • On-highway revenues declined 13 percent primarily due to lower heavy and medium-duty truck production in North America

Distribution Segment

  • Sales - $1.5 billion, down 3 percent
  • Segment EBIT - $96 million, or 6.4 percent of sales, compared to $123 million or 7.9 percent of sales
  • Increased revenue from acquisitions was more than offset by a 5 percent decline in organic sales and a 1 percent unfavorable impact from currency

Components Segment

  • Sales - $1.1 billion, down 8 percent.
  • Segment EBIT - $148 million , or 12.9 percent of sales, compared to $156 million or 12.6 percent of sales
  • Revenues in North America declined due to lower medium and heavy-duty truck production, partially offset by higher revenues in China

Power Systems Segment

  • Sales - $856 million, down 13 percent
  • Segment EBIT - $59 million, or 6.9 percent of sales, compared to $74 million, or 7.5 percent of sales
  • Revenues declined due to lower power generation and industrial engine demand in Asia, the Middle East and Africa

1 Generally Accepted Accounting Principles

About Cummins

Cummins Inc., a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service diesel and natural gas engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Headquartered in Columbus, Indiana, (USA) Cummins currently employs approximately 55,000 people worldwide and serves customers in approximately 190 countries and territories through a network of approximately 600 company-owned and independent distributor locations and approximately 7,200 dealer locations. Cummins earned $1.4 billion on sales of $19.1 billion in 2015. Press releases can be found on the Web at www.cummins.com. Follow Cummins on Twitter at www.twittter.com/cummins and on YouTube at www.youtube.com/cummininc.

Forward-looking disclosure statement

Information provided in this release that is not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our forecasts, guidance, preliminary results, expectations, hopes, beliefs and intentions on strategies regarding the future. These forward looking statements include, without limitation, statements relating to our plans and expectations for our revenues for the full year of 2016. Our actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including, but not limited to: the adoption and implementation of global emission standards; the price and availability of energy; the pace of infrastructure development; increasing global competition among our customers; general economic, business and financing conditions; governmental action; changes in our customers’ business strategies; competitor pricing activity; expense volatility; labor relations; and other risks detailed from time to time in our Securities and Exchange Commission filings, including particularly in the Risk Factors section of our 2015 Annual Report on Form 10-K. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this press release and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the Securities and Exchange Commission, which are available at http://www.sec.gov or at http://www.cummins.com in the Investor Relations section of our website.

Presentation of Non-GAAP Financial Information

This earnings release includes information that does not conform to U.S. generally accepted accounting principles (GAAP) and are considered non-GAAP measures. EBIT is a non-GAAP measure used in this release, and is defined and reconciled to what management believes to be the most comparable GAAP measure in a schedule attached to this release. Cummins presents this information as it believes it is useful to understanding the Company's operating performance, and because EBIT is a measure used internally to assess the performance of the operating units.

Webcast information

Cummins management will host a teleconference to discuss these results today at 10 a.m. EDT. This teleconference will be webcast and available on the Investor Relations section of the Cummins website at www.cummins.com . Participants wishing to view the visuals available with the audio are encouraged to sign-in a few minutes prior to the start of the teleconference.

CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (a)

 
Three months ended
In millions, except per share amounts October 2,
2016
  September 27,
2015
NET SALES $ 4,187 $ 4,620
Cost of sales 3,108   3,412  
GROSS MARGIN 1,079 1,208
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses 513 530
Research, development and engineering expenses 157 197
Equity, royalty and interest income from investees 74 78
Loss contingency 99
Other operating expense, net   (2 )
OPERATING INCOME 384 557
Interest income 6 9
Interest expense 16 16
Other income, net 8   11  
INCOME BEFORE INCOME TAXES 382 561
Income tax expense 82   169  
CONSOLIDATED NET INCOME 300 392
Less: Net income attributable to noncontrolling interests 11   12  
NET INCOME ATTRIBUTABLE TO CUMMINS INC. $ 289   $ 380  
 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic $ 1.72 $ 2.15
Diluted $ 1.72 $ 2.14
 
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 167.8 177.0
Diluted 168.2 177.4
 
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 1.025 $ 0.975
 
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.
 

CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (a)

 
Nine months ended
In millions, except per share amounts October 2,
2016
  September 27,
2015
NET SALES $ 13,006 $ 14,344
Cost of sales 9,674   10,609  
GROSS MARGIN 3,332 3,735
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses 1,527 1,584
Research, development and engineering expenses 478 558
Equity, royalty and interest income from investees 234 240
Loss contingency 138
Other operating expense, net (2 ) (5 )
OPERATING INCOME 1,421 1,828
Interest income 18 20
Interest expense 51 47
Other income, net 34   12  
INCOME BEFORE INCOME TAXES 1,422 1,813
Income tax expense 362   521  
CONSOLIDATED NET INCOME 1,060 1,292
Less: Net income attributable to noncontrolling interests 44   54  
NET INCOME ATTRIBUTABLE TO CUMMINS INC. $ 1,016   $ 1,238  
 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic $ 5.99 $ 6.92
Diluted $ 5.99 $ 6.90
 
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 169.5 178.9
Diluted 169.7 179.3
 
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 2.975 $ 2.535
 
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.
 

CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (a)

   
In millions, except par value October 2,
2016
December 31,
2015
ASSETS
Current assets
Cash and cash equivalents $ 1,251 $ 1,711
Marketable securities 250   100  
Total cash, cash equivalents and marketable securities 1,501 1,811
Accounts and notes receivable, net 2,873 2,820
Inventories 2,820 2,707
Prepaid expenses and other current assets 600   609  
Total current assets 7,794   7,947  
Long-term assets
Property, plant and equipment 7,460 7,322
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
Goodwill 482 482
Other intangible assets, net 319 328
Pension assets 773 735
Other assets 1,014   922  
Total assets $ 15,136   $ 15,134  
 
LIABILITIES
Current liabilities
Accounts payable (principally trade) $ 1,781 $ 1,706
Loans payable 48 24
Commercial paper 273
Accrued compensation, benefits and retirement costs 393 409
Current portion of accrued product warranty 333 359
Current portion of deferred revenue 460 403
Other accrued expenses 985 863
Current maturities of long-term debt 35   39  
Total current liabilities 4,308   3,803  
Long-term liabilities
Long-term debt 1,593 1,576
Postretirement benefits other than pensions 326 349
Pensions 301 298
Other liabilities and deferred revenue 1,344   1,358  
Total liabilities $ 7,872   $ 7,384  
 
EQUITY
Cummins Inc. shareholders’ equity
Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.4 shares issued $ 2,209 $ 2,178
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 (1,632 ) (1,348 )
Total Cummins Inc. shareholders’ equity 6,934 7,406
Noncontrolling interests 330   344  
Total equity $ 7,264   $ 7,750  
Total liabilities and equity $ 15,136   $ 15,134  
 
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.
 

CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (a)

 
Nine months ended
In millions October 2,
2016
  September 27,
2015
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income $ 1,060 $ 1,292
Adjustments to reconcile consolidated net income to net cash provided by operating activities
Restructuring payments (53 )
Loss contingency 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 (92 ) (119 )
Other post-retirement benefits payments in excess of expense (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  
 
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 (447 ) (175 )
Investments in marketable securities—liquidations 291 228
Cash flows from derivatives not designated as hedges (64 ) 17
Other, net 14   (5 )
Net cash used in investing activities (590 ) (477 )
 
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 111 24
Net borrowings of commercial paper 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  
 
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.
 

CUMMINS INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)

As previously announced, beginning with the second quarter of 2016, we realigned certain of our reportable segments to be consistent with changes to our organizational structure and how the Chief Operating Decision Maker monitors the performance of our segments. We reorganized our business to combine our Power Generation segment and our high horsepower engine business to create the new Power Systems segment. Our reportable operating segments consist of Engine, Distribution, Components and Power Systems. We began to report results for our new reporting structure in the second quarter of 2016 and also reflected this change for historical periods.

We allocate certain common costs and expenses, primarily corporate functions, among segments. These include certain costs and expenses of shared services, such as information technology, human resources, legal, finance and supply chain management. In addition to the reorganization noted above, we reevaluated the allocation of these costs, considering the new segment structure created in April 2016 and adjusted our allocation methodology accordingly. The revised methodology, which is based on a combination of relative segment sales and relative service usage levels, is effective for the periods beginning after January 1, 2016 and resulted in the revision of our segment operating results, including segment earnings before interest, income taxes and noncontrolling interests (EBIT), for all four segments for the first quarter of 2016 with a greater share of costs allocated to the Distribution and Components segments than in previous years. Prior periods were not revised for the new allocation methodology. These changes had no impact on our consolidated results.

In millions   Engine   Distribution   Components  

Power
Systems

  Non-segment
Items (1)
  Total
Three months ended October 2, 2016
External sales $ 1,357 $ 1,497 $ 824 $ 509 $ $ 4,187
Intersegment sales 502   7   319   347   (1,175 )  
Total sales 1,859 1,504 1,143 856 (1,175 ) 4,187
Depreciation and amortization(2) 42 28 32 29 131
Research, development and engineering expenses 56 3 54 44 157
Equity, royalty and interest income from investees 38 19 9 8 74
Loss contingency 99 99
Interest income 3 1 1 1 6
Segment EBIT 89 96 148 59 6 398
 
Segment EBIT as a percentage of total sales 4.8 % 6.4 % 12.9 % 6.9 % 9.5 %
 
Three months ended September 27, 2015
External sales $ 1,627 $ 1,543 $ 891 $ 559 $ $ 4,620
Intersegment sales 475   8   349   423   (1,255 )  
Total sales 2,102 1,551 1,240 982 (1,255 ) 4,620
Depreciation and amortization(2) 47 26 28 27 128
Research, development and engineering expenses 73 2 65 57 197
Equity, royalty and interest income from investees 33 19 9 17 78
Interest income 6 1 1 1 9
Segment EBIT 217 123 156 74 7 577
 
Segment EBIT as a percentage of total sales 10.3 % 7.9 % 12.6 % 7.5 % 12.5 %
                         

(1)

Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended October 2, 2016 and September 27, 2015.

(2)

Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Income as "Interest expense."

 
In millions   Engine   Distribution   Components  

Power
Systems

 

Non-segment
Items (1)

  Total
Nine months ended October 2, 2016
External sales $ 4,350 $ 4,493 $ 2,654 $ 1,509 $ $ 13,006
Intersegment sales 1,487   18   1,005   1,076   (3,586 )  
Total sales 5,837 4,511 3,659 2,585 (3,586 ) 13,006
Depreciation and amortization(2) 121 86 95 87 389
Research, development and engineering expenses 166 10 161 141 478
Equity, royalty and interest income from investees 120 56 29 29 234
Loss contingency 138 138
Interest income 8 3 3 4 18
Segment EBIT 492 270 501 195 15 1,473
 
Segment EBIT as a percentage of total sales 8.4 % 6.0 % 13.7 % 7.5 % 11.3 %
 
Nine months ended September 27, 2015
External sales $ 5,150 $ 4,499 $ 2,839 $ 1,856 $ $ 14,344
Intersegment sales 1,422   23   1,097   1,225   (3,767 )  
Total sales 6,572 4,522 3,936 3,081 (3,767 ) 14,344
Depreciation and amortization(2) 140 78 82 81 381
Research, development and engineering expenses 195 8 183 172 558
Equity, royalty and interest income from investees 107 60 26 47 240
Interest income 10 3 3 4 20
Segment EBIT 695 324 574 302 (35 ) 1,860
 
Segment EBIT as a percentage of total sales 10.6 % 7.2 % 14.6 % 9.8 % 13.0 %
                         

(1)

Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the nine months ended October 2, 2016 and September 27, 2015.

(2)

Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Income as "Interest expense." The amortization of debt discount and deferred costs was $2 million for the nine months ended October 2, 2016 and September 27, 2015.

 

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

  Three months ended   Nine months ended
In millions October 2,
2016
  September 27,
2015
October 2,
2016
  September 27,
2015
Total segment EBIT $ 398 $ 577 $ 1,473 $ 1,860
Less: Interest expense 16   16   51   47
Income before income taxes $ 382   $ 561   $ 1,422   $ 1,813
 

CUMMINS INC. AND SUBSIDIARIES
SELECTED FOOTNOTE DATA
(Unaudited)

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
 

LOSS CONTINGENCY

In the fourth quarter of 2015, we disclosed the request by one customer to participate in the design and bear the financial cost of a field campaign (Campaign) associated with quality issues in certain third party aftertreatment systems causing some of our inter-related engines to fail in-use emission testing. We established a reserve in the fourth quarter of 2015. In the second quarter of 2016, we recoded an additional accrual of $39 million based upon the Campaign design at the time. Additional in-use emission testing performed in the third quarter of 2016 has indicated that the Campaign should be expanded to include a larger population of vehicles. Our third quarter results include an additional accrual of $99 million to reflect the higher estimated cost of the expanded Campaign. We have not reached a cost sharing agreement with our customer related to this matter and our final cost could differ from what we have recorded.

CUMMINS INC. AND SUBSIDIARIES
FINANCIAL MEASURES THAT SUPPLEMENT GAAP
(Unaudited)

Net income and diluted earnings per share (EPS) attributable to Cummins Inc. excluding special items

We believe these are useful measures of our operating performance for the periods presented as they illustrate our operating performance without regard to special items including tax adjustments. These measures are not in accordance with, or an alternative for, accounting principles generally accepted in the United States of America (GAAP) and may not be consistent with measures used by other companies. It should be considered supplemental data. The following table reconciles net income attributable to Cummins Inc. to net income attributable to Cummins Inc. excluding special items for the following periods:

    Three months ended
October 2, 2016   September 27, 2015
In millions Net Income   Diluted EPS Net Income   Diluted EPS
Net income attributable to Cummins Inc. $ 289 $ 1.72 $ 380 $ 2.14
Add
Loss contingency, net (1) 50   0.30    
Net income attributable to Cummins Inc. excluding special items $ 339   $ 2.02   $ 380   $ 2.14
 
    Nine months ended
October 2, 2016   September 27, 2015
In millions Net Income   Diluted EPS Net Income   Diluted EPS
Net income attributable to Cummins Inc. $ 1,016 $ 5.99 $ 1,238 $ 6.90
Add
Loss contingency, net (1) $ 74 $ 0.44
Less
Tax benefit     18   0.10
Net income attributable to Cummins Inc. excluding special items $ 1,090   $ 6.43   $ 1,220   $ 6.80
 

(1) The loss contingency is net of the favorable variable compensation impact.

 

Earnings before interest, income taxes and noncontrolling interests

We define EBIT as earnings before interest expense, income tax expense and noncontrolling interests in income of consolidated subsidiaries. We use EBIT to assess and measure the performance of our operating segments and also as a component in measuring our variable compensation programs. This measure is not in accordance with, or an alternative for, GAAP and may not be consistent with measures used by other companies. It should be considered supplemental data. Below is a reconciliation of EBIT to “Net income attributable to Cummins Inc.” for each of the applicable periods:

  Three months ended   Nine months ended
In millions October 2, 2016   September 27, 2015 October 2, 2016   September 27, 2015
Earnings before interest expense and income taxes $ 398   $ 577   $ 1,473   $ 1,860  
 
EBIT as a percentage of net sales 9.5 % 12.5 % 11.3 % 13.0 %
 
Less
Interest expense 16 16 51 47
Income tax expense 82   169   362   521  
Consolidated net income 300   392   1,060   1,292  
 
Less
Net income attributable to noncontrolling interests 11   12   44   54  
Net income attributable to Cummins Inc. $ 289   $ 380   $ 1,016   $ 1,238  
 
Net income attributable to Cummins Inc. as a percentage of net sales 6.9 % 8.2 % 7.8 % 8.6 %
 

CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)

Engine Segment Sales by Market and Unit Shipments by Engine Classification

In the second quarter of 2016, in conjunction with the reorganization of our segments, our Engine segment reorganized its reporting structure as follows:

  • Heavy-duty truck - We manufacture diesel engines that range from 310 to 600 horsepower serving global heavy-duty truck customers worldwide, primarily in North America.
  • Medium-duty truck and bus - We manufacture diesel engines ranging from 200 to 450 horsepower serving medium-duty truck and bus customers worldwide, with key markets including North America, Latin America, Europe and Mexico. We also provide diesel and natural gas engines for school buses, transit buses and shuttle buses worldwide, with key markets including North America, Europe, Latin America and Asia, and diesel engines for Class A motor homes (RVs), primarily in North America.
  • Light-duty automotive (Pickup and Light Commercial Vehicle (LCV)) - We manufacture 105 to 385 horsepower diesel engines, including engines for the pickup truck market for Chrysler and Nissan in North America, and LCV markets in Europe, Latin America and Asia.
  • Off-highway - We provide diesel engines that range from 60 to 755 horsepower to key global markets including construction, mining, rail, defense, agriculture, marine, and oil and gas equipment and also to the power generation business for standby, mobile and distributed power generation solutions throughout the world.

Sales for our Engine segment by market were as follows:

2016          
In millions Q1 Q2 Q3 Q4 YTD
Heavy-duty truck $ 631 $ 622 $ 625 $ $ 1,878
Medium-duty truck and bus 549 600 517 1,666
Light-duty automotive 433 394 345 1,172
Off-highway 363   386   372     1,121
Total sales $ 1,976   $ 2,002   $ 1,859   $   $ 5,837
 
2015
In millions Q1 Q2 Q3 Q4 YTD
Heavy-duty truck $ 757 $ 875 $ 784 $ 700 $ 3,116
Medium-duty truck and bus 608 674 585 640 2,507
Light-duty automotive 381 354 339 401 1,475
Off-highway 399   422   394   357   1,572
Total sales $ 2,145   $ 2,325   $ 2,102   $ 2,098   $ 8,670
 
2014
In millions YTD
Heavy-duty truck $ 3,072
Medium-duty truck and bus 2,431
Light-duty automotive 1,567
Off-highway 1,897  
Total sales $ 8,967  
 

Unit shipments by engine classification (including unit shipments to Power Systems and off-highway engine units included in their respective classification) were as follows:

2016          
Units Q1 Q2 Q3 Q4 YTD
Heavy-duty 19,700 20,700 20,100 60,500
Medium-duty 55,400 62,300 53,400 171,100
Light-duty 61,700   57,100   49,800     168,600
Total units 136,800   140,100   123,300     400,200
 
2015
Units Q1 Q2 Q3 Q4 YTD
Heavy-duty 28,700 32,800 28,600 24,300 114,400
Medium-duty 61,200 66,600 59,600 59,700 247,100
Light-duty 51,200   53,400   47,800   56,900   209,300
Total units 141,100   152,800   136,000   140,900   570,800
 
2014
Units YTD
Heavy-duty 122,100
Medium-duty 266,800
Light-duty 204,400  
Total units 593,300  
 

Distribution Segment Sales by Product Line

2016          
In millions Q1 Q2 Q3 Q4 YTD
Parts $ 648 $ 642 $ 643 $ $ 1,933
Service 299 297 299 895
Power generation 275 326 291 892
Engines 241   279   271     791
Total sales $ 1,463   $ 1,544   $ 1,504   $   $ 4,511
 
2015
In millions Q1 Q2 Q3 Q4 YTD
Parts $ 573 $ 598 $ 604 $ 648 $ 2,423
Service 284 307 301 330 1,222
Power generation 298 272 323 397 1,290
Engines 321   318   323   332   1,294
Total sales $ 1,476   $ 1,495   $ 1,551   $ 1,707   $ 6,229
 

Component Segment Sales by Business

2016          
In millions Q1 Q2 Q3 Q4 YTD
Emission solutions $ 607 $ 624 $ 540 $ $ 1,771
Turbo technologies 265 276 241 782
Filtration 252 262 244 758
Fuel systems 113   117   118     348
Total sales $ 1,237   $ 1,279   $ 1,143   $   $ 3,659
 
2015
In millions Q1 Q2 Q3 Q4 YTD
Emission solutions $ 613 $ 679 $ 607 $ 600 $ 2,499
Turbo technologies 301 307 266 267 1,141
Filtration 255 266 240 249 1,010
Fuel systems 130   145   127   120   522
Total sales $ 1,299   $ 1,397   $ 1,240   $ 1,236   $ 5,172
 

Power Systems Segment Sales by Product Line and Unit Shipments by Engine Classification

In the second quarter of 2016, in conjunction with the reorganization of our segments, our Power Systems segment reorganized its reporting structure into the following product lines:

  • Power generation - We design, manufacture, sell and support generators ranging from 2 kilowatts to 3.5 megawatts, as well as paralleling systems and transfer switches, for applications such as residential, commercial, industrial, data centers, health care, telecommunications and waste water treatment plants. We also provide turnkey solutions for distributed generation and energy management applications using natural gas or biogas as a fuel. We also serves global rental accounts for diesel and gas generator sets.
  • Industrial - We design, manufacture, sell and support diesel and natural gas high-horsepower engines up to 5,500 horsepower for a wide variety of equipment in the mining, rail, defense, oil and gas, and commercial marine applications throughout the world. Across these markets, we have major customers in North America, Europe, Middle East, Africa, China, Korea, Japan, Latin America, India, Russia, Southeast Asia, South Pacific and Mexico.
  • Generator technologies - We design, manufacture, sell and support A/C generator/alternator products for internal consumption and for external generator set assemblers. Our products are sold under the Stamford, AVK and Markon brands and range in output from 3 kilovolt-amperes (kVA) to 12,000 kVA.

Sales for our Power Systems segment by product line were as follows:

2016          
In millions Q1 Q2 Q3 Q4 YTD
Power generation $ 520 $ 597 $ 545 $ $ 1,662
Industrial 215 240 233 688
Generator technologies 73   84   78     235
Total sales $ 808   $ 921   $ 856   $   $ 2,585
 
2015
In millions Q1 Q2 Q3 Q4 YTD
Power generation $ 624 $ 710 $ 621 $ 615 $ 2,570
Industrial 280 295 275 287 1,137
Generator technologies 98   92   86   84   360
Total sales $ 1,002   $ 1,097   $ 982   $ 986   $ 4,067
 
2014
In millions YTD
Power generation $ 2,633
Industrial 1,331
Generator technologies 450  
Total sales $ 4,414  
 

High-horsepower unit shipments by engine classification were as follows:

2016          
Units Q1 Q2 Q3 Q4 YTD
Power generation 1,800 2,200 2,000 6,000
Industrial 1,000   1,100   1,000     3,100
Total units 2,800   3,300   3,000     9,100
 
2015
Units Q1 Q2 Q3 Q4 YTD
Power generation 2,200 2,500 2,000 1,900 8,600
Industrial 1,300   1,200   1,200   1,500   5,200
Total units 3,500   3,700   3,200   3,400   13,800
 
2014
Units YTD
Power generation 8,700
Industrial 6,100  
Total units 14,800  

Contacts

Cummins Inc.
Carole Casto, 317-610-2480
Executive Director - Corporate Communications
carole.casto@cummins.com

Contacts

Cummins Inc.
Carole Casto, 317-610-2480
Executive Director - Corporate Communications
carole.casto@cummins.com