UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

cumminsca06.jpg

FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report:  May 2, 2017
 
  CUMMINS INC.
(Exact name of registrant as specified in its charter)
Indiana
(State or other Jurisdiction of
Incorporation)
1-4949
 (Commission File Number)
35-0257090
 (I.R.S. Employer Identification No.)

500 Jackson Street
P. O. Box 3005
Columbus, IN  47202-3005
(Principal Executive Office)  (Zip Code)

Registrant's telephone number, including area code:  (812) 377-5000
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter)

Emerging growth Company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
 

1


Item 2.02. Results of Operations and Financial Condition.
 
On May 2, 2017, Cummins Inc. (“Cummins,” “the Company,” “the registrant,” “we,” “our,” or “us”) issued the attached press release reporting its financial results for the first quarter of 2017, which is furnished herewith as Exhibit 99.

The information furnished pursuant to this Item 2.02, including Exhibit 99, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act.


Item 9.01. Financial Statements and Exhibits.
 
(d)
The following exhibit is furnished pursuant to Item 2.02 herewith: 
99-Press Release dated May 2, 2017


SIGNATURE

 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Date: May 2, 2017
 
CUMMINS INC.
 /s/ CHRISTOPHER CLULOW
Christopher Clulow
Vice President - Corporate Controller
(Principal Accounting Officer)

 

2

CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (a)



 
 
Three months ended
In millions, except per share amounts
 
April 2,
2017
 
April 3,
2016
NET SALES
 
$
4,589

 
$
4,291

Cost of sales
 
3,461

 
3,235

GROSS MARGIN
 
1,128

 
1,056

OPERATING EXPENSES AND INCOME
 
 
 
 
Selling, general and administrative expenses
 
537

 
490

Research, development and engineering expenses
 
158

 
166

Equity, royalty and interest income from investees
 
108

 
72

Other operating income (expense), net
 
5

 
(2
)
OPERATING INCOME
 
546

 
470

Interest income
 
2

 
6

Interest expense
 
18

 
19

Other income (expense), net
 
18

 
8

INCOME BEFORE INCOME TAXES
 
548

 
465

Income tax expense
 
143

 
132

CONSOLIDATED NET INCOME
 
405

 
333

Less: Net income attributable to noncontrolling interests
 
9

 
12

NET INCOME ATTRIBUTABLE TO CUMMINS INC.
 
$
396

 
$
321

 
 
 
 
 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
 
 
 
 
Basic
 
$
2.36

 
$
1.87

Diluted
 
$
2.36

 
$
1.87

 
 
 
 
 
WEIGHTED AVERAGE SHARES OUTSTANDING
 
 

 
 
Basic
 
167.5

 
171.8

Diluted
 
168.0

 
172.0

 
 
 
 
 
CASH DIVIDENDS DECLARED PER COMMON SHARE
 
$
1.025

 
$
0.975

 
 
 
 
 
(a)  Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.






 




3

CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (a)


In millions, except par value
 
April 2,
2017
 
December 31,
2016
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
1,322

 
$
1,120

Marketable securities
 
145

 
260

Total cash, cash equivalents and marketable securities
 
1,467

 
1,380

Accounts and notes receivable, net
 
3,247

 
3,025

Inventories
 
2,894

 
2,675

Prepaid expenses and other current assets
 
551

 
627

Total current assets
 
8,159

 
7,707

Long-term assets
 
 
 
 
Property, plant and equipment
 
7,746

 
7,635

Accumulated depreciation
 
(3,944
)
 
(3,835
)
Property, plant and equipment, net
 
3,802

 
3,800

Investments and advances related to equity method investees
 
1,059

 
946

Goodwill
 
482

 
480

Other intangible assets, net
 
345

 
332

Pension assets
 
785

 
731

Other assets
 
1,002

 
1,015

Total assets
 
$
15,634

 
$
15,011

 
 
 
 
 
LIABILITIES
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable (principally trade)
 
$
2,168

 
$
1,854

Loans payable
 
48

 
41

Commercial paper
 
274

 
212

Accrued compensation, benefits and retirement costs
 
334

 
412

Current portion of accrued product warranty
 
352

 
333

Current portion of deferred revenue
 
498

 
468

Other accrued expenses
 
941

 
970

Current maturities of long-term debt
 
47

 
35

Total current liabilities
 
4,662

 
4,325

Long-term liabilities
 
 
 
 
Long-term debt
 
1,576

 
1,568

Postretirement benefits other than pensions
 
317

 
329

Pensions
 
325

 
326

Other liabilities and deferred revenue
 
1,278

 
1,289

Total liabilities
 
$
8,158

 
$
7,837

 
 
 
 
 
EQUITY
 
 
 
 
Cummins Inc. shareholders’ equity
 
 
 
 
Common stock, $2.50 par value, 500 shares authorized, 222.3 and 222.4 shares issued
 
$
2,163

 
$
2,153

Retained earnings
 
11,265

 
11,040

Treasury stock, at cost, 54.4 and 54.2 shares
 
(4,524
)
 
(4,489
)
Common stock held by employee benefits trust, at cost, 0.6 and 0.7 shares
 
(7
)
 
(8
)
Accumulated other comprehensive loss
 
(1,732
)
 
(1,821
)
Total Cummins Inc. shareholders’ equity
 
7,165

 
6,875

Noncontrolling interests
 
311

 
299

Total equity
 
$
7,476

 
$
7,174

Total liabilities and equity
 
$
15,634

 
$
15,011

 
 
 
 
 
(a)  Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.




4

CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (a)


 
 
Three months ended
In millions
 
April 2, 2017
 
April 3, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
Consolidated net income
 
$
405

 
$
333

Adjustments to reconcile consolidated net income to net cash provided by operating activities
 
 
 
 
Depreciation and amortization
 
139

 
128

Deferred income taxes
 
10

 
(2
)
Equity in income of investees, net of dividends
 
(83
)
 
(48
)
Pension contributions in excess of expense
 
(23
)
 
(50
)
Other post-retirement benefits payments in excess of expense
 
(10
)
 
(8
)
Stock-based compensation expense
 
7

 
5

Restructuring charges and other actions, net of cash payments
 

 
(25
)
Translation and hedging activities
 
11

 
(14
)
Changes in current assets and liabilities, net of acquisitions
 
 
 
 
Accounts and notes receivable
 
(205
)
 
(98
)
Inventories
 
(202
)
 
(54
)
Other current assets
 
73

 
188

Accounts payable
 
296

 
107

Accrued expenses
 
(90
)
 
(283
)
Changes in other liabilities and deferred revenue
 
48

 
78

Other, net
 
3

 
10

Net cash provided by operating activities
 
379

 
267

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
Capital expenditures
 
(81
)
 
(71
)
Investments in internal use software
 
(27
)
 
(13
)
Investments in and advances to equity investees
 
(20
)
 
(25
)
Investments in marketable securities—acquisitions
 
(26
)
 
(291
)
Investments in marketable securities—liquidations
 
147

 
35

Cash flows from derivatives not designated as hedges
 
(24
)
 
(26
)
Other, net
 
4

 
3

Net cash used in investing activities
 
(27
)
 
(388
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
Proceeds from borrowings
 

 
105

Net borrowings of commercial paper
 
62

 
50

Payments on borrowings and capital lease obligations
 
(11
)
 
(15
)
Distributions to noncontrolling interests
 
(10
)
 
(10
)
Dividend payments on common stock
 
(171
)
 
(170
)
Repurchases of common stock
 
(51
)
 
(575
)
Other, net
 
17

 
(21
)
Net cash used in financing activities
 
(164
)
 
(636
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
 
14

 
(39
)
Net increase (decrease) in cash and cash equivalents
 
202

 
(796
)
Cash and cash equivalents at beginning of year
 
1,120

 
1,711

CASH AND CASH EQUIVALENTS AT END OF PERIOD
 
$
1,322

 
$
915

 
 
 
 
 
(a)  Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.

5

CUMMINS INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)

 
In millions
 
Engine
 
Distribution
 
Components
 
Power Systems
 
Intersegment Eliminations (1)
 
Total
 
Three months ended April 2, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
External sales
 
$
1,457

 
$
1,637

 
$
980

 
$
515

 
$

 
$
4,589

 
Intersegment sales
 
566

 
8

 
364

 
367

 
(1,305
)
 

 
Total sales
 
2,023

 
1,645

 
1,344

 
882

 
(1,305
)
 
4,589

 
Depreciation and amortization (2)
 
44

 
30

 
37

 
28

 

 
139

 
Research, development and engineering expenses
 
54

 
4

 
50

 
50

 

 
158

 
Equity, royalty and interest income from investees
 
72

 
11

 
13

 
12

 

 
108

 
Interest income
 
1

 
1

 

 

 

 
2

 
Segment EBIT
 
229

 
100

 
179

 
57

 
1

 
566

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment EBIT as a percentage of total sales
 
11.3
%
 
6.1
%
 
13.3
%
 
6.5
%
 
 
 
12.3
%
 
 
 

 
 
 
 
 
 
 
 
 
 
 
Three months ended April 3, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
External sales
 
$
1,489

 
$
1,458

 
$
897

 
$
447

 
$

 
$
4,291

 
Intersegment sales
 
487

 
5

 
340

 
361

 
(1,193
)
 

 
Total sales
 
1,976

 
1,463

 
1,237

 
808

 
(1,193
)
 
4,291

 
Depreciation and amortization (2)
 
39

 
28

 
31

 
29

 

 
127

 
Research, development and engineering expenses
 
57

 
4

 
56

 
49

 

 
166

 
Equity, royalty and interest income from investees
 
36

 
18

 
8

 
10

 

 
72

 
Interest income
 
2

 
1

 
1

 
2

 

 
6

 
Segment EBIT
 
197

 
87

 
163

 
46

 
(9
)
 
484

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment EBIT as a percentage of total sales
 
10.0
%
 
5.9
%
 
13.2
%
 
5.7
%
 
 
 
11.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1
)
Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended April 2, 2017 and April 3, 2016.
(2
)
Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Income as "Interest expense." The amortization of debt discount and deferred costs were less than $1 million and $1 million for the three months ended April 2, 2017 and April 3, 2016, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Income is shown in the table below:
 
 
 
Three months ended
In millions
 
April 2,
2017
 
April 3,
2016
Total segment EBIT
 
$
566

 
$
484

Less: Interest expense
 
18

 
19

Income before income taxes
 
$
548

 
$
465



6

CUMMINS INC. AND SUBSIDIARIES
SELECT FOOTNOTE DATA
(Unaudited)


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
In millions
 
April 2,
2017
 
April 3,
2016
Distribution entities
 
 
 
 
Komatsu Cummins Chile, Ltda.
 
$
7

 
$
10

North American distributors
 

 
5

Manufacturing entities
 
 

 
 
Beijing Foton Cummins Engine Co., Ltd.
 
33

 
18

Dongfeng Cummins Engine Company, Ltd.
 
22

 
7

Chongqing Cummins Engine Company, Ltd.
 
9

 
8

All other manufacturers
 
24

 
16

Cummins share of net income
 
95

 
64

Royalty and interest income
 
13

 
8

Equity, royalty and interest income from investees
 
$
108

 
$
72

 
 
 
 
 
 
 
 
 
 
 
 
Earnings before interest, income taxes and noncontrolling interests
We define EBIT as earnings before interest expense, income tax expense and noncontrolling interests in income of consolidated subsidiaries. We use EBIT to assess and measure the performance of our operating segments and also as a component in measuring our variable compensation programs. This measure is not in accordance with, or an alternative for, accounting principles generally accepted in the United States and may not be consistent with measures used by other companies. It should be considered supplemental data. Below is a reconciliation of “Net income attributable to Cummins Inc.” to EBIT for each of the applicable periods:
 
 
Three months ended
In millions
 
April 2, 2017
 
April 3, 2016
Net income attributable to Cummins Inc.
 
$
396

 
$
321

 
 
 
 
 
Net income attributable to Cummins Inc. as a percentage of net sales
 
8.6
%
 
7.5
%
 
 
 
 
 
Add
 
 
 
 
Net income attributable to noncontrolling interests
 
9

 
12

Consolidated net income
 
405

 
333

 
 
 
 
 
Add
 
 
 
 
Interest expense
 
18

 
19

Income tax expense
 
143

 
132

Earnings before interest expense and income taxes
 
566

 
484

 
 
 
 
 
EBIT as a percentage of net sales
 
12.3
%
 
11.3
%
 
 
 
 
 
 
 
 
 

7

CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)


Engine Segment Sales by Market and Unit Shipments by Engine Classification
Sales for our Engine segment by market were as follows:
2017
 
 
 
 
 
 
 
 
 
 
In millions
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Heavy-duty truck
 
$
620

 
$

 
$

 
$

 
$
620

Medium-duty truck and bus
 
544

 

 

 

 
544

Light-duty automotive
 
423

 

 

 

 
423

Off-highway
 
436

 

 

 

 
436

Total sales
 
$
2,023

 
$

 
$

 
$

 
$
2,023

 
 
 
 
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
 
 
 
 
In millions
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Heavy-duty truck
 
$
631

 
$
622

 
$
625

 
$
565

 
$
2,443

Medium-duty truck and bus
 
549

 
600

 
517

 
606

 
2,272

Light-duty automotive
 
433

 
394

 
345

 
409

 
1,581

Off-highway
 
363

 
386

 
372

 
387

 
1,508

Total sales
 
$
1,976

 
$
2,002

 
$
1,859

 
$
1,967

 
$
7,804

Unit shipments by engine classification (including unit shipments to Power Systems and off-highway engine units included in their respective classification) were as follows:
2017
 
 
 
 
 
 
 
 
 
 
Units
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Heavy-duty
 
19,200

 

 

 

 
19,200

Medium-duty
 
60,300

 

 

 

 
60,300

Light-duty
 
63,100

 

 

 

 
63,100

Total units
 
142,600

 

 

 

 
142,600

 
 
 
 
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
 
 
 
 
Units
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Heavy-duty
 
19,700

 
20,700

 
20,100

 
18,500

 
79,000

Medium-duty
 
55,400

 
62,300

 
53,400

 
58,000

 
229,100

Light-duty
 
61,700

 
57,100

 
49,800

 
60,000

 
228,600

Total units
 
136,800

 
140,100

 
123,300

 
136,500

 
536,700


8

CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)


Distribution Segment Sales by Product Line
2017
 
 
 
 
 
 
 
 
 
 
In millions
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Parts
 
$
745

 
$

 
$

 
$

 
$
745

Service
 
319

 

 

 

 
319

Power generation
 
306

 

 

 

 
306

Engines
 
275

 

 

 

 
275

Total sales
 
$
1,645

 
$

 
$

 
$

 
$
1,645

 
 
 
 
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
 
 
 
 
In millions
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Parts
 
$
648

 
$
642

 
$
643

 
$
694

 
$
2,627

Service
 
299

 
297

 
299

 
320

 
1,215

Power generation
 
275

 
326

 
291

 
347

 
1,239

Engines
 
241

 
279

 
271

 
309

 
1,100

Total sales
 
$
1,463

 
$
1,544

 
$
1,504

 
$
1,670

 
$
6,181

Component Segment Sales by Business
In the first quarter of 2017, our Components segment reorganized its reporting structure to move a small piece of the emission solutions business to the fuel systems business to enhance operational, administrative and product development efficiencies. Prior year balances were reclassified to conform with this change.
2017
 
 
 
 
 
 
 
 
 
 
In millions
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Emission solutions
 
$
616

 
$

 
$

 
$

 
$
616

Turbo technologies
 
287

 

 

 

 
287

Filtration
 
277

 

 

 

 
277

Fuel systems
 
164

 

 

 

 
164

Total sales
 
$
1,344

 
$

 
$

 
$

 
$
1,344

 
 
 
 
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
 
 
 
 
In millions
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Emission solutions
 
$
589

 
$
603

 
$
522

 
$
524

 
$
2,238

Turbo technologies
 
265

 
276

 
241

 
254

 
1,036

Filtration
 
252

 
262

 
244

 
252

 
1,010

Fuel systems
 
131

 
138

 
136

 
147

 
552

Total sales
 
$
1,237

 
$
1,279

 
$
1,143

 
$
1,177

 
$
4,836

 
 
 
 
 
 
 
 
 
 
 
2015
 
 
 
 
 
 
 
 
 
 
In millions
 
YTD
 
 
 
 
 
 
 
 
Emission solutions
 
$
2,449

 
 
 
 
 
 
 
 
Turbo technologies
 
1,141

 
 
 
 
 
 
 
 
Filtration
 
1,010

 
 
 
 
 
 
 
 
Fuel systems
 
572

 
 
 
 
 
 
 
 
Total sales
 
$
5,172

 
 
 
 
 
 
 
 

9

CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)


Power Systems Segment Sales by Product Line and Unit Shipments by Engine Classification
In the first quarter of 2017, the Power Systems segment reorganized its product lines to better reflect how the business is managed. Prior year sales have been reclassified to reflect these changes.
Sales for our Power Systems segment by product line were as follows:
2017
 
 
 
 
 
 
 
 
 
 
In millions
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Power generation
 
$
526

 
$

 
$

 
$

 
$
526

Industrial
 
275

 

 

 

 
275

Generator technologies
 
81

 

 

 

 
81

Total sales
 
$
882

 
$

 
$

 
$

 
$
882

 
 
 
 
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
 
 
 
 
In millions
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Power generation
 
$
518

 
$
602

 
$
543

 
$
593

 
$
2,256

Industrial
 
215

 
236

 
235

 
255

 
941

Generator technologies
 
75

 
83

 
78

 
84

 
320

Total sales
 
$
808

 
$
921

 
$
856

 
$
932

 
$
3,517

High-horsepower unit shipments by engine classification were as follows: 
2017
 
 
 
 
 
 
 
 
 
 
Units
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Power generation
 
1,900

 

 

 

 
1,900

Industrial
 
1,300

 

 

 

 
1,300

Total units
 
3,200

 

 

 

 
3,200

 
 
 
 
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
 
 
 
 
Units
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Power generation
 
1,800

 
2,200

 
2,000

 
1,900

 
7,900

Industrial
 
1,000

 
1,100

 
1,000

 
1,300

 
4,400

Total units
 
2,800

 
3,300

 
3,000

 
3,200

 
12,300




10