Cummins

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549


FORM 8-K

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934


Date of Report:  October 25, 2011

 

  CUMMINS INC.
(Exact name of registrant as specified in its charter)

Indiana
(State or other Jurisdiction of
Incorporation)

1-4949
(Commission File Number)

35-0257090
(I.R.S. Employer Identification
 No.)


500 Jackson Street
P. O. Box 3005
Columbus, IN  47202-3005
(Principal Executive Office)  (Zip Code)

Registrant's telephone number, including area code:  (812) 377-5000

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

[ ]

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[ ]

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[ ]

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[ ]

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

  

 

 

 


 

 

 

Item 2.02. Results of Operations and Financial Condition.

 

On October 25, 2011, Cummins Inc. issued a press release regarding its release of third quarter results. 
 

Item 7.01.  Regulation FD Disclosure

 

The following information is furnished pursuant to Item 2.02, "Results of Operations and Financial Condition" and Item 7.01, "Regulation FD Disclosure."
 

On October 25, 2011, Cummins Inc. (“Cummins,” “the Company,” “the registrant,” “we,” “our,” or, “us”) issued the attached press release reporting its financial results for the third quarter of 2011.  A copy of Cummins' press release is attached hereto as Exhibit 99 and hereby incorporated by reference.
 

Item 9.01. Financial Statements and Exhibits.

 

 

(d)

The following exhibit is furnished herewith:
 

99-Press Release dated October 25, 2011


SIGNATURE
 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: October 25, 2011

 

CUMMINS INC.

 

 /s/ Marsha L. Hunt
______________________________

Marsha L. Hunt
Vice President - Corporate Controller
(Principal Accounting Officer)

 

 

 

 


 

 

 

 

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited) (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

September 25,

 

June 26,

 

September 26,

In millions, except per share amounts

 

2011

 

2011

 

2010

NET SALES

 

$

 4,626

 

$

 4,641

 

$

 3,401

Cost of  sales

 

 

 3,438

 

 

 3,438

 

 

 2,571

GROSS MARGIN

 

 

 1,188

 

 

 1,203

 

 

 830

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES AND INCOME

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

 489

 

 

 463

 

 

 375

 

Research, development and engineering expenses

 

 

 164

 

 

 157

 

 

 103

 

Equity, royalty and interest income from investees  (Note 1)

 

 

 102

 

 

 117

 

 

 88

 

Gain on sale of business  (Note 2)

 

 

 - 

 

 

 68

 

 

 - 

 

Other operating (expense) income, net

 

 

 2

 

 

 - 

 

 

 (5)

OPERATING INCOME

 

 

 639

 

 

 768

 

 

 435

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 9

 

 

 10

 

 

 6

Interest expense

 

 

 11

 

 

 13

 

 

 11

Other income (expense), net

 

 

 (8)

 

 

 (3)

 

 

 8

INCOME BEFORE INCOME TAXES

 

 

 629

 

 

 762

 

 

 438

 

 

 

 

 

 

 

 

 

 

 

Income tax expense  (Note 3)

 

 

 157

 

 

 225

 

 

 129

CONSOLIDATED NET INCOME

 

 

 472

 

 

 537

 

 

 309

 

 

 

 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests

 

 

 20

 

 

 32

 

 

 26

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

 452

 

$

 505

 

$

 283

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE

 

 

 

 

 

 

 

 

 

 

TO CUMMINS INC.

 

 

 

 

 

 

 

 

 

 

Basic

 

$

 2.35

 

$

 2.61

 

$

 1.45

 

Diluted

 

$

 2.35

 

$

 2.60

 

$

 1.44

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 192.1

 

 

 193.8

 

 

 195.8

 

Diluted

 

 

 192.7

 

 

 194.4

 

 

 196.3

 

 

 

 

 

 

 

 

 

 

 

CASH DIVIDENDS DECLARED PER COMMON SHARE

 

$

 0.40

 

$

 0.2625

 

$

 0.2625

 

(a)     Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America (GAAP).

 

 


 

 

 

 

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited) (a)

 

 

 

 

 

 

 

 

 

Nine months ended

In millions, except per share amounts

 

September 25, 2011

 

 

September 26, 2010

NET SALES

$

 13,127

 

$

 9,087

Cost of  sales

 

 9,779

 

 

 6,903

GROSS MARGIN

 

 3,348

 

 

 2,184

 

 

 

 

 

 

 

OPERATING EXPENSES AND INCOME

 

 

 

 

 

 

Selling, general and administrative expenses

 

 1,341

 

 

 1,064

 

Research, development and engineering expenses

 

 450

 

 

 291

 

Equity, royalty and interest income from investees  (Note 1)

 

 315

 

 

 261

 

Gain on sale of business  (Note 2)

 

 68

 

 

 - 

 

Other operating (expense) income, net

 

 (4)

 

 

 (13)

OPERATING INCOME

 

 1,936

 

 

 1,077

 

 

 

 

 

 

 

Interest income

 

 25

 

 

 14

Interest expense

 

 34

 

 

 29

Other income (expense), net

 

 (14)

 

 

 25

INCOME BEFORE INCOME TAXES

 

 1,913

 

 

 1,087

 

 

 

 

 

 

 

Income tax expense  (Note 3)

 

 539

 

 

 338

CONSOLIDATED NET INCOME

 

 1,374

 

 

 749

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests

 

 74

 

 

 71

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

$

 1,300

 

$

 678

 

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE

 

 

 

 

 

 

TO CUMMINS INC.

 

 

 

 

 

 

Basic

$

 6.71

 

$

 3.44

 

Diluted

$

 6.69

 

$

 3.43

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

Basic

 

 193.8

 

 

 197.0

 

Diluted

 

 194.4

 

 

 197.4

 

 

 

 

 

 

 

CASH DIVIDENDS DECLARED PER COMMON SHARE

$

 0.925

 

$

 0.6125

 

(a)     Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America (GAAP).

 

 


 

 

 

 

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (a)

 

 

 

 

 

September 25,

 

December 31,

 In millions, except par value

2011

 

2010

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

$

 1,165

 

$

 1,023

 

Marketable securities

 

 273

 

 

 339

 

 

Total cash, cash equivalents and marketable securities

 

 1,438

 

 

 1,362

 

Accounts and notes receivable, net

 

 2,666

 

 

 2,243

 

Inventories

 

 2,295

 

 

 1,977

 

Deferred income taxes

 

 277

 

 

 314

 

Prepaid expenses and other current assets

 

 350

 

 

 393

 

 

 

Total current assets

 

 7,026

 

 

 6,289

Long-term assets

 

 

 

 

 

 

Property, plant and equipment

 

 5,131

 

 

 4,927

 

 

Accumulated depreciation

 

 (2,963)

 

 

 (2,886)

 

 

Property, plant and equipment, net

 

 2,168

 

 

 2,041

 

Investments and advances related to equity method investees

 

 830

 

 

 734

 

Goodwill

 

 346

 

 

 367

 

Other intangible assets, net

 

 215

 

 

 222

 

Deferred income taxes

 

 125

 

 

 203

 

Other assets

 

 628

 

 

 546

 

 

Total assets

$

 11,338

 

$

 10,402

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Loans payable

$

 48

 

$

 82

 

Accounts payable (principally trade)

 

 1,659

 

 

 1,362

 

Current portion of accrued product warranty

 

 417

 

 

 421

 

Accrued compensation, benefits and retirement costs

 

 481

 

 

 468

 

Deferred revenue

 

 208

 

 

 182

 

Taxes payable (including taxes on income)

 

 251

 

 

 202

 

Other accrued expenses

 

 678

 

 

 543

 

 

Total current liabilities

 

 3,742

 

 

 3,260

Long-term liabilities

 

 

 

 

 

 

Long-term debt

 

 665

 

 

 709

 

Pensions

 

 75

 

 

 195

 

Postretirement benefits other than pensions

 

 446

 

 

 439

 

Other liabilities and deferred revenue

 

 866

 

 

 803

 

 

Total liabilities

 

 5,794

 

 

 5,406

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Cummins Inc. shareholders’ equity

 

 

 

 

 

 

 

Common stock, $2.50 par value, 500 shares authorized, 222.2 and 221.8 shares issued

 

 1,982

 

 

 1,934

 

 

Retained earnings

 

 5,567

 

 

 4,445

 

 

Treasury stock, at cost, 29.3 and 24.0 shares

 

 (1,505)

 

 

 (964)

 

 

Common stock held by employee benefits trust, at cost, 1.9 and 2.1 shares

 

 (22)

 

 

 (25)

 

 

Accumulated other comprehensive loss

 

 

 

 

 

 

 

 

Defined benefit postretirement plans

 

 (606)

 

 

 (646)

 

 

 

Other

 

 (205)

 

 

 (74)

 

 

 

 

Total accumulated other comprehensive loss

 

 (811)

 

 

 (720)

 

 

 

Total Cummins Inc. shareholders’ equity

 

 5,211

 

 

 4,670

 

Noncontrolling interests

 

 333

 

 

 326

 

 

 

Total equity

 

 5,544

 

 

 4,996

Total liabilities and equity

$

 11,338

 

$

 10,402

 

(a)     Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America (GAAP).

 

 


 

 

 

 

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (a)

 

 

 

Nine months ended

 

 

 

September 25,

 

September 26,

In millions

2011

 

2010

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Consolidated net income

$

 1,374

 

$

 749

 

Adjustments to reconcile consolidated net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 243

 

 

 239

 

 

Gain on sale of business  (Note 2)

 

 (68)

 

 

 - 

 

 

Gain on fair value adjustment for consolidated investee

 

 - 

 

 

 (12)

 

 

Deferred income taxes

 

 148

 

 

 83

 

 

Equity in income of investees, net of dividends

 

 7

 

 

 (95)

 

 

Pension contributions in excess of expense

 

 (71)

 

 

 (114)

 

 

Excess tax benefits on stock based awards

 

 (4)

 

 

 (8)

 

 

Other post-retirement benefits payments in excess of expense

 

 (10)

 

 

 (22)

 

 

Stock-based compensation expense

 

 28

 

 

 17

 

 

Translation and hedging activities

 

 (14)

 

 

 10

 

Changes in current assets and liabilities, net of acquisitions and divestitures:

 

 

 

 

 

 

 

Accounts and notes receivable

 

 (469)

 

 

 (198)

 

 

Inventories

 

 (367)

 

 

 (524)

 

 

Other current assets

 

 (5)

 

 

 (16)

 

 

Accounts payable

 

 317

 

 

 336

 

 

Accrued expenses

 

 173

 

 

 102

 

Changes in other liabilities and deferred revenue

 

 93

 

 

 97

 

Other, net

 

 (7)

 

 

 (25)

Net cash provided by operating activities

 

 1,368

 

 

 619

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Capital expenditures

 

 (377)

 

 

 (170)

 

Investments in internal use software

 

 (31)

 

 

 (28)

 

Proceeds from disposals of property, plant and equipment

 

 5

 

 

 46

 

Investments in and advances to equity investees

 

 (104)

 

 

 (17)

 

Proceeds from sale of business, net of cash sold  (Note 2)

 

 111

 

 

 - 

 

Acquisition of businesses, net of cash acquired

 

 - 

 

 

 (77)

 

Investments in marketable securities—acquisitions

 

 (538)

 

 

 (560)

 

Investments in marketable securities—liquidations

 

 572

 

 

 452

 

Purchases of other investments

 

 - 

 

 

 (54)

 

Cash flows from derivatives not designated as hedges

 

 4

 

 

 2

 

Other, net

 

 2

 

 

 - 

Net cash used in investing activities

 

 (356)

 

 

 (406)

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Proceeds from borrowings

 

 96

 

 

 163

 

Payments on borrowings and capital lease obligations

 

 (174)

 

 

 (64)

 

Net borrowings under short-term credit agreements

 

 (5)

 

 

 (4)

 

Distributions to noncontrolling interests

 

 (50)

 

 

 (21)

 

Dividend payments on common stock

 

 (178)

 

 

 (120)

 

Proceeds from sale of common stock held by employee benefit trust

 

 - 

 

 

 52

 

Repurchases of common stock

 

 (546)

 

 

 (241)

 

Excess tax benefits on stock-based awards

 

 4

 

 

 8

 

Other, net

 

 13

 

 

 17

Net cash used in financing activities

 

 (840)

 

 

 (210)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

 (30)

 

 

 4

Net increase (decrease) in cash and cash equivalents

 

 142

 

 

 7

Cash and cash equivalents at beginning of year

 

 1,023

 

 

 930

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

 1,165

 

$

 937

 

(a)     Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America (GAAP).

 

 


 

 

 

 

CUMMINS INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

 

  

Engine

 

Power Generation

 

Components

 

Distribution

 

Non-segment Items(1)

Total

 

In millions

 

 

 

 

 

 

  

 

 

Three months ended September 25, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

External sales

 

$

 2,539

 

$

 604

 

$

 704

 

$

 779

 

$

 - 

$

 4,626

 

Intersegment sales

 

 416

 

 270

 

 311

 

 4

 

 (1,001)

 

 - 

 

 

   Total sales

 

 

 2,955

 

 

 874

 

 

 1,015

 

 

 783

 

 

 (1,001)

 

 4,626

 

Depreciation and amortization(2)

 

 

 46

 

 

 11

 

 

 19

 

 

 6

 

 

 - 

 

 82

 

Research, development and engineering expenses

 

 

 103

 

 

 14

 

 

 46

 

 

 1

 

 

 - 

 

 164

 

Equity, royalty and interest income from investees

 

 

 35

 

 

 16

 

 

 7

 

 

 44

 

 

 - 

 

 102

 

Interest income

 

 

 5

 

 

 2

 

 

 1

 

 

 1

 

 

 - 

 

 9

 

Segment EBIT

 

 

 349

 

 

 92

 

 

 113

 

 

 104

 

 

 (18)

 

 640

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

Three months ended June 26, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

External sales

 

$

 2,476

 

$

 649

 

$

 741

 

$

 775

 

$

 - 

$

 4,641

 

Intersegment sales

 

 424

 

 

 260

 

 

 291

 

 

 10

 

 

 (985)

 

 - 

 

 

   Total sales

 

 

 2,900

 

 

 909

 

 

 1,032

 

 

 785

 

 

 (985)

 

 4,641

 

Depreciation and amortization(2)

 

 

 44

 

 

 11

 

 

 18

 

 

 5

 

 

 - 

 

 78

 

Research, development and engineering expenses

 

 

 102

 

 

 12

 

 

 43

 

 

 - 

 

 

 - 

 

 157

 

Equity, royalty and interest income from investees

 

 

 49

 

 

 13

 

 

 9

 

 

 46

 

 

 - 

 

 117

 

Interest income

 

 

 6

 

 

 3

 

 

 1

 

 

 - 

 

 

 - 

 

 10

 

Segment EBIT

 

 

 377

 

 

 105

 

 

 120

 

 

 106

 

 

 67

 

 775

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

Three months ended September 26, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

External sales

 

$

 1,727

 

$

 564

 

$

 540

 

$

 570

 

$

 - 

$

 3,401

 

Intersegment sales

 

 342

 

 227

 

 229

 

 3

 

 (801)

 

 - 

 

 

   Total sales

 

 

 2,069

 

 

 791

 

 

 769

 

 

 573

 

 

 (801)

 

 3,401

 

Depreciation and amortization(2)

 

 

 42

 

 

 10

 

 

 20

 

 

 5

 

 

 - 

 

 77

 

Research, development and engineering expenses

 

 

 65

 

 

 8

 

 

 30

 

 

 - 

 

 

 - 

 

 103

 

Equity, royalty and interest income from investees

 

 

 37

 

 

 12

 

 

 6

 

 

 33

 

 

 - 

 

 88

 

Interest income

 

 

 3

 

 

 2

 

 

 - 

 

 

 1

 

 

 - 

 

 6

 

Segment EBIT

 

 

 223

 

 

 97

 

 

 63

 

 

 74

 

 

 (8)

 

 449

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

Nine months ended September 25, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

External sales

 

$

 7,021

 

$

 1,810

 

$

 2,105

 

$

 2,191

 

$

 - 

$

 13,127

 

Intersegment sales

 

 1,225

 

 768

 

 866

 

 19

 

 (2,878)

 

 - 

 

 

   Total sales

 

 

 8,246

 

 

 2,578

 

 

 2,971

 

 

 2,210

 

 

 (2,878)

 

 13,127

 

Depreciation and amortization(2)

 

 

 135

 

 

 32

 

 

 55

 

 

 17

 

 

 - 

 

 239

 

Research, development and engineering expenses

 

 

 285

 

 

 37

 

 

 126

 

 

 2

 

 

 - 

 

 450

 

Equity, royalty and interest income from investees

 

 

 126

 

 

 37

 

 

 24

 

 

 128

 

 

 - 

 

 315

 

Interest income

 

 

 14

 

 

 6

 

 

 3

 

 

 2

 

 

 - 

 

 25

 

Segment EBIT

 

 

 1,016

 

 

 286

 

 

 338

 

 

 299

 

 

 8

 

 1,947

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

Nine months ended  September 26, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

External sales

 

$

 4,495

 

$

 1,460

 

$

 1,515

 

$

 1,617

 

$

 - 

$

 9,087

 

Intersegment sales

 

 896

 

 556

 

 613

 

 8

 

 (2,073)

 

 - 

 

 

   Total sales

 

 

 5,391

 

 

 2,016

 

 

 2,128

 

 

 1,625

 

 

 (2,073)

 

 9,087

 

Depreciation and amortization(2)

 

 

 125

 

 

 31

 

 

 61

 

 

 19

 

 

 - 

 

 236

 

Research, development and engineering expenses

 

 

 187

 

 

 23

 

 

 81

 

 

 - 

 

 

 - 

 

 291

 

Equity, royalty and interest income from investees

 

 

 124

 

 

 27

 

 

 17

 

 

 93

 

 

 - 

 

 261

 

Interest income

 

 

 7

 

 

 4

 

 

 1

 

 

 2

 

 

 - 

 

 14

 

Segment EBIT

 

 

 553

 

 

 207

 

 

 195

 

 

 215

 

 

 (54)

 

 1,116

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 (1)

Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses.  The three months ended June 26, 2011, and the nine months ended September 25, 2011, include a $68 million gain ($37 million after-tax) related to the sale of our exhaust business from the Components segment.  The gain has been excluded from segment results as it was not considered by management in its evaluation of operating results for the three months ended June 26, 2011, and the nine months ended September 25, 2011.  For the three and nine months ended September 26, 2010, unallocated corporate expenses included $32 million of Brazil tax recoveries ($21 million after-tax) and $2 million in flood damage expenses.  In the third quarter of 2010, it was determined that we overpaid a Brazilian revenue based tax during 2004-2008.  Our 2010 results include a pre-tax recovery related to tax credits on imported products arising from this overpayment.  The recovery has been excluded from segment results as it was not considered by management it its evaluation of operating results for the quarter.  There were no other significant unallocated corporate expenses for the three and nine months ended September 25, 2011 and September 26, 2010.

 (2)

Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount that is included in the Condensed Consolidated Statements of Income as “Interest expense.”

 

 


 

 

 

 

CUMMINS INC. AND SUBSIDIARIES

RECONCILIATION OF SEGMENT INFORMATION

(Unaudited)

                                                                                                            

A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Income is shown in the table below:

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 25,

 

June 26,

 

September 26,

 

September 25,

 

September 26,

In millions

 

2011

 

2011

 

2010

 

2011

 

2010

Segment EBIT

 

$

 640

 

$

 775

 

$

 449

 

$

 1,947

 

$

 1,116

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 11

 

 

 13

 

 

 11

 

 

 34

 

 

 29

Income before income taxes

 

$

 629

 

$

 762

 

$

 438

 

$

 1,913

 

$

 1,087

 

 


 

 

 

 

CUMMINS INC. AND SUBSIDIARIES

SELECTED FOOTNOTE DATA

(Unaudited)

 

NOTE 1.  EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES

 

Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Income for the interim reporting periods was as follows:

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 25,

 

June 26,

 

September 26,

 

September 25,

 

September 26,

In millions

 

2011

 

2011

 

2010

 

2011

 

2010

Distribution Entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North American distributors

 

$

 35

 

$

 35

 

$

 26

 

$

 100

 

$

 72

Komatsu Cummins Chile, Ltda

 

 

 6

 

 

 6

 

 

 5

 

 

 16

 

 

 11

All other distributors

 

 

 1

 

 

 1

 

 

 - 

 

 

 3

 

 

 2

Manufacturing Entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chongqing Cummins Engine Company, Ltd.

 

 

 20

 

 

 19

 

 

 12

 

 

 51

 

 

 35

Dongfeng Cummins Engine Company, Ltd.

 

 

 15

 

 

 26

 

 

 24

 

 

 64

 

 

 76

Shanghai Fleetguard Filter Co., Ltd.

 

 

 4

 

 

 4

 

 

 3

 

 

 12

 

 

 9

Cummins Westport, Inc.

 

 

 4

 

 

 3

 

 

 2

 

 

 8

 

 

 7

Tata Cummins, Ltd.

 

 

 2

 

 

 3

 

 

 4

 

 

 9

 

 

 11

Valvoline Cummins, Ltd.

 

 

 2

 

 

 2

 

 

 2

 

 

 6

 

 

 7

Komatsu manufacturing alliances

 

 

 - 

 

 

 (1)

 

 

 2

 

 

 1

 

 

 7

Beijing Foton Cummins Engine Co., Ltd.

 

 

 (2)

 

 

 (1)

 

 

 (6)

 

 

 (5)

 

 

 (12)

All other manufacturers

 

 

 7

 

 

 6

 

 

 7

 

 

 19

 

 

 14

 

Cummins share of net income

 

 

 94

 

 

 103

 

 

 81

 

 

 284

 

 

 239

Royalty and interest income

 

 

 8

 

 

 14

 

 

 7

 

 

 31

 

 

 22

Equity, royalty and interest income from investees

 

$

 102

 

$

 117

 

$

 88

 

$

 315

 

$

 261

 

NOTE 2.  SALE OF EXHAUST BUSINESS

 

In January 2011, we reached an agreement to sell certain assets and liabilities of our exhaust business which manufactures exhaust products and select components for emission systems for a variety of applications not core to our other product offerings.  The transaction closed in the second quarter of 2011.  This business was historically included in our Components segment.  The sales price was $123 million.  We recognized a pre-tax gain on the sale of $68 million, which included an allocation of goodwill of $19 million.  The transaction had a working capital adjustment mechanism that was determined in the third quarter.  There was not a significant change to the measurement of the gain.  The gain was excluded from segment results as it was not considered by management in its evaluation of operating results for the nine months ended September 25, 2011.

 

Sales for this business were $171 million, $126 million and $169 million in 2010, 2009 and 2008, respectively.  Income before income taxes for this business was approximately $22 million, $11 million and $19 million in 2010, 2009 and 2008, respectively.   

 

We will enter into supply and other agreements with the operations that will represent ongoing involvement and as such, the results of these operations will not be presented as discontinued operations.

 

 


 

 

 

 

CUMMINS INC. AND SUBSIDIARIES

SELECTED FOOTNOTE DATA

(Unaudited)

 

NOTE 3.  INCOME TAXES

 

Our effective tax rate for the year is expected to approximate 29.5 percent, absent any discrete period activity.  Our tax rate is generally less than the 35 percent U.S. income tax rate primarily due to lower income tax rates on foreign income and research tax credits.  The tax rates for the three and nine month periods ended September 25, 2011, were 25.0 percent and 28.2 percent, respectively.  The tax rate for the third quarter includes discrete items that total a benefit of $29 million (or $0.15 per share) related primarily to amended tax returns for prior periods.  The tax rate for the nine months ended September 25, 2011, includes total discrete tax benefits of $25 million.

 

Our effective tax rates for the comparable prior year periods were 29.5 percent and 31.1 percent, respectively.  In July 2010, the U.K. passed legislation which reduced our U.K. tax rate from 28 percent to 27 percent in 2011.  We had an additional charge to our third quarter tax provision of approximately $2 million to reduce the value of our U.K. deferred tax assets.  The tax rate for the nine month period included a discrete income tax charge of $7 million related to the enactment of the “Patient Protection and Affordable Care Act.”  The lower rate in 2011 compared to 2010 is a result of the geographic mix of earnings.

 

 


 

 

 

 

CUMMINS INC. AND SUBSIDIARIES

FINANCIAL MEASURES THAT SUPPLEMENT GAAP

(Unaudited)

 

Earnings before interest, taxes and noncontrolling interests

 

We define EBIT as earnings before interest expense, income tax expense and noncontrolling interests in income of consolidated subsidiaries (EBIT).  We use EBIT to assess and measure the performance of our operating segments and also as a component in measuring our variable compensation programs.  Below is a reconciliation of EBIT, a non-GAAP financial measure, to “Net income attributable to Cummins Inc.,” for each of the applicable periods:

 

 

 

Three months ended

 

Nine months ended

 

 

September 25,

 

June 26,

 

September 26,

 

September 25,

 

September 26,

In millions

2011

 

2011

 

2010

 

2011

 

2010

Earnings before interest expense, income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and gain on sale of business

$

 640

 

$

 707

 

$

 449

 

$

 1,879

 

$

 1,116

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before interest expense, income taxes and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 gain on sale of business as a percentage of net sales

 

13.8%

 

 

15.2%

 

 

13.2%

 

 

14.3%

 

 

12.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of business

 

 - 

 

 

 68

 

 

 - 

 

 

 68

 

 

 - 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before interest expense and income taxes

 

 640

 

 

775

 

 

 449

 

 

 1,947

 

 

 1,116

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBIT as a percentage of net sales

 

13.8%

 

 

16.7%

 

 

13.2%

 

 

14.8%

 

 

12.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 11

 

 

 13

 

 

 11

 

 

 34

 

 

 29

 

Income tax expense

 

 157

 

 

 225

 

 

 129

 

 

 539

 

 

 338

Consolidated net income

 

 472

 

 

 537

 

 

 309

 

 

 1,374

 

 

 749

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling interests

 

 20

 

 

32

 

 

 26

 

 

 74

 

 

 71

Net income attributable to Cummins Inc.

$

 452

 

$

 505

 

$

 283

 

$

 1,300

 

$

 678

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Cummins Inc. as a

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

percentage of net sales

 

9.8%

 

 

10.9%

 

 

8.3%

 

 

9.9%

 

 

7.5%

 

Net income and diluted earnings per share (EPS) attributable to Cummins Inc. excluding gain on sale of business and discrete income tax items

 

We believe this is a useful measure of our operating performance for the periods presented as it illustrates our underlying operating performance and trends without regard to discrete income tax items and the gain related to the sale of our exhaust business.  This measure is not in accordance with, or an alternative for, accounting principles generally accepted in the United States of America and may not be consistent with measures used by other companies.  It should be considered supplemental data.  The following table reconciles net income attributable to Cummins Inc. excluding gain on sale of business and discrete income tax items to “Net income attributable to Cummins Inc.” for the three and nine month periods ended September 25, 2011. 

 

 

  

 

Three months ended

 

 

Nine months ended

 

  

 

September 25, 2011

 

 

September 25, 2011

In millions

 

Net Income

 

 

Diluted EPS

 

 

Net Income

 

 

Diluted EPS

Net income attributable to Cummins Inc. excluding

 

 

 

 

 

 

 

 

 

 

 

 

discrete income tax items and the gain on sale of business

$

 423

 

$

 2.20

 

$

 1,234

 

$

 6.35

Add:

 

 

 

 

 

 

 

 

 

 

 

 

Third quarter discrete income tax items

 

 29

 

 

 0.15

 

 

 29

 

 

 0.15

 

Gain on sale of business(1)

 

 - 

 

 

 - 

 

 

 37

 

 

 0.19

Net income attributable to Cummins Inc.

$

 452

 

$

 2.35

 

$

 1,300

 

$

 6.69

 

  

 

 

 

 

 

 

 

 

 

 

 

(1)

The gain has been excluded from operating results as it was not considered by management in its evaluation of performance for the nine months ended September 25, 2011.

 

 


 

 

 

 

CUMMINS INC. AND SUBSIDIARIES

BUSINESS UNIT SALES DATA

(Unaudited)

 

Engine segment net sales by market

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In millions

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Heavy-duty truck

$

 485

 

$

 693

 

$

 748

 

$

 - 

 

$

 1,926

Medium-duty truck and bus

 

 474

 

 

 608

 

 

 640

 

 

 - 

 

 

 1,722

Light-duty auto and RV

 

 296

 

 

 310

 

 

 271

 

 

 - 

 

 

 877

Industrial

 

 855

 

 

 988

 

 

 977

 

 

 - 

 

 

 2,820

Stationary power

 

 281

 

 

 301

 

 

 319

 

 

 - 

 

 

 901

 

Total sales

$

 2,391

 

$

 2,900

 

$

 2,955

 

$

 - 

 

$

 8,246

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In millions

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Heavy-duty truck

$

 252

 

$

 340

 

$

 395

 

$

 516

 

$

 1,503

Medium-duty bus and truck

 

 217

 

 

 352

 

 

 430

 

 

 436

 

 

 1,435

Light-duty auto and RV

 

 207

 

 

 296

 

 

 239

 

 

 280

 

 

 1,022

Industrial

 

 577

 

 

 656

 

 

 700

 

 

 956

 

 

 2,889

Stationary power

 

 170

 

 

 255

 

 

 305

 

 

 309

 

 

 1,039

 

Total sales

$

 1,423

 

$

 1,899

 

$

 2,069

 

$

 2,497

 

$

 7,888

 

Unit shipments by engine classification (including unit shipments to Power Generation)

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Units

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Midrange

 

 109,400

 

 

 131,300

 

 

 130,600

 

 

 - 

 

 

 371,300

Heavy-duty

 

 20,000

 

 

 29,900

 

 

 31,100

 

 

 - 

 

 

 81,000

High-horsepower

 

 4,900

 

 

 5,700

 

 

 5,600

 

 

 - 

 

 

 16,200

 

Total units

 

 134,300

 

 

 166,900

 

 

 167,300

 

 

 - 

 

 

 468,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Units

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Mid-range

 

 69,100

 

 

 90,500

 

 

 93,500

 

 

 115,800

 

 

 368,900

Heavy-duty

 

 8,700

 

 

 14,500

 

 

 15,200

 

 

 22,800

 

 

 61,200

High horsepower

 

 3,400

 

 

 4,800

 

 

 4,900

 

 

 5,400

 

 

 18,500

 

Total units

 

 81,200

 

 

 109,800

 

 

 113,600

 

 

 144,000

 

 

 448,600

 

Power generation segment sales by business

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In millions

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Commercial products

$

 505

 

$

 568

 

$

 579

 

$

 - 

 

$

 1,652

Generator technologies

 

 153

 

 

 190

 

 

 166

 

 

 - 

 

 

 509

Consumer

 

 50

 

 

 53

 

 

 48

 

 

 - 

 

 

 151

Commercial projects

 

 55

 

 

 58

 

 

 46

 

 

 - 

 

 

 159

Power electronics

 

 32

 

 

 40

 

 

 35

 

 

 - 

 

 

 107

 

Total sales

$

 795

 

$

 909

 

$

 874

 

$

 - 

 

$

 2,578

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In millions

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Commercial products

$

 307

 

$

 436

 

$

 519

 

$

 569

 

$

 1,831

Generator technologies

 

 107

 

 

 135

 

 

 140

 

 

 167

 

 

 549

Commercial projects

 

 33

 

 

 57

 

 

 49

 

 

 83

 

 

 222

Consumer

 

 43

 

 

 49

 

 

 49

 

 

 45

 

 

 186

Power electronics

 

 27

 

 

 31

 

 

 34

 

 

 39

 

 

 131

 

Total sales

$

 517

 

$

 708

 

$

 791

 

$

 903

 

$

 2,919

 

 


 

 

 

 

CUMMINS INC. AND SUBSIDIARIES

BUSINESS UNIT SALES DATA

(Unaudited)

 

Component segment sales by business

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In millions

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Turbo technologies

$

 297

 

$

 314

 

$

 298

 

$

 - 

 

$

 909

Emission solutions

 

 273

 

 

 311

 

 

 306

 

 

 - 

 

 

 890

Filtration

 

 255

 

 

 287

 

 

 288

 

 

 - 

 

 

 830

Fuel systems

 

 99

 

 

 120

 

 

 123

 

 

 - 

 

 

 342

 

Total sales

$

 924

 

$

 1,032

 

$

 1,015

 

$

 - 

 

$

 2,971

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In millions

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Turbo technologies

$

 200

 

$

 226

 

$

 239

 

$

 283

 

$

 948

Emission solutions

 

 137

 

 

 170

 

 

 192

 

 

 251

 

 

 750

Filtration

 

 228

 

 

 250

 

 

 248

 

 

 285

 

 

 1,011

Fuel systems

 

 65

 

 

 83

 

 

 90

 

 

 99

 

 

 337

 

Total sales

$

 630

 

$

 729

 

$

 769

 

$

 918

 

$

 3,046

 

Distribution segment sales by product

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In millions

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Parts and filtration

$

 235

 

$

 271

 

$

 283

 

$

 - 

 

$

 789

Power generation

 

 145

 

 

 195

 

 

 191

 

 

 - 

 

 

 531

Engines

 

 140

 

 

 186

 

 

 171

 

 

 - 

 

 

 497

Service

 

 122

 

 

 133

 

 

 138

 

 

 - 

 

 

 393

 

Total sales

$

 642

 

$

 785

 

$

 783

 

$

 - 

 

$

 2,210

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In millions

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Parts and filtration

$

 193

 

$

 221

 

$

 220

 

$

 248

 

$

 882

Power generation

 

 99

 

 

 135

 

 

 125

 

 

 157

 

 

 516

Engines

 

 83

 

 

 109

 

 

 112

 

 

 162

 

 

 466

Service

 

 101

 

 

 111

 

 

 116

 

 

 132

 

 

 460

 

Total sales

$

 476

 

$

 576

 

$

 573

 

$

 699

 

$

 2,324