Cummins Announces Second Quarter Results

Cummins Inc. (NYSE: CMI) today reported results for the second quarter of 2019.

Second quarter revenues of $6.2 billion increased 1 percent from the same quarter in 2018. Increased truck production in North America and stronger demand in North American power generation markets was partially offset by lower demand in oil and gas and international truck markets. Currency negatively impacted revenues by 2 percent primarily due to a stronger US dollar.

Second quarter sales in North America set a new record and improved by 7 percent while international revenues decreased by 6 percent. Sales in North America increased in all segments except Power Systems, which was negatively impacted by lower demand in oil and gas markets. International revenues declined primarily due to lower truck demand in China, Europe, Brazil, and India.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter were a record $1.1 billion, or 17.0 percent of sales, compared to $897 million or 14.6 percent of sales a year ago. Net income attributable to Cummins in the second quarter was $675 million ($4.27 per diluted share), compared to net income of $545 million ($3.32 per diluted share).

“We achieved record revenues, EBITDA, and operating cash flow in the first half of 2019, extending our track record of raising performance cycle over cycle,” said Chairman and CEO Tom Linebarger. “While we do expect to see a moderation in demand in the second half of the year, our financial strength combined with our diversified geographic and end market exposure will enable us to generate strong profits, continue to invest in future growth, and return cash to shareholders.”

2019 Outlook:

Cummins now expects 2019 revenue to be flat, which places the forecast at the low end of our previous guidance range of flat to 4 percent. This lower outlook is driven by reduced truck demand in international markets, moderating parts demand in North America, and the impact of a stronger US dollar. The company continues to expect EBITDA to be in the range of 16.25 to 16.75 percent of sales and plans to return 75 percent of Operating Cash Flow to shareholders in the form of dividends and share repurchases.

Our outlook does not include any potential impact of the company’s review of its emission certification process and compliance with emissions standards or acquisition of Hydrogenics.

Second Quarter 2019 Highlights:

• The Board of Directors approved a 15 percent increase in the Company's quarterly cash dividend from $1.14 per share to $1.311 per share
• Cummins entered into a definitive agreement to acquire the majority of shares of fuel cell systems provider Hydrogenics Corporation. The agreement is subject to customary closing conditions and Hydrogenics’ shareholder approval
• Cummins and Gillig announced that the GILLIG zero-emission battery electric bus, powered by Cummins, is now available for commercial orders by customers

1	Generally Accepted Accounting Principles

Second quarter 2019 detail (all comparisons to same period in 2018)

Engine Segment

• Sales - $2.7 billion, flat versus prior year
• Segment EBITDA - $416 million, or 15.4 percent of sales, compared to $362 million or 13.4 percent of sales
• On-highway revenues increased 2 percent and off-highway revenues decreased by 7 percent
• North America revenues increased by 7 percent due to higher demand in on-highway markets while international revenues declined 15 percent primarily due to lower demand in China

Distribution Segment

• Sales - $2.0 billion, up 2 percent
• Segment EBITDA - $172 million, or 8.5 percent of sales, compared to $145 million or 7.3 percent of sales
• Revenues in North America increased by 2 percent and international sales were flat
• Strong demand for power generation equipment in North America, especially data centers, was partially offset by lower demand in oil and gas markets and the unfavorable impact from a stronger US dollar, which impacted sales by 2 percent

Components Segment

• Sales - $1.8 billion, down 2 percent
• Segment EBITDA - $297 million, or 16.1 percent of sales, compared to $237 million or 12.6 percent of sales
• Revenues in North America increased by 5 percent due to higher heavy and medium-duty truck production while international sales declined by 12 percent due to lower demand in Europe, China, and India

Power Systems Segment

• Sales - $1.2 billion, down 3 percent
• Segment EBITDA - $173 million, or 14.4 percent of sales, compared to $186 million or 14.9 percent of sales
• Industrial revenues decreased 11 percent due to lower demand in North America oil and gas and global mining markets while power generation revenues were flat

Electrified Power Segment

• Sales - $8 million
• Segment EBITDA loss - $33 million

About Cummins

Cummins Inc., a global technology leader, is a corporation of complementary business segments designing, manufacturing, distributing and servicing a broad portfolio of power solutions. The company’s products range from diesel and natural gas engines to hybrid and electric platforms, as well as related technologies, including transmissions, battery systems, fuel systems, controls, air handling, filtration, emission solutions, and electrical power generation systems. Headquartered in Columbus, Indiana (U.S.), since its founding in 1919, Cummins employs approximately 62,600 people committed to powering a more prosperous world through three global corporate responsibility priorities critical to healthy communities: education, environment and equality of opportunity. Cummins serves customers in approximately 190 countries and territories through a network of approximately 600 company-owned and independent distributor locations, and over 7,600 dealer locations. In 2018, the company earned about $2.1 billion on sales of $23.8 billion. See how Cummins is powering a world that’s Always On by accessing news releases and more information at https://www.cummins.com/always-on. Follow Cummins on Twitter at www.twitter.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 and EBITDA percentage for the full year of 2019. 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: any adverse results of our internal review into our emissions certification process and compliance with emissions standards; a sustained slowdown or significant downturn in our markets; changes in the engine outsourcing practices of significant customers; the development of new technologies that reduce demand for our current products and services; increased scrutiny from regulatory agencies, as well as unpredictability in the adoption, implementation and enforcement of emissions standards around the world; product recalls; policy changes in international trade; the United Kingdom's (U.K.) decision to end its membership in the European Union; lower than expected acceptance of new or existing products or services; a slowdown in infrastructure development and/or depressed commodity prices; supply shortages and supplier financial risk, particularly from any of our single-sourced suppliers; exposure to potential security breaches or other disruptions to our information technology systems and data security; a major customer experiencing financial distress; the actions of, and income from, joint ventures and other investees that we do not directly control; our plan to reposition our portfolio of product offerings through exploration of strategic acquisitions and divestitures and related uncertainties of entering such transactions; failure to realize expected results from our investment in Eaton Cummins Automated Transmission Technologies joint venture; competitor activity; increasing competition, including increased global competition among our customers in emerging markets; foreign currency exchange rate changes; variability in material and commodity costs; political, economic and other risks from operations in numerous countries; changes in taxation; global legal and ethical compliance costs and risks; aligning our capacity and production with our demand; product liability claims; increasingly stringent environmental laws and regulations; future bans or limitations on the use of diesel-powered products; the price and availability of energy; the performance of our pension plan assets and volatility of discount rates; labor relations; changes in accounting standards; our sales mix of products; protection and validity of our patent and other intellectual property rights; the outcome of pending and future litigation and governmental proceedings; continued availability of financing, financial instruments and financial resources in the amounts, at the times and on the terms required to support our future business; and other risks detailed from time to time in our SEC filings, including particularly in the Risk Factors section of our 2018 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. 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 SEC, 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

EBITDA 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 EBITDA 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. ET. 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 NET INCOME
	(Unaudited) (a)
			Three months ended
	In millions, except per share amounts		June 30, 2019				July 1, 2018
	NET SALES		$	6,221			$	6,132
	Cost of sales		4,580				4,692
	GROSS MARGIN		1,641				1,440
	OPERATING EXPENSES AND INCOME
	Selling, general and administrative expenses		629				613
	Research, development and engineering expenses		251				219
	Equity, royalty and interest income from investees		96				110
	Other operating income (expense), net		(9		)		4
	OPERATING INCOME		848				722
	Interest income		12				10
	Interest expense		29				28
	Other income, net		40				11
	INCOME BEFORE INCOME TAXES		871				715
	Income tax expense		186				161
	CONSOLIDATED NET INCOME		685				554
	Less: Net income attributable to noncontrolling interests		10				9
	NET INCOME ATTRIBUTABLE TO CUMMINS INC.		$	675			$	545
	EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
	Basic		$	4.29			$	3.33
	Diluted		$	4.27			$	3.32
	WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
	Basic		157.4				163.8
	Diluted		158.0				164.3
(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 NET INCOME
	(Unaudited) (a)
			Six months ended
	In millions, except per share amounts		June 30, 2019				July 1, 2018
	NET SALES		$	12,225			$	11,702
	Cost of sales		9,052				9,062
	GROSS MARGIN		3,173				2,640
	OPERATING EXPENSES AND INCOME
	Selling, general and administrative expenses		1,222				1,190
	Research, development and engineering expenses		488				429
	Equity, royalty and interest income from investees		188				225
	Other operating income (expense), net		(4		)		6
	OPERATING INCOME		1,647				1,252
	Interest income		24				17
	Interest expense		61				52
	Other income, net		106				21
	INCOME BEFORE INCOME TAXES		1,716				1,238
	Income tax expense		362				359
	CONSOLIDATED NET INCOME		1,354				879
	Less: Net income attributable to noncontrolling interests		16				9
	NET INCOME ATTRIBUTABLE TO CUMMINS INC.		$	1,338			$	870
	EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
	Basic		$	8.51			$	5.30
	Diluted		$	8.47			$	5.27
	WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
	Basic		157.3				164.3
	Diluted		157.9				165.0
(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		June 30, 2019				December 31, 2018
	ASSETS
	Current assets
	Cash and cash equivalents		$	1,397			$	1,303
	Marketable securities		335				222
	Total cash, cash equivalents and marketable securities		1,732				1,525
	Accounts and notes receivable, net		4,179				3,866
	Inventories		3,896				3,759
	Prepaid expenses and other current assets		643				668
	Total current assets		10,450				9,818
	Long-term assets
	Property, plant and equipment, net		4,077				4,096
	Investments and advances related to equity method investees		1,274				1,222
	Goodwill		1,125				1,126
	Other intangible assets, net		901				909
	Pension assets		960				929
	Other assets		1,467				962
	Total assets		$	20,254			$	19,062
	LIABILITIES
	Current liabilities
	Accounts payable (principally trade)		$	2,991			$	2,822
	Loans payable		119				54
	Commercial paper		434				780
	Accrued compensation, benefits and retirement costs		465				679
	Current portion of accrued product warranty		809				654
	Current portion of deferred revenue		505				498
	Other accrued expenses		920				852
	Current maturities of long-term debt		46				45
	Total current liabilities		6,289				6,384
	Long-term liabilities
	Long-term debt		1,624				1,597
	Pensions and other postretirement benefits		522				532
	Accrued product warranty		663				740
	Deferred revenue		726				658
	Other liabilities		1,234				892
	Total liabilities		$	11,058			$	10,803
	EQUITY
	Cummins Inc. shareholders’ equity
	Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.4 shares issued		$	2,307			$	2,271
	Retained earnings		13,897				12,917
	Treasury stock, at cost, 64.6 and 64.4 shares		(6,082		)		(6,028		)
	Common stock held by employee benefits trust, at cost, 0.3 and 0.4 shares		(4		)		(5		)
	Accumulated other comprehensive loss		(1,840		)		(1,807		)
	Total Cummins Inc. shareholders’ equity		8,278				7,348
	Noncontrolling interests		918				911
	Total equity		$	9,196			$	8,259
	Total liabilities and equity		$	20,254			$	19,062
(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)
			Six months ended
	In millions		June 30, 2019				July 1, 2018
	CASH FLOWS FROM OPERATING ACTIVITIES
	Consolidated net income		$	1,354			$	879
	Adjustments to reconcile consolidated net income to net cash provided by operating activities
	Depreciation and amortization		315				308
	Deferred income taxes		17				(21		)
	Equity in income of investees, net of dividends		(43		)		(163		)
	Pension contributions (in excess of) under expense, net		(45		)		25
	Other postretirement benefits payments in excess of expense, net		(10		)		—
	Stock-based compensation expense		28				28
	Gain on corporate owned life insurance		(55		)		—
	Foreign currency remeasurement and transaction exposure		46				(21		)
	Changes in current assets and liabilities
	Accounts and notes receivable		(312		)		(555		)
	Inventories		(125		)		(475		)
	Other current assets		15				(42		)
	Accounts payable		148				442
	Accrued expenses		(194		)		94
	Changes in other liabilities		120				5
	Other, net		(39		)		(31		)
	Net cash provided by operating activities		1,220				473
	CASH FLOWS FROM INVESTING ACTIVITIES
	Capital expenditures		(242		)		(186		)
	Investments in internal use software		(34		)		(35		)
	Investments in and advances to equity investees		(18		)		(15		)
	Investments in marketable securities—acquisitions		(259		)		(143		)
	Investments in marketable securities—liquidations		153				116
	Cash flows from derivatives not designated as hedges		(26		)		(9		)
	Other, net		15				36
	Net cash used in investing activities		(411		)		(236		)
	CASH FLOWS FROM FINANCING ACTIVITIES
	Net (payments) borrowings of commercial paper		(346		)		504
	Payments on borrowings and finance lease obligations		(17		)		(33		)
	Net borrowings (payments) under short-term credit agreements		57				(1		)
	Distributions to noncontrolling interests		(13		)		(11		)
	Dividend payments on common stock		(358		)		(355		)
	Repurchases of common stock		(100		)		(379		)
	Other, net		66				22
	Net cash used in financing activities		(711		)		(253		)
	EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(4		)		(35		)
	Net increase (decrease) in cash and cash equivalents		94				(51		)
	Cash and cash equivalents at beginning of year		1,303				1,369
	CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	1,397			$	1,318
(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)
		In millions		Engine				Distribution				Components				Power Systems				Electrified Power				Total Segments				Intersegment Eliminations (1)				Total
		Three months ended June 30, 2019
		External sales		$	2,073			$	2,015			$	1,401			$	724			$	8			$	6,221			$	—			$	6,221
		Intersegment sales		630				13				445				479				—				1,567				(1,567		)		—
		Total sales		2,703				2,028				1,846				1,203				8				7,788				(1,567		)		6,221
		Research, development and engineering expenses		88				7				75				57				24				251				—				251
		Equity, royalty and interest income from investees		62				12				11				11				—				96				—				96
		Interest income		4				4				2				2				—				12				—				12
		Segment EBITDA		416				172				297				173				(33		)		1,025				33				1,058
		Depreciation and amortization (2)		51				28				47				30				2				158				—				158
		EBITDA as a percentage of total sales		15.4		%		8.5		%		16.1		%		14.4		%		NM				13.2		%						17.0		%
		Three months ended July 1, 2018
		External sales		$	2,050			$	1,988			$	1,402			$	691			$	1			$	6,132			$	—			$	6,132
		Intersegment sales		646				6				485				555				—				1,692				(1,692		)		—
		Total sales		2,696				1,994				1,887				1,246				1				7,824				(1,692		)		6,132
		Research, development and engineering expenses		76				5				62				60				16				219				—				219
		Equity, royalty and interest income from investees		67				11				14				18				—				110				—				110
		Interest income		3				3				2				2				—				10				—				10
		Segment EBITDA		362				145				237				186				(21		)		909				(12		)		897
		Depreciation and amortization (2)		47				27				47				32				1				154				—				154
		EBITDA as a percentage of total sales		13.4		%		7.3		%		12.6		%		14.9		%		NM				11.6		%						14.6		%

"NM" - not meaningful information
(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 June 30, 2019 and July 1, 2018.
(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 Net Income as "Interest expense." A portion of depreciation expense is included in "Research, development and engineering expense."

		CUMMINS INC. AND SUBSIDIARIES
		SEGMENT INFORMATION
		(Unaudited)
		In millions		Engine				Distribution				Components				Power Systems				Electrified Power				Total Segments				Intersegment Eliminations (1)				Total
		Six months ended June 30, 2019
		External sales		$	4,057			$	4,008			$	2,802			$	1,347			$	11			$	12,225			$	—			$	12,225
		Intersegment sales		1,299				21				905				933				—				3,158				(3,158		)		—
		Total sales		5,356				4,029				3,707				2,280				11				15,383				(3,158		)		12,225
		Research, development and engineering expenses		166				14				150				113				45				488				—				488
		Equity, royalty and interest income from investees		118				23				21				26				—				188				—				188
		Interest income		8				8				4				4				—				24				—				24
		Segment EBITDA		854				343				622				311				(62		)		2,068				23				2,091
		Depreciation and amortization (2)		101				57				93				59				4				314				—				314
		EBITDA as a percentage of total sales		15.9		%		8.5		%		16.8		%		13.6		%		NM				13.4		%						17.1		%
		Six months ended July 1, 2018
		External sales		$	3,863			$	3,835			$	2,715			$	1,286			$	3			$	11,702			$	—			$	11,702
		Intersegment sales		1,279				12				925				1,034				—				3,250				(3,250		)		—
		Total sales		5,142				3,847				3,640				2,320				3				14,952				(3,250		)		11,702
		Research, development and engineering expenses		155				10				124				117				23				429				—				429
		Equity, royalty and interest income from investees		134				24				30				37				—				225				—				225
		Interest income		5				5				3				4				—				17				—				17
		Segment EBITDA		648				268				464				328				(31		)		1,677				(80		)		1,597
		Depreciation and amortization (2)		96				54				93				62				2				307				—				307
		EBITDA as a percentage of total sales		12.6		%		7.0		%		12.7		%		14.1		%		NM				11.2		%						13.6		%

"NM" - not meaningful information
(1)	Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the six months ended June 30, 2019 and July 1, 2018.
(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 $1 million and $1 million for the six months ended June 30, 2019 and July 1, 2018, respectively. A portion of depreciation expense is included in "Research, development and engineering expense."

CUMMINS INC. AND SUBSIDIARIES
RECONCILIATION OF SEGMENT INFORMATION
(Unaudited)
A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Net Income is shown in the table below:
		Three months ended								Six months ended
In millions		June 30, 2019				July 1, 2018				June 30, 2019				July 1, 2018
Total EBITDA		$	1,058			$	897			$	2,091			$	1,597
Less:
Depreciation and amortization		158				154				314				307
Interest expense		29				28				61				52
Income before income taxes		$	871			$	715			$	1,716			$	1,238

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 Net Income for the reporting periods was as follows:
		Three months ended								Six months ended
In millions		June 30, 2019				July 1, 2018				June 30, 2019				July 1, 2018
Manufacturing entities
Beijing Foton Cummins Engine Co., Ltd.		$	20			$	24			$	41			$	45
Dongfeng Cummins Engine Company, Ltd.		16				17				30				34
Chongqing Cummins Engine Company, Ltd.		10				15				22				32
All other manufacturers		28				34				55				70
Distribution entities
Komatsu Cummins Chile, Ltda.		7				6				13				13
All other distributors		—				—				(1		)		—
Cummins share of net income		81				96				160				194
Royalty and interest income		15				14				28				31
Equity, royalty and interest income from investees		$	96			$	110			$	188			$	225

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

Reconciliation of Non GAAP measures - Earnings before interest, income taxes, noncontrolling interests, depreciation and amortization (EBITDA)

We believe EBITDA is a useful measure of our operating performance as it assists investors and debt holders in comparing our performance on a consistent basis without regard for financing methods, capital structure, income taxes or depreciation and amortization methods, which can vary significantly depending upon many factors.

EBITDA is not in accordance with, or an alternative for, accounting principles generally accepted in the United States (GAAP) and may not be consistent with measures used by other companies. It should be considered supplemental data; however, the amounts included in the EBITDA calculation are derived from amounts included in the Condensed Consolidated Statements of Net Income. Below is a reconciliation of “Net income attributable to Cummins Inc.” to EBITDA for each of the applicable periods:

		Three months ended								Six months ended
In millions		June 30, 2019				July 1, 2018				June 30, 2019				July 1, 2018
Net income attributable to Cummins Inc.		$	675			$	545			$	1,338			$	870
Net income attributable to Cummins Inc. as a percentage of net sales		10.9		%		8.9		%		10.9		%		7.4		%
Add:
Net income attributable to noncontrolling interests		10				9				16				9
Consolidated net income		685				554				1,354				879
Add:
Interest expense		29				28				61				52
Income tax expense		186				161				362				359
Depreciation and amortization		158				154				314				307
EBITDA		$	1,058			$	897			$	2,091			$	1,597
EBITDA as a percentage of net sales		17.0		%		14.6		%		17.1		%		13.6		%

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

We believe these are useful measures of our operating performance for the periods presented as they illustrate our operating performance without regard to other discrete tax adjustments. These measures are not in accordance with, or an alternative for GAAP and may not be consistent with measures used by other companies. This should be considered supplemental data. The following table reconciles net income and diluted EPS attributable to Cummins Inc. to net income and diluted EPS attributable to Cummins Inc. excluding special discrete tax items for the following periods:

				Three months ended
				June 30, 2019								July 1, 2018
	In millions, except per share amounts			Net Income				Diluted EPS				Net Income				Diluted EPS
	Net income and diluted EPS attributable to Cummins Inc.			$	675			$	4.27			$	545			$	3.32
	Special discrete tax items			—				—				(4		)		(0.03		)
	Net income and diluted EPS attributable to Cummins Inc. excluding special discrete tax items			$	675			$	4.27			$	541			$	3.29

						Six months ended
						June 30, 2019								July 1, 2018
		In millions, except per share amounts				Net Income				Diluted EPS				Net Income				Diluted EPS
		Net income and diluted EPS attributable to Cummins Inc.				$	1,338			$	8.47			$	870			$	5.27
		Special discrete tax items (1)				—				—				74				0.45
		Net income and diluted EPS attributable to Cummins Inc. excluding special discrete tax items				$	1,338			$	8.47			$	944			$	5.72

(1)

Our effective tax rate for the six months ended July 1, 2018, was 29.0 percent and contained $74 million, or $0.45 per share, of unfavorable discrete tax items, primarily related to a Tax Legislation adjustment of $80 million. This includes $45 million associated with changes related to the Tax Legislation measurement period adjustment and $35 million associated with the one-time recognition of deferred tax charges at historical tax rates on intercompany profit in inventory.

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

Engine Segment Sales by Market and Unit Shipments by Engine Classification

Sales for our Engine segment by market were as follows:

2019
In millions		Q1				Q2				Q3				Q4				YTD
Heavy-duty truck		$	979			$	970			$	—			$	—			$	1,949
Medium-duty truck and bus		721				739				—				—				1,460
Light-duty automotive		382				480				—				—				862
Off-highway		571				514				—				—				1,085
Total sales		$	2,653			$	2,703			$	—			$	—			$	5,356
2018
In millions		Q1				Q2				Q3				Q4				YTD
Heavy-duty truck		$	815			$	920			$	958			$	959			$	3,652
Medium-duty truck and bus		692				777				699				687				2,855
Light-duty automotive		402				444				517				456				1,819
Off-highway		537				555				552				596				2,240
Total sales		$	2,446			$	2,696			$	2,726			$	2,698			$	10,566

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

2019
Units		Q1			Q2			Q3			Q4			YTD
Heavy-duty		33,900			35,000			—			—			68,900
Medium-duty		79,000			76,400			—			—			155,400
Light-duty		56,400			64,100			—			—			120,500
Total units		169,300			175,500			—			—			344,800
2018
Units		Q1			Q2			Q3			Q4			YTD
Heavy-duty		26,600			32,000			34,600			35,300			128,500
Medium-duty		74,000			83,500			76,000			77,600			311,100
Light-duty		61,900			68,500			76,800			66,200			273,400
Total units		162,500			184,000			187,400			179,100			713,000

Distribution Segment Sales by Product Line

Sales for our Distribution segment by product line were as follows:

2019
In millions		Q1				Q2				Q3				Q4				YTD
Parts		$	844			$	833			$	—			$	—			$	1,677
Power generation		403				427				—				—				830
Engines		391				395				—				—				786
Service		363				373				—				—				736
Total sales		$	2,001			$	2,028			$	—			$	—			$	4,029
2018
In millions		Q1				Q2				Q3				Q4				YTD
Parts		$	808			$	817			$	800			$	809			$	3,234
Power generation		326				346				359				455				1,486
Engines		367				461				400				406				1,634
Service		352				370				372				380				1,474
Total sales		$	1,853			$	1,994			$	1,931			$	2,050			$	7,828

Component Segment Sales by Product Line

Sales for our Components segment by product line were as follows:

2019
In millions		Q1				Q2				Q3				Q4				YTD
Emission solutions		$	854			$	828			$	—			$	—			$	1,682
Turbo technologies		335				319				—				—				654
Filtration		325				331				—				—				656
Electronics and fuel systems		198				212				—				—				410
Automated transmissions		149				156				—				—				305
Total sales		$	1,861			$	1,846			$	—			$	—			$	3,707
2018
In millions		Q1				Q2				Q3				Q4				YTD
Emission solutions		$	775			$	841			$	769			$	792			$	3,177
Turbo technologies		340				355				317				331				1,343
Filtration		320				324				308				313				1,265
Electronics and fuel systems		201				226				210				201				838
Automated transmissions		117				141				150				135				543
Total sales		$	1,753			$	1,887			$	1,754			$	1,772			$	7,166

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

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

2019
In millions		Q1				Q2				Q3				Q4				YTD
Power generation		$	567			$	668			$	—			$	—			$	1,235
Industrial		420				432				—				—				852
Generator technologies		90				103				—				—				193
Total sales		$	1,077			$	1,203			$	—			$	—			$	2,280
2018
In millions		Q1				Q2				Q3				Q4				YTD
Power generation		$	571			$	666			$	636			$	713			$	2,586
Industrial		414				483				380				386				1,663
Generator technologies		89				97				91				100				377
Total sales		$	1,074			$	1,246			$	1,107			$	1,199			$	4,626

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

2019
Units		Q1			Q2			Q3			Q4			YTD
Power generation		2,100			2,300			—			—			4,400
Industrial		1,600			1,600			—			—			3,200
Total units		3,700			3,900			—			—			7,600
2018
Units		Q1			Q2			Q3			Q4			YTD
Power generation		2,100			2,300			2,400			2,300			9,100
Industrial		1,700			2,100			1,900			1,900			7,600
Total units		3,800			4,400			4,300			4,200			16,700

 

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