CMI Cummins Inc

• 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

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 SUBSIDIARIESCONDENSED 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 SUBSIDIARIESCONDENSED 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 SUBSIDIARIESCONDENSED 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 SUBSIDIARIESCONDENSED 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 SUBSIDIARIESSEGMENT 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  

PowerSystems

  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  

PowerSystems

 

Non-segmentItems (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 SUBSIDIARIESSELECTED 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 SUBSIDIARIESFINANCIAL 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 SUBSIDIARIESBUSINESS 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  

View source version on businesswire.com: http://www.businesswire.com/news/home/20161101005387/en/

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