SEC Filings


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

EBIT
Distribution segment EBIT for the three months ended October 1, 2017, decreased $5 million versus the comparable period in 2016 primarily due to higher selling, general and administrative expenses (mainly related to higher variable compensation expense) and lower equity, royalty and interest income from investees, offset by higher gross margin and a gain on the sale of assets.
Distribution segment EBIT for the nine months ended October 1, 2017, increased $17 million versus the comparable period in 2016 primarily due to higher gross margin, partially offset by higher selling, general and administrative expenses (mainly related to higher variable compensation expense) and lower equity, royalty and interest income from investees. Major components of EBIT and related changes to EBIT and EBIT as a percentage of sales were as follows:
 
 
Three months ended
 
Nine months ended
 
 
October 1, 2017 vs. October 2, 2016
 
October 1, 2017 vs. October 2, 2016
 
 
Favorable/(Unfavorable) Change
 
Favorable/(Unfavorable) Change
In millions
 
Amount
 
Percent
 
Percentage point
change as a percent
of total sales
 
Amount
 
Percent
 
Percentage point
change as a percent
of total sales
Gross margin
 
$
25

 
9
 %
 
(1.1
)
 
$
93

 
12
 %
 
(0.2
)
Selling, general and administrative expenses
 
(37
)
 
(20
)%
 
(0.3
)
 
(79
)
 
(14
)%
 
(0.1
)
Equity, royalty and interest income from investees
 
(8
)
 
(42
)%
 
(0.7
)
 
(21
)
 
(38
)%
 
(0.5
)
Gain on sale of assets
 
15

 
100
 %
 
NM

 
15

 
100
 %
 
NM

___________________________________
"NM" - not meaningful information
The increase in gross margin dollars for the three months ended October 1, 2017, versus the comparable period in 2016, was primarily due to higher organic volumes and the acquisition of a North American distributor in the fourth quarter of 2016, partially offset by increased variable compensation expense. Gross margin as a percentage of sales declined primarily due to the increase in variable compensation expense. The increase in selling, general and administrative expenses was primarily due to higher variable compensation expense and increased compensation expense related to the acquisition of a North American distributor. The decrease in equity, royalty and interest income from investees was primarily due to the acquisition of a North American distributor in the fourth quarter of 2016.
The increase in gross margin for the nine months ended October 1, 2017, versus the comparable period in 2016, was primarily due to higher organic volumes and the acquisition of a North American distributor in the fourth quarter of 2016, partially offset by increased variable compensation expense. Gross margin as a percentage of sales declined primarily due to the increase in variable compensation expense. The increase in selling, general and administrative expenses was primarily due to higher variable compensation expense, increased compensation expense related to the acquisition of a North American distributor and higher consulting expenses. The decrease in equity, royalty and interest income from investees was primarily due to the acquisition of a North American distributor, in the fourth quarter of 2016.

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