SEC Filings


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

Components segment sales for the nine months ended October 1, 2017, increased $672 million, across all lines of business, versus the comparable period in 2016. The following were the primary drivers:
Emission solutions sales increased $272 million primarily due to stronger market demand for trucks in North America and China and increased sales of products to meet new emission standards in India.
Fuel systems sales increased $125 million primarily due to higher demand in China and Mexico.
Turbo technologies sales increased $109 million primarily due to higher demand in China and North America.
Filtration sales increased $97 million primarily due to higher demand in North America, Australia, China and Eastern Europe.
Automated transmissions had North American sales of $69 million following consolidation of the ECJV during August and September.
These increases were partially offset by unfavorable foreign currency fluctuations (primarily in the Chinese renminbi and British pound).
EBIT 
Components segment EBIT for the three months ended October 1, 2017, increased $69 million versus the comparable period in 2016, as higher gross margin was partially offset by increased selling, general and administrative expenses and higher research, development and engineering expenses.
Components segment EBIT for the nine months ended October 1, 2017, increased $85 million versus the comparable period in 2016 primarily due to higher gross margin and increased equity, royalty and interest income from investees, partially offset by higher selling, general and administrative expenses. 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
 
$
94

 
34
 %
 
 
$
122

 
14
 %
 
(0.9
)
Selling, general and administrative expenses
 
(30
)
 
(34
)%
 
 
(64
)
 
(24
)%
 
(0.3
)
Research, development and engineering expenses
 
(9
)
 
(17
)%
 
0.6
 
(9
)
 
(6
)%
 
0.5

Equity, royalty and interest income from investees
 
3

 
33
 %
 
 
11

 
38
 %
 
0.1

The increase in gross margin for the three months ended October 1, 2017, versus the comparable period in 2016, was primarily due to higher volumes, lower material costs and improved leverage, partially offset by higher warranty costs driven by campaigns and increased variable compensation expense. The increase in selling, general and administrative expenses was primarily due to higher compensation expense, especially variable compensation expense and expenses related to the new ECJV. The increase in research, development and engineering expenses was primarily due to higher variable compensation expense.
The increase in gross margin for the nine months ended October 1, 2017, versus the comparable period in 2016, was primarily due to higher volumes, lower material costs and improved leverage, partially offset by unfavorable pricing in North America, higher warranty costs driven by campaigns and changes in estimates and increased variable compensation expense. The increase in selling, general and administrative expenses was primarily due to higher compensation expense, especially variable compensation expense, and expenses related to the new ECJV. The increase in research, development and engineering expenses was primarily due to higher variable compensation expense. The increase in equity, royalty and interest income from investees was primarily due to higher earnings at Dongfeng Cummins Emission Solutions Co., Ltd., Shanghai Fleetguard Filter Co. and Fleetguard Filtration Systems India Pvt.

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