SEC Filings


10-Q
CUMMINS INC filed this Form 10-Q on 10/31/2017
Entire Document
 

NOTE 4. 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 1,
2017
 
October 2,
2016
 
October 1,
2017
 
October 2,
2016
Distribution entities
 
 
 
 
 
 
 
 
Komatsu Cummins Chile, Ltda.
 
$
8

 
$
8

 
$
23

 
$
26

North American distributors
 

 
7

 

 
18

All other distributors
 
(1
)
 
1

 
(1
)
 
2

Manufacturing entities
 
 
 
 
 
 

 
 

Beijing Foton Cummins Engine Co., Ltd.
 
24

 
19

 
79

 
59

Dongfeng Cummins Engine Company, Ltd.
 
15

 
10

 
56

 
32

Chongqing Cummins Engine Company, Ltd.
 
11

 
11

 
30

 
28

All other manufacturers
 
27

 
8

 
78

 
40

Cummins share of net income
 
84

 
64

 
265

 
205

Royalty and interest income
 
11

 
10

 
36

 
29

Equity, royalty and interest income from investees
 
$
95

 
$
74

 
$
301

 
$
234


NOTE 5. MARKETABLE SECURITIES
A summary of marketable securities, all of which are classified as current, was as follows:
 
 
 
October 1, 2017
 
December 31, 2016
In millions
 
Cost
 
Gross unrealized
gains/(losses)
 
Estimated
fair value
 
Cost
 
Gross unrealized
gains/(losses)
 
Estimated
fair value
Available-for-sale (1)
 
 

 
 

 
 

 
 

 
 

 
 

Debt mutual funds
 
$
139

 
$

 
$
139

 
$
132

 
$

 
$
132

Bank debentures
 

 

 

 
114

 

 
114

Equity mutual funds
 
12

 
2

 
14

 
12

 

 
12

Government debt securities
 
1

 

 
1

 
2

 

 
2

Total marketable securities
 
$
152

 
$
2

 
$
154

 
$
260

 
$

 
$
260

____________________________________
(1) All marketable securities are classified as Level 2 securities. The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 securities and there were no transfers between Level 2 or 3 during the first nine months of 2017 and for the year ended 2016.
A description of the valuation techniques and inputs used for our Level 2 fair value measures was as follows:
Debt mutual funds— The fair value measure for the vast majority of these investments is the daily net asset value published on a regulated governmental website. Daily quoted prices are available from the issuing brokerage and are used on a test basis to corroborate this Level 2 input.
Bank debentures— These investments provide us with a contractual rate of return and generally range in maturity from three months to five years. The counterparties to these investments are reputable financial institutions with investment grade credit ratings. Since these instruments are not tradable and must be settled directly by us with the respective financial institution, our fair value measure is the financial institutions’ month-end statement.
Equity mutual funds— The fair value measure for these investments is the net asset value published by the issuing brokerage. Daily quoted prices are available from reputable third party pricing services and are used on a test basis to corroborate this Level 2 input measure.
Government debt securities— The fair value measure for these securities is broker quotes received from reputable firms. These securities are infrequently traded on a national stock exchange and these values are used on a test basis to corroborate our Level 2 input measure.

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