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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended October 1, 2017
Commission File Number 1-4949
CUMMINS INC.
(Exact name of registrant as specified in its charter)
|
| | |
Indiana (State of Incorporation) | | 35-0257090 (IRS Employer Identification No.) |
500 Jackson Street
Box 3005
Columbus, Indiana 47202-3005
(Address of principal executive offices)
Telephone (812) 377-5000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
|
| | | | |
Large accelerated filer x | | Accelerated filer o | | Non-accelerated filer o |
Smaller reporting company o | | 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
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of October 1, 2017, there were 165,967,528 shares of common stock outstanding with a par value of $2.50 per share.
Website Access to Company’s Reports
Cummins maintains an internet website at www.cummins.com. Investors can obtain copies of our filings from this website free of charge as soon as reasonably practicable after they are electronically filed with, or furnished, to the Securities and Exchange Commission. Cummins is not including the information provided on the website as part of, or incorporating such information by reference into, this Quarterly Report on Form 10-Q.
CUMMINS INC. AND SUBSIDIARIES
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q
|
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| | Page |
| | |
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| Condensed Consolidated Statements of Income for the three and nine months ended October 1, 2017 and October 2, 2016 | |
| Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended October 1, 2017 and October 2, 2016 | |
| Condensed Consolidated Balance Sheets at October 1, 2017 and December 31, 2016 | |
| Condensed Consolidated Statements of Cash Flows for the nine months ended October 1, 2017 and October 2, 2016 | |
| Condensed Consolidated Statements of Changes in Equity for the nine months ended October 1, 2017 and October 2, 2016 | |
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| | |
| | |
| | |
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| | |
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PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
| | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
In millions, except per share amounts | | October 1, 2017 | | October 2, 2016 | | October 1, 2017 | | October 2, 2016 |
NET SALES (a) | | $ | 5,285 |
| | $ | 4,187 |
| | $ | 14,952 |
| | $ | 13,006 |
|
Cost of sales | | 3,946 |
| | 3,108 |
| | 11,236 |
| | 9,674 |
|
GROSS MARGIN | | 1,339 |
| | 1,079 |
| | 3,716 |
| | 3,332 |
|
OPERATING EXPENSES AND INCOME | | |
| | |
| | |
| | |
|
Selling, general and administrative expenses | | 624 |
| | 513 |
| | 1,757 |
| | 1,527 |
|
Research, development and engineering expenses | | 213 |
| | 157 |
| | 545 |
| | 478 |
|
Equity, royalty and interest income from investees (Note 4) | | 95 |
| | 74 |
| | 301 |
| | 234 |
|
Loss contingency (Note 9) | | — |
| | 99 |
| | — |
| | 138 |
|
Other operating income (expense), net | | 32 |
| | — |
| | 55 |
| | (2 | ) |
OPERATING INCOME | | 629 |
| | 384 |
| | 1,770 |
| | 1,421 |
|
Interest income | | 4 |
| | 6 |
| | 11 |
| | 18 |
|
Interest expense (Note 7) | | 18 |
| | 16 |
| | 57 |
| | 51 |
|
Other income (expense), net | | 7 |
| | 8 |
| | 45 |
| | 34 |
|
INCOME BEFORE INCOME TAXES | | 622 |
| | 382 |
| | 1,769 |
| | 1,422 |
|
Income tax expense | | 165 |
| | 82 |
| | 466 |
| | 362 |
|
CONSOLIDATED NET INCOME | | 457 |
| | 300 |
| | 1,303 |
| | 1,060 |
|
Less: Net income attributable to noncontrolling interests | | 4 |
| | 11 |
| | 30 |
| | 44 |
|
NET INCOME ATTRIBUTABLE TO CUMMINS INC. | | $ | 453 |
| | $ | 289 |
| | $ | 1,273 |
| | $ | 1,016 |
|
| | | | | | | | |
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. | | |
| | |
| | |
| | |
|
Basic | | $ | 2.72 |
| | $ | 1.72 |
| | $ | 7.62 |
| | $ | 5.99 |
|
Diluted | | $ | 2.71 |
| | $ | 1.72 |
| | $ | 7.60 |
| | $ | 5.99 |
|
| | | | | | | | |
WEIGHTED AVERAGE SHARES OUTSTANDING | | |
| | |
| | |
| | |
|
Basic | | 166.3 |
| | 167.8 |
| | 167.0 |
| | 169.5 |
|
Dilutive effect of stock compensation awards | | 0.7 |
| | 0.4 |
| | 0.6 |
| | 0.2 |
|
Diluted | | 167.0 |
| | 168.2 |
| | 167.6 |
| | 169.7 |
|
| | | | | | | | |
CASH DIVIDENDS DECLARED PER COMMON SHARE | | $ | 1.08 |
| | $ | 1.025 |
| | $ | 3.13 |
| | $ | 2.975 |
|
____________________________________
(a) , respectively.
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
| | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
In millions | | October 1, 2017 | | October 2, 2016 | | October 1, 2017 | | October 2, 2016 |
CONSOLIDATED NET INCOME | | $ | 457 |
| | $ | 300 |
| | $ | 1,303 |
| | $ | 1,060 |
|
Other comprehensive income (loss), net of tax (Note 10) | | |
| | |
| | |
| | |
|
Change in pension and other postretirement defined benefit plans | | 16 |
| | 13 |
| | 52 |
| | 31 |
|
Foreign currency translation adjustments | | 94 |
| | (29 | ) | | 276 |
| | (299 | ) |
Unrealized gain (loss) on marketable securities | | — |
| | — |
| | 1 |
| | 1 |
|
Unrealized gain (loss) on derivatives | | (1 | ) | | 7 |
| | — |
| | (20 | ) |
Total other comprehensive income (loss), net of tax | | 109 |
| | (9 | ) | | 329 |
| | (287 | ) |
COMPREHENSIVE INCOME | | 566 |
| | 291 |
| | 1,632 |
| | 773 |
|
Less: Comprehensive income attributable to noncontrolling interests | | 2 |
| | 14 |
| | 42 |
| | 41 |
|
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC. | | $ | 564 |
| | $ | 277 |
| | $ | 1,590 |
| | $ | 732 |
|
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
CUMMINS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) |
| | | | | | | | |
In millions, except par value | | October 1, 2017 | | December 31, 2016 |
ASSETS | | |
| | |
|
Current assets | | |
| | |
|
Cash and cash equivalents | | $ | 1,290 |
| | $ | 1,120 |
|
Marketable securities (Note 5) | | 154 |
| | 260 |
|
Total cash, cash equivalents and marketable securities | | 1,444 |
| | 1,380 |
|
Accounts and notes receivable, net | | | | |
Trade and other | | 3,532 |
| | 2,803 |
|
Nonconsolidated equity investees | | 278 |
| | 222 |
|
Inventories (Note 6) | | 3,146 |
| | 2,675 |
|
Prepaid expenses and other current assets | | 656 |
| | 627 |
|
Total current assets | | 9,056 |
| | 7,707 |
|
Long-term assets | | |
| | |
|
Property, plant and equipment | | 7,901 |
| | 7,635 |
|
Accumulated depreciation | | (4,085 | ) | | (3,835 | ) |
Property, plant and equipment, net | | 3,816 |
| | 3,800 |
|
Investments and advances related to equity method investees | | 1,213 |
| | 946 |
|
Goodwill | | 1,036 |
| | 480 |
|
Other intangible assets, net | | 964 |
| | 332 |
|
Pension assets | | 912 |
| | 731 |
|
Other assets | | 995 |
| | 1,015 |
|
Total assets | | $ | 17,992 |
| | $ | 15,011 |
|
| | | | |
LIABILITIES | | |
| | |
|
Current liabilities | | |
| | |
|
Accounts payable (principally trade) | | $ | 2,486 |
| | $ | 1,854 |
|
Loans payable (Note 7) | | 64 |
| | 41 |
|
Commercial paper (Note 7) | | 514 |
| | 212 |
|
Accrued compensation, benefits and retirement costs | | 674 |
| | 412 |
|
Current portion of accrued product warranty (Note 8) | | 462 |
| | 333 |
|
Current portion of deferred revenue | | 528 |
| | 468 |
|
Other accrued expenses | | 968 |
| | 970 |
|
Current maturities of long-term debt (Note 7) | | 62 |
| | 35 |
|
Total current liabilities | | 5,758 |
| | 4,325 |
|
Long-term liabilities | | |
| | |
|
Long-term debt (Note 7) | | 1,615 |
| | 1,568 |
|
Postretirement benefits other than pensions | | 319 |
| | 329 |
|
Pensions | | 328 |
| | 326 |
|
Other liabilities and deferred revenue | | 1,411 |
| | 1,289 |
|
Total liabilities | | $ | 9,431 |
| | $ | 7,837 |
|
| | | | |
Commitments and contingencies (Note 9) | |
|
| |
|
|
| | |
| | |
|
EQUITY | | | | |
Cummins Inc. shareholders’ equity | | |
| | |
|
Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.4 shares issued | | $ | 2,198 |
| | $ | 2,153 |
|
Retained earnings | | 11,791 |
| | 11,040 |
|
Treasury stock, at cost, 56.4 and 54.2 shares | | (4,849 | ) | | (4,489 | ) |
Common stock held by employee benefits trust, at cost, 0.6 and 0.7 shares | | (7 | ) | | (8 | ) |
Accumulated other comprehensive loss (Note 10) | | (1,504 | ) | | (1,821 | ) |
Total Cummins Inc. shareholders’ equity | | 7,629 |
| | 6,875 |
|
Noncontrolling interests | | 932 |
| | 299 |
|
Total equity | | $ | 8,561 |
| | $ | 7,174 |
|
Total liabilities and equity | | $ | 17,992 |
| | $ | 15,011 |
|
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
CUMMINS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
| | | | | | | | |
| | Nine months ended |
In millions | | October 1, 2017 | | October 2, 2016 |
CASH FLOWS FROM OPERATING ACTIVITIES | | |
| | |
|
Consolidated net income | | $ | 1,303 |
| | $ | 1,060 |
|
Adjustments to reconcile consolidated net income to net cash provided by operating activities | | |
| | |
|
Depreciation and amortization | | 433 |
| | 391 |
|
Deferred income taxes | | 26 |
| | 60 |
|
Equity in income of investees, net of dividends | | (166 | ) | | (94 | ) |
Pension contributions in excess of expense (Note 3) | | (63 | ) | | (92 | ) |
Other post retirement benefits payments in excess of expense (Note 3) | | (4 | ) | | (16 | ) |
Stock-based compensation expense | | 34 |
| | 28 |
|
Restructuring payments | | — |
| | (53 | ) |
Loss contingency (Note 9) | | — |
| | 138 |
|
Translation and hedging activities | | 61 |
| | (39 | ) |
Changes in current assets and liabilities, net of acquisitions | | | | |
|
Accounts and notes receivable | | (722 | ) | | (112 | ) |
Inventories | | (401 | ) | | (150 | ) |
Other current assets | | (28 | ) | | 138 |
|
Accounts payable | | 567 |
| | 101 |
|
Accrued expenses | | 369 |
| | (279 | ) |
Changes in other liabilities and deferred revenue | | 177 |
| | 188 |
|
Other, net | | (115 | ) | | 45 |
|
Net cash provided by operating activities | | 1,471 |
| | 1,314 |
|
| | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | |
| | |
|
Capital expenditures | | (282 | ) | | (312 | ) |
Investments in internal use software | | (59 | ) | | (42 | ) |
Proceeds from disposals of property, plant and equipment | | 104 |
| | 11 |
|
Investments in and advances to equity investees | | (71 | ) | | (29 | ) |
Acquisitions of businesses, net of cash acquired (Note 11) | | (600 | ) | | (1 | ) |
Investments in marketable securities—acquisitions (Note 5) | | (106 | ) | | (447 | ) |
Investments in marketable securities—liquidations (Note 5) | | 218 |
| | 291 |
|
Cash flows from derivatives not designated as hedges | | 9 |
| | (64 | ) |
Other, net | | 1 |
| | 3 |
|
Net cash used in investing activities | | (786 | ) | | (590 | ) |
| | | | |
CASH FLOWS FROM FINANCING ACTIVITIES | | |
| | |
|
Proceeds from borrowings | | 4 |
| | 111 |
|
Net borrowings of commercial paper | | 302 |
| | 273 |
|
Payments on borrowings and capital lease obligations | | (38 | ) | | (156 | ) |
Net borrowings under short-term credit agreements | | 19 |
| | 25 |
|
Distributions to noncontrolling interests | | (29 | ) | | (42 | ) |
Dividend payments on common stock | | (522 | ) | | (505 | ) |
Repurchases of common stock | | (391 | ) | | (745 | ) |
Other, net | | 55 |
| | (6 | ) |
Net cash used in financing activities | | (600 | ) | | (1,045 | ) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | | 85 |
| | (139 | ) |
Net increase (decrease) in cash and cash equivalents | | 170 |
| | (460 | ) |
Cash and cash equivalents at beginning of year | | 1,120 |
| | 1,711 |
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD | | $ | 1,290 |
| | $ | 1,251 |
|
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
In millions | Common Stock | | Additional Paid-in Capital | | Retained Earnings | | Treasury Stock | | Common Stock Held in Trust | | Accumulated Other Comprehensive Loss | | Total Cummins Inc. Shareholders’ Equity | | Noncontrolling Interests | | Total Equity |
BALANCE AT DECEMBER 31, 2015 | $ | 556 |
| | $ | 1,622 |
| | $ | 10,322 |
| | $ | (3,735 | ) | | $ | (11 | ) | | $ | (1,348 | ) | | $ | 7,406 |
| | $ | 344 |
| | $ | 7,750 |
|
Net income |
|
| |
|
| | 1,016 |
| |
|
| |
|
| |
|
| | 1,016 |
| | 44 |
| | 1,060 |
|
Other comprehensive income (loss), net of tax (Note 10) |
|
| |
|
| |
|
| |
|
| |
|
| | (284 | ) | | (284 | ) | | (3 | ) | | (287 | ) |
Issuance of common stock |
|
| | 5 |
| |
|
| |
|
| |
|
| |
|
| | 5 |
| | — |
| | 5 |
|
Employee benefits trust activity |
|
| | 19 |
| |
|
| |
|
| | 3 |
| |
|
| | 22 |
| | — |
| | 22 |
|
Repurchases of common stock |
|
| |
|
| |
|
| | (745 | ) | |
|
| |
|
| | (745 | ) | | — |
| | (745 | ) |
Cash dividends on common stock |
|
| |
|
| | (505 | ) | |
|
| |
|
| |
|
| | (505 | ) | | — |
| | (505 | ) |
Distributions to noncontrolling interests |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | — |
| | (49 | ) | | (49 | ) |
Stock based awards |
|
| | (7 | ) | |
|
| | 12 |
| |
|
| |
|
| | 5 |
| | — |
| | 5 |
|
Other shareholder transactions |
|
| | 14 |
| |
|
| |
|
| |
|
| |
|
| | 14 |
| | (6 | ) | | 8 |
|
BALANCE AT OCTOBER 2, 2016 | $ | 556 |
| | $ | 1,653 |
| | $ | 10,833 |
| | $ | (4,468 | ) | | $ | (8 | ) | | $ | (1,632 | ) | | $ | 6,934 |
| | $ | 330 |
| | $ | 7,264 |
|
| | | | | | | | | | | | | | | | | |
BALANCE AT DECEMBER 31, 2016 | $ | 556 |
| | $ | 1,597 |
| | $ | 11,040 |
| | $ | (4,489 | ) | | $ | (8 | ) | | $ | (1,821 | ) | | $ | 6,875 |
| | $ | 299 |
| | $ | 7,174 |
|
Net income |
|
| |
|
| | 1,273 |
| |
|
| |
|
| |
|
| | 1,273 |
| | 30 |
| | 1,303 |
|
Other comprehensive income (loss), net of tax (Note 10) |
|
| |
|
| |
|
| |
|
| |
|
| | 317 |
| | 317 |
| | 12 |
| | 329 |
|
Issuance of common stock |
|
| | 5 |
| |
|
| |
|
| |
|
| |
|
| | 5 |
| | — |
| | 5 |
|
Employee benefits trust activity |
|
| | 14 |
| |
|
| |
|
| | 1 |
| |
|
| | 15 |
| | — |
| | 15 |
|
Repurchases of common stock |
|
| |
|
| |
|
| | (391 | ) | |
|
| |
|
| | (391 | ) | | — |
| | (391 | ) |
Cash dividends on common stock |
|
| |
|
| | (522 | ) | |
|
| |
|
| |
|
| | (522 | ) | | — |
| | (522 | ) |
Distributions to noncontrolling interests |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | — |
| | (29 | ) | | (29 | ) |
Stock based awards |
|
| | 2 |
| |
|
| | 31 |
| |
|
| |
|
| | 33 |
| | — |
| | 33 |
|
Acquisition of business | | | | | | | | | | | | | — |
| | 600 |
| | 600 |
|
Other shareholder transactions |
|
| | 24 |
| |
|
| |
|
| |
|
| |
|
| | 24 |
| | 20 |
| | 44 |
|
BALANCE AT OCTOBER 1, 2017 | $ | 556 |
| | $ | 1,642 |
| | $ | 11,791 |
| | $ | (4,849 | ) | | $ | (7 | ) | | $ | (1,504 | ) | | $ | 7,629 |
| | $ | 932 |
| | $ | 8,561 |
|
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
CUMMINS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. NATURE OF OPERATIONS
Cummins Inc. (“Cummins,” “we,” “our” or “us”) was founded in 1919 as Cummins Engine Company, a corporation in Columbus, Indiana, as one of the first diesel engine manufacturers. We changed our name to Cummins Inc. in 2001. We are a global power leader that designs, manufactures, distributes and services diesel and natural gas engines and engine-related component products, including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems, transmissions and electric power generation systems. We sell our products to original equipment manufacturers (OEMs), distributors and other customers worldwide. We serve our customers through a network of approximately 600 wholly-owned and independent distributor locations and over 7,400 dealer locations in more than 190 countries and territories.
NOTE 2. BASIS OF PRESENTATION
Interim Condensed Financial Statements
The unaudited Condensed Consolidated Financial Statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of operations, financial position and cash flows. All such adjustments are of a normal recurring nature. The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles in the United States of America (GAAP) pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial information. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by such rules and regulations.
These interim condensed financial statements should be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2016. Our interim period financial results for the three and nine month periods presented are not necessarily indicative of results to be expected for any other interim period or for the entire year. The year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.
Reclassifications
Certain amounts for prior year periods have been reclassified to conform to the presentation of the current year.
Use of Estimates in Preparation of Financial Statements
Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts presented and disclosed in our Condensed Consolidated Financial Statements. Significant estimates and assumptions in these Condensed Consolidated Financial Statements require the exercise of judgment and are used for, but not limited to, allowance for doubtful accounts, estimates of future cash flows and other assumptions associated with goodwill and long-lived asset impairment tests, useful lives for depreciation and amortization, warranty programs, determination of discount rate and other assumptions for pension and other postretirement benefit costs, income taxes and deferred tax valuation allowances, lease classification and contingencies. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates.
Reporting Period
Our reporting period usually ends on the Sunday closest to the last day of the quarterly calendar period. The third quarters of 2017 and 2016 ended on October 1 and October 2, respectively. Our fiscal year ends on December 31, regardless of the day of the week on which December 31 falls.
Weighted-average Diluted Shares Outstanding
The weighted-average diluted common shares outstanding excludes the anti-dilutive effect of certain stock options since such options had an exercise price in excess of the monthly average market value of our common stock. The options excluded from diluted earnings per share were as follows:
|
| | | | | | | | | | | |
| Three months ended | | Nine months ended |
| October 1, 2017 | | October 2, 2016 | | October 1, 2017 | | October 2, 2016 |
Options excluded | 3,728 |
| | 936,857 |
| | 42,139 |
| | 1,295,664 |
|
NOTE 3. PENSION AND OTHER POSTRETIREMENT BENEFITS
We sponsor funded and unfunded domestic and foreign defined benefit pension and other postretirement plans. Contributions to these plans were as follows:
|
| | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
In millions | | October 1, 2017 | | October 2, 2016 | | October 1, 2017 | | October 2, 2016 |
Defined benefit pension plans | | |
| | |
| | |
| | |
|
Voluntary contribution | | $ | 41 |
| | $ | 16 |
| | $ | 125 |
| | $ | 101 |
|
Mandatory contribution | | — |
| | 5 |
| | — |
| | 23 |
|
Defined benefit pension contributions | | $ | 41 |
| | $ | 21 |
| | $ | 125 |
| | $ | 124 |
|
| | | | | | | | |
Other postretirement plans | | $ | 1 |
| | $ | 4 |
| | $ | 19 |
| | $ | 32 |
|
| | | | | | | | |
Defined contribution pension plans | | $ | 19 |
| | $ | 17 |
| | $ | 67 |
| | $ | 53 |
|
We anticipate making additional defined benefit pension contributions during the remainder of 2017 of $10 million for our U.S. and U.K. pension plans. Approximately $134 million of the estimated $135 million of pension contributions for the full year are voluntary. These contributions may be made from trusts or company funds either to increase pension assets or to make direct benefit payments to plan participants. We expect our 2017 net periodic pension cost to approximate $83 million.
The components of net periodic pension and other postretirement benefit costs under our plans were as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Pension | | | | |
| | U.S. Plans | | U.K. Plans | | Other Postretirement Benefits |
| | Three months ended |
In millions | | October 1, 2017 | | October 2, 2016 | | October 1, 2017 | | October 2, 2016 | | October 1, 2017 | | October 2, 2016 |
Service cost | | $ | 27 |
| | $ | 22 |
| | $ | 7 |
| | $ | 5 |
| | $ | — |
| | $ | — |
|
Interest cost | | 26 |
| | 26 |
| | 10 |
| | 13 |
| | 3 |
| | 4 |
|
Expected return on plan assets | | (50 | ) | | (50 | ) | | (18 | ) | | (17 | ) | | — |
| | — |
|
Recognized net actuarial loss | | 10 |
| | 9 |
| | 10 |
| | 3 |
| | 2 |
| | 1 |
|
Net periodic benefit cost | | $ | 13 |
| | $ | 7 |
| | $ | 9 |
| | $ | 4 |
| | $ | 5 |
| | $ | 5 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Pension | | | | |
| | U.S. Plans | | U.K. Plans | | Other Postretirement Benefits |
| | Nine months ended |
In millions | | October 1, 2017 | | October 2, 2016 | | October 1, 2017 | | October 2, 2016 | | October 1, 2017 | | October 2, 2016 |
Service cost | | $ | 80 |
| | $ | 68 |
| | $ | 20 |
| | $ | 16 |
| | $ | — |
| | $ | — |
|
Interest cost | | 79 |
| | 82 |
| | 30 |
| | 39 |
| | 10 |
| | 12 |
|
Expected return on plan assets | | (153 | ) | | (152 | ) | | (52 | ) | | (55 | ) | | — |
| | — |
|
Recognized net actuarial loss | | 28 |
| | 23 |
| | 30 |
| | 11 |
| | 5 |
| | 4 |
|
Net periodic benefit cost | | $ | 34 |
| | $ | 21 |
| | $ | 28 |
| | $ | 11 |
| | $ | 15 |
| | $ | 16 |
|
NOTE 4. 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 | | Nine months ended |
In millions | | October 1, 2017 | | October 2, 2016 | | October 1, 2017 | | October 2, 2016 |
Distribution entities | | | | | | | | |
Komatsu Cummins Chile, Ltda. | | $ | 8 |
| | $ | 8 |
| | $ | 23 |
| | $ | 26 |
|
North American distributors | | — |
| | 7 |
| | — |
| | 18 |
|
All other distributors | | (1 | ) | | 1 |
| | (1 | ) | | 2 |
|
Manufacturing entities | | | | | | |
| | |
|
Beijing Foton Cummins Engine Co., Ltd. | | 24 |
| | 19 |
| | 79 |
| | 59 |
|
Dongfeng Cummins Engine Company, Ltd. | | 15 |
| | 10 |
| | 56 |
| | 32 |
|
Chongqing Cummins Engine Company, Ltd. | | 11 |
| | 11 |
| | 30 |
| | 28 |
|
All other manufacturers | | 27 |
| | 8 |
| | 78 |
| | 40 |
|
Cummins share of net income | | 84 |
| | 64 |
| | 265 |
| | 205 |
|
Royalty and interest income | | 11 |
| | 10 |
| | 36 |
| | 29 |
|
Equity, royalty and interest income from investees | | $ | 95 |
| | $ | 74 |
| | $ | 301 |
| | $ | 234 |
|
NOTE 5. MARKETABLE SECURITIES
A summary of marketable securities, all of which are classified as current, was as follows: