SEC Filings


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

 
 
Three months ended
Operating Segments
 
October 1, 2017
 
October 2, 2016
 
Percent change
 
 
 
 
Percent
 
 
 
 
 
Percent
 
 
 
2017 vs. 2016
In millions
 
Sales
 
of Total
 
EBIT
 
Sales
 
of Total
 
EBIT
 
Sales
 
EBIT
Engine
 
$
2,336

 
44
 %
 
$
229

 
$
1,859

 
44
 %
 
$
89

 
26
%
 
NM

Distribution
 
1,753

 
33
 %
 
91

 
1,504

 
36
 %
 
96

 
17
%
 
(5
)%
Components(1)
 
1,533

 
29
 %
 
217

 
1,143

 
27
 %
 
148

 
34
%
 
47
 %
Power Systems
 
1,056

 
20
 %
 
81

 
856

 
21
 %
 
59

 
23
%
 
37
 %
Intersegment eliminations
 
(1,393
)
 
(26
)%
 

 
(1,175
)
 
(28
)%
 

 
19
%
 

Non-segment
 

 

 
22

 

 

 
6

 

 
NM

Total
 
$
5,285

 
100
 %
 
$
640

 
$
4,187

 
100
 %
 
$
398

 
26
%
 
61
 %
 
______________________________________
"NM" - not meaningful information
(1) The 2017 disclosures include Eaton Cummins Automated Transmission Technologies joint venture results consolidated during the third quarter. See Note 11 , "ACQUISITION," to the Condensed Consolidated Financial Statements for additional information.
Net income attributable to Cummins was $453 million, or $2.71 per diluted share, on sales of $5.3 billion for the three months ended October 1, 2017, versus the comparable prior year period net income attributable to Cummins of $289 million, or $1.72 per diluted share, on sales of $4.2 billion. The increase in net income and earnings per diluted share was driven by significantly higher net sales and gross margin, the absence of an accrual for a loss contingency recorded in the third quarter of 2016 and higher equity, royalty and interest income from investees, partially offset by increased selling, general and administrative expenses, higher research, development and engineering expenses and a higher effective tax rate. The increase in gross margin was primarily due to higher volumes, improved leverage and lower material costs, partially offset by higher warranty costs ($105 million primarily due to campaigns in the Engine and Components segments) and increased variable compensation expense of $59 million. Diluted earnings per share for the three months ended October 1, 2017, benefited $0.01 from fewer weighted average shares outstanding due to the stock repurchase program.
 
 
 
Nine months ended
Operating Segments
 
October 1, 2017
 
October 2, 2016
 
Percent change
 
 
 
 
Percent
 
 
 
 
 
Percent
 
 
 
2017 vs. 2016
In millions
 
Sales
 
of Total
 
EBIT
 
Sales
 
of Total
 
EBIT
 
Sales
 
EBIT
Engine
 
$
6,666

 
45
 %
 
$
735

 
$
5,837

 
45
 %
 
$
492

 
14
%
 
49
%
Distribution
 
5,120

 
34
 %
 
287

 
4,511

 
35
 %
 
270

 
14
%
 
6
%
Components(1)
 
4,331

 
29
 %
 
586

 
3,659

 
28
 %
 
501

 
18
%
 
17
%
Power Systems
 
2,955

 
20
 %
 
199

 
2,585

 
20
 %
 
195

 
14
%
 
2
%
Intersegment eliminations
 
(4,120
)
 
(28
)%
 

 
(3,586
)
 
(28
)%
 

 
15
%
 

Non-segment
 

 

 
19

 

 

 
15

 

 
27
%
Total
 
$
14,952

 
100
 %
 
$
1,826

 
$
13,006

 
100
 %
 
$
1,473

 
15
%
 
24
%
______________________________________
(1) The 2017 disclosures include Eaton Cummins Automated Transmission Technologies joint venture results consolidated during the third quarter of 2017. See Note 11 , "ACQUISITION," to the Condensed Consolidated Financial Statements for additional information.

Net income attributable to Cummins was $1.3 billion, or $7.60 per diluted share, on sales of $15.0 billion for the nine months ended October 1, 2017, versus the comparable prior year period net income attributable to Cummins of $1.0 billion, or $5.99 per diluted share, on sales of $13.0 billion. The increase in net income and earnings per diluted share was driven by higher net sales and gross margin, the absence of an accrual for a loss contingency recorded in the second and third quarters of 2016 and higher equity, royalty and interest income from investees, partially offset by increased selling, general and administrative expenses and higher research, development and engineering expenses and a higher effective tax rate. The increase in gross margin was primarily due to higher volumes, improved leverage and lower material costs, partially offset by higher warranty costs ($234 million primarily due to campaigns in the Engine, Components and Power Systems segments and changes in estimates in the Engine and Components segments) and increased variable compensation expense of $101 million. Diluted earnings per share for the nine months ended October 1, 2017, benefited $0.04 from fewer weighted average shares outstanding, primarily due to the stock repurchase program.

We generated $1.5 billion of operating cash flows for the nine months ended October 1, 2017, compared to $1.3 billion for the comparable period in 2016. Refer to the section titled "Cash Flows" in the "LIQUIDITY AND CAPITAL RESOURCES" section for a discussion of items impacting cash flows.

28