01—Abstract
Summary
Summary of the 10-K filed February 14, 2018. Cited figures are marked; the original filing is the authoritative source.
Cummins Inc. reported strong revenue growth of 17% in 2017, reaching $20.4 billiona, driven by broad-based demand across its four operating segments: Engine, Distribution, Components, and Power Systems.
The company's performance was bolstered by improved North American on-highway markets and robust international demand, particularly in China and India, supported by new emission regulations. Despite revenue growth, net income attributable to Cummins Inc. declined by 28% to $999 millionb, largely due to a significant $777 million charge related to the U.S. Tax Cuts and Jobs Act of 2017. Excluding this one-time tax impact, adjusted net income and earnings per share showed a more favorable picture, indicating underlying operational strength.
02—Key points
Key Highlights
- Net sales increased by 17% to $20.4 billion in 2017, driven by strong demand across all operating segments.
- The company experienced significant growth in North American on-highway markets and key international markets like China and India.
- Net income attributable to Cummins Inc. was impacted by a $777 million charge related to the 2017 U.S. Tax Cuts and Jobs Act.
- Research, Development, and Engineering (R,D&E) expenses increased by 18% to $752 million, reflecting ongoing investment in future technologies and emission standards compliance.
- Cummins formed a 50/50 joint venture with Eaton Corporation for automated transmissions (ECJV) in July 2017, consolidating it into the Components segment.
- The company repurchased $451 million of its common stock in 2017, continuing its commitment to enhancing shareholder value.
- The company's 2017 outlook projected continued demand improvement or strength in most key markets, with challenges noted in China's truck market.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Cummins Inc kept $0.05.
- Revenue$20.43B100.0%
- Cost of revenue−$15.33B75.0%
- Gross profit$5.10B25.0%
- Operating costs−$2.77B13.5%
- Operating income$2.33B11.4%
- Interest, other & tax−$1.33B6.5%
- Net income$999.0M4.9%
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 14, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $20.43B$17.51B | +16.7% |
| Cost of Revenue | $15.33B$13.05B | +17.4% |
| Gross Profit | $5.10B$4.46B | +14.4% |
| R&D Expenses | $754.00M$637.00M | +18.4% |
| SG&A Expenses | $2.43B$2.10B | +15.7% |
| Operating Income | $2.33B$1.88B | +24.1% |
| Interest Expense | $81.00M$69.00M | +17.4% |
| Net Income | $999.00M$1.39B | −28.3% |
| EPS (Basic) | $5.99$8.25 | −27.4% |
| EPS (Diluted) | $5.97$8.23 | −27.5% |
| Shares Outstanding (Basic) | 166.70M169.04M | −1.4% |
| Shares Outstanding (Diluted) | 167.30M169.34M | −1.2% |
05—Questions
Frequently Asked Questions
What was the primary driver for the significant decrease in net income in 2017?
The primary driver for the significant decrease in net income in 2017 was a one-time tax adjustment of $777 million related to the U.S. Tax Cuts and Jobs Act of 2017. This legislation impacted deferred taxes, the transition tax on unrepatriated earnings, and withholding taxes on foreign earnings.
How did the company's operating segments perform in 2017?
All four operating segments saw revenue growth. The Engine segment increased sales by 15%, Distribution by 14%, Components by 22%, and Power Systems by 15%. This growth was driven by improved market demand in North America and key international regions.
What is the company's outlook for 2018 based on this filing?
The company's outlook for 2018 was positive, expecting demand to improve or remain strong in many of its important markets, including North American heavy-duty and medium-duty truck demand and global mining and construction markets. However, a decline in China's truck market was anticipated as a challenge.
What significant investments or strategic moves did Cummins make in 2017?
In 2017, Cummins formed the Eaton Cummins Automated Transmission Technologies (ECJV) joint venture for $600 million, consolidating it into its Components segment. Additionally, the company acquired Brammo Inc., a battery designer, for $68 million, signaling a move into electrification.
06—Continue