SEC Filings


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

Generator technologies sales increased $30 million primarily due to higher demand in Western Europe and China.
These increases were partially offset by unfavorable foreign currency fluctuations that negatively impacted sales (primarily due to the British pound).
EBIT
Power Systems segment EBIT for the three months ended October 1, 2017, increased $22 million versus the comparable period in 2016 primarily due to higher gross margin and equity, royalty and interest income from investees, partially offset by increased selling, general and administrative expenses and higher research, development and engineering expenses.
Power Systems segment EBIT for the nine months ended October 1, 2017, increased $4 million versus the comparable period in 2016 primarily due to higher gross margin and equity, royalty and interest income from investees, partially offset by increased selling, general and administrative expenses and higher research, development and engineering 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
 
$
49

 
25
 %
 
0.3

 
$
49

 
8
 %
 
(1.2
)
Selling, general and administrative expenses
 
(18
)
 
(18
)%
 
0.5

 
(29
)
 
(10
)%
 
0.4

Research, development and engineering expenses
 
(17
)
 
(39
)%
 
(0.7
)
 
(20
)
 
(14
)%
 
0.1

Equity, royalty and interest income from investees
 
6

 
75
 %
 
0.4

 
11

 
38
 %
 
0.3

The increase in gross margin for the three months ended October 1, 2017, versus the comparable period in 2016, was primarily due to increased volumes, partially offset by unfavorable mix, higher variable compensation expense and increased material costs. The increase in selling, general and administrative expenses was primarily due to higher compensation expense, especially variable compensation expense. The increase in research, development and engineering expenses was primarily due to higher compensation expense, especially variable compensation expense, higher consulting expenses and lower expense recovery. The increase in equity, royalty and interest income from investees was primarily due to the absence of a joint venture asset impairment recorded in the third 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 increased volumes and favorable foreign currency fluctuations (primarily the British pound), partially offset by unfavorable mix, higher warranty cost related to a campaign accrual, increased material costs and higher variable compensation expense. The increase in selling, general and administrative expenses was primarily due to higher variable compensation expense and higher consulting expenses. The increase in research, development and engineering expenses was primarily due to higher variable compensation expense, increased project spending and higher consulting expenses. The increase in equity, royalty and interest income from investees was primarily due to the absence of a joint venture asset impairment recorded in the third quarter of 2016.

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