SOURCE: Cummins Inc.

Cummins Inc.

February 05, 2015 07:30 ET

Cummins Announces Results for 2014; Reports Record Revenues; Shares Expectations for Revenue and EBIT Growth in 2015

Fourth Quarter Revenues of $5.1 Billion and EBIT of 13 Percent of Sales Excluding One-Time Items; Full Year 2014 Revenues Increased 11 Percent and EBIT Increased 16 Percent; The Company Expects Revenue Growth of Between 2 and 4 Percent and EBIT to Be in the Range of 13.5 to 14 Percent of Sales in 2015, up From 13 Percent in 2014; Cummins Plans to Return 50 Percent of Operating Cash Flow to Shareholders in 2015

COLUMBUS, IN--(Marketwired - February 05, 2015) - Cummins Inc. (NYSE: CMI) today reported results for the fourth quarter and full year of 2014.

Fourth quarter revenue of $5.1 billion, increased 11 percent from the same quarter in 2013. The year-over-year increase was driven by higher revenues in North America which more than offset lower demand in Brazil and Europe.

Earnings before interest and taxes (EBIT) were $629 million for the fourth quarter or 12.4 percent of sales. These results include $32 million of expense associated with cost reduction activities in the Power Generation business. Excluding this expense, EBIT was $661 million or 13.0 percent of sales. This compares to $566 million or 12.3 percent of sales a year ago.

Net income attributable to Cummins in the fourth quarter was $444 million ($2.44 per diluted share), or $465 million ($2.56 per diluted share) excluding one-time items, compared to $432 million ($2.32 per diluted share) in the fourth quarter of 2013.

Revenues for the full year were a record $19.2 billion, 11 percent higher than 2013. Acquisitions contributed 3 percent to revenue growth. Revenues in North America increased 20 percent and international sales grew 2 percent. Within international markets, growth in China more than offset weaker demand in Brazil and India.

EBIT for the year was $2.5 billion or 13.0 percent of sales. Excluding one-time items, EBIT was $2.53 billion or 13.2 percent compared to $2.16 billion or 12.5 percent of sales in 2013.

Net income attributable to Cummins for the full year was $1.65 billion ($9.02 per diluted share), or $1.67 billion ($9.13 per diluted share) excluding one-time items, up from $1.48 billion ($7.91 per diluted share) in 2013. The full year tax rate was 28.7 percent.

"We reported record revenues in 2014 despite weak economic conditions in several of our most important international markets," said Chairman and CEO Tom Linebarger. "Revenues grew 11 percent as demand in on-highway markets in North America improved, we continued executing our distributor acquisition strategy, and we delivered strong growth in China driven by new products. We continued to invest in future growth, reflecting our commitment to technology and product leadership, while growing EBIT faster than sales."

Cummins' improvement in profitability was driven by record performance in the Components and Distribution businesses and higher earnings in the Engine business. Results in the Company's Power Generation business fell short of expectations, but the actions the Company has taken to lower costs will improve earnings going forward. Demand in North American on-highway markets is expected to improve again in 2015, but will be partially offset by continued weakness in international markets and the negative impact of the strong U.S. dollar.

Linebarger continued, "We are committed to improving the quality of our products and service for our customers, closely managing costs and further improving our financial performance in 2015. The Company delivered on its commitment to return 50 percent of cash from operations to shareholders in 2014 and will do so again this year."

Based on the current forecast, Cummins expects full year revenues to grow between 2 and 4 percent, and EBIT to be in the range of 13.5 to 14.0 percent.

2014 highlights:

  • The Company increased its dividend by 25 percent and repurchased 4.8 million shares
  • The Company received credit rating upgrades from Standard & Poor's and Moody's
  • For the seventh consecutive year, Cummins was named one of the world's most ethical companies by The Ethisphere Institute
  • Cummins received a perfect score in the Corporate Equality Index by the Human Rights Campaign for the 10th consecutive year
  • The Company was ranked among the World's Best in Newsweek's 2014 Green Rankings
  • Cummins was named one of the Top 50 companies for diversity by Diversity Inc for the seventh consecutive year

Fourth quarter 2014 detail (all comparisons to same period in 2013)

Engine Segment

  • Q4 Sales - $2.8 billion, up 11 percent
  • Q4 Segment EBIT - $315 million, or 11.1 percent of sales, compared to $235 million or 9.2 percent of sales
  • Strong demand in on-highway markets in North America more than offset weakness in Brazil, China and Europe
  • Full year sales $11 billion, up 9 percent, EBIT of $1.23 billion compared to $1.04 billion in 2013

Components Segment

  • Q4 Sales - $1.3 billion, up 16 percent
  • Q4 Segment EBIT - $160 million, or 12.1 percent of sales, compared to $140 million or 12.3 percent of sales
  • Higher demand in on-highway markets in North America, Europe and China
  • Full year sales $5.1 billion, up 18 percent, EBIT of $684 million compared to $527 million in 2013

Power Generation Segment

  • Q4 Sales - $760 million, flat compared to 2013
  • Q4 Segment EBIT - $22 million, or 2.9 percent of sales, compared to $46 million or 6.1 percent of sales. EBIT in the fourth quarter of 2014 includes expense of $32 million associated with cost reduction activities
  • Higher revenues in Latin America and Africa offset weaker demand in Eastern Europe and India
  • Full year sales $2.9 billion, down 4 percent, EBIT of $168 million compared to $218 million in 2013

Distribution Segment

  • Q4 Sales - $1.7 billion, up 58 percent, up 7 percent excluding acquisitions
  • Q4 Segment EBIT - $158 million, or 9.3 percent of sales, compared to $107 million or 10.0 percent of sales
  • Current quarter included gains of $35 million, and amortization costs of $17 million related to acquisitions
  • Higher revenues were primarily driven by acquisitions and stronger demand for parts and service in North America
  • Full year sales $5.2 billion, up 38 percent, EBIT of $491 million compared to $388 million in 2013

About Cummins
Cummins Inc., a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service diesel and natural gas engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Headquartered in Columbus, Indiana, (USA) Cummins currently employs approximately 54,600 people worldwide and serves customers in approximately 190 countries and territories through a network of approximately 600 company-owned and independent distributor locations and approximately 7,200 dealer locations. Cummins earned $1.65 billion on sales of $19.2 billion in 2014. Press releases can be found on the Web at www.cummins.com. Follow Cummins on Twitter at @Cummins and on YouTube at CumminsInc.

Forward-looking disclosure statement
Information provided in this release that is not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our forecasts, guidance, preliminary results, expectations, hopes, beliefs and intentions on strategies regarding the future. These forward looking statements include, without limitation, statements relating to our plans and expectations for our revenues for the full year of 2015. Our actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including, but not limited to: the adoption and implementation of global emission standards; the price and availability of energy; the pace of infrastructure development; increasing global competition among our customers; general economic, business and financing conditions; governmental action; changes in our customers' business strategies; competitor pricing activity; expense volatility; labor relations; and other risks detailed from time to time in our Securities and Exchange Commission filings, including particularly in the Risk Factors section of our 2013 Annual Report on Form 10-K. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this press release and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the Securities and Exchange Commission, which are available at http://www.sec.gov or at http://www.cummins.com in the Investor Relations section of our website.

Presentation of Non-GAAP Financial Information
EBIT is a non-GAAP measure used in this release, and is defined and reconciled to what management believes to be the most comparable GAAP measure in a schedule attached to this release. Cummins presents this information as it believes it is useful to understanding the Company's operating performance, and because EBIT is a measure used internally to assess the performance of the operating units.

Webcast information
Cummins management will host a teleconference to discuss these results today at 10 a.m. EST. This teleconference will be webcast and available on the Investor Relations section of the Cummins website at www.cummins.com. Participants wishing to view the visuals available with the audio are encouraged to sign-in a few minutes prior to the start of the teleconference.

The following files are available for download:

  
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (a)
 
   Three months ended  
In millions, except per share amounts  December 31,
2014
  December 31,
2013
 
NET SALES  $ 5,090   $4,588  
 Cost of sales    3,817    3,451  
GROSS MARGIN    1,273    1,137  
             
OPERATING EXPENSES AND INCOME            
 Selling, general and administrative expenses    568    473  
 Research, development and engineering expenses    187    181  
 Equity, royalty and interest income from investees    76    80  
 Other operating income (expense), net    (13 )  (10 )
OPERATING INCOME    581    553  
             
 Interest income    6    6  
 Interest expense    17    19  
 Other income, net    42    7  
INCOME BEFORE INCOME TAXES    612    547  
             
 Income tax expense    145    86  
CONSOLIDATED NET INCOME    467    461  
             
 Less: Net income attributable to noncontrolling interests    23    29  
NET INCOME ATTRIBUTABLE TO CUMMINS INC.  $ 444   $432  
             
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.            
 Basic  $ 2.45   $2.33  
 Diluted  $ 2.44   $2.32  
             
WEIGHTED AVERAGE SHARES OUTSTANDING            
 Basic    181.4    185.7  
 Diluted    181.9    186.3  
             
CASH DIVIDENDS DECLARED PER COMMON SHARE  $ 0.78   $0.625  
         

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

  
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (a)
 
  Years ended December 31,  
In millions, except per share amounts 2014   2013  
NET SALES $19,221   $17,301  
 Cost of sales  14,360    13,021  
GROSS MARGIN  4,861    4,280  
           
OPERATING EXPENSES AND INCOME          
 Selling, general and administrative expenses  2,095    1,817  
 Research, development and engineering expenses  754    713  
 Equity, royalty and interest income from investees  370    361  
 Other operating expense, net  (17 )  (10 )
OPERATING INCOME  2,365    2,101  
           
 Interest income  23    27  
 Interest expense  64    41  
 Other income, net  110    32  
INCOME BEFORE INCOME TAXES  2,434    2,119  
           
 Income tax expense  698    531  
CONSOLIDATED NET INCOME  1,736    1,588  
           
 Less: Net income attributable to noncontrolling interests  85    105  
NET INCOME ATTRIBUTABLE TO CUMMINS INC. $1,651   $1,483  
           
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.          
 Basic $9.04   $7.93  
 Diluted $9.02   $7.91  
           
WEIGHTED AVERAGE SHARES OUTSTANDING          
 Basic  182.7    187.0  
 Diluted  183.1    187.4  
           
CASH DIVIDENDS DECLARED PER COMMON SHARE $2.81   $2.25  
        

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

 
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (a)
   December 31,
In millions, except par value  2014  2013
ASSETS      
Current assets      
 Cash and cash equivalents  $2,301  $2,699
 Marketable securities   93   150
  Total cash, cash equivalents and marketable securities   2,394   2,849
 Accounts and notes receivable, net   2,946   2,649
 Inventories   2,866   2,381
 Prepaid expenses and other current assets   849   760
   Total current assets   9,055   8,639
Long-term assets        
 Property, plant and equipment, net   3,686   3,156
 Investments and advances related to equity method investees   981   931
 Goodwill and other intangible assets, net   822   818
 Other assets   1,232   1,184
      Total assets  $15,776  $14,728
         
LIABILITIES        
Current liabilities        
 Loans payable  $86  $17
 Accounts payable (principally trade)   1,881   1,557
 Accrued expenses   2,054   1,794
    Total current liabilities   4,021   3,368
Long-term liabilities        
 Long-term debt   1,589   1,672
 Other liabilities   2,073   1,818
     Total liabilities   7,683   6,858
         
EQUITY        
Cummins Inc. shareholders' equity        
 Common stock, $2.50 par value, 500 shares authorized, 222.3 and 222.3 shares issued   2,139   2,099
 Retained earnings   9,545   8,406
 Treasury stock, at cost, 40.1 and 35.6 shares   (2,844)   (2,195)
 Common stock held by employee benefits trust, at cost, 1.1 and 1.3 shares   (13)   (16)
 Accumulated other comprehensive loss   (1,078)   (784)
   Total Cummins Inc. shareholders' equity   7,749   7,510
Noncontrolling interests   344   360
     Total equity   8,093   7,870
      Total liabilities and equity  $15,776  $14,728
             

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

 
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (a)
 
 
   Years ended December 31,
In millions  2014  2013
NET CASH PROVIDED BY OPERATING ACTIVITIES  $2,266  $2,089
         
CASH FLOWS FROM INVESTING ACTIVITIES        
 Capital expenditures   (743)   (676)
 Investments in internal use software   (55)   (64)
 Investments in and advances to equity investees   (60)   (42)
 Acquisitions of businesses, net of cash acquired   (436)   (147)
 Investments in marketable securities-acquisitions   (275)   (418)
 Investments in marketable securities-liquidations   336   525
 Purchases of other investments   -   (40)
 Cash flows from derivatives not designated as hedges   (14)   1
 Other, net   13   15
Net cash used in investing activities   (1,234)   (846)
         
CASH FLOWS FROM FINANCING ACTIVITIES        
 Proceeds from borrowings   55   1,004
 Payments on borrowings and capital lease obligations   (94)   (90)
 Distributions to noncontrolling interests   (83)   (75)
 Dividend payments on common stock   (512)   (420)
 Repurchases of common stock   (670)   (381)
 Other, net   (39)   14
Net cash (used in) provided by financing activities   (1,343)   52
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS   (87)   35
Net (decrease) increase in cash and cash equivalents   (398)   1,330
Cash and cash equivalents at beginning of year   2,699   1,369
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $2,301  $2,699
       

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

 
 
CUMMINS INC. AND SUBSIDIARIES 
SEGMENT INFORMATION 
(Unaudited)
 

In millions

Engine
  
Distribution
     
Components
 Power
Generation
     Non-segment
Items(1)
  
Total
 
Three months ended December 31, 2014                      
External sales$1,988  $1,682     $970 $450     $-  $5,090 
Intersegment sales 851   12      351  310      (1,524)  - 
 Total sales 2,839   1,694      1,321  760      (1,524)  5,090 
Depreciation and amortization(2) 54   28      27  15      -   124 
Research, development and engineering expenses 103   2      60  22      -   187 
Equity, royalty and interest income from                            
investees 30   28      9  9      -   76 
Interest income 3   2      1  -      -   6 
Segment EBIT 315   158  (3)  160  22  (4)  (26)  629 
                             
Segment EBIT as a percentage of total sales 11.1%  9.3%     12.1% 2.9%         12.4%
                             
Three months ended December 31, 2013                            
External sales$2,131  $1,065     $859 $533     $-  $4,588 
Intersegment sales 431   8      276  226      (941)  - 
 Total sales 2,562   1,073      1,135  759      (941)  4,588 
Depreciation and amortization(2) 49   14      25  13      -   101 
Research, development and engineering expenses 106   2      53  20      -   181 
Equity, royalty and interest income from                            
investees 30   41      7  2      -   80 
Interest income 3   1      1  1      -   6 
Segment EBIT 235   107      140  46      38   566 
                             
Segment EBIT as a percentage of total sales 9.2%  10.0%     12.3% 6.1%         12.3%
   
(1) Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended December 31, 2014 and December 31, 2013.
(2) Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Income as "Interest expense."
(3) Distribution segment EBIT for the three months ended December 31, 2014 included gains of $35 million on the fair value adjustments resulting from the acquisitions of controlling interests in North American distributors.
(4) Power Generation segment EBIT for the three months ended December 31, 2014, included actions taken to reduce its future cost structure. Costs associated with these actions were $32 million and are primarily related to the closure of a plant in Germany. The charge also included $3 million of targeted actions throughout the business including various headcount reductions to better align capacity with current levels of demand.
  
 
 
CUMMINS INC. AND SUBSIDIARIES 
SEGMENT INFORMATION 
(Unaudited)
In millionsEngine Distribution Components Power Generation Non-segment Items(1) Total
Year ended December 31, 2014                 
External sales$8,437 $5,135
 $3,791
 $1,858
 $-
 $19,221
Intersegment sales 2,525  39  1,327  1,038  (4,929)  -
 Total sales 10,962  5,174  5,118  2,896  (4,929)  19,221
Depreciation and amortization(2) 207  86  106  53  -  452
Research, development and engineering expenses 438  9  230  77  -  754
Equity, royalty and interest income from investees 147  148  36  39  -  370
Interest income 12  4  4  3  -  23
Segment EBIT 1,225  491(3) 684
  168
(4) (70)
  2,498
                  
Segment EBIT as a percentage of total sales 11.2%  9.5%
  13.4%
  5.8%
     13.0%
                  
Year ended December 31, 2013                 
External sales$8,270 $3,726
 $3,151
 $2,154
 $-
 $17,301
Intersegment sales 1,743  23  1,191  877  (3,834)  -
 Total sales 10,013  3,749  4,342  3,031  (3,834)  17,301
Depreciation and amortization(2) 205  54  96  50  -  405
Research, development and engineering expenses 416  6  218  73  -  713
Equity, royalty and interest income from investees 136  165  28  32  -  361
Interest income 16  2  3  6  -  27
Segment EBIT 1,041  388(3) 527
  218
  (14)
  2,160
                  
Segment EBIT as a percentage of total sales 10.4%  10.3%
  12.1%
  7.2%
     12.5%
   
(1) Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the years ended December 31, 2014 and December 31, 2013.
(2) Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Income as "Interest expense." The amortization of debt discount and deferred costs were $3 million and $2 million for the years ended December 31, 2014 and 2013, respectively.
(3) Distribution segment EBIT for the years ended December 31, 2014 and December 31, 2013 included gains of $73 million and $12 million on the fair value adjustments resulting from the acquisitions of controlling interests in North American distributors in each period, respectively.
(4) Power Generation segment EBIT for the year ended December 31, 2014, included actions taken to reduce its future cost structure. Costs associated with these actions were $32 million and are primarily related to the closure of a plant in Germany. The charge also included $3 million of targeted actions throughout the business including various headcount reductions to better align capacity with current levels of demand.
  

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  Twelve months ended
In millions December 31, 2014  December 31, 2013  December 31, 2014  December 31, 2013
Total EBIT $629  $566  $2,498  $2,160
Less: Interest expense  17   19   64   41
 Income before income taxes $612  $547  $2,434  $2,119
             

 
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 reporting periods was as follows:

     
 Three months ended  Years ended
In millions December
31, 2014
  December
31, 2013
 December
31, 2014
 December
31, 2013
Distribution Entities            
North American distributors $18   $31 $107  $129
Komatsu Cummins Chile, Ltda.  7   8  29   25
All other distributors  2   -  4   1
Manufacturing Entities              
Dongfeng Cummins Engine Company, Ltd.  16
   18
  67   63
Chongqing Cummins Engine Company, Ltd.  12
   14
  51   58
Beijing Foton Cummins Engine Co., Ltd. (Light-duty)  4
   3
  28   17
Beijing Foton Cummins Engine Co., Ltd. (Heavy-duty)  (12)
   (7)  (30)   (21)
All other manufacturers  20   4
  74   53
 Cummins share of net income 67   71  330  325
Royalty and interest income  9    9  40   36
 Equity, royalty and interest income from investees $76   $80 $370  $361
              

NOTE 2. INCOME TAXES

U.S. tax legislation was passed in the fourth quarter extending the federal research tax credit to 2014. We recorded a $24 million benefit in the fourth quarter related to this legislation.

NOTE 3. ACQUISITIONS
The Distribution segment joint venture acquisitions for the fourth quarter 2014 were as follows:

 
Entity Acquired  Date of Acquisition  Additional Percent
Interest Acquired
 Payments to Former Owners  Acquisition
Related
Debt
Retirements
 Total Purchase 
Consideration
 Type of
Acquisition
(1)
 Gain
Recognized
(1)
 Goodwill
Acquired
 Intangibles
Recognized
 Net Sales Previous Fiscal Year Ended
Cummins Bridgeway LLC  11/03/14  54 %  $22  $45  $77(3)  COMB  $13  $4  $15  $331
Cummins Npower LLC  09/29/14  50 %   33   34   73(3)   COMB   15   7   8   374
Cummins Power South LLC  09/29/14  50 %   17   16   35(3)   COMB   7   8   1   239
                            

____________________________________________________
(1) All results from acquired entities were included in Distribution segment results subsequent to the acquisition date. Newly consolidated entities were accounted for as business combinations (COMB) with gains recognized based on the requirement to remeasure our pre-existing ownership to fair value in accordance with GAAP.
(2) Purchase accounting for this acquisition is preliminary awaiting customary adjustment to purchase price in accordance with the purchase agreements.
(3) The "Total Purchase Consideration" represents the total amount that will or is estimated to be paid to complete the acquisition. In some instances a portion of the acquisition payment has not yet been made and will be paid in future periods in accordance with the purchase contract. The total outstanding consideration as of December 31, 2014 for these entities was $18 million.

 
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 periods presented as it illustrates our operating performance without regard to special items including tax adjustments and plant closing and other actions. This measure is not in accordance with, or an alternative for, accounting principles generally accepted in the United States of America (GAAP) 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 following periods:

 
  Three months ended
  December 31, 2014  December 31, 2013
In millions Net Income  Diluted EPS  Net Income  Diluted EPS
Net income attributable to Cummins Inc. $ 444    $ 2.44    $ 432    $ 2.32 
Add                      
Power Generation segment actions (1)  21     0.12     -     
Less                      
Tax items  -     -     70     0.38 
Net income attributable to Cummins Inc. excluding special items $ 465    $ 2.56    $ 362    $ 1.94 
                       
   Years ended
   December 31, 2014   December 31, 2013
In millions  Net Income    Diluted EPS    Net Income    Diluted EPS
Net income attributable to Cummins Inc. $ 1,651    $ 9.02    $ 1,483    $ 7.91 
Add                      
Power Generation segment actions (1)  21     0.11     -     
Less                      
Tax items  -     -     74     0.39 
Net income attributable to Cummins Inc. excluding special items $ 1,672    $ 9.13    $ 1,409    $ 7.52 
                               
(1) In the fourth quarter of 2014, we recorded a plant closing and initiated other actions totaling $32 million ($21 million after tax).                              
 
 
CUMMINS INC. AND SUBSIDIARIES
FINANCIAL MEASURES THAT SUPPLEMENT GAAP
(Unaudited)
 

Earnings before interest, taxes, noncontrolling interests and special items

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. This measure is not in accordance with, or an alternative for, GAAP and may not be consistent with measures used by other companies. It should be considered supplemental data. Below is a reconciliation of EBIT to "Net income attributable to Cummins Inc.," for each of the applicable periods:

     
    Three months ended   Years ended
In millions   December 31,
2014
  December 31,
2013
  December 31,
2014
  December 31,
2013
Earnings before interest expense, income taxes and special items   $ 661     $ 566     $ 2,530     $ 2,160  
                            
Earnings before interest expense, income taxes and special items as a percentage of net sales   13.0 %    12.3 %    13.2 %    12.5 %
                            
Less                           
 Plant closing and other actions   32      -      32      -  
Earnings before interest expense and income taxes   $ 629     $ 566     $ 2,498     $ 2,160  
                            
EBIT as a percentage of net sales   12.4 %    12.3 %    13.0 %    12.5 %
                            
Less                           
 Interest expense   17      19      64      41  
 Income tax expense   145      86      698      531  
Consolidated net income   467      461      1,736      1,588  
                            
Less                           
 Net income attributable to noncontrolling interests   23      29      85      105  
  Net income attributable to Cummins Inc.   $ 444     $ 432     $ 1,651     $ 1,483  
                            
Net income attributable to Cummins Inc. as a percentage of net sales   8.7 %    9.4 %    8.6 %    8.6 %
                
 
CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)
 

Engine segment net sales by market:

                
2014                              
In millions   Q1   Q2   Q3   Q4   YTD
Heavy-duty truck   $ 722     $ 796     $ 823     $ 798     $ 3,139  
Medium-duty truck and bus   601      646      631      652      2,530  
Light-duty automotive and RV   361      336      354      385      1,436  
Industrial   700      757      788      795      3,040  
Stationary power   179      209      220      209      817  
 Total sales   $ 2,563     $ 2,744     $ 2,816     $ 2,839     $ 10,962  
                                   
2013                                  
In millions   Q1    Q2    Q3    Q4    YTD
Heavy-duty truck   $ 654     $ 723     $ 690     $ 638     $ 2,705  
Medium-duty truck and bus   448      595      570      572      2,185  
Light-duty automotive and RV   260      345      330      365      1,300  
Industrial   714      762      709      811      2,996  
Stationary power   227      231      193      176      827  
 Total sales   $ 2,303     $ 2,656     $ 2,492     $ 2,562     $ 10,013  
                      

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

 
                
2014                              
Units   Q1   Q2   Q3   Q4   YTD
Midrange   118,900     118,700     117,700     115,900     471,200  
Heavy-duty   28,800     30,300     32,300     30,700     122,100  
High-horsepower   3,400     3,900     3,900     3,600     14,800  
 Total units   151,100     152,900     153,900     150,200     608,100  
                               
2013                              
Units   Q1   Q2   Q3   Q4   YTD
Midrange   94,600     121,900     113,800     115,700     446,000  
Heavy-duty   24,900     28,300     26,500     25,700     105,400  
High-horsepower   4,200     3,600     3,500     3,500     14,800  
 Total units   123,700     153,800     143,800     144,900     566,200  
                 

Distribution segment sales by business:

                
2014                              
In millions   Q1   Q2   Q3   Q4   YTD
Parts and filtration   $ 382     $ 461     $ 491     $ 590     $ 1,924  
Power generation   193      278      279      413      1,163  
Engines   174      249      270      368      1,061  
Service   201      250      252      323      1,026  
 Total sales   $ 950     $ 1,238     $ 1,292     $ 1,694     $ 5,174  
                                   
2013                                  
In millions   Q1    Q2    Q3    Q4    YTD
Parts and filtration   $ 322     $ 369     $ 377     $ 397     $ 1,465  
Power generation   163      241      234      293      931  
Engines   152      183      170      208      713  
Service   141      161      163      175      640  
 Total sales   $ 778     $ 954     $ 944     $ 1,073     $ 3,749  
                      

Component segment sales by business:

                
2014                              
In millions   Q1   Q2   Q3   Q4   YTD
Emission Solutions   $ 543     $ 582     $ 598     $ 620     $ 2,343  
Turbo Technologies   313      307      297      305      1,222  
Filtration   265      275      268      267      1,075  
Fuel systems   109      116      124      129      478  
 Total sales   $ 1,230     $ 1,280     $ 1,287     $ 1,321     $ 5,118  
                                   
2013                                  
In millions   Q1    Q2    Q3    Q4    YTD
Emission Solutions   $ 400     $ 444     $ 458     $ 489     $ 1,791  
Turbo Technologies   266      294      263      292      1,115  
Filtration   255      271      248      254      1,028  
Fuel systems   97      108      103      100      408  
 Total sales   $ 1,018     $ 1,117     $ 1,072     $ 1,135     $ 4,342  
                      

Power Generation segment sales by business:

                
2014                              
In millions   Q1   Q2   Q3   Q4   YTD
Power products   $373     $ 445     $ 439     $ 412     $ 1,669  
Power systems    137      141      159      194      631  
Alternators    105      126      115      103      449  
Power solutions    24      31      41      51      147  
 Total sales   $639     $ 743     $ 754     $ 760     $ 2,896  
                                    
2013                                   
In millions    Q1    Q2    Q3    Q4    YTD
Power products   $409     $ 474     $ 421     $ 421     $ 1,725  
Power systems    179      187      122      168      656  
Alternators    126      125      126      119      496  
Power solutions    32      28      43      51      154  
 Total sales   $746     $ 814     $ 712     $ 759     $ 3,031  
                      

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