01—Abstract
Summary
Summary of the 10-K filed February 13, 2017. Cited figures are marked; the original filing is the authoritative source.
Cummins Inc. (CMI) in its 2016 10-K filing reported on a challenging year marked by a decline in revenue and profitability, primarily driven by weakness in key markets such as North America and China, and a slowdown in certain industrial sectors.
Despite these headwinds, the company demonstrated resilience through strategic cost management and ongoing investments in research and development, particularly focusing on future growth areas like emissions reduction and new power technologies. The filing highlights the company's diversified business segments, including Engines, Distribution, Components, and Power Systems, each facing unique market dynamics but contributing to an overall effort to navigate a complex global economic environment. Looking ahead, Cummins emphasized its commitment to innovation and adapting to evolving customer needs and regulatory landscapes.
The company's strategic priorities include strengthening its core businesses, expanding into new markets, and investing in advanced technologies to maintain its competitive edge. Investors should note the company's focus on operational efficiency and its continued efforts to manage inventory and supply chain challenges. While the near-term outlook presented some uncertainties, Cummins' long-term strategy remained centered on leveraging its strong brand, global presence, and technological capabilities to drive sustainable growth.
02—Key points
Key Highlights
- Revenue decline in 2016 compared to 2015, attributed to challenging market conditions, particularly in North America and China, and a slowdown in industrial sectors.
- Operating income and net income also decreased, reflecting the revenue shortfall and ongoing investments.
- The company operates through four main segments: Engine, Distribution, Components, and Power Systems, each with its own market drivers and performance.
- Continued significant investment in Research and Development (R&D) to drive future growth and adapt to evolving emissions standards and new technologies.
- Focus on cost management and operational efficiency to mitigate the impact of lower sales volumes.
- Acknowledged challenges in certain end markets but highlighted resilience and strategic positioning for future recovery and growth.
- Management discussed strategies to navigate global economic uncertainties and evolving regulatory environments.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Cummins Inc kept $0.08.
- Revenue$17.51B100.0%
- Cost of revenue−$13.05B74.5%
- Gross profit$4.46B25.5%
- Operating costs−$2.58B14.7%
- Operating income$1.88B10.7%
- Interest, other & tax−$486.0M2.8%
- Net income$1.39B8.0%
Where FY2016 revenue went
$17.51B- Cost of revenue: $13.05B, 75% of revenue
- Net income: $1.39B, 8.0% of revenue
- R&D: $637.0M, 3.6% of revenue
- SG&A: $2.10B, 12% of revenue
- Interest, other & tax: $486.0M, 2.8% of revenue
Kept 8.0% as net incomeNet income $1.39B · 8.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 13, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $17.51B$19.11B | −8.4% |
| Cost of Revenue | $13.05B$14.16B | −7.9% |
| Gross Profit | $4.46B$4.95B | −9.9% |
| R&D Expenses | $637.00M$735.00M | −13.3% |
| SG&A Expenses | $2.10B$2.09B | +0.3% |
| Operating Income | $1.88B$2.06B | −8.6% |
| Interest Expense | $69.00M$65.00M | +6.2% |
| Net Income | $1.39B$1.40B | −0.4% |
| EPS (Basic) | $8.25$7.86 | +5.0% |
| EPS (Diluted) | $8.23$7.84 | +5.0% |
| Shares Outstanding (Basic) | 169.04M178.04M | −5.1% |
| Shares Outstanding (Diluted) | 169.34M178.41M | −5.1% |
05—Questions
Frequently Asked Questions
What were the main reasons for the decline in Cummins' revenue in 2016?
Cummins reported a decline in revenue for 2016 primarily due to challenging market conditions, particularly a slowdown in North America and China, and a general weakening in several industrial sectors. These factors impacted demand for the company's products across its various operating segments.
How did Cummins address the decline in sales and profitability?
The company focused on strategic cost management and improving operational efficiency to mitigate the impact of lower sales volumes. They also continued to invest in Research and Development to support long-term growth and innovation.
What are Cummins' key business segments, and how did they perform?
Cummins operates through four primary segments: Engine, Distribution, Components, and Power Systems. While the filing doesn't provide detailed segment performance figures in this excerpt, it indicates that these segments faced varied market dynamics, contributing to the overall financial results.
What is Cummins' outlook for future growth?
Cummins is strategically focused on innovation, investing in new technologies and emissions reduction solutions to adapt to evolving customer needs and regulatory requirements. The company aims to leverage its global presence and technological capabilities for sustainable long-term growth, while navigating current market uncertainties.
06—Continue