SEC Filings


10-K
CUMMINS INC filed this Form 10-K on 02/11/2019
Entire Document
 

Our financial performance depends, in large part, on varying conditions in the markets we serve, particularly the on-highway, construction and general industrial markets. Demand in these markets tends to fluctuate in response to overall economic conditions. Our sales may also be impacted by OEM inventory levels, production schedules and stoppages. Economic downturns in markets we serve generally result in reduced sales of our products and can result in price reductions in certain products and/or markets. As a worldwide business, our operations are also affected by currency, political, economic and regulatory matters, including adoption and enforcement of environmental and emission standards, in the countries we serve. As part of our growth strategy, we invest in businesses in certain countries that carry high levels of these risks such as China, Brazil, India, Mexico, Russia and countries in the Middle East and Africa. At the same time, our geographic diversity and broad product and service offerings have helped limit the impact from a drop in demand in any one industry or customer or the economy of any single country on our consolidated results.
Worldwide revenues improved 16 percent in 2018 compared to 2017, with all operating segments reporting higher sales. Net sales in the United States (U.S.) and Canada improved by 19 percent primarily due to increased demand in the North American on-highway markets (primarily in the heavy- and medium-duty truck markets), increased demand in all of our distribution product lines, sales from the automated transmission business acquired during the third quarter of 2017 and increased industrial demand (especially in oil and gas and construction markets). International demand growth (excludes the U.S. and Canada) in 2018 improved international net sales by 12 percent compared to 2017, with sales up in most of our markets, especially in Europe, Asia Pacific, Latin America, China and India. The increase in international sales was primarily due to increased demand in industrial markets (especially construction and mining markets in China and Europe), increased on-highway demand (especially in Brazil, Europe and India), increased demand in our distribution business (especially in Western Europe, Asia Pacific and China) and increased demand for power generation equipment (primarily in the Middle East, Asia Pacific and China).    
Effective January 1, 2018, we changed our segment measure of profitability to EBITDA (defined as earnings before interest expense, income taxes, noncontrolling interests, depreciation and amortization) as a primary basis for the Chief Operating Decision Maker to evaluate the performance of each of our operating segments. EBITDA assists investors and debt holders in comparing our performance on a consistent basis without regard for depreciation and amortization, which can vary significantly depending upon many factors. Prior periods have been revised to reflect the current presentation. Segment amounts exclude certain expenses not specifically identifiable to segments. The following tables contain sales and EBITDA by operating segment for the years ended December 31, 2018 and 2017. See the section titled "OPERATING SEGMENT RESULTS" for a more detailed discussion of net sales and EBITDA by operating segment including the reconciliation of segment EBITDA to net income attributable to Cummins Inc.
 
 
Operating Segments
 
 
2018
 
2017
 
Percent change
 
 
 
 
Percent
of Total
 
 
 
 
 
Percent
of Total
 
 
 
2018 vs. 2017
In millions
 
Sales
 
EBITDA
 
Sales
 
EBITDA
 
Sales
 
EBITDA
Engine
 
$
10,566

 
44
 %
 
$
1,446

 
$
8,953

 
44
 %
 
$
1,143

 
18
%
 
27
%
Distribution
 
7,828

 
33
 %
 
563

 
7,058

 
34
 %
 
500

 
11
%
 
13
%
Components
 
7,166

 
30
 %
 
1,030

 
5,889

 
29
 %
 
917

 
22
%
 
12
%
Power Systems
 
4,626

 
20
 %
 
614

 
4,058

 
20
 %
 
411

 
14
%
 
49
%
Electrified Power
 
7

 
 %
 
(90
)
 

 
 %
 

 
NM

 
NM

Intersegment eliminations
 
(6,422
)
 
(27
)%
 
(87
)
 
(5,530
)
 
(27
)%
 
55

 
16
%
 
NM

Total
 
$
23,771

 
100
 %
 
$
3,476

 
$
20,428

 
100
 %
 
$
3,026

 
16
%
 
15
%
_____________________________________________________
"NM" - not meaningful information

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