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Cummins Announces Fourth Quarter and Full Year 2016 Results
  • Fourth quarter revenues of $4.5 billion; GAAP1 Net Income of $378 million
  • EBIT of 11.7 percent of sales; Diluted EPS of $2.25
  • Full year revenues of $17.5 billion; GAAP1 Net Income of $1.39 billion EBIT of 11.4 percent of sales; Diluted EPS of $8.23
  • Company expects full year 2017 revenues to be flat to down 5 percent, EBIT expected to be in the range of 11.0 to 11.5 percent

COLUMBUS, Ind.--(BUSINESS WIRE)--Feb. 9, 2017-- Cummins Inc. (NYSE: CMI) today reported results for the fourth quarter of 2016.

Fourth quarter revenues of $4.5 billion decreased 6 percent from the same quarter in 2015, largely reflecting lower commercial truck production in North America and weak global demand for industrial engines and power generation equipment. Currency negatively impacted revenues by approximately 2 percent compared to the same period last year, primarily due to a stronger U.S. dollar. Revenues in North America decreased 13 percent while international sales improved by 6 percent primarily due to increased revenues in China.

Net income attributable to Cummins in the fourth quarter was $378 million ($2.25 per diluted share), compared to $161 million ($0.92 per diluted share) a year ago. Net income for the fourth quarter of 2015 excluding impairment and restructuring charges was $355 million ($2.02 per diluted share). The tax rate in the fourth quarter of 2016 was 22 percent.

Earnings before interest and taxes (EBIT) in the fourth quarter was $526 million, or 11.7 percent of sales, compared to $230 million or 4.8 percent of sales a year ago. Excluding impairment and restructuring charges, EBIT for the fourth quarter of 2015 was $531 million or 11.1 percent of sales.

“Despite weak conditions in a number of our largest markets, Cummins delivered fourth quarter results that were a little better than expected due to our strong market share in on-highway markets in North America and the benefits of our cost reduction work,” said Tom Linebarger Chairman and CEO. “We made significant progress in a number of our key initiatives in 2016, including executing our restructuring actions, completing the acquisition of our distributors in North America and continuing to invest in new products, all of which help position the Company for profitable growth when markets improve. We also returned 75 percent of the Company’s Operating Cash Flow to shareholders, consistent with our plan for the year.”

Revenues for the full year 2016 were $17.5 billion, 8 percent lower than 2015. Revenues in North America decreased 12 percent and international sales decreased 2 percent mainly due to foreign currency movements. Excluding the impact of the currency movements, international revenues increased 2 percent with growth in China and India being offset by weaker demand in Latin America, the Middle East and Africa.

Net income attributable to Cummins for the full year was $1.39 billion ($8.23 per diluted share), compared to $1.4 billion ($7.84 per diluted share) in 2015. Excluding impairment and restructuring charges, net income was $1.59 billion ($8.93 per diluted share) in 2015. The full year tax rate was 24.6 percent in 2016.

EBIT for the year was $2.0 billion or 11.4 percent of sales, compared to $2.1 billion or 10.9 percent of sales in 2015. Excluding impairments and restructuring charges, EBIT for 2015 was $2.4 billion or 12 .5 percent of sales.

2017 Outlook:

Based on the current forecast, Cummins projects full year 2017 revenues to be flat to down 5 percent, and EBIT to be in the range of 11.0 to 11.5 percent of sales. Results in the first quarter of the year will continue to be challenged by difficult markets and are expected to mark the low point of the year. The Company expects to return at least 50 percent of Operating Cash Flow to shareholders in 2017 in the form of dividends and share repurchases.

2016 highlights:

  • Cummins partnered with Peterbilt to develop and demonstrate technologies under the U.S. Department of Energy's (DOE) SuperTruck II program
  • Cummins was recognized with the 2016 United States Overall Best Heavy-Duty Truck Engine Supplier Leadership Award by Frost and Sullivan
  • The Environmental Protection Agency (EPA) certified Cummins’ full range of heavy- and medium-duty diesel engines for the 2017 Greenhouse Gas Emission Standards
  • The Company returned 75 percent of Operating Cash Flow to shareholders in the form of dividends and share repurchases
  • For the twelfth straight year, Cummins Inc. was awarded a perfect score in the 2017 Corporate Equality Index (CEI) from the Human Rights Campaign

1 Generally Accepted Accounting Principles

Fourth quarter 2016 detail (all comparisons to same period in 2015) excluding restructuring and impairment charges in 2015

Engine Segment

  • Sales - $2.0 billion, down 6 percent
  • Segment EBIT - $194 million, or 9.9 percent of sales, compared to $160 million or 7.6 percent of sales
  • On-highway revenues declined 9 percent primarily due to a decline in commercial truck production in North America, partially offset by an 8 percent increase in off-highway sales

Distribution Segment

  • Sales - $1.7 billion, down 2 percent
  • Segment EBIT - $122 million, or 7.3 percent of sales, compared to $111 million or 6.5 percent of sales
  • Weaker sales to off-highway markets and an unfavorable impact of 1 percent from a stronger US dollar more than offset 5 percent revenue growth from acquisitions

Components Segment

  • Sales - $1.2 billion, down 5 percent.
  • Segment EBIT - $140 million , or 11.9 percent of sales, compared to $175 million or 14.2 percent of sales
  • Revenues in North America declined due to lower commercial truck production, but were partially offset by higher revenues in China

Power Systems Segment

  • Sales - $932 million, down 5 percent
  • Segment EBIT - $68 million, or 7.3 percent of sales, compared to $59 million, or 6 percent of sales
  • Revenues declined due to lower power generation and industrial engine demand in most regions

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 55,400 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 7,400 dealer locations. Cummins earned $1.39 billion on sales of $17.5 billion in 2016. 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/cumminsinc.

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 2017. 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

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. EST. 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

December 31,
2016

  December 31,
2015
NET SALES $ 4,503 $ 4,766
Cost of sales 3,383   3,554  
GROSS MARGIN 1,120 1,212
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses 519 508
Research, development and engineering expenses 158 177
Equity, royalty and interest income from investees 67 75
Loss contingency charge 60
Impairment of light-duty diesel assets 211
Restructuring actions and other charges 90
Other operating expense, net (3 ) (12 )
OPERATING INCOME 507 229
Interest income 5 4
Interest expense 18 18
Other income (expense), net 14   (3 )
INCOME BEFORE INCOME TAXES 508 212
Income tax expense 112   34  
CONSOLIDATED NET INCOME 396 178
Less: Net income attributable to noncontrolling interests 18   17  
NET INCOME ATTRIBUTABLE TO CUMMINS INC. $ 378   $ 161  
 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic $ 2.26 $ 0.92
Diluted $ 2.25 $ 0.92
 
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 167.6 175.5
Diluted 168.1 175.8
 
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.
 
 
Years ended December 31,
In millions, except per share amounts 2016   2015
NET SALES $ 17,509 $ 19,110
Cost of sales 13,057   14,163  
GROSS MARGIN 4,452 4,947
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses 2,046 2,092
Research, development and engineering expenses 636 735
Equity, royalty and interest income from investees 301 315
Loss contingency charges 138 60
Impairment of light-duty diesel assets 211
Restructuring actions and other charges 90
Other operating expense, net (5 ) (17 )
OPERATING INCOME 1,928 2,057
Interest income 23 24
Interest expense 69 65
Other income, net 48   9  
INCOME BEFORE INCOME TAXES 1,930 2,025
Income tax expense 474   555  
CONSOLIDATED NET INCOME 1,456 1,470
Less: Net income attributable to noncontrolling interests 62   71  
NET INCOME ATTRIBUTABLE TO CUMMINS INC. $ 1,394   $ 1,399  
 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic $ 8.25 $ 7.86
Diluted $ 8.23 $ 7.84
 
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 169.0 178.0
Diluted 169.3 178.4
 
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 4.00 $ 3.51
 

(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 December 31,
2016
December 31,
2015
ASSETS
Current assets
Cash and cash equivalents $ 1,120 $ 1,711
Marketable securities 260   100  
Total cash, cash equivalents and marketable securities 1,380 1,811
Accounts and notes receivable, net 3,025 2,820
Inventories 2,675 2,707
Prepaid expenses and other current assets 627   609  
Total current assets 7,707   7,947  
Long-term assets
Property, plant and equipment, net 3,800 3,745
Investments and advances related to equity method investees 946 975
Goodwill and other intangible assets, net 812 810
Other assets 1,746   1,657  
Total assets $ 15,011   $ 15,134  
 
LIABILITIES
Current liabilities
Accounts payable (principally trade) $ 1,854 $ 1,706
Loans payable 41 24
Commercial paper 212
Accrued expenses 2,218   2,073  
Total current liabilities 4,325   3,803  
Long-term liabilities
Long-term debt 1,568 1,576
Other liabilities 1,944   2,005  
Total liabilities $ 7,837   $ 7,384  
 
EQUITY
Cummins Inc. shareholders’ equity
Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.4 shares issued $ 2,153 $ 2,178
Retained earnings 11,040 10,322
Treasury stock, at cost, 54.2 and 47.2 shares (4,489 ) (3,735 )
Common stock held by employee benefits trust, at cost, 0.7 and 0.9 shares (8 ) (11 )
Accumulated other comprehensive loss (1,821 ) (1,348 )
Total Cummins Inc. shareholders’ equity 6,875 7,406
Noncontrolling interests 299   344  
Total equity $ 7,174   $ 7,750  
Total liabilities and equity $ 15,011   $ 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)
 

Years ended December 31,

In millions 2016   2015
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,935   $ 2,059  
 
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (531 ) (744 )
Investments in internal use software (63 ) (55 )
Investments in and advances to equity investees (41 ) (7 )
Acquisitions of businesses, net of cash acquired (94 ) (117 )
Investments in marketable securities—acquisitions (478 ) (282 )
Investments in marketable securities—liquidations 306 270
Proceeds from sale of equity investees 60
Cash flows from derivatives not designated as hedges (102 ) 8
Other, net 26   9  
Net cash used in investing activities (917 ) (918 )
 
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 111 44
Net borrowings of commercial paper 212
Payments on borrowings and capital lease obligations (163 ) (76 )
Net borrowings (payments) under short-term credit agreements 19 (41 )
Distributions to noncontrolling interests (65 ) (49 )
Dividend payments on common stock (676 ) (622 )
Repurchases of common stock (778 ) (900 )
Acquisition of noncontrolling interests (98 ) (10 )
Other, net 29   10  
Net cash used in financing activities (1,409 ) (1,644 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (200 ) (87 )
Net decrease in cash and cash equivalents (591 ) (590 )
Cash and cash equivalents at beginning of year 1,711   2,301  
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,120   $ 1,711  
 

(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

Intersegment
Eliminations (1)

Total
Three months ended December 31, 2016
External sales $ 1,424 $ 1,664 $ 860 $ 555 $ $ 4,503
Intersegment sales 543   6   317   377   (1,243 )  
Total sales 1,967 1,670 1,177 932 (1,243 ) 4,503
Depreciation and amortization (2) 42 30 38 28 138
Research, development and engineering expenses 60 3 47 48 158
Equity, royalty and interest income from investees 28 14 12 13 67
Interest income 2 1 1 1 5
Segment EBIT 194 122 (3) 140 68 (4) 2 526
 
Segment EBIT as a percentage of total sales 9.9 % 7.3 % 11.9 % 7.3 % 11.7 %
 
Three months ended December 31, 2015
External sales $ 1,583 $ 1,699 $ 906 $ 578 $ $ 4,766
Intersegment sales 515   8   330   408   (1,261 )  
Total sales 2,098 1,707 1,236 986 (1,261 ) 4,766
Depreciation and amortization (2) 47 27 27 29 130
Research, development and engineering expenses 68 2 53 54 177
Equity, royalty and interest income from investees 39 18 9 9 75
Loss contingency charge 60 60
Impairment of light-duty diesel assets 202 9 211
Restructuring actions and other charges 17 23 13 26 11 90
Interest income 1 1 1 1 4
Segment EBIT (59 ) 88 153 33 15 230
 
Segment EBIT as a percentage of total sales (2.8 )% 5.2 % 12.4 % 3.3 % 4.8 %
                                   

(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 December 31, 2016 and 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."

(3)

Distribution segment EBIT included a gain of $15 million on the fair value adjustment resulting from the acquisition of the controlling interest in a North American distributor for the three months ended December 31, 2016. See ''ACQUISITION'' for additional information.

(4)

In the fourth quarter of 2016, we sold our remaining 49 percent interest in Cummins Olayan Energy for $61 million and recognized a gain of $17 million.
 
       
In millions Engine Distribution Components

Power
Systems

Intersegment
Eliminations (1)

Total
Year ended December 31, 2016
External sales $ 5,774 $ 6,157 $ 3,514 $ 2,064 $ $ 17,509
Intersegment sales 2,030   24   1,322   1,453   (4,829 )  
Total sales 7,804 6,181 4,836 3,517 (4,829 ) 17,509
Depreciation and amortization (2) 163 116 133 115 527
Research, development and engineering expenses 226 13 208 189 636
Equity, royalty and interest income from investees 148 70 41 42 301
Loss contingency charges 138 138
Interest income 10 4 4 5 23
Segment EBIT 686 392 (3) 641 263 (4) 17 1,999
 
Segment EBIT as a percentage of total sales 8.8 % 6.3 % 13.3 % 7.5 % 11.4 %
 
Year ended December 31, 2015
External sales $ 6,733 $ 6,198 $ 3,745 $ 2,434 $ $ 19,110
Intersegment sales 1,937   31   1,427   1,633   (5,028 )  
Total sales 8,670 6,229 5,172 4,067 (5,028 ) 19,110
Depreciation and amortization (2) 187 105 109 110 511
Research, development and engineering expenses 263 10 236 226 735
Equity, royalty and interest income from investees 146 78 35 56 315
Loss contingency charge 60 60
Impairment of light-duty diesel assets 202 9 211
Restructuring charges and other actions 17 23 13 26 11 90
Interest income 11 4 4 5 24
Segment EBIT 636 412 (3) 727 335 (20 ) 2,090
 
Segment EBIT as a percentage of total sales 7.3 % 6.6 % 14.1 % 8.2 % 10.9 %
                                   

(1)

  Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the years ended December 31, 2016 and 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 were $3 million for both the years ended December 31, 2016 and December 31, 2015.

(3)

Distribution segment EBIT included gains of $15 million and $18 million on the fair value adjustments resulting from the acquisition of the controlling interests in North American distributors for the years ended December 31, 2016 and December 31, 2015.

(4)

In the fourth quarter of 2016, we sold our remaining 49 percent interest in Cummins Olayan Energy for $61 million and recognized a gain of $17 million.
 

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 Years ended
In millions December 31,
2016
  December 31,
2015
December 31,
2016
  December 31,
2015
Total segment EBIT $ 526 $ 230 $ 1,999 $ 2,090
Less: Interest expense 18   18   69   65
Income before income taxes $ 508   $ 212   $ 1,930   $ 2,025
 

CUMMINS INC. AND SUBSIDIARIES
SELECT 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 Years ended
In millions December 31,
2016
  December 31,
2015
December 31,
2016
  December 31,
2015
Distribution entities
Komatsu Cummins Chile, Ltda. $ 8 $ 8 $ 34 $ 31
North American distributors 3 6 21 33
All other distributors (2 ) 1 3
Manufacturing entities
Dongfeng Cummins Engine Company, Ltd. 14 11 46 51
Chongqing Cummins Engine Company, Ltd. 10 9 38 41
Beijing Foton Cummins Engine Co., Ltd. (7 ) 15 52 62
All other manufacturers 29   11   69   52
Cummins share of net income 55 61 260 273
Royalty and interest income 12   14   41   42
Equity, royalty and interest income from investees $ 67   $ 75   $ 301   $ 315
 

ACQUISITION

The Distribution segment North American distributor acquisition in the fourth quarter of 2016 was as follows:

Entity Acquired  

Date of
Acquisition

 

Additional
Percent
Interest
Acquired

 

Payments
to
Former
Owners

 

Acquisition
Related
Debt
Retirements

 

Total
Purchase
Consideration

 

Type of
Acquisition(1)

 

Gain
Recognized(1)

 

Goodwill
Acquired

 

Intangibles
Recognized

 

Net Sales
Previous
Fiscal Year
Ended

Cummins Pacific LLC (Pacific)   10/04/16   50%   $ 30   $ 67   $ 99 (2) COMB   $ 15   $ 4   $ 8   $ 391

____________________________________________________

(1)

  The results from Pacific were included in Distribution segment results subsequent to the acquisition date. Pacific was accounted for as business combination (COMB) with gains recognized based on the requirement to remeasure our pre-existing ownership to fair value in accordance with GAAP.

(2)

The "Total Purchase Consideration" represents the total amount that will or is estimated to be paid to complete the acquisition. A portion of the acquisition payment has not yet been made and will be paid in future periods in accordance with the purchase contract. The total outstanding consideration at December 31, 2016, for this entity was $2 million.
 

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
December 31, 2016   December 31, 2015
In millions Net Income   Diluted EPS Net Income   Diluted EPS
Net income attributable to Cummins Inc. $ 378 $ 2.25 $ 161 $ 0.92
Add
Impairment of light-duty diesel assets, net of tax (1) 133 0.75
Restructuring actions and other charges, net of tax (2)     61   0.35
Net income attributable to Cummins Inc. excluding special items $ 378   $ 2.25   $ 355   $ 2.02
 
Years ended
December 31, 2016 December 31, 2015
In millions Net Income Diluted EPS Net Income Diluted EPS
Net income attributable to Cummins Inc. $ 1,394 $ 8.23 $ 1,399 $ 7.84
Add
Impairment of light-duty diesel assets, net of tax (1) 133 0.75
Restructuring actions and other charges, net of tax (2)     61   0.34
Net income attributable to Cummins Inc. excluding special items $ 1,394   $ 8.23   $ 1,593   $ 8.93

__________________________________________

(1)

  In the fourth quarter of 2015, we recorded a $211 million charge for impairment of our light-duty diesel assets.

(2)

In the fourth quarter of 2015, we recorded a $90 million charge for restructuring actions and other charges.
 

Earnings before interest, income taxes, noncontrolling interests and special items

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 “Net income attributable to Cummins Inc.” to EBIT for each of the applicable periods:

   
Three months ended Years ended
In millions

December 31, 2016

  December 31, 2015 December 31, 2016   December 31, 2015
Net income attributable to Cummins Inc. $ 378 $ 161 $ 1,394 $ 1,399
 
Net income attributable to Cummins Inc. as a percentage of net sales 8.4 % 3.4 % 8.0 % 7.3 %
 
Add
Net income attributable to noncontrolling interests 18   17   62   71  
Consolidated net income 396   178   1,456   1,470  
 
Add
Interest expense 18 18 69 65
Income tax expense 112   34   474   555  
Earnings before interest expense and income taxes 526   230   1,999   2,090  
 
EBIT as a percentage of net sales 11.7 % 4.8 % 11.4 % 10.9 %
 
Add
Impairment of light-duty diesel assets 211 211
Restructuring actions and other charges   90     90  
Earnings before interest expense, income taxes and special items $ 526   $ 531   $ 1,999   $ 2,391  
 
Earnings before interest expense, income taxes and special items as a percentage of net sales 11.7 % 11.1 % 11.4 % 12.5 %
 

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 and natural gas engines that range from 310 to 605 horsepower serving global heavy-duty truck customers worldwide, primarily in North America, Latin America and Australia.
  • Medium-duty truck and bus - We manufacture diesel and natural gas engines ranging from 130 to 450 horsepower serving medium-duty truck and bus customers worldwide, with key markets including North America, Latin America, China, Europe and India. Applications include pickup and delivery trucks, vocational truck, school bus, transit bus and shuttle bus. We also provide 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 manufacture diesel engines that range from 48 to 715 horsepower to key global markets including mining, marine, rail, oil and gas, defense, agriculture and construction 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 $ 565 $ 2,443
Medium-duty truck and bus 549 600 517 606 2,272
Light-duty automotive 433 394 345 409 1,581
Off-highway 363   386   372   387   1,508
Total sales $ 1,976   $ 2,002   $ 1,859   $ 1,967   $ 7,804
 
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 18,500 79,000
Medium-duty 55,400 62,300 53,400 58,000 229,100
Light-duty 61,700   57,100   49,800   60,000   228,600
Total units 136,800   140,100   123,300   136,500   536,700
 
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 $ 694 $ 2,627
Service 299 297 299 320 1,215
Power generation 275 326 291 347 1,239
Engines 241   279   271   309   1,100
Total sales $ 1,463   $ 1,544   $ 1,504   $ 1,670   $ 6,181
 
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 $ 546 $ 2,317
Turbo technologies 265 276 241 254 1,036
Filtration 252 262 244 252 1,010
Fuel systems 113   117   118   125   473
Total sales $ 1,237   $ 1,279   $ 1,143   $ 1,177   $ 4,836
 
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 back-up and prime power generators ranging from 2 kilowatts to 3.5 megawatts, as well as controls, paralleling systems and transfer switches, for applications such as consumer, 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 serve 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, the 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 $ 573 $ 2,235
Industrial 215 240 233 275 963
Generator technologies 73   84   78   84   319
Total sales $ 808   $ 921   $ 856   $ 932   $ 3,517
 
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 1,900 7,900
Industrial 1,000   1,100   1,000   1,300   4,400
Total units 2,800   3,300   3,000   3,200   12,300
 
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  

Source: Cummins Inc.

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

© 2014 Cummins Inc.,Box 3005, Columbus, IN 47202-3005 U.S.A
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