CUMMINS INC - FORM 8-K - February 2, 2012

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EX-99 - CUMMINS INCesexhibit99.htm

 

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:  February 2, 2012

 

  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 February 2, 2012, Cummins Inc. issued a press release regarding its release of fourth quarter and full year 2011 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 February 2, 2012, Cummins Inc. (“Cummins,” “the Company,” “the registrant,” “we,” “our,” or, “us”) issued the attached press release reporting its financial results for the fourth quarter and full year 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 February 2, 2012


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: February 2, 2012

 

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

 

 

 

December 31,

 

September 25,

 

December 31,

In millions, except per share amounts

 

2011

 

2011

 

2010

NET SALES

 

$

 4,921

 

$

 4,626

 

$

 4,139

Cost of  sales

 

 

 3,680

 

 

 3,438

 

 

 3,155

GROSS MARGIN

 

 

 1,241

 

 

 1,188

 

 

 984

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES AND INCOME

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

 496

 

 

 489

 

 

 423

 

Research, development and engineering expenses

 

 

 179

 

 

 164

 

 

 123

 

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

 

 

 101

 

 

 102

 

 

 90

 

Gain on sale of businesses (Note 2)

 

 

 53

 

 

 - 

 

 

 - 

 

Other operating (expense) income, net (Note 3)

 

 

 25

 

 

 2

 

 

 (3)

OPERATING INCOME

 

 

 745

 

 

 639

 

 

 525

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 9

 

 

 9

 

 

 7

Interest expense

 

 

 10

 

 

 11

 

 

 11

Other income (expense), net

 

 

 14

 

 

 (8)

 

 

 9

INCOME BEFORE INCOME TAXES

 

 

 758

 

 

 629

 

 

 530

 

 

 

 

 

 

 

 

 

 

 

Income tax expense  (Note 4)

 

 

 186

 

 

 157

 

 

 139

CONSOLIDATED NET INCOME

 

 

 572

 

 

 472

 

 

 391

 

 

 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests

 

 

 24

 

 

 20

 

 

 29

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

 548

 

$

 452

 

$

 362

 

 

 

 

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE

 

 

 

 

 

 

 

 

 

 

TO CUMMINS INC.

 

 

 

 

 

 

 

 

 

 

Basic

 

$

 2.87

 

$

 2.35

 

$

 1.85

 

Diluted

 

$

 2.86

 

$

 2.35

 

$

 1.84

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSANDING

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 190.9

 

 

 192.1

 

 

 195.8

 

Diluted

 

 

 191.5

 

 

 192.7

 

 

 196.4

 

 

 

 

 

 

 

 

 

 

 

CASH DIVIDENDS DECLARED PER COMMON SHARE

 

$

 0.40

 

$

 0.40

 

$

 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)

 

 

 

 

 

 

 

 

 

For the years ended

 

 

December 31,

 

December 31,

In millions, except per share amounts

2011

 

2010

NET SALES

$

 18,048

 

$

 13,226

Cost of  sales

 

 13,459

 

 

 10,058

GROSS MARGIN

 

 4,589

 

 

 3,168

 

 

 

 

 

 

 

OPERATING EXPENSES AND INCOME

 

 

 

 

 

 

Selling, general and administrative expenses

 

 1,837

 

 

 1,487

 

Research, development and engineering expenses

 

 629

 

 

 414

 

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

 

 416

 

 

 351

 

Gain on sale of businesses  (Note 2)

 

 121

 

 

 - 

 

Other operating (expense) income, net (Note 3)

 

 21

 

 

 (16)

OPERATING INCOME

 

 2,681

 

 

 1,602

 

 

 

 

 

 

 

Interest income

 

 34

 

 

 21

Interest expense

 

 44

 

 

 40

Other income (expense), net

 

 - 

 

 

 34

INCOME BEFORE INCOME TAXES

 

 2,671

 

 

 1,617

 

 

 

 

 

 

 

Income tax expense  (Note 4)

 

 725

 

 

 477

CONSOLIDATED NET INCOME

 

 1,946

 

 

 1,140

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests

 

 98

 

 

 100

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

$

 1,848

 

$

 1,040

 

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE

 

 

 

 

 

 

TO CUMMINS INC.

 

 

 

 

 

 

Basic

$

 9.58

 

$

 5.29

 

Diluted

$

 9.55

 

$

 5.28

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

Basic

 

 193.0

 

 

 196.7

 

Diluted

 

 193.6

 

 

 197.1

 

 

 

 

 

 

 

CASH DIVIDENDS DECLARED PER COMMON SHARE

$

 1.325

 

$

 0.875

 

(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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 In millions, except par value

2011

 

2010

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

$

 1,484

 

$

 1,023

 

Marketable securities

 

 277

 

 

 339

 

 

Total cash, cash equivalents and marketable securities

 

 1,761

 

 

 1,362

 

Accounts and notes receivable, net

 

 2,526

 

 

 2,243

 

Inventories

 

 2,141

 

 

 1,977

 

Deferred income taxes

 

 268

 

 

 314

 

Prepaid expenses and other current assets

 

 395

 

 

 393

 

 

Total current assets

 

 7,091

 

 

 6,289

Long-term assets

 

 

 

 

 

 

Property, plant and equipment, net

 

 2,288

 

 

 2,041

 

Investments and advances related to equity method investees

 

 838

 

 

 734

 

Goodwill and other intangibles, net

 

 566

 

 

 589

 

Other assets

 

 885

 

 

 749

 

 

Total assets

$

 11,668

 

$

 10,402

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Loans payable

$

 28

 

$

 82

 

Accounts payable (principally trade)

 

 1,546

 

 

 1,362

 

Accrued expenses

 

 2,083

 

 

 1,816

 

 

Total current liabilities

 

 3,657

 

 

 3,260

Long-term liabilities

 

 

 

 

 

 

Long-term debt

 

 658

 

 

 709

 

Other liabilities

 

 1,522

 

 

 1,437

 

 

Total liabilities

 

 5,837

 

 

 5,406

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Cummins Inc. shareholders’ equity

 

 

 

 

 

 

 

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

 

 2,001

 

 

 1,934

 

 

Retained earnings

 

 6,038

 

 

 4,445

 

 

Treasury stock, at cost, 30.2 and 24.0 shares

 

 (1,587)

 

 

 (964)

 

 

Common stock held by employee benefits trust, at cost, 1.8 and 2.1 shares

 

 (22)

 

 

 (25)

 

 

Accumulated other comprehensive loss

 

 (938)

 

 

 (720)

 

 

 

Total Cummins Inc. shareholders’ equity

 

 5,492

 

 

 4,670

 

Noncontrolling interests

 

 339

 

 

 326

 

 

 

 

Total equity

 

 5,831

 

 

 4,996

Total liabilities and equity

$

 11,668

 

$

 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)

 

 

 

 

 

 

 

 

 

 

 

For the years ended

 

 

 

December 31,

 

December 31,

In millions

2011

 

2010

NET CASH PROVIDED BY OPERATING ACTIVITIES

$

 2,073

 

$

 1,006

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Capital expenditures

 

 (622)

 

 

 (364)

 

Investments in internal use software

 

 (60)

 

 

 (43)

 

Proceeds from disposals of property, plant and equipment

 

 8

 

 

 55

 

Investments in and advances to equity investees

 

 (81)

 

 

 (2)

 

Proceeds from sale of businesses, net of cash sold

 

 199

 

 

 - 

 

Acquisition of business, net of cash acquired

 

 - 

 

 

 (104)

 

Investments in marketable securities-acquisitions

 

 (729)

 

 

 (823)

 

Investments in marketable securities-liquidations

 

 750

 

 

 690

 

Purchases of other investments

 

 - 

 

 

 (62)

 

Cash flows from derivatives not designated as hedges

 

 (18)

 

 

 2

 

Other, net

 

 1

 

 

 - 

Net cash used in investing activities

 

 (552)

 

 

 (651)

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Proceeds from borrowings

 

 127

 

 

 214

 

Payments on borrowings and capital lease obligations

 

 (237)

 

 

 (143)

 

Net borrowings (payments) under short-term credit agreements

 

 6

 

 

 9

 

Distributions to noncontrolling interests

 

 (56)

 

 

 (28)

 

Dividend payments on common stock

 

 (255)

 

 

 (172)

 

Proceeds from sale of common stock held by employee benefit trust

 

 - 

 

 

 58

 

Repurchases of common stock

 

 (629)

 

 

 (241)

 

Excess tax benefits (deficiencies) on stock-based awards

 

 5

 

 

 10

 

Other, net

 

 14

 

 

 26

Net cash used in financing activities

 

 (1,025)

 

 

 (267)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

 (35)

 

 

 5

Net increase (decrease) in cash and cash equivalents

 

 461

 

 

 93

Cash and cash equivalents at beginning of year

 

 1,023

 

 

 930

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

 1,484

 

$

 1,023

 

(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)

In millions

 

Engine

 

Components

 

Power Generation

 

Distribution

 

Non-segment Items(1)

Total

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

Three months ended December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

External sales

 

$

 2,628

 

$

 781

 

$

 682

 

$

 830

 

$

 - 

 

$

 4,921

 

Intersegment sales

 

 

 433

 

 

 311

 

 

 238

 

 

 4

 

 

 (986)

 

 

 - 

 

 

Total sales

 

 

 3,061

 

 

 1,092

 

 

 920

 

 

 834

 

 

 (986)

 

 

 4,921

 

Depreciation and amortization(2)

 

 

 46

 

 

 18

 

 

 10

 

 

 8

 

 

 - 

 

 

 82

 

Research, development and engineering expenses

 

 

 112

 

 

 49

 

 

 17

 

 

 1

 

 

 - 

 

 

 179

 

Equity, royalty and interest income from investees

 

 

 40

 

 

 7

 

 

 10

 

 

 44

 

 

 - 

 

 

 101

 

Interest income

 

 

 4

 

 

 2

 

 

 2

 

 

 1

 

 

 - 

 

 

 9

 

Segment EBIT

 

 

 368

 

 

 132

 

 

 87

 

 

 87

 

 

 94

 

 

 768

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

Three months ended September 25, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

External sales

 

$

 2,539

 

$

 704

 

$

 604

 

$

 779

 

$

 - 

 

$

 4,626

 

Intersegment sales

 

 

 416

 

 

 311

 

 

 270

 

 

 4

 

 

 (1,001)

 

 

 - 

 

 

Total sales

 

 

 2,955

 

 

 1,015

 

 

 874

 

 

 783

 

 

 (1,001)

 

 

 4,626

 

Depreciation and amortization(2)

 

 

 46

 

 

 19

 

 

 11

 

 

 6

 

 

 - 

 

 

 82

 

Research, development and engineering expenses

 

 

 103

 

 

 46

 

 

 14

 

 

 1

 

 

 - 

 

 

 164

 

Equity, royalty and interest income from investees

 

 

 35

 

 

 7

 

 

 16

 

 

 44

 

 

 - 

 

 

 102

 

Interest income

 

 

 5

 

 

 1

 

 

 2

 

 

 1

 

 

 - 

 

 

 9

 

Segment EBIT

 

 

 349

 

 

 113

 

 

 92

 

 

 104

 

 

 (18)

 

 

 640

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

Three months ended December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

External sales

 

$

 2,099

 

$

 656

 

$

 690

 

$

 694

 

$

 - 

 

$

 4,139

 

Intersegment sales

 

 

 398

 

 

 262

 

 

 213

 

 

 5

 

 

 (878)

 

 

 - 

 

 

Total sales

 

 

 2,497

 

 

 918

 

 

 903

 

 

 699

 

 

 (878)

 

 

 4,139

 

Depreciation and amortization (2)

 

 

 46

 

 

 18

 

 

 10

 

 

 6

 

 

 - 

 

 

 80

 

Research, development and engineering expenses

 

 

 76

 

 

 33

 

 

 13

 

 

 1

 

 

 - 

 

 

 123

 

Equity, royalty and interest income from investees

 

 

 37

 

 

 6

 

 

 8

 

 

 39

 

 

 - 

 

 

 90

 

Interest income

 

 

 5

 

 

 1

 

 

 1

 

 

 - 

 

 

 - 

 

 

 7

 

Segment EBIT

 

 

 256

 

 

 83

 

 

 92

 

 

 82

 

 

 28

 

 

 541

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

For the year ended December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

External sales

 

$

 9,649

 

$

 2,886

 

$

 2,492

 

$

 3,021

 

$

 - 

 

$

 18,048

 

Intersegment sales

 

 

 1,658

 

 

 1,177

 

 

 1,006

 

 

 23

 

 

 (3,864)

 

 

 - 

 

 

Total sales

 

 

 11,307

 

 

 4,063

 

 

 3,498

 

 

 3,044

 

 

 (3,864)

 

 

 18,048

 

Depreciation and amortization (2)

 

 

 181

 

 

 73

 

 

 42

 

 

 25

 

 

 - 

 

 

 321

 

Research, development and engineering expenses

 

 

 397

 

 

 175

 

 

 54

 

 

 3

 

 

 - 

 

 

 629

 

Equity, royalty and interest income from investees

 

 

 166

 

 

 31

 

 

 47

 

 

 172

 

 

 - 

 

 

 416

 

Interest income

 

 

 18

 

 

 5

 

 

 8

 

 

 3

 

 

 - 

 

 

 34

 

Segment EBIT

 

 

 1,384

 

 

 470

 

 

 373

 

 

 386

 

 

 102

 

 

 2,715

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

For the year ended December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

External sales

 

$

 6,594

 

$

 2,171

 

$

 2,150

 

$

 2,311

 

$

 - 

 

$

 13,226

 

Intersegment sales

 

 

 1,294

 

 

 875

 

 

 769

 

 

 13

 

 

 (2,951)

 

 

 - 

 

 

Total sales

 

 

 7,888

 

 

 3,046

 

 

 2,919

 

 

 2,324

 

 

 (2,951)

 

 

 13,226

 

Depreciation and amortization (2)

 

 

 171

 

 

 79

 

 

 41

 

 

 25

 

 

 - 

 

 

 316

 

Research, development and engineering expenses

 

 

 263

 

 

 114

 

 

 36

 

 

 1

 

 

 - 

 

 

 414

 

Equity, royalty and interest income from investees

 

 

 161

 

 

 23

 

 

 35

 

 

 132

 

 

 - 

 

 

 351

 

Interest income

 

 

 12

 

 

 2

 

 

 5

 

 

 2

 

 

 - 

 

 

 21

 

Segment EBIT

 

 

 809

 

 

 278

 

 

 299

 

 

 297

 

 

 (26)

 

 

 1,657

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

(1)

Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses.  For the three months ended December 31, 2011 unallocated corporate expenses includes a $53 million gain ($33 after-tax) recorded for the sale of certain assets and liabilities of our light-duty filtration business from the Components segment, and a $38 million gain ($24 million after-tax) related to flood damage recoveries from the insurance settlement regarding a June 2008 flood in Southern Indiana.  There were no significant unallocated corporate expenses for the three months ended September 25, 2011 and the three months ended December 31, 2010.  The year ended December 31, 2011, includes a $121 million gain ($70 million after-tax) related to the sale of certain assets and liabilities of our exhaust and light-duty filtration business, both from the Components segment, and a $38 million gain ($24 million after-tax) related to flood damage recoveries from the insurance settlement regarding a June 2008 flood in Southern Indiana.  The gains have been excluded from segment results as they were not considered by management in its evaluation of operating results for the year ended December 31, 2011.  For the year ended December 31, 2010 unallocated corporate expenses included $32 million in Brazil tax recoveries ($21 million after-tax) and $2 million in flood damage expenses.  This tax recovery has been excluded from segment results as it was not considered by management in its evaluation of operating results for the year ended December 31, 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 Consolidatead Statements of Income is shown in the table below:

 

 

 

 

Three months ended

 

For the years ended

 

 

 

December 31,

 

September 25,

 

December 31,

 

December 31,

 

December 31,

In millions

 

2011

 

2011

 

2010

 

2011

 

2010

Segment EBIT

 

$

 768

 

$

 640

 

$

 541

 

$

 2,715

 

$

 1,657

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 10

 

 

 11

 

 

 11

 

 

 44

 

 

 40

Income before income taxes

 

$

 758

 

$

 629

 

$

 530

 

$

 2,671

 

$

 1,617

 

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

 

For the years ended

 

 

 

December 31,

 

September 25,

 

December 31,

 

December 31,

 

December 31,

In millions

 

2011

 

2011

 

2010

 

2011

 

2010

Distribution Entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North American distributors

 

$

 34

 

$

 35

 

$

 29

 

$

 134

 

$

 101

Komatsu Cummins Chile, Ltda

 

 

 6

 

 

 6

 

 

 5

 

 

 22

 

 

 16

All other distributors

 

 

 1

 

 

 1

 

 

 1

 

 

 4

 

 

 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Manufacturing Entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chongqing Cummins Engine Company, Ltd.

 

 

 17

 

 

 20

 

 

 11

 

 

 68

 

 

 46

Dongfeng Cummins Engine Company, Ltd.

 

 

 16

 

 

 15

 

 

 23

 

 

 80

 

 

 99

Cummins Westport, Inc.

 

 

 6

 

 

 4

 

 

 3

 

 

 14

 

 

 10

Tata Cummins, Ltd.

 

 

 5

 

 

 2

 

 

 3

 

 

 14

 

 

 14

Shanghai Fleetguard Filter Co., Ltd.

 

 

 3

 

 

 4

 

 

 3

 

 

 15

 

 

 12

Komatsu manufacturing alliances

 

 

 2

 

 

 - 

 

 

 4

 

 

 3

 

 

 11

Valvoline Cummins, Ltd.

 

 

 1

 

 

 2

 

 

 1

 

 

 7

 

 

 8

Beijing Foton Cummins Engine Co., Ltd.

 

 

 (2)

 

 

 (2)

 

 

 (4)

 

 

 (7)

 

 

 (16)

Cummins MerCruiser Diesel Marine, LLC

 

 

 (3)

 

 

 - 

 

 

 (2)

 

 

 (3)

 

 

 (3)

All other manufacturers

 

 

 5

 

 

 7

 

 

 5

 

 

 24

 

 

 20

 

Cummins share of net income

 

 

 91

 

 

 94

 

 

 82

 

 

 375

 

 

 321

Royalty and interest income

 

 

 10

 

 

 8

 

 

 8

 

 

 41

 

 

 30

Equity, royalty and interest income from investees

 

$

 101

 

$

 102

 

$

 90

 

$

 416

 

$

 351

 

NOTE 2.  SALE OF BUSINESSES

 

In the second quarter of 2011, we sold 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.  This business was historically included in our Components segment.  The sales price was $123 million.  We recognized a gain on the sale of $68 million ($37 million after-tax), which included an allocation of goodwill of $19 million.  The gain was excluded from segment results as it was not considered by management in its evaluation of operating results for the year ended December 31, 2011.

 

Sales for this business were $62 million, $171 million and $126 million in 2011 (through closing), 2010 and 2009, respectively.  EBIT for this business was approximately $9 million, $22 million and $11 million in 2011 (through closing), 2010 and 2009, respectively.   

 

During the fourth quarter of 2011, we sold certain assets and liabilities of our light-duty filtration business which manufactures light-duty automotive and industrial filtration solutions.  The sales price was $90 million and included a note receivable from the buyer of approximately $1 million.  There are no earnouts or other contingencies associated with the sales price.  We recognized a gain on the sale of $53 million ($33 million after-tax), which included an allocation of goodwill of $6 million.  The gain was excluded from segment results as it was not considered by management in its evaluation of operating results for the year ended December 31, 2011.

 

Sales for this business were $64 million, $74 million and $54 million in 2011 (through closing), 2010 and 2009, respectively.  EBIT for this business was approximately $13 million, $9 million and $2 million in 2011 (through closing), 2010 and 2009, 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.  FLOOD INSURANCE RECOVERY

 

In June 2008, four of our sites in Southern Indiana, including our Technical Center, experienced extensive flood damage.  In October 2011, we received $40 million from our insurance carriers to settle all outstanding 2008 flood claims.  As a result, we recognized a gain of approximately $38 million ($24 million after-tax), net of any remaining flood related expenses, in “Other operating (expense) income, net” in our Condensed Consolidated Statements of Income.

 

NOTE 4.  INCOME TAXES

 

Our income tax rates are generally less than the 35 percent U.S. income tax rate primarily because of lower taxes on foreign earnings and research tax credits. Our effective tax rate for the fourth quarter and full year of 2011 was 24.5 percent and 27.1 percent, respectively.  Excluding the gain on sale of certain assets and liabilities of the businesses and the flood insurance recovery, our effective tax rate for the fourth quarter and full year of 2011 was 22.8 percent and 26.3 percent, respectively.  The tax rate for the fourth quarter and full year includes discrete tax items that total a benefit of $56 million ($0.29 per share) and $85 million ($0.44 per share), respectively.  The discrete tax items for the fourth quarter and full year related primarily to additional research credits claimed on amended tax returns for prior periods, the settlement of uncertain tax positions and restructuring of our foreign operations.  Our effective tax rate for the fourth quarter and full year of 2010 was 26.2 percent and 29.5 percent, respectively. 

 

A reconciliation of the U.S. federal income tax rate of 35 percent to the actual effective tax rate is as follows:

 

 

  

Years ended December 31,

 

  

2011

 

 

2010

 

 

U.S. federal statutory rate

35.0

%

 

35.0

%

 

State income tax, net of federal effect

0.4

 

 

0.6

 

 

Research tax credits

(4.7)

 

 

(1.3)

 

 

Differences in rates and taxability of foreign subsidiaries and joint ventures

(4.6)

 

 

(4.7)

 

 

Other, net

1.0

 

 

(0.1)

 

Effective tax rate

27.1

%

 

29.5

%

 

We expect our 2012 effective tax rate to be 29 percent excluding any discrete items that may arise.  The research tax credit expired December 31, 2011 and has not yet been renewed by Congress.  If the research credit is reinstated, we would anticipate the 2012 effective tax rate to be 28 percent.

 

NOTE 5.  DEPRECIATION AND AMORTIZATION

 

Depreciation and amortization expense included in operating activities of the Condensed Consolidated Statements of Cash Flows for the years ended December 31, 2011 and 2010, was $325 million and $320 million, respectively.


 

CUMMINS INC. AND SUBSIDIARIES

FINANCIAL MEASURES THAT SUPPLEMENT GAAP

(Unaudited)

Net income and diluted earnings per share (EPS) attributable to Cummins Inc. excluding special items.

We believe this is a useful measure of our operating performance for the period presented as it illustrates our operating performance without regard to special items including the gains related to the sale of certain assets and liabilities of our exhaust business and our filtration business and flood insurance recovery.  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. to net income attributable to Cummins Inc. excluding special items for the quarter and year ended December 31, 2011.

 

 

  

 

Three months ended

 

 

Year ended

 

  

 

December 31, 2011

 

 

December 31, 2011

In millions

 

Net Income

 

 

Diluted EPS

 

 

Net Income

 

 

Diluted EPS

Net income attributable to Cummins Inc.

$

 548

 

$

 2.86

 

$

 1,848

 

$

 9.55

Subtract:

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of businesses(1)

 

 33

 

 

 0.17

 

 

 70

 

 

 0.36

 

Flood insurance recovery(1)

 

 24

 

 

 0.13

 

 

 24

 

 

 0.12

Net income attributable to Cummins Inc. excluding

 

 

 

 

 

 

 

 

 

 

 

 

special items

$

 491

 

$

 2.56

 

$

 1,754

 

$

 9.07

 

  

 

 

 

 

 

 

 

 

 

 

 

(1)

The gains have been excluded from operating results as they were not considered by management in its evaluation of performance for the year ended December 31, 2011.

 

CUMMINS INC. AND SUBSIDIARIES

FINANCIAL MEASURES THAT SUPPLEMENT GAAP

(Unaudited)

 

Earnings before interest expense, income taxes and noncontrolling interests.

We define EBIT as earnings or loss 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

 

For the years ended

 

 

December 31,

 

September 25,

 

December 31,

 

December 31,

 

December 31,

In millions

2011

 

2011

 

2010

 

2011

 

2010

Earnings before interest expense, income taxes and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

special items

$

 677

 

$

 640

 

$

 541

 

$

 2,556

 

$

 1,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before interest expense, income taxes and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

special items as a percentage of net sales

 

13.8%

 

 

13.8%

 

 

13.1%

 

 

14.2%

 

 

12.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of businesses

 

 53

 

 

 - 

 

 

 - 

 

 

 121

 

 

 - 

 

Flood insurance recovery

 

 38

 

 

 - 

 

 

 - 

 

 

 38

 

 

 - 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before interest expense and income taxes

$

 768

 

$

 640

 

$

 541

 

$

 2,715

 

$

 1,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBIT as a percentage of net sales

 

15.6%

 

 

13.8%

 

 

13.1%

 

 

15.0%

 

 

12.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 10

 

 

 11

 

 

 11

 

 

 44

 

 

 40

 

Income tax expense

 

 186

 

 

 157

 

 

 139

 

 

 725

 

 

 477

Consolidated net income

 

 572

 

 

 472

 

 

 391

 

 

 1,946

 

 

 1,140

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling interests

 

 24

 

 

 20

 

 

 29

 

 

 98

 

 

 100

Net income attributable to Cummins Inc.

$

 548

 

$

 452

 

$

 362

 

$

 1,848

 

$

 1,040

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Cummins Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

as a percentage of net sales

 

11.1%

 

 

9.8%

 

 

8.7%

 

 

10.2%

 

 

7.9%

 

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

 

$

 865

 

$

 2,791

Medium-duty truck and bus

 

 

 474

 

 

 608

 

 

 640

 

 

 598

 

 

 2,320

Light-duty automotive and RV

 

 

 296

 

 

 310

 

 

 271

 

 

 299

 

 

 1,176

Industrial

 

 

 855

 

 

 988

 

 

 977

 

 

 1,030

 

 

 3,850

Stationary power

 

 

 281

 

 

 301

 

 

 319

 

 

 269

 

 

 1,170

 

Total sales

 

$

 2,391

 

$

 2,900

 

$

 2,955

 

$

 3,061

 

$

 11,307

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In millions

 

 

Q1

 

 

Q2

 

 

Q3

 

 

Q4

 

 

YTD

Heavy-duty truck

 

$

 252

 

$

 340

 

$

 395

 

$

 516

 

$

 1,503

Medium-duty truck and bus

 

 

 217

 

 

 352

 

 

 430

 

 

 436

 

 

 1,435

Light-duty automotive 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

Mid-range

 

 

 109,400

 

 

 131,300

 

 

 130,600

 

 

 138,100

 

 

 509,400

Heavy-duty

 

 

 20,000

 

 

 29,900

 

 

 31,100

 

 

 35,300

 

 

 116,300

High horsepower

 

 

 4,900

 

 

 5,700

 

 

 5,600

 

 

 5,400

 

 

 21,600

 

Total units

 

 

 134,300

 

 

 166,900

 

 

 167,300

 

 

 178,800

 

 

 647,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

CUMMINS INC. AND SUBSIDIARIES

BUSINESS UNIT SALES DATA

(Unaudited)

 

Component segment sales by business

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In millions

 

 

Q1

 

 

Q2

 

 

Q3

 

 

Q4

 

 

YTD

Emission solutions

 

$

 273

 

$

 311

 

$

 306

 

$

 372

 

$

 1,262

Turbo technologies

 

 

 297

 

 

 314

 

 

 298

 

 

 314

 

 

 1,223

Filtration

 

 

 255

 

 

 287

 

 

 288

 

 

 283

 

 

 1,113

Fuel systems

 

 

 99

 

 

 120

 

 

 123

 

 

 123

 

 

 465

 

Total sales

 

$

 924

 

$

 1,032

 

$

 1,015

 

$

 1,092

 

$

 4,063

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In millions

 

 

Q1

 

 

Q2

 

 

Q3

 

 

Q4

 

 

YTD

Emission solutions

 

$

 137

 

$

 170

 

$

 192

 

$

 251

 

$

 750

Turbo technologies

 

 

 200

 

 

 226

 

 

 239

 

 

 283

 

 

 948

Filtration

 

 

 228

 

 

 250

 

 

 248

 

 

 285

 

 

 1,011

Fuel systems

 

 

 65

 

 

 83

 

 

 90

 

 

 99

 

 

 337

 

Total sales

 

$

 630

 

$

 729

 

$

 769

 

$

 918

 

$

 3,046

 

Power generation segment sales by business

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In millions

 

 

Q1

 

 

Q2

 

 

Q3

 

 

Q4

 

 

YTD

Commercial products

 

$

 505

 

$

 568

 

$

 579

 

$

 578

 

$

 2,230

Generator technologies

 

 

 153

 

 

 190

 

 

 166

 

 

 164

 

 

 673

Commercial projects

 

 

 55

 

 

 58

 

 

 46

 

 

 84

 

 

 243

Consumer

 

 

 50

 

 

 53

 

 

 48

 

 

 49

 

 

 200

Power electronics

 

 

 32

 

 

 40

 

 

 35

 

 

 45

 

 

 152

 

Total sales

 

$

 795

 

$

 909

 

$

 874

 

$

 920

 

$

 3,498

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Distribution segment sales by business

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In millions

 

 

Q1

 

 

Q2

 

 

Q3

 

 

Q4

 

 

YTD

Parts and filtration

 

$

 235

 

$

 271

 

$

 283

 

$

 296

 

$

 1,085

Power generation

 

 

 145

 

 

 195

 

 

 191

 

 

 191

 

 

 722

Engines

 

 

 140

 

 

 186

 

 

 171

 

 

 206

 

 

 703

Service

 

 

 122

 

 

 133

 

 

 138

 

 

 141

 

 

 534

 

Total sales

 

$

 642

 

$

 785

 

$

 783

 

$

 834

 

$

 3,044

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

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