10-QPeriod: Q2 FY2015

CUMMINS INC Quarterly Report for Q2 Ended Jun 28, 2015

Filed July 29, 2015For Securities:CMI

Summary

Cummins Inc. reported increased net sales and net income for the second quarter and first half of 2015 compared to the prior year, driven by a rebound in North American on-highway markets and the consolidation of recently acquired distributors. While international markets faced headwinds from economic uncertainty and unfavorable currency fluctuations, domestic performance bolstered overall results. Key financial indicators showed robust growth, with diluted earnings per share (EPS) rising significantly. The company also demonstrated a commitment to shareholder returns through substantial share repurchases and a planned dividend increase. Cummins maintained a strong liquidity position with ample cash reserves and access to credit facilities, underscoring its financial stability amidst global economic variations.

Financial Highlights

52 data points
Beta

Revenue

$5.01B

26.6% Gross Margin

Net Income

$471.00M

9.4% Net Margin

EPS (Diluted)

$2.62

Total Assets

$15.88B

Cash & Equivalents

$1.76B

Free Cash Flow

$249.00M

Financial Statements
Beta
Revenue$5.01B
Cost of Revenue$3.68B
Gross Profit$1.33B
R&D Expenses$166.00M
SG&A Expenses$537.00M
Operating Income$723.00M
Interest Expense$17.00M
Net Income$471.00M
EPS (Basic)$2.63
EPS (Diluted)$2.62
Shares Outstanding (Basic)179.20M
Shares Outstanding (Diluted)179.60M

Key Highlights

  • 1Net sales increased by 4% in Q2 2015 and 5% for the first half of 2015 compared to the prior year, driven by North American market strength and distributor acquisitions.
  • 2Net income attributable to Cummins Inc. grew by 6% in Q2 2015 and 9% for the first half of 2015, indicating improved profitability.
  • 3Diluted EPS increased by 8% in Q2 2015 and 12% for the first half of 2015, reflecting enhanced shareholder value.
  • 4The Distribution segment saw significant sales growth of 21% in Q2 and 36% in the first half, largely due to the consolidation of North American distributors.
  • 5The company repurchased $514 million of common stock in the first half of 2015 and planned further acquisitions of North American distributors.
  • 6Operating cash flow for the first half of 2015 was $569 million, a decrease from the prior year, largely due to working capital fluctuations.
  • 7The company announced a 25% increase in its quarterly dividend, signaling confidence in future performance and commitment to shareholders.

Frequently Asked Questions

The primary driver of the sales increase in the second quarter of 2015 was the consolidation of partially-owned North American distributors acquired since December 31, 2013, coupled with higher demand in North American on-highway markets. Unfavorable foreign currency fluctuations partially offset these gains.

For the first half of 2015, Cummins Inc. reported increased net income attributable to Cummins Inc. of $858 million, a 9% rise from $784 million in the prior year period. This improvement was driven by enhanced gross margins and lower research, development, and engineering expenses, despite higher selling, general, and administrative expenses and reduced income from investees.

The company expects continued growth in North American on-highway markets and strong light-duty demand. However, challenges include weak power generation markets, continued negative impact from economic conditions in Brazil, weak end markets in China, potential weakness in some European markets, foreign currency volatility, and deteriorating oil and gas and mining markets. The company plans to acquire more North American distributors, which is expected to boost Distribution segment sales.

Cummins maintains a strong liquidity position with $1.8 billion in cash and marketable securities as of June 28, 2015. The company has access to a $1.7 billion revolving credit facility and other credit facilities. Cash flow from operations is the primary source of liquidity, used for working capital, capital expenditures, share repurchases, dividends, acquisitions, and debt service.