SOURCE: Cummins Inc.

Cummins Inc.

October 29, 2013 07:30 ET

Cummins Reports Results for the Third Quarter of 2013

Third Quarter Revenues of $4.3 Billion and EBIT of 12.6 Percent of Sales; Now Expects Full Year Revenues to Be Down 3 Percent Compared to 2012; Full Year EBIT to Be in the Range 12.5 to 13 Percent of Sales

COLUMBUS, IN--(Marketwired - October 29, 2013) - Cummins Inc. (NYSE: CMI) today reported results for the third quarter of 2013.

Third quarter revenues of $4.3 billion increased 4 percent from the third quarter of 2012. Revenues in North America increased by 11 percent and international revenues declined by 4 percent. Within international markets, growth in China and Brazil was offset by weaker demand in India, Australia and Europe.

Earnings before interest and taxes (EBIT) were $536 million or 12.6 percent of sales, compared to $496 million or 12.0 percent of sales a year ago.

Net income attributable to Cummins in the third quarter was $355 million ($1.90 per diluted share), compared to $352 million ($1.86 per diluted share) in the third quarter of 2012.

"The Company increased gross margins in the third quarter primarily due to the benefits of our cost reduction initiatives. Material cost savings, productivity gains and lower warranty expenses all contributed to the improvement," said Tom Linebarger, Chairman and CEO. "Revenues were below our expectations as we continue to face an environment of weak demand for capital goods in most of our major markets. Our focus on lowering costs in all parts of our business positions us well to deliver strong earnings growth as market conditions improve."

Based on the current forecast, the Company expects full year revenues to be down 3 percent compared to 2012 and EBIT to be in the range of 12.5 to 13 percent of sales. Previously the Company expected revenues to be flat compared to 2012 and EBIT to be in the range of 13 to 14 percent.

Recent highlights include:

  • The Company issued $1 billion of debt, consisting of $500 million of 3.65% senior unsecured notes due in 2023 and $500 million of 4.875% senior unsecured notes due in 2043
  • Cummins leaders shared their five-year plans for profitable growth with analysts and investors, including expected revenues of between $25 and $31 billion and EBIT in the range of 16 to 18 percent by 2018
  • The Company announced plans to acquire the remaining interest in its North American distributors, principally over the next three to five years
  • Cummins made the Dow Jones Sustainability Indices for the 9th consecutive year and was recognized for the strides it has made in decreasing energy use
  • Nissan announced plans to offer the Cummins 5.0 L V8 Turbo Diesel engine in its next generation Titan pickup truck
  • The Company received its best score ever on greenhouse gas reduction from CDP, formerly known as the Carbon Disclosure Project

Third quarter detail (all comparisons to same period in 2012)

Engine Segment

  • Sales - $2.5 billion, down 1 percent
  • Segment EBIT - $272 million, or 10.9 percent of sales, compared to $239 million or 9.5 percent of sales
  • Lower demand in global mining, stationary power and the light duty on-highway market in the US were the most significant drivers of the lower revenues
  • Demand increased for medium duty truck engines in North America and Brazil

Components

  • Sales - $1.1 billion, an increase of 14 percent
  • Segment EBIT - $132 million, or 12.3 percent of sales, compared to $89 million or 9.5 percent of sales
  • Higher revenues primarily related to higher on-highway demand in North America, Europe and China

Power Generation

  • Sales - $712 million, down 13 percent
  • Segment EBIT - $45 million, or 6.3 percent of sales, compared to $73 million or 9.0 percent of sales
  • Weaker demand in most international markets, particularly Europe and India, offsetting stronger revenues in North America

Distribution

  • Sales - $944 million, up 2% excluding acquisitions
  • Segment EBIT - $86 million, or 9.1 percent of sales, compared to $99 million or 12.4 percent of sales
  • Higher power generation and parts sales in North America offset by lower sales in South Pacific and China

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 46,000 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 6,500 dealer locations. Cummins earned $1.65 billion on sales of $17.3 billion in 2012. 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 2013. 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 2012 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.

   
   
CUMMINS INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  
(Unaudited) (a)  
   
   Three months ended  
In millions, except per share amounts  
 
September 29,
2013
 
 
 
 
June 30,
2013
 

September 30,
2012
 
 
NET SALES  $4,266   $4,525   4,118  
  Cost of sales   3,157    3,372   3,076  
GROSS MARGIN   1,109    1,153   1,042  
             
OPERATING EXPENSES AND INCOME               
  Selling, general and administrative expenses   492    484   456  
  Research, development and engineering expenses   173    177   186  
  Equity, royalty and interest income from investees (Note 1)   91    108   94  
  Other operating income (expense), net   (11 )  10   (1 )
OPERATING INCOME   524    610   493  
             
  Interest income   6    10   5  
  Interest expense   8    8   9  
  Other income (expense), net   6    1   (2 )
INCOME BEFORE INCOME TAXES   528    613   487  
             
  Income tax expense (Note 2)   154    172   117  
CONSOLIDATED NET INCOME   374    441   370  
             
  Less: Net income attributable to noncontrolling interests   19    27   18  
NET INCOME ATTRIBUTABLE TO CUMMINS INC.  $355   $414  $352  
             
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO               
CUMMINS INC.               
  Basic  $1.91   $2.20  $1.87  
  Diluted  $1.90   $2.20  $1.86  
             
WEIGHTED AVERAGE SHARES OUTSTANDING               
  Basic   186.0    187.8   188.6  
  Diluted   186.5    188.2   189.0  
             
CASH DIVIDENDS DECLARED PER COMMON SHARE  $0.625   $0.50  $0.50  
                       

(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)
 
   Nine months ended

In millions, except per share amounts
 
September 29,
2013
 
September 30,
2012
NET SALES  $12,713  $13,042
  Cost of sales   9,494   9,592
GROSS MARGIN   3,219   3,450
       
OPERATING EXPENSES AND INCOME        
  Selling, general and administrative expenses   1,420   1,418
  Research, development and engineering expenses   532   554
  Equity, royalty and interest income from investees (Note 1)   281   302
  Gain on sale of businesses   -   6
  Other operating income (expense), net   -   3
OPERATING INCOME   1,548   1,789
       
  Interest income   21   20
  Interest expense   22   25
  Other income (expense), net   25   14
INCOME BEFORE INCOME TAXES   1,572   1,798
       
  Income tax expense (Note 2)   445   458
CONSOLIDATED NET INCOME   1,127   1,340
       
  Less: Net income attributable to noncontrolling interests   76   64
NET INCOME ATTRIBUTABLE TO CUMMINS INC.  $1,051  $1,276
       
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO        
CUMMINS INC.        
  Basic  $5.61  $6.73
  Diluted  $5.60  $6.72
       
WEIGHTED AVERAGE SHARES OUTSTANDING        
  Basic   187.4   189.6
  Diluted   187.8   190.0
       
CASH DIVIDENDS DECLARED PER COMMON SHARE  $1.625  $1.30
             

(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)  
   
   September 29,   December 31,  
In millions, except par value  2013   2012  
ASSETS           
Current assets           
  Cash and cash equivalents  $2,499   $1,369  
  Marketable securities   162    247  
   Total cash, cash equivalents and marketable securities   2,661    1,616  
  Accounts and notes receivable, net   2,709    2,475  
  Inventories   2,513    2,221  
  Prepaid expenses and other current assets   643    855  
    Total current assets   8,526    7,167  
Long-term assets           
  Property, plant and equipment   6,182    5,876  
  Accumulated depreciation   (3,234 )  (3,152 )
   Property, plant and equipment, net   2,948    2,724  
  Investments and advances related to equity method investees   966    897  
  Goodwill   457    445  
  Other intangible assets, net   362    369  
  Other assets   1,077    946  
      Total assets  $14,336   $12,548  
          
LIABILITIES           
Current liabilities           
  Loans payable  $15   $16  
  Accounts payable (principally trade)   1,613    1,339  
  Current maturities of long-term debt   47    61  
  Current portion of accrued product warranty   374    386  
  Accrued compensation, benefits and retirement costs   413    400  
  Deferred revenue   269    215  
  Taxes payable (including taxes on income)   112    173  
  Other accrued expenses   547    546  
    Total current liabilities   3,390    3,136  
Long-term liabilities           
  Long-term debt (Note 3)   1,731    698  
  Postretirement benefits other than pensions   407    432  
  Other liabilities and deferred revenue   1,344    1,308  
     Total liabilities   6,872    5,574  
          
EQUITY           
Cummins Inc. shareholders' equity           
  Common stock, $2.50 par value, 500 shares authorized, 222.3 and 222.4 shares issued   2,095    2,058  
  Retained earnings   8,089    7,343  
  Treasury stock, at cost, 34.9 and 32.6 shares   (2,104 )  (1,830 )
  Common stock held by employee benefits trust, at cost, 1.3 and 1.5 shares   (16 )  (18 )
  Accumulated other comprehensive loss           
   Defined benefit postretirement plans   (738 )  (794 )
   Other   (230 )  (156 )
   Total accumulated other comprehensive loss   (968 )  (950 )
    Total Cummins Inc. shareholders' equity   7,096    6,603  
Noncontrolling interests   368    371  
     Total equity   7,464    6,974  
      Total liabilities and equity  $14,336   $12,548  
                           

(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)  
   
   Nine months ended  
In millions  September 29, 2013   September 30, 2012  
CASH FLOWS FROM OPERATING ACTIVITIES           
  Consolidated net income  $1,127   $1,340  
  Adjustments to reconcile consolidated net income to net cash provided by operating activities           
   Depreciation and amortization   305    262  
   Restructuring payments, net   (25 )  -  
   Gain on sale of businesses   -    (6 )
   Gain on fair value adjustment for consolidated investees   (12 )  (7 )
   Deferred income taxes   78    91  
   Equity in income of investees, net of dividends   (98 )  (51 )
   Pension contributions in excess of expense   (96 )  (74 )
   Other post-retirement benefits payments in excess of expense   (20 )  (16 )
   Stock-based compensation expense   29    29  
   Excess tax benefits on stock-based awards   (13 )  (12 )
   Translation and hedging activities   26    16  
  Changes in current assets and liabilities, net of acquisitions:           
   Accounts and notes receivable   (216 )  66  
   Inventories   (206 )  (367 )
   Other current assets   182    (54 )
   Accounts payable   252    (145 )
   Accrued expenses   (146 )  (398 )
  Changes in other liabilities and deferred revenue   147    154  
  Other, net   19    (41 )
Net cash provided by operating activities   1,333    787  
CASH FLOWS FROM INVESTING ACTIVITIES           
  Capital expenditures   (417 )  (424 )
  Investments in internal use software   (43 )  (62 )
  Investments in and advances to equity investees   (12 )  (92 )
  Acquisition of businesses, net of cash acquired   (145 )  (215 )
  Proceeds from sale of business, net of cash sold   -    10  
  Investments in marketable securities-acquisitions   (360 )  (433 )
  Investments in marketable securities-liquidations   433    475  
  Cash flows from derivatives not designated as hedges   (15 )  13  
  Other, net   14    9  
Net cash used in investing activities   (545 )  (719 )
CASH FLOWS FROM FINANCING ACTIVITIES           
  Proceeds from borrowings (Note 3)   987    64  
  Payments on borrowings and capital lease obligations   (62 )  (120 )
  Net borrowings under short-term credit agreements   34    5  
  Distributions to noncontrolling interests   (53 )  (50 )
  Dividend payments on common stock   (305 )  (246 )
  Repurchases of common stock   (289 )  (231 )
  Excess tax benefits on stock-based awards   13    12  
  Other, net   19    16  
Net cash provided by (used in) financing activities   344    (550 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS   (2 )  31  
Net increase (decrease) in cash and cash equivalents   1,130    (451 )
Cash and cash equivalents at beginning of year   1,369    1,484  
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $2,499   $1,033  

(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
  
Components
  Power
Generation
  
Distribution
  Non-segment
Items(1)
  
Total
 
Three months ended September 29, 2013                               
External sales  $2,045   $784   $499   $938   $-   $4,266  
Intersegment sales   447    288    213    6    (954 )  -  
  Total sales   2,492    1,072    712    944    (954 )  4,266  
Depreciation and amortization(2)   53    24    13    15    -    105  
Research, development and engineering expenses   103    51    18    1    -    173  
Equity, royalty and interest income from investees   31    5    13    42    -    91  
Interest income   4    1    1    -    -    6  
Segment EBIT   272    132    45    86    1    536  
                          
Segment EBIT as a percentage of total sales   10.9 %  12.3 %  6.3 %  9.1 %       12.6 %
                          
Three months ended June 30, 2013                               
External sales  $2,209   $786   $583   $947   $-   $4,525  
Intersegment sales   447    331    231    7    (1,016 )  -  
  Total sales   2,656    1,117    814    954    (1,016 )  4,525  
Depreciation and amortization(2)   51    23    12    15    -    101  
Research, development and engineering expenses   102    57    17    1    -    177  
Equity, royalty and interest income from investees   52    9    10    37    -    108  
Interest income   7    -    2    1    -    10  
Segment EBIT(3)   339    136    76    100    (30 )  621  
                          
Segment EBIT as a percentage of total sales   12.8 %  12.2 %  9.3 %  10.5 %       13.7 %
                          
Three months ended September 30, 2012                               
External sales  $2,131   $663   $526   $798   $-   $4,118  
Intersegment sales   396    275    288    3    (962 )  -  
  Total sales   2,527    938    814    801    (962 )  4,118  
Depreciation and amortization(2)   48    21    12    8    -    89  
Research, development and engineering expenses   115    51    19    1    -    186  
Equity, royalty and interest income from investees   25    7    12    50    -    94  
Interest income   2    1    2    -    -    5  
Segment EBIT(3)   239    89    73    99    (4 )  496  
                          
Segment EBIT as a percentage of total sales   9.5 %  9.5 %  9.0 %  12.4 %       12.0 %
                                                 
  • (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 September 29, 2013, June 30, 2013, and September 30, 2012.
  • (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."
  • (3) Distribution segment EBIT for the three months ended June 30, 2013, included a $5 million gain on the fair value adjustment resulting from the acquisition of a controlling interest in Cummins Rocky Mountain LLC. Distribution segment EBIT for the three months ended September 30, 2012, included a $7 million gain on the fair value adjustment resulting from the acquisition of a controlling interest in Cummins Central Power.
   
   
   
CUMMINS INC. AND SUBSIDIARIES  
SEGMENT INFORMATION  
(Unaudited)  
   

In millions
 
Engine
  
Components
  Power
Generation
  
Distribution
  Non-segment
Items(1)
  
Total
 
Nine months ended September 29, 2013                               
External sales  $6,139   $2,292   $1,621   $2,661   $-   $12,713  
Intersegment sales   1,312    915    651    15    (2,893 )  -  
  Total sales   7,451    3,207    2,272    2,676    (2,893 )  12,713  
Depreciation and amortization(2)   156    71    37    40    -    304  
Research, development and engineering expenses   310    165    53    4    -    532  
Equity, royalty and interest income from investees   106    21    30    124    -    281  
Interest income   13    2    5    1    -    21  
Segment EBIT(3)   806    387    172    281    (52 )  1,594  
                          
Segment EBIT as a percentage of total sales   10.8 %  12.1 %  7.6 %  10.5 %       12.5 %
                          
Nine months ended September 30, 2012                               
External sales  $6,924   $2,147   $1,614   $2,357   $-   $13,042  
Intersegment sales   1,303    926    889    13    (3,131 )  -  
  Total sales   8,227    3,073    2,503    2,370    (3,131 )  13,042  
Depreciation and amortization(2)   142    59    34    23    -    258  
Research, development and engineering expenses   341    153    56    4    -    554  
Equity, royalty and interest income from investees   100    23    32    147    -    302  
Interest income   9    3    7    1    -    20  
Segment EBIT(3)   996    348    243    285    (49 )  1,823  
                          
Segment EBIT as a percentage of total sales   12.1 %  11.3 %  9.7 %  12.0 %       14.0 %
                                                 
  • (1) Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. The nine months ended September 30, 2012, included a $6 million gain ($4 million after-tax) related to adjustments from our 2011 divestitures. The gain has been excluded from segment results as it was not considered in our evaluation of operating results for the corresponding periods. There were no other significant unallocated corporate expenses for the nine months ended September 29, 2013 and September 30, 2012.
  • (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."
  • (3) Distribution segment EBIT for the nine months ended September 29, 2013, included a $7 million gain and $5 million gain on the fair value adjustment resulting from the acquisitions of a controlling interest in Cummins Northwest LLC and Cummins Rocky Mountain LLC, respectively. Distribution segment EBIT for the nine months ended September 30, 2012, included a $7 million gain on the fair value adjustment resulting from the acquisition of a controlling interest in Cummins Central Power.
 
 
 
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

In millions
 September 29, 2013  June 30, 2013  September 30, 2012  September 29, 2013  September 30, 2012
Total EBIT  $536  $621  $496  $1,594  $1,823
Less: Interest expense   8   8   9   22   25
  Income before income taxes  $528  $613  $487  $1,572  $1,798
   
   
   
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  
 
In millions
 
 
September 29, 2013  
 
June 30, 2013  
 
September 30, 2012  
 
 
 
September 29, 2013  
 
September 30, 2012  
 
Distribution Entities                       
North American distributors  $34  $29  $37   $98  $115  
Komatsu Cummins Chile, Ltda.   6   6   9    17   20  
All other distributors   1   -   -    1   3  
Manufacturing Entities                       
Chongqing Cummins Engine Company, Ltd.   15   17   14    44   49  
Dongfeng Cummins Engine Company, Ltd.   13   20   9    45   42  
Beijing Foton Cummins Engine Co., Ltd.   4   9   3    14   3  
Shanghai Fleetguard Filter Co., Ltd.   4   4   3    11   10  
Cummins Westport, Inc.   2   3   2    5   11  
Tata Cummins, Ltd.   1   2   -    4   7  
Komatsu manufacturing alliances   -   4   (1 )  3   (1 )
Valvoline Cummins, Ltd.   -   2   2    5   6  
Xian Cummins Engine Company Ltd.   -   1   1    1   (5 )
All other manufacturers   3   1   6    6   12  
  Cummins share of net income   83   98   85    254   272  
Royalty and interest income   8   10   9    27   30  
   Equity, royalty and interest income from investees  $91  $108  $94   $281  $302  
                   
                                   

NOTE 2. INCOME TAXES

Our effective tax rate for the year is expected to approximate 28.5 percent, excluding any one-time items that may arise. Our tax rate is generally less than the 35 percent U.S. statutory income tax rate primarily due to lower tax rates on foreign income and research tax credits. The tax rates for the three and nine month periods ended September 29, 2013, were 29.2 percent and 28.3 percent, respectively. These tax rates include a $7 million discrete net tax expense for the third quarter tax adjustments: $4 million expense attributable to prior year tax return true-up adjustments, $1 million benefit related to release of prior year tax reserves and a discrete tax charge for $4 million related to a third quarter enactment of U.K. tax law changes. In addition the nine month tax rate includes a discrete tax benefit in the first quarter of 2013 of $28 million attributable to the reinstatement of the research credit back to 2012 as well as a discrete tax expense in the first quarter of 2013 of $17 million, which primarily relates to the write-off of a deferred tax asset deemed unrecoverable. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law and reinstated the research tax credit. As tax law changes are accounted for in the period of enactment, we recognized the discrete tax benefit in the first quarter of 2013.

Our tax rates for the three and nine month periods ended September 30, 2012, were 24.1 percent and 25.5 percent, respectively. These tax rates include a $16 million tax benefit for third quarter discrete tax adjustments, $6 million of which related to a dividend distribution of accumulated foreign income earned in prior years. These discrete tax adjustments also included a discrete tax benefit of $13 million for prior year tax return true-up adjustments and a discrete tax charge of $3 million related to the third quarter enactment of U.K. tax law changes. The increase in the 2013 effective tax rates compared to 2012 is primarily due to unfavorable changes in the pre-tax mix of income taxed in higher rate jurisdictions and discrete tax items.

CUMMINS INC. AND SUBSIDIARIES
SELECTED FOOTNOTE DATA
(Unaudited)

NOTE 3. DEBT

In September 2013, we issued $1 billion aggregate principal amount of senior notes consisting of $500 million aggregate principal amount of 3.65% senior unsecured notes due in 2023 and $500 million aggregate principal amount of 4.875% senior unsecured notes due in 2043. We received net proceeds of $979 million. The senior notes pay interest semi-annually on April 1 and October 1, commencing on April 1, 2014. The indenture governing the senior notes contains covenants that, among other matters, limit (i) our ability to consolidate or merge into, or sell, assign, convey, lease, transfer or otherwise dispose of all or substantially all of our and our subsidiaries' assets to another person, (ii) our and certain of our subsidiaries' ability to create or assume liens and (iii) our and certain of our subsidiaries' ability to engage in sale and leaseback transactions. We currently anticipate using a portion of the net proceeds from the sale of the notes for the planned acquisitions of the equity that we do not already own in our partially-owned United States and Canadian distributors, as well as for general corporate purposes.

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 the one-time tax adjustments and gain related to the sale of certain assets and liabilities. 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 quarters ended September 29, 2013, June 30, 2013 and September 30, 2012:

                         
   Three months ended
   September 29, 2013   June 30, 2013  September 30, 2012
In millions  Net Income   Diluted EPS   Net Income  Diluted EPS  Net Income  Diluted EPS
Net income attributable to Cummins Inc.  $355   $1.90   $414  $2.20  $352  $1.86
Less                          
  One-time tax items (1)   (7 )  (0.04 )  -   -   16   0.08
Net income attributable to Cummins Inc.excluding special items  $362   $1.94   $414  $2.20  $336  $1.78

 

 
   Nine months ended
   September 29, 2013  September 30, 2012
In millions  Net Income  Diluted EPS  Net Income  Diluted EPS
Net income attributable to Cummins Inc.  $1,051  $5.60  $1,276  $6.72
Less                
  One-time tax items (1)   4   0.03   16   0.09
  Gain on sale of businesses (2)   -   -   4   0.02
Net income attributable to Cummins Inc.                
excluding special items  $1,047  $5.57  $1,256  $6.61
                         
  • (1) The one-time tax items for the three and nine months ended September 29, 2013, included a $7 million discrete tax expense. In addition, the nine months ended September 29, 2013, included a discrete tax benefit of $28 million attributable to the 2012 research credit as well as discrete tax expense of $17 million, which relates to the write-off of a deferred tax asset deemed unrecoverable.
    The three and nine month periods ended September 30, 2012, included a $16 million tax benefit for third quarter 2012 discrete tax adjustments, $6 million of which related to a dividend distribution of accumulated foreign income earned in prior years. These discrete tax adjustments also included a discrete tax benefit of $13 million for prior year tax return true-up adjustments and a discrete tax charge of $3 million related to the third quarter enactment of U.K. tax law changes.
  • (2) The gain has been excluded from operating results as it was not considered in our evaluation of performance for the nine months ended September 30, 2012.

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  

In millions
 September 29, 2013   June 30, 2013   September 30, 2012   September 29, 2013   September 30, 2012  
Earnings before interest income, income taxes and special items  $536   $621   $496   $1,594   $1,817  
                      
Earnings before interest expense, income taxes and special items as a percentage of net sales   12.6 %  13.7 %  12.0 %  12.5 %  13.9 %
                      
Add                          
  Gain on sale of businesses   -    -    -    -    6  
                      
Earnings before interest expense and income taxes  $536   $621   $496   $1,594   $1,823  
                      
EBIT as a percentage of net sales   12.6 %  13.7 %  12.0 %  12.5 %  14.0 %
                      
Less                          
  Interest expense   8    8    9    22    25  
  Income tax expense   154    172    117    445    458  
Consolidated net income   374    441    370    1,127    1,340  
                      
Less                          
  Net income attributable to noncontrolling interests   19    27    18    76    64  
   Net income attributable to Cummins Inc.  $355   $414   $352   $1,051   $1,276  
                      
Net income attributable to Cummins Inc. as a percentage of net sales   8.3 %  9.1 %  8.5 %  8.3 %  9.8 %
 
 
 
CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)
           
Engine segment net sales by market               
                     
2013               
In millions  Q1  Q2  Q3  Q4  YTD
Heavy-duty truck  $654  $723  $690   -  $2,067
Medium-duty truck and bus   448   595   570   -   1,613
Light-duty automotive and RV   260   345   330   -   935
Industrial   714   762   709   -   2,185
Stationary power   227   231   193   -   651
  Total sales  $2,303  $2,656  $2,492   -  $7,451
                
2012                    
In millions   Q1   Q2   Q3   Q4   YTD
Heavy-duty truck  $892  $807  $656  $609  $2,964
Medium-duty truck and bus   526   512   478   575   2,091
Light-duty automotive and RV   286   297   353   343   1,279
Industrial   861   859   766   747   3,233
Stationary power   294   366   274   232   1,166
  Total sales  $2,859  $2,841  $2,527  $2,506  $10,733
 
 
 
Unit shipments by engine classification (including unit shipments to Power Generation)
                     
2013               
Units  Q1  Q2  Q3  Q4  YTD
Midrange  94,600  121,900  113,800  -  330,300
Heavy-duty  24,900  28,300  26,500  -  79,700
High-horsepower  4,200  3,600  3,500  -  11,300
  Total units  123,700  153,800  143,800  -  421,300
           
2012               
Units  Q1  Q2  Q3  Q4  YTD
Midrange  109,000  110,000  113,000  108,500  440,500
Heavy-duty  36,000  33,000  26,000  24,100  119,100
High-horsepower  5,500  5,800  4,600  3,900  19,800
  Total units  150,500  148,800  143,600  136,500  579,400
 
 
 
CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)
 
Component segment sales by business               
                     
2013               
In millions  Q1  Q2  Q3  Q4  YTD
Emission solutions  $400  $444  $458   -  $1,302
Turbo technologies   266   294   263   -   823
Filtration   255   271   248   -   774
Fuel systems   97   108   103   -   308
  Total sales  $1,018  $1,117  $1,072   -  $3,207
                
2012                    
In millions   Q1   Q2   Q3   Q4   YTD
Emission solutions  $404  $349  $325  $337  $1,415
Turbo technologies   298   297   257   254   1,106
Filtration   270   266   260   252   1,048
Fuel systems   127   124   96   96   443
  Total sales  $1,099  $1,036  $938  $939  $4,012
                
Power Generation segment sales by business                    
2013                    
In millions   Q1   Q2   Q3   Q4   YTD
Power products  $409  $474  $421   -  $1,304
Generator technologies   126   125   126   -   377
Power systems   179   187   122   -   488
Power solutions   32   28   43   -   103
  Total sales  $746  $814  $712   -  $2,272
                
2012                    
In millions   Q1   Q2   Q3   Q4   YTD
Power products  $375  $459  $425  $395  $1,654
Generator technologies   141   160   138   127   566
Power systems   188   217   174   178   757
Power solutions   76   73   77   65   291
  Total sales  $780  $909  $814  $765  $3,268
                
Distribution segment sales by business                    
2013                    
In millions   Q1   Q2   Q3   Q4   YTD
Parts and filtration  $322  $369  $377   -  $1,068
Power generation   163   241   234   -   638
Engines   152   183   170   -   505
Service   141   161   163   -   465
  Total sales  $778  $954  $944   -  $2,676
                
2012                    
In millions   Q1   Q2   Q3   Q4   YTD
Parts and filtration  $288  $302  $326  $319  $1,235
Power generation   186   201   178   242   807
Engines   166   147   157   195   665
Service   135   144   140   151   570
  Total sales  $775  $794  $801  $907  $3,277
                                 

Contact Information

  • Contact information

    Carole Casto
    Executive Director - Corporate Communications
    (317) 610-2480