2018 Q2 Form 10-Q Financial Statement

#000002617218000019 Filed on May 01, 2018

View on sec.gov

Income Statement

Concept 2018 Q2 2017 Q2
Revenue $5.570B $4.589B
YoY Change 21.38% 6.94%
Cost Of Revenue $4.370B $3.457B
YoY Change 26.41% 6.86%
Gross Profit $1.200B $1.132B
YoY Change 6.01% 7.2%
Gross Profit Margin 21.54% 24.67%
Selling, General & Admin $577.0M $547.0M
YoY Change 5.48% 11.63%
% of Gross Profit 48.08% 48.32%
Research & Development $210.0M $158.0M
YoY Change 32.91% -4.82%
% of Gross Profit 17.5% 13.96%
Depreciation & Amortization $154.0M $139.0M
YoY Change 10.79% 8.59%
% of Gross Profit 12.83% 12.28%
Operating Expenses $787.0M $705.0M
YoY Change 11.63% 7.47%
Operating Profit $530.0M $540.0M
YoY Change -1.85% 14.89%
Interest Expense $24.00M $18.00M
YoY Change 33.33% -5.26%
% of Operating Profit 4.53% 3.33%
Other Income/Expense, Net $10.00M $24.00M
YoY Change -58.33% 200.0%
Pretax Income $523.0M $548.0M
YoY Change -4.56% 17.85%
Income Tax $198.0M $143.0M
% Of Pretax Income 37.86% 26.09%
Net Earnings $325.0M $405.0M
YoY Change -19.75% 21.62%
Net Earnings / Revenue 5.83% 8.83%
Basic Earnings Per Share $1.97 $2.36
Diluted Earnings Per Share $1.96 $2.36
COMMON SHARES
Basic Shares Outstanding 164.9M shares 167.5M shares
Diluted Shares Outstanding 165.7M shares 168.0M shares

Balance Sheet

Concept 2018 Q2 2017 Q2
SHORT-TERM ASSETS
Cash & Short-Term Investments $1.387B $1.467B
YoY Change -5.45% 15.15%
Cash & Equivalents $1.207B $1.322B
Short-Term Investments $180.0M $145.0M
Other Short-Term Assets $558.0M $551.0M
YoY Change 1.27% 7.2%
Inventory $3.411B $2.894B
Prepaid Expenses
Receivables $3.845B $3.247B
Other Receivables $0.00 $0.00
Total Short-Term Assets $9.201B $8.159B
YoY Change 12.77% 9.25%
LONG-TERM ASSETS
Property, Plant & Equipment $3.892B $3.802B
YoY Change 2.37% 2.42%
Goodwill $1.085B $482.0M
YoY Change 125.1% -0.62%
Intangibles $960.0M $345.0M
YoY Change 178.26% 0.29%
Long-Term Investments $1.288B $1.059B
YoY Change 21.62% 0.57%
Other Assets $908.0M $1.002B
YoY Change -9.38% 0.0%
Total Long-Term Assets $9.191B $7.475B
YoY Change 22.96% 1.58%
TOTAL ASSETS
Total Short-Term Assets $9.201B $8.159B
Total Long-Term Assets $9.191B $7.475B
Total Assets $18.39B $15.63B
YoY Change 17.64% 5.44%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $2.854B $2.168B
YoY Change 31.64% 19.85%
Accrued Expenses $1.783B $1.627B
YoY Change 9.59% 10.91%
Deferred Revenue
YoY Change
Short-Term Debt $649.0M $322.0M
YoY Change 101.55% 92.81%
Long-Term Debt Due $57.00M $47.00M
YoY Change 21.28% -4.08%
Total Short-Term Liabilities $5.832B $4.662B
YoY Change 25.1% 19.02%
LONG-TERM LIABILITIES
Long-Term Debt $1.571B $1.576B
YoY Change -0.32% -2.35%
Other Long-Term Liabilities $2.693B $1.920B
YoY Change 40.26% -5.7%
Total Long-Term Liabilities $4.264B $3.496B
YoY Change 21.97% -4.22%
TOTAL LIABILITIES
Total Short-Term Liabilities $5.832B $4.662B
Total Long-Term Liabilities $4.264B $3.496B
Total Liabilities $10.10B $8.158B
YoY Change 23.76% 7.81%
SHAREHOLDERS EQUITY
Retained Earnings $11.64B $11.27B
YoY Change 3.34% 7.56%
Common Stock $2.163B
YoY Change 4.19%
Preferred Stock
YoY Change
Treasury Stock (at cost) $5.061B $4.524B
YoY Change 11.87% 7.64%
Treasury Stock Shares 57.60M shares 54.40M shares
Shareholders Equity $7.394B $7.165B
YoY Change
Total Liabilities & Shareholders Equity $18.39B $15.63B
YoY Change 17.64% 5.44%

Cashflow Statement

Concept 2018 Q2 2017 Q2
OPERATING ACTIVITIES
Net Income $325.0M $405.0M
YoY Change -19.75% 21.62%
Depreciation, Depletion And Amortization $154.0M $139.0M
YoY Change 10.79% 8.59%
Cash From Operating Activities -$117.0M $379.0M
YoY Change -130.87% 41.95%
INVESTING ACTIVITIES
Capital Expenditures $72.00M $81.00M
YoY Change -11.11% 14.08%
Acquisitions
YoY Change
Other Investing Activities -$25.00M -$4.000M
YoY Change 525.0% 33.33%
Cash From Investing Activities -$36.00M -$27.00M
YoY Change 33.33% -93.04%
FINANCING ACTIVITIES
Cash Dividend Paid $178.0M $171.0M
YoY Change 4.09% 0.59%
Common Stock Issuance & Retirement, Net $163.0M $51.00M
YoY Change 219.61% -91.13%
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -52.00M -164.0M
YoY Change -68.29% -74.21%
NET CHANGE
Cash From Operating Activities -$117.0M 379.0M
Cash From Investing Activities -36.00M -27.00M
Cash From Financing Activities -52.00M -164.0M
Net Change In Cash -$117.0M 188.0M
YoY Change -162.23% -124.83%
FREE CASH FLOW
Cash From Operating Activities -$117.0M $379.0M
Capital Expenditures $72.00M $81.00M
Free Cash Flow -$189.0M $298.0M
YoY Change -163.42% 52.04%

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IncreaseDecreaseInAccountsAndNotesReceivable
205000000 USD
CY2018Q2 us-gaap Increase Decrease In Inventories
IncreaseDecreaseInInventories
259000000 USD
CY2017Q2 us-gaap Increase Decrease In Inventories
IncreaseDecreaseInInventories
202000000 USD
CY2018Q2 us-gaap Increase Decrease In Other Operating Assets
IncreaseDecreaseInOtherOperatingAssets
-56000000 USD
CY2017Q2 us-gaap Increase Decrease In Other Operating Assets
IncreaseDecreaseInOtherOperatingAssets
-73000000 USD
CY2018Q2 us-gaap Increase Decrease In Accounts Payable
IncreaseDecreaseInAccountsPayable
246000000 USD
CY2017Q2 us-gaap Increase Decrease In Accounts Payable
IncreaseDecreaseInAccountsPayable
296000000 USD
CY2018Q2 us-gaap Increase Decrease In Accrued Liabilities
IncreaseDecreaseInAccruedLiabilities
-272000000 USD
CY2017Q2 us-gaap Increase Decrease In Accrued Liabilities
IncreaseDecreaseInAccruedLiabilities
-90000000 USD
CY2018Q2 us-gaap Increase Decrease In Other Noncurrent Assets And Liabilities Net
IncreaseDecreaseInOtherNoncurrentAssetsAndLiabilitiesNet
-27000000 USD
CY2017Q2 us-gaap Increase Decrease In Other Noncurrent Assets And Liabilities Net
IncreaseDecreaseInOtherNoncurrentAssetsAndLiabilitiesNet
-48000000 USD
CY2018Q2 us-gaap Other Noncash Income Expense
OtherNoncashIncomeExpense
45000000 USD
CY2017Q2 us-gaap Other Noncash Income Expense
OtherNoncashIncomeExpense
-3000000 USD
CY2018Q2 us-gaap Net Cash Provided By Used In Operating Activities Continuing Operations
NetCashProvidedByUsedInOperatingActivitiesContinuingOperations
-117000000 USD
CY2017Q2 us-gaap Net Cash Provided By Used In Operating Activities Continuing Operations
NetCashProvidedByUsedInOperatingActivitiesContinuingOperations
379000000 USD
CY2018Q2 us-gaap Payments To Acquire Property Plant And Equipment
PaymentsToAcquirePropertyPlantAndEquipment
72000000 USD
CY2017Q2 us-gaap Payments To Acquire Property Plant And Equipment
PaymentsToAcquirePropertyPlantAndEquipment
81000000 USD
CY2018Q2 us-gaap Payments To Develop Software
PaymentsToDevelopSoftware
15000000 USD
CY2017Q2 us-gaap Payments To Develop Software
PaymentsToDevelopSoftware
27000000 USD
CY2018Q2 us-gaap Payments To Acquire Equity Method Investments
PaymentsToAcquireEquityMethodInvestments
16000000 USD
CY2017Q2 us-gaap Payments To Acquire Equity Method Investments
PaymentsToAcquireEquityMethodInvestments
20000000 USD
CY2018Q2 us-gaap Payments To Acquire Marketable Securities
PaymentsToAcquireMarketableSecurities
67000000 USD
CY2017Q2 us-gaap Payments To Acquire Marketable Securities
PaymentsToAcquireMarketableSecurities
26000000 USD
CY2018Q2 us-gaap Proceeds From Sale And Maturity Of Marketable Securities
ProceedsFromSaleAndMaturityOfMarketableSecurities
82000000 USD
CY2017Q2 us-gaap Proceeds From Sale And Maturity Of Marketable Securities
ProceedsFromSaleAndMaturityOfMarketableSecurities
147000000 USD
CY2018Q2 us-gaap Payments For Proceeds From Derivative Instrument Investing Activities
PaymentsForProceedsFromDerivativeInstrumentInvestingActivities
-27000000 USD
CY2017Q2 us-gaap Payments For Proceeds From Derivative Instrument Investing Activities
PaymentsForProceedsFromDerivativeInstrumentInvestingActivities
24000000 USD
CY2018Q2 us-gaap Payments For Proceeds From Other Investing Activities
PaymentsForProceedsFromOtherInvestingActivities
-25000000 USD
CY2017Q2 us-gaap Payments For Proceeds From Other Investing Activities
PaymentsForProceedsFromOtherInvestingActivities
-4000000 USD
CY2018Q2 us-gaap Net Cash Provided By Used In Investing Activities Continuing Operations
NetCashProvidedByUsedInInvestingActivitiesContinuingOperations
-36000000 USD
CY2017Q2 us-gaap Net Cash Provided By Used In Investing Activities Continuing Operations
NetCashProvidedByUsedInInvestingActivitiesContinuingOperations
-27000000 USD
CY2018Q2 us-gaap Proceeds From Repayments Of Commercial Paper
ProceedsFromRepaymentsOfCommercialPaper
295000000 USD
CY2017Q2 us-gaap Proceeds From Repayments Of Commercial Paper
ProceedsFromRepaymentsOfCommercialPaper
62000000 USD
CY2018Q2 us-gaap Repayments Of Long Term Debt And Capital Securities
RepaymentsOfLongTermDebtAndCapitalSecurities
16000000 USD
CY2017Q2 us-gaap Repayments Of Long Term Debt And Capital Securities
RepaymentsOfLongTermDebtAndCapitalSecurities
11000000 USD
CY2018Q2 us-gaap Payments To Minority Shareholders
PaymentsToMinorityShareholders
11000000 USD
CY2018Q2 us-gaap Payments Of Dividends
PaymentsOfDividends
178000000 USD
CY2017Q2 us-gaap Payments To Minority Shareholders
PaymentsToMinorityShareholders
10000000 USD
CY2017Q2 us-gaap Payments Of Dividends
PaymentsOfDividends
171000000 USD
CY2018Q2 us-gaap Payments For Repurchase Of Common Stock
PaymentsForRepurchaseOfCommonStock
163000000 USD
CY2017Q2 us-gaap Payments For Repurchase Of Common Stock
PaymentsForRepurchaseOfCommonStock
51000000 USD
CY2018Q2 us-gaap Proceeds From Payments For Other Financing Activities
ProceedsFromPaymentsForOtherFinancingActivities
21000000 USD
CY2017Q2 us-gaap Proceeds From Payments For Other Financing Activities
ProceedsFromPaymentsForOtherFinancingActivities
17000000 USD
CY2018Q2 us-gaap Net Cash Provided By Used In Financing Activities Continuing Operations
NetCashProvidedByUsedInFinancingActivitiesContinuingOperations
-52000000 USD
CY2017Q2 us-gaap Net Cash Provided By Used In Financing Activities Continuing Operations
NetCashProvidedByUsedInFinancingActivitiesContinuingOperations
-164000000 USD
CY2018Q2 us-gaap Effect Of Exchange Rate On Cash And Cash Equivalents
EffectOfExchangeRateOnCashAndCashEquivalents
43000000 USD
CY2017Q2 us-gaap Effect Of Exchange Rate On Cash And Cash Equivalents
EffectOfExchangeRateOnCashAndCashEquivalents
14000000 USD
CY2018Q2 us-gaap Cash And Cash Equivalents Period Increase Decrease
CashAndCashEquivalentsPeriodIncreaseDecrease
-162000000 USD
CY2017Q2 us-gaap Cash And Cash Equivalents Period Increase Decrease
CashAndCashEquivalentsPeriodIncreaseDecrease
202000000 USD
CY2017Q4 us-gaap Cash And Cash Equivalents At Carrying Value
CashAndCashEquivalentsAtCarryingValue
1369000000 USD
CY2016Q4 us-gaap Cash And Cash Equivalents At Carrying Value
CashAndCashEquivalentsAtCarryingValue
1120000000 USD
CY2018Q2 us-gaap Cash And Cash Equivalents At Carrying Value
CashAndCashEquivalentsAtCarryingValue
1207000000 USD
CY2017Q2 us-gaap Cash And Cash Equivalents At Carrying Value
CashAndCashEquivalentsAtCarryingValue
1322000000 USD
CY2016Q4 us-gaap Stockholders Equity Including Portion Attributable To Noncontrolling Interest
StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
7174000000 USD
CY2017Q2 us-gaap Profit Loss
ProfitLoss
405000000 USD
CY2017Q2 us-gaap Other Comprehensive Income Loss Net Of Tax
OtherComprehensiveIncomeLossNetOfTax
102000000 USD
CY2017Q2 us-gaap Stock Issued During Period Value Treasury Stock Reissued
StockIssuedDuringPeriodValueTreasuryStockReissued
10000000 USD
CY2017Q2 us-gaap Treasury Stock Value Acquired Cost Method
TreasuryStockValueAcquiredCostMethod
51000000 USD
CY2017Q2 us-gaap Dividends Common Stock Cash
DividendsCommonStockCash
171000000 USD
CY2017Q2 us-gaap Minority Interest Decrease From Distributions To Noncontrolling Interest Holders
MinorityInterestDecreaseFromDistributionsToNoncontrollingInterestHolders
10000000 USD
CY2017Q2 us-gaap Stock Issued During Period Value Share Based Compensation
StockIssuedDuringPeriodValueShareBasedCompensation
15000000 USD
CY2017Q2 us-gaap Stockholders Equity Other
StockholdersEquityOther
-2000000 USD
CY2017Q2 us-gaap Stockholders Equity Including Portion Attributable To Noncontrolling Interest
StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
7476000000 USD
CY2017Q4 us-gaap Stockholders Equity Including Portion Attributable To Noncontrolling Interest
StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
8164000000 USD
CY2018Q2 us-gaap New Accounting Pronouncement Or Change In Accounting Principle Effect Of Adoption Quantification
NewAccountingPronouncementOrChangeInAccountingPrincipleEffectOfAdoptionQuantification
30000000 USD
CY2018Q2 us-gaap Profit Loss
ProfitLoss
325000000 USD
CY2018Q2 us-gaap Other Comprehensive Income Loss Net Of Tax
OtherComprehensiveIncomeLossNetOfTax
99000000 USD
CY2018Q2 us-gaap Stock Issued During Period Value New Issues
StockIssuedDuringPeriodValueNewIssues
3000000 USD
CY2018Q2 us-gaap Stock Issued During Period Value Treasury Stock Reissued
StockIssuedDuringPeriodValueTreasuryStockReissued
7000000 USD
CY2018Q2 us-gaap Treasury Stock Value Acquired Cost Method
TreasuryStockValueAcquiredCostMethod
163000000 USD
CY2018Q2 us-gaap Dividends Common Stock Cash
DividendsCommonStockCash
178000000 USD
CY2018Q2 us-gaap Minority Interest Decrease From Distributions To Noncontrolling Interest Holders
MinorityInterestDecreaseFromDistributionsToNoncontrollingInterestHolders
11000000 USD
CY2018Q2 us-gaap Stock Issued During Period Value Share Based Compensation
StockIssuedDuringPeriodValueShareBasedCompensation
3000000 USD
CY2018Q2 us-gaap Stockholders Equity Other
StockholdersEquityOther
-17000000 USD
CY2018Q2 us-gaap Stockholders Equity Including Portion Attributable To Noncontrolling Interest
StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
8296000000 USD
CY2018Q2 us-gaap Nature Of Operations
NatureOfOperations
<span style="font-family:inherit;font-size:10pt;font-weight:bold;">NOTE 1. NATURE OF OPERATIONS</span><span style="font-family:inherit;font-size:10pt;">Cummins Inc. (“Cummins,” “we,” “our” or “us”) was founded in 1919 as Cummins Engine Company, a corporation in Columbus, Indiana, and one of the first diesel engine manufacturers. In 2001, we changed our name to Cummins Inc. </span><span style="font-family:inherit;font-size:10pt;">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, electric power generation systems, batteries and electrified power systems. We sell our products to original equipment manufacturers (OEMs), distributors and other customers worldwide.</span><span style="font-family:inherit;font-size:10pt;"> </span><span style="font-family:inherit;font-size:10pt;">We serve our customers through a network of approximately</span><span style="font-family:inherit;font-size:10pt;"> </span><span style="font-family:inherit;font-size:10pt;"><span>500</span></span><span style="font-family:inherit;font-size:10pt;"> wholly-owned and independent distributor locations and over</span><span style="font-family:inherit;font-size:10pt;"> </span><span style="font-family:inherit;font-size:10pt;"><span>7,500</span></span><span style="font-family:inherit;font-size:10pt;"> </span><span style="font-family:inherit;font-size:10pt;">dealer locations in more than </span><span style="font-family:inherit;font-size:10pt;"><span>190</span></span><span style="font-family:inherit;font-size:10pt;"> countries and territories.</span>
CY2018Q2 cmi Company Owned And Independent Distributor Locations Number
CompanyOwnedAndIndependentDistributorLocationsNumber
500 location
CY2018Q2 cmi Dealer Locations Number
DealerLocationsNumber
7500 location
CY2018Q2 cmi Countries And Territories Number
CountriesAndTerritoriesNumber
190 country
CY2018Q2 us-gaap Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount
AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount
6867 shares
CY2017Q2 us-gaap Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount
AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount
116535 shares
CY2018Q2 us-gaap Revenue Recognition Sales Of Goods
RevenueRecognitionSalesOfGoods
<span style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Revenue Recognition Sales of Products</span><span style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;"> </span><div style="line-height:120%;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;"><br/></span></div><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;">We sell to customers either through long-term arrangements or standalone purchase orders. Our long-term arrangements generally do not include committed volumes until underlying purchase orders are issued. Our performance obligations vary by contract, but may include diesel and natural gas engines and engine-related component products, including filtration, aftertreatment, turbochargers, fuel systems, transmissions, controls systems, air handling systems, and electric power generation systems, batteries, parts, maintenance services, and extended coverage.</span><span style="font-family:inherit;font-size:10pt;"> </span></div><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;"><br/></span></div><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;">Typically, we recognize revenue on the products we sell at a point in time, generally in accordance with shipping terms, which reflects the transfer of control to the customer. Since control of construction projects transfer to the customer as the work is performed, revenue on these projects is recognized based on the percentage of inputs incurred to date compared to the total expected cost of inputs, which is reflective of the value transferred to the customer. Revenue is recognized under long-term </span></div><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;">maintenance and other service agreements over the term of the agreement as underlying services are performed based on the percentage of the cost of services provided to date compared to the total expected cost of services to be provided under the contract. Sales of extended coverage are recognized based on the pattern of expected costs over the extended coverage period or, if such a pattern is unknown, on a straight-line basis over the coverage period as the customer is considered to benefit from our stand ready obligation over the coverage period. In all cases, we believe cost incurred is the most representative depiction of the extent of service performed to date on a particular contract.</span><span style="font-family:inherit;font-size:10pt;"> </span></div><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;"><br/></span></div><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;">Our arrangements may include the act of shipping products to our customers after the performance obligation related to that product has been satisfied. We have elected to account for shipping and handling as activities to fulfill the promise to transfer goods and have not allocated revenue to the shipping activity. All related shipping and handling costs are accrued at the time of shipment.</span><span style="font-family:inherit;font-size:10pt;"> </span></div><div style="line-height:120%;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;"><br/></span></div><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;">Our sales arrangements may include the collection of sales and other similar taxes that are then remitted to the related taxing authority. We have elected to present the amounts collected for these taxes net of the related tax expense rather than presenting them as additional revenue.</span><span style="font-family:inherit;font-size:10pt;"> </span></div><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;"><br/></span></div><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;">We grant credit limits and terms to customers based upon traditional practices and competitive conditions. Typical terms vary by market, but payments are generally due in 90 days or less from invoicing for most of our product and service sales, while payments on construction and other similar arrangements may be due on an installment basis.</span><span style="font-family:inherit;font-size:10pt;"> </span></div><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;"><br/></span></div><span style="font-family:inherit;font-size:10pt;">For contracts where the time between cash collection and performance is less than one year, we have elected to use the practical expedient that allows us to ignore the possible existence of a significant financing component within the contract. For contracts where this time period exceeds one year, generally the timing difference is the result of business concerns other than financing. We do have a limited amount of customer financing for which we charge or impute interest, but such amounts are immaterial to our </span>Condensed Consolidated Statements of Income.
CY2018Q2 us-gaap Revenue Recognition Incentives
RevenueRecognitionIncentives
<span style="font-style:italic;font-weight:bold;">Sales Incentives</span><span style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;"> </span><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;"><br/></span></div><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;">We provide various sales incentives to both our distribution network and OEM customers. These programs are designed to promote the sale of our products in the channel or encourage the usage of our products by OEM customers. When there is uncertainty surrounding these sales incentives, we may limit the amount of revenue we recognize under a contract until the uncertainty has been resolved. Sales incentives primarily fall into three categories:</span><span style="font-family:inherit;font-size:10pt;"> </span></div><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;"><br/></span></div><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;"/><td/></tr><tr><td style="vertical-align:top"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><span style="font-family:inherit;font-size:10pt;">•</span></div></td><td style="vertical-align:top;"><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;">Volume rebates;</span></div></td></tr></table><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;"/><td/></tr><tr><td style="vertical-align:top"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><span style="font-family:inherit;font-size:10pt;">•</span></div></td><td style="vertical-align:top;"><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;">Market share rebates; and</span></div></td></tr></table><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;"/><td/></tr><tr><td style="vertical-align:top"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><span style="font-family:inherit;font-size:10pt;">•</span></div></td><td style="vertical-align:top;"><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;">Aftermarket rebates.</span></div></td></tr></table><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;"><br/></span></div><span style="font-family:inherit;font-size:10pt;">For volume rebates, we provide certain customers with rebate opportunities for attaining specified volumes during a particular quarter or year. We consider the expected amount of these rebates at the time of the original sale as we determine the overall transaction price. We update our assessment of the amount of rebates that will be earned quarterly based on our best estimate of the volume levels the customer will reach during the measurement period. For market share rebates, we provide certain customers with rebate opportunities based on the percentage of their production that utilizes our product. These rebates are typically measured either quarterly or annually and we assess them at least quarterly to determine our current estimates of amounts expected to be earned. These estimates are considered in the determination of transaction price at the time of the original sale based on the current market shares, with adjustments made as the level changes. For aftermarket rebates, we provide incentives to promote sales to certain dealers and end-markets. These rebates are typically paid on a quarterly, or more frequent, basis and estimates are made at the end of each quarter as to the amount yet to be paid. These estimates are based on historical experience with the particular program. </span>
CY2018Q2 us-gaap Revenue Recognition Sales Returns
RevenueRecognitionSalesReturns
<span style="font-style:italic;font-weight:bold;">Sales Returns</span><span style="font-family:inherit;font-size:10pt;font-weight:bold;"> </span><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;"><br/></span></div><span style="font-family:inherit;font-size:10pt;">The initial determination of the transaction price may also be impacted by expected product returns. Rights of return do not exist for the majority of our sales, other than for quality issues. We do offer certain return rights in our aftermarket business, where some aftermarket customers are permitted to return small amounts of parts and filters each year, and in our power generation business, which sells portable generators to retail customers. An estimate of future returns is accounted for at the time of sale as a reduction in the overall contract transaction price based on historical return rates.</span>
CY2018Q2 us-gaap Revenue Recognition Multiple Element Arrangements
RevenueRecognitionMultipleElementArrangements
<span style="font-style:italic;font-weight:bold;">Multiple Performance Obligations</span><span style="font-family:inherit;font-size:10pt;font-weight:bold;"> </span><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;"><br/></span></div><span style="font-family:inherit;font-size:10pt;">Our sales arrangements may include multiple performance obligations. We identify each of the material performance obligations in these arrangements and allocate the total transaction price to each performance obligation based on its relative selling price. In most cases, the individual performance obligations are also sold separately and we use that price as the basis for allocating revenue to the included performance obligations. When an arrangement includes multiple performance obligations and invoicing to the customer does not match the allocated portion of the transaction price, unbilled revenue or deferred revenue is recorded reflecting that difference. Unbilled and deferred revenue are discussed in more detail below.</span>
CY2018Q2 us-gaap Revenue Recognition Long Term Contracts
RevenueRecognitionLongTermContracts
<span style="font-style:italic;font-weight:bold;">Long-term Contracts</span><span style="font-family:inherit;font-size:10pt;font-weight:bold;"> </span><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;"><br/></span></div><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;">Our long-term maintenance agreements often include a variable amount of transaction price. We are generally compensated under such arrangements on a cost per hour of usage basis. We typically can estimate the expected usage over the life of the contract, but reassess the transaction price each quarter and adjust our recognized revenue accordingly. Certain maintenance agreements apply to generators used to provide standby power, which have limited expectations of usage. These agreements may include monthly minimum payments, providing some certainty to the total transaction price. For these particular contracts that relate to standby power, we limit revenue recognized to date to an amount representing the total minimums earned to date under the contract plus any cumulative billings earned in excess of the minimums. We reassess the estimates of progress and transaction price on a quarterly basis. For prime power arrangements, revenue is not subject to such a constraint and is generally equal to the current estimate on a percentage of completion basis times the total expected revenue under the contract.</span></div><div style="line-height:120%;text-align:left;font-size:10pt;"><span style="font-family:inherit;font-size:10pt;"><br/></span></div><span style="font-family:inherit;font-size:10pt;">Most of our contracts are for a period of less than one year. We have certain long-term maintenance agreements, construction contracts and extended warranty coverage arrangements that span a period in excess of one year. The aggregate amount of the transaction price for long-term maintenance agreements and construction contracts allocated to performance obligations that have not been satisfied as of</span><span style="font-family:inherit;font-size:10pt;"> </span><span style="font-family:inherit;font-size:10pt;">April 1, 2018,</span><span style="font-family:inherit;font-size:10pt;"> was </span><span style="font-family:inherit;font-size:10pt;"><span>$643 million</span></span><span style="font-family:inherit;font-size:10pt;">. We expect to recognize the related revenue of </span><span style="font-family:inherit;font-size:10pt;"><span>$239 million</span></span><span style="font-family:inherit;font-size:10pt;"> over the next </span><span style="font-family:inherit;font-size:10pt;"><span>12 months</span></span><span style="font-family:inherit;font-size:10pt;"> and </span><span style="font-family:inherit;font-size:10pt;"><span>$404 million</span></span><span style="font-family:inherit;font-size:10pt;"> over periods up to </span><span style="font-family:inherit;font-size:10pt;"><span>10 years</span></span><span style="font-family:inherit;font-size:10pt;">. See </span><span style="font-family:inherit;font-size:10pt;">NOTE 10</span><span style="font-family:inherit;font-size:10pt;"> ,"</span><span style="font-family:inherit;font-size:10pt;">PRODUCT WARRANTY LIABILITY</span><span style="font-family:inherit;font-size:10pt;">," for additional disclosures on extended warranty coverage arrangements. Our other contracts generally are for a duration of less than one year or include payment terms that correspond to the value we are providing our customers.</span>
CY2018Q2 us-gaap Revenue Remaining Performance Obligation
RevenueRemainingPerformanceObligation
643000000 USD
CY2018Q2 us-gaap Revenue Remaining Performance Obligation
RevenueRemainingPerformanceObligation
239000000 USD
CY2018Q2 us-gaap Revenue Remaining Performance Obligation Expected Timing Of Satisfaction Period
RevenueRemainingPerformanceObligationExpectedTimingOfSatisfactionPeriod
P12M
CY2018Q2 us-gaap Revenue Remaining Performance Obligation
RevenueRemainingPerformanceObligation
404000000 USD
CY2018Q2 us-gaap Revenue Remaining Performance Obligation Expected Timing Of Satisfaction Period
RevenueRemainingPerformanceObligationExpectedTimingOfSatisfactionPeriod
P10Y
CY2018Q2 us-gaap Revenue Recognition Deferred Revenue
RevenueRecognitionDeferredRevenue
<span style="font-family:inherit;font-size:10pt;">The timing of our billing does not always match the timing of our revenue recognition. When we are entitled to bill a customer in advance of when we are permitted to recognize revenue, we record deferred revenue. Deferred revenue may arise in construction contracts, where billings may occur in advance of performance or in accordance with specific milestones. Deferred revenue may also occur in long-term maintenance contracts, where billings are often based on usage of the underlying equipment, which generally follows a predictable pattern that often will result in the accumulation of collections in advance of our performance of the related maintenance services. Finally, deferred revenue exists in our extended coverage contracts, where the cash is collected prior to the commencement of the coverage period. Deferred revenue is included in our </span><span style="font-style:italic;">Condensed Consolidated Balance Sheets</span><span style="font-family:inherit;font-size:10pt;"> </span><span style="font-family:inherit;font-size:10pt;">as a component of current liabilities for those expected to be recognized in revenue in a period of less than one year and long-term liabilities for those expected to be recognized as revenue in a period beyond one year. Deferred revenue is recognized as revenue as (or when) control of the underlying product, project or service passes to the customer under the related contract.</span>
CY2018Q2 us-gaap Contract With Customer Asset Gross
ContractWithCustomerAssetGross
49000000 USD
CY2018Q1 us-gaap Contract With Customer Asset Gross
ContractWithCustomerAssetGross
6000000 USD
CY2018Q2 us-gaap Contract With Customer Liability
ContractWithCustomerLiability
1085000000 USD
CY2018Q1 us-gaap Contract With Customer Liability
ContractWithCustomerLiability
1052000000 USD
CY2018Q2 us-gaap Contract With Customer Liability Revenue Recognized
ContractWithCustomerLiabilityRevenueRecognized
-128000000 USD
CY2018Q1 us-gaap Contract With Customer Liability Revenue Recognized
ContractWithCustomerLiabilityRevenueRecognized
0 USD
CY2018Q2 us-gaap Allowance For Doubtful Accounts Receivable
AllowanceForDoubtfulAccountsReceivable
17000000 USD
CY2017Q4 us-gaap Allowance For Doubtful Accounts Receivable
AllowanceForDoubtfulAccountsReceivable
16000000 USD
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