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SEC Filings, Earing Reports, Press Releases
Cummins Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 2, 2012 04:36PM
Cummins Inc. (CMI) filed Quarterly Report for the period ended 2012-04-01.
Highlight of Business Operations:The weighted-average diluted common shares outstanding exclude 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 for the three month periods ended April 1, 2012, and March 27, 2011, were as follows:
As a result of our international business presence, we are exposed to foreign currency exchange risks. We transact business in foreign currencies and, as a result, our income experiences some volatility related to movements in foreign currency exchange rates. To help manage our exposure to exchange rate volatility, we use foreign exchange forward contracts on a regular basis to hedge forecasted intercompany and third-party sales and purchases denominated in non-functional currencies. Our internal policy allows for managing anticipated foreign currency cash flows for up to one year. These foreign currency forward contracts are designated and qualify as foreign currency cash flow hedges under GAAP. The effective portion of the unrealized gain or loss on the forward contract is deferred and reported as a component of Accumulated other comprehensive loss (AOCL). When the hedged forecasted transaction (sale or purchase) occurs, the unrealized gain or loss is reclassified into income in the same line item associated with the hedged transaction in the same period or periods during which the hedged transaction affects income. The ineffective portion of the hedge, unrealized gain or loss, if any, is recognized in current income during the period of change. As of April 1, 2012, the amount we expect to reclassify from AOCL to income over the next year is an unrealized net loss of $1 million. For the three month periods ended April 1, 2012 and March 27, 2011, there were no circumstances that would have resulted in the discontinuance of a foreign currency cash flow hedge.
Net income attributable to Cummins was $455 million, or $2.38 per diluted share, on sales of $4.5 billion for the three month period ended April 1, 2012, versus the comparable prior year period with net income attributable to Cummins of $343 million, or $1.75 per diluted share, on sales of $3.9 billion. The increase in income was driven by higher sales volumes in many markets and geographic regions, improved gross margins, a lower effective tax rate and slightly higher equity income, partially offset by higher selling, general and administrative expenses and research, development and engineering expenses.
Gross margin increased by $241 million for the three month period ended April 1, 2012, versus the comparable period in 2011, and increased as a percentage of sales by 2.0 percentage points. The increase for the three months ended April 1, 2012, was led by increases in volume, favorable product mix and increased pricing.
The provision for warranties issued as a percent of sales for the three month period ended April 1, 2012, was 2.4 percent in 2012 compared to 2.7 percent for the comparable period in 2011. Accrual rates for engines sold this quarter were generally lower than rates charged in prior quarters as our warranty costs for EPA 2010 products have been lower than expected. A more detailed discussion of margin by segment is presented in the OPERATING SEGMENT RESULTS section.