Cummins Reports Strong Sales and Profits in Fourth Quarter 2009
-- 2010 Forecast of $11 Billion in Sales and 7 Percent EBIT in Line With 2009 Performance
COLUMBUS, Ind.--(BUSINESS WIRE)-- Cummins Inc. (NYSE: CMI) today reported that the fourth quarter 2009 was the most profitable fourth quarter in Company history, eclipsing the previous mark set in 2007.
Sales of $3.40 billion grew 3 percent from $3.29 billion in the fourth quarter 2008, while net income attributable to Cummins Inc. increased to $270 million, or $1.36 a share, from $43 million, or 22 cents a share, a year ago.
Earnings Before Interest and Taxes (EBIT) was $383 million or 11.3 percent of sales, compared to $56 million, or 1.7 percent of sales in the fourth quarter 2008. The fourth quarter 2009 results include a pre-tax charge of $4 million to cover the costs associated with restructuring, while the 2008 results included a $37 million pre-tax charge for similar actions. Excluding these charges, fourth quarter 2009 EBIT was $387 million, or 11.4 percent of sales, compared to $93 million, or 2.8 percent of sales in the same period in 2008.
For all of 2009, the Company reported revenues of $10.8 billion, down 25 percent from $14.3 billion in 2008 as a result of the deep global recession that reduced demand in most markets throughout the year. Despite the downturn, Cummins reported solid profit and significant positive cash flow in 2009 as the Company's results improved on a quarter-to-quarter basis throughout 2009.
EBIT before restructuring and other charges was $774 million, or 7.2 percent of sales - compared to EBIT before restructuring and other charges of $1.26 billion, or 8.8 percent of sales in 2008. Net income attributable to Cummins Inc. in 2009 declined by 43 percent to $428 million, or $2.16 a share, compared to $755 million, or $3.84 a share in 2008. Excluding the restructuring and other charges, full year 2009 earnings per share was $2.49.
The Company reported an increase in cash of $244 million in the fourth quarter and approximately $500 million for all of 2009, driven by broad-based efforts to lower costs, align manufacturing capacity with demand and reduce inventory levels across all its businesses. The Company had $930 million in cash at the end of 2009.
"Given the extraordinarily challenging economic climate throughout much of the year, we are extremely pleased with our financial results for both the fourth quarter and all of 2009," said Cummins Chairman and Chief Executive Officer Tim Solso. "By taking decisive action early in the recession to bring our costs in line with real demand for our products, and through the hard work of all our people worldwide, we delivered as we promised in 2009: We earned a solid profit during the deepest recession in decades and generated a significant amount of cash while continuing to invest in technologies and programs critical to our success."
In addition to its strong financial performance, the Company invested significantly in new products in 2009, delivering engines and components that will allow Cummins to meet the most stringent emissions standards in the world and enter new product markets in China and other growing regions.
The Company's fourth quarter results were driven by continued strength in China, India and Brazil, along with a significant increase for on-highway truck engines and components in North America in advance of new emissions standards that took effect at the beginning of 2010.
Engine segment sales in the fourth quarter jumped by 12 percent compared to the same period in 2008, while Components sales - which are closely tied to engine volumes - grew 8 percent. When compared to the third quarter of 2009, the gains were even more dramatic: Engine sales increased 51 percent and Components sales were up 24 percent.
At the same time, Cummins' strong presence in China, India and Brazil continued to play an important role in the Company's performance in the fourth quarter. The economies in all three countries have rebounded from the recession much more quickly than more mature markets such as the United States and Western Europe. The Company expects revenue in China and India to return to pre-recession levels in 2010, with solid growth also expected in Brazil.
As a result of its fourth quarter performance, Cummins continued its trend of quarter-to-quarter profit gains in 2009, as reflected in the significant increase in EBIT as a percentage of sales over the course of the year. EBIT, excluding restructuring and other charges, has increased each of the past four quarters, growing from 2.8 percent of sales in the fourth quarter 2008 to 11.4 percent of sales in the fourth quarter 2009.
Despite the strong fourth quarter results and the expected continued improvement in large emerging markets, Cummins expects the first half of 2010 to be extremely challenging, especially in the United States and Europe. The increase in truck engine and components sales in the United States during the fourth quarter was largely the result of OEM customers buying 2009 engines in advance of the EPA emissions regulations, which took effect on Jan. 1, 2010.
Based on current orders and forecasts for the first part of this year, North American truck and bus engine shipments could fall by as much as 80 percent in the first half of 2010, compared to the second half of 2009. This translates into a 50 percent drop in externally reported revenue for heavy-duty truck and medium-duty truck and bus in the first half of 2010 compared to the second half of 2009
That weakness also will affect the Company's components businesses, although higher Cummins component content on the 2010 engines and improved truck sales in emerging markets will partially offset this drop in demand.
In addition, the Company is expecting its Power Generation business to perform at levels consistent with 2009. This late-cycle segment bottomed out in the third quarter of 2009 but has yet to resume strong growth.
The weakness in these segments will be offset by continued strong growth in the Company's distribution business and further improvement in China, India and Brazil. Cummins also expects to see growth across all its business segments in the second half of the year, compared to the first six months.
"In many ways, the first half of 2010 will be more challenging than the environment we faced in the early part of the recession," said Cummins President and Chief Operating Officer Tom Linebarger. "We will continue to manage our business very conservatively to ensure that we stay focused on our priorities of earning a solid profit throughout the entire downturn, investing in our future and demonstrating that we care about our customers more than anyone else in the industry."
Based on its current forecasts, Cummins expects 2010 sales and earnings to be similar to its 2009 performance. The Company's current full-year guidance calls for sales of $11 billion for the year, with an EBIT of 7 percent of sales.
The Company also expects to continue to generate positive cash flow, and intends to significantly increase its capital investment in 2010. Cummins is forecasting capital spending of approximately $400 million in 2010, an increase of nearly 30 percent from 2009, to fund projects critical to the Company's long-term growth.
The Company will share more details of its long-term growth strategy at a half-day meeting with investment analysts in New York City on March 16.
"We have worked hard to position Cummins to emerge from the current downturn an even stronger company," Solso said. "The Company is in the best financial condition in its history. I am confident we have the plans and the people in place to resume our strong growth in 2011 and sustain it well into the future."
Fourth quarter details (all comparisons are to same period in 2008 unless otherwise noted)
Engine Segment
-- Sales - $2.17 billion, up 12 percent
-- Segment EBIT - $211 million (9.7 percent of sales), compared to a loss
of $40 million
-- Total on-highway sales increased 58 percent
o Revenues in worldwide heavy-duty truck rose 52 percent; medium-duty
truck and bus grew 44 percent; sales to the light-duty automotive and
RV markets increased 106 percent on the launch of 2010 model year
Dodge Ram pickup
-- Sales down significantly in most off-highway markets
o Construction sales down 24 percent; commercial marine down 37 percent;
Mining down 12 percent; stationary power down 43 percent;
Power Generation
-- Sales - $601 million, down 32 percent
-- Segment EBIT - $34 million (5.7 percent of sales), down 55 percent from
$75 million (8.5 percent of sales)
-- Commercial product sales down 36 percent; commercial projects down 26
percent; Consumer products down 11 percent; Alternators down 34 percent;
Power Electronics down 8 percent
-- All major geographic markets declined from previous year, except India,
where sales increased 19 percent
-- Despite continued weakness compared to previous year, sales increased 9
percent and segment EBIT improved from 4.2 percent of sales to 5.7
compared to third quarter
Components
-- Sales - $732 million, up 8 percent
-- Segment EBIT - $73 million (10 percent of sales), up from a loss of $6
million
-- Turbocharger sales up 25 percent; Filtration down 12 percent; Emission
Solutions up 14 percent; Fuel Systems up 26 percent
-- Drop in Filtration sales almost entirely result of shift of exhaust
business to Emission Solutions
-- Fuel systems and Turbocharger sales led by large increases in volumes in
North America as result of on-highway engine purchase in advance of 2010
EPA emissions changes
Distribution
-- Sales - $486 million, down 13 percent
-- Segment EBIT - $67 million (13.8 percent of sales), up 5 percent from
$64 million (11.5 percent of sales)
-- Stable JV Income, favorable foreign currency movements and lower
spending helped lead to improved segment EBIT, despite lower sales.
Joint Ventures
-- Total income - $67 million, up 31 percent from $51 million
-- Engine JVs accounted for all the gain from previous year, led by China
JVs
-- China heavy- and medium-duty truck engine end market sales increased a
combined 136 percent in the fourth quarter.
Presentation of Non-GAAP Financial Information
EBIT and net income attributable to Cummins Inc. excluding restructuring and other charges are non-GAAP measures used in this release. Each 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.
About Cummins
Cummins Inc., a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Headquartered in Columbus, Indiana, (USA) Cummins serves customers in approximately 190 countries and territories through a network of more than 500 company-owned and independent distributor locations and approximately 5,200 dealer locations. Cummins reported net income of $428 million on sales of $10.8 billion in 2009. Press releases can be found on the Web at www.cummins.com.
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 the company's expectations, hopes, beliefs and intentions on strategies regarding the future. It is important to note that the company's 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, general economic, business and financing conditions, labor relations, governmental action, competitor pricing activity, expense volatility and other risks detailed from time to time in Cummins Securities and Exchange Commission filings.
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (a)
Three months ended
December 31, September 27, December 31,
In millions (except per share 2009 2009 2008
amounts)
NET SALES $ 3,400 $ 2,530 $ 3,288
Cost of sales 2,627 2,027 2,754
GROSS MARGIN 773 503 534
OPERATING EXPENSES AND INCOME
Selling, general and 348 304 341
administrative expenses
Research, development and 108 90 102
engineering expenses
Equity, royalty and interest 67 57 51
income from investees (Note 1)
Restructuring and other charges 4 22 37
Other operating income (expense), 5 3 (3 )
net
OPERATING INCOME 385 147 102
Interest income 3 2 4
Interest expense 9 9 9
Other (expense) income, net (Note (5 ) 6 (50 )
2)
INCOME BEFORE INCOME TAXES 374 146 47
Income tax expense (benefit) (Note 84 36 (12 )
3)
NET INCOME 290 110 59
Less: net income attributable to 20 15 16
noncontrolling interests
NET INCOME ATTRIBUTABLE TO CUMMINS $ 270 $ 95 $ 43
INC.
EARNINGS PER COMMON SHARE
ATTRIBUTABLE TO CUMMINS INC.
Basic $ 1.36 $ 0.48 $ 0.22
Diluted $ 1.36 $ 0.48 $ 0.22
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic 198.4 197.4 194.7
Diluted 198.7 197.8 196.6
CASH DIVIDENDS DECLARED PER COMMON $ 0.175 $ 0.175 $ 0.175
SHARE
(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) 2009 2008
NET SALES $ 10,800 $ 14,342
Cost of sales 8,631 11,402
GROSS MARGIN 2,169 2,940
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses 1,239 1,450
Research, development and engineering expenses 362 422
Equity, royalty and interest income from 214 253
investees (Note 1)
Restructuring and other charges 99 37
Other operating (expense) income, net (1 ) (12 )
OPERATING INCOME 682 1,272
Interest income 8 18
Interest expense 35 42
Other (expense) income, net (Note 2) (15 ) (70 )
INCOME BEFORE INCOME TAXES 640 1,178
Income tax expense (Note 3) 156 360
NET INCOME 484 818
Less: net income attributable to noncontrolling 56 63
interests
NET INCOME ATTRIBUTABLE TO CUMMINS INC. $ 428 $ 755
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS
INC.
Basic $ 2.17 $ 3.87
Diluted $ 2.16 $ 3.84
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 197.4 195.0
Diluted 197.7 196.5
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.70 $ 0.60
(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, December 31,
In millions (except par value) 2009 2008
ASSETS
Current assets
Cash and cash equivalents $ 930 $ 426
Marketable securities 190 77
Accounts and notes receivable, net 2,004 1,782
Inventories 1,341 1,783
Prepaid expenses and other current assets 538 645
Total current assets 5,003 4,713
Long-term assets
Property, plant and equipment, net 1,886 1,841
Investments and advances related to equity method 574 588
investees
Goodwill and other intangible assets, net 592 585
Other assets 761 792
Total assets $ 8,816 $ 8,519
LIABILITIES
Current liabilities
Loans payable $ 37 $ 39
Accounts payable (principally trade) 957 1,009
Accrued expenses 1,438 1,591
Total current liabilities 2,432 2,639
Long-term liabilities
Long-term debt 637 629
Other liabilities 1,727 1,771
Total liabilities 4,796 5,039
EQUITY
Cummins Inc. shareholders' equity
Common stock, $2.50 par value, 500 shares 1,861 1,793
authorized, 222.0 and 221.7 shares issued
Retained earnings 3,575 3,288
Treasury stock, at cost, 20.7 and 20.4 shares (731 ) (715 )
Common stock held by employee benefits trust, at (36 ) (61 )
cost, 3.0 and 5.1 shares
Unearned compensation (1 ) (5 )
Accumulated other comprehensive loss (895 ) (1,066 )
Total Cummins Inc. shareholders' equity 3,773 3,234
Noncontrolling interests 247 246
Total equity 4,020 3,480
Total liabilities and equity $ 8,816 $ 8,519
(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)
For the years ended
December 31, December 31,
In millions 2009 2008
NET CASH PROVIDED BY OPERATING ACTIVITIES (Note $ 1,137 $ 987
5)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (310 ) (543 )
Investments in internal use software (35 ) (82 )
Investments in and advances to equity investees (3 ) (89 )
Acquisition of businesses, net of cash acquired (2 ) (142 )
Proceeds from the sale of an equity investment 64
Investments in marketable (431 ) (390 )
securities--acquisitions
Investments in marketable 335 409
securities--liquidations
Cash flows from derivatives not designated as (18 ) (53 )
hedges
Purchases of other investments (62 ) (62 )
Other, net 17 40
Net cash used in investing activities (509 ) (848 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 76 76
Payments on borrowings and capital lease (97 ) (152 )
obligations
Net borrowings under short-term credit agreements (2 ) 33
Distributions to noncontrolling interests (34 ) (24 )
Dividend payments on common stock (141 ) (122 )
Proceeds from sale of common stock held by 72 63
employee benefit trust
Repurchases of common stock (20 ) (128 )
Other, net 5 17
Net cash used in financing activities (141 ) (237 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH 17 (53 )
EQUIVALENTS
Net increase (decrease) in cash and cash 504 (151 )
equivalents
Cash and cash equivalents at beginning of year 426 577
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 930 $ 426
(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 Power Components Distribution Non-segment Total
Generation items(1)
Three months
ended
December 31,
2009
External $ 1,974 $ 477 $ 466 $ 483 $ -- $ 3,400
sales
Intersegment 194 124 266 3 (587 ) --
sales
Total sales 2,168 601 732 486 (587 ) 3,400
Depreciation
and 50 14 20 3 87
amortization
(2)
Research,
development
and 73 8 27 108
engineering
expense
Equity,
royalty and
interest 24 6 4 33 -- 67
income from
investees
Restructuring
and other 4 4
charges
Interest 1 2 -- 3
income
Segment EBIT 211 34 73 67 (2 ) 383
Three months
ended
September 27,
2009
External $ 1,270 $ 444 $ 395 $ 421 $ -- $ 2,530
sales
Intersegment 169 105 196 1 (471 ) --
sales
Total sales 1,439 549 591 422 (471 ) 2,530
Depreciation
and 49 13 18 5 -- 85
amortization
(2)
Research,
development
and 59 9 22 -- 90
engineering
expense
Equity,
royalty and
interest 16 5 4 32 -- 57
income from
investees
Restructuring
and other 22 22
charges
Interest 1 1 -- 2
income
Segment EBIT 61 23 31 55 (15 ) 155
Three months
ended
December 31,
2008
External $ 1,590 $ 675 $ 468 $ 555 $ -- $ 3,288
sales
Intersegment 346 212 208 2 (768 ) --
sales
Total sales 1,936 887 676 557 (768 ) 3,288
Depreciation
and 47 10 16 8 81
amortization
(2)
Research,
development
and 71 10 21 102
engineering
expense
Equity,
royalty and
interest 8 6 4 33 -- 51
income from
investees
Restructuring
and other 37 37
charges
Interest 3 1 -- 4
income
Segment EBIT (40 ) 75 (6 ) 64 (37 ) 56
For the year
ended
December 31,
2009
External $ 5,582 $ 1,879 $ 1,562 $ 1,777 $ -- $ 10,800
sales
Intersegment 823 538 793 7 (2,161 ) --
sales
Total sales 6,405 2,417 2,355 1,784 (2,161 ) 10,800
Depreciation
and 185 49 73 17 324
amortization
(2)
Research,
development
and 241 33 88 362
engineering
expense
Equity,
royalty and
interest 54 22 13 125 -- 214
income from
investees
Restructuring
and other 99 99
charges
Interest 3 3 1 1 -- 8
income
Segment EBIT 252 167 95 235 (74 ) 675
For the year
ended
December 31,
2008
External $ 7,432 $ 2,601 $ 2,154 $ 2,155 $ -- $ 14,342
sales
Intersegment 1,378 899 998 9 (3,284 ) --
sales
Total sales 8,810 3,500 3,152 2,164 (3,284 ) 14,342
Depreciation
and 180 41 65 25 311
amortization
(2)
Research,
development
and 286 41 95 422
engineering
expense
Equity,
royalty and
interest 99 23 14 117 -- 253
income from
investees
Restructuring
and other 37 37
charges
Interest 10 3 3 2 -- 18
income
Segment EBIT 535 376 169 242 (102 ) 1,220
Includes intercompany eliminations and unallocated corporate expenses. For
the three months and the year ended December 31, 2009, unallocated
corporate expenses include $4 million and $99 million of restructuring and
other charges and gains of $7 million and $12 million related to flood
damages, respectively. For both the three months and the year ended
(1) December 31, 2008, unallocated corporate expenses include $37 million of
restructuring and other charges and a $36 million decrease in cash
surrender value in corporate owned life insurance (COLI). For the year
ended December 31, 2008, unallocated corporate expenses also included $5
million related to flood damages. For the three months ended September 27,
2009, unallocated corporate expenses included restructuring and other
charges of $22 million and a gain of $8 million related to flood damages.
Depreciation and amortization as shown on a segment basis excludes the
(2) amortization of debt discount that is included in our Condensed
Consolidated Statements of Income as "interest expense."
CUMMINS INC. AND SUBSIDIARIES
RECONCILIATION OF SEGMENT INFORMATION
(Unaudited)
A reconciliation of our segment information to the corresponding amounts in the
Condensed Consolidated Financial Statements is shown in the table below:
Three months ended For the years ended
December 31, September 27, December 31, December 31, December 31,
In 2009 2009 2008 2009 2008
millions
Segment $ 383 $ 155 $ 56 $ 675 $ 1,220
EBIT
Less:
Interest 9 9 9 35 42
expense
Income
before $ 374 $ 146 $ 47 $ 640 $ 1,178
income
taxes
FINANCIAL MEASURES THAT SUPPLEMENT GAAP
(Unaudited)
Earnings before interest, taxes, noncontrolling interests and restructuring and
other charges
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 consolidated net
income attributable to Cummins Inc., for each of the applicable periods:
Three months ended For the years ended
December September December December 31, December 31,
31, 27, 31,
In millions 2009 2009 2008 2009 2008
Earnings
before
interest,
income taxes $ 387 $ 177 $ 93 $ 774 $ 1,257
and
restructuring
and other
charges
Earnings
before
interest
expense,
income taxes
and 11.4 % 7.0 % 2.8 % 7.2 % 8.8 %
restructuring
and other
charges as a
percentage of
net sales
Less:
Restructuring
and other 4 22 37 99 37
charges
Earnings
before $ 383 $ 155 $ 56 $ 675 $ 1,220
interest and
income taxes
EBIT as a
percentage of 11.3 % 6.1 % 1.7 % 6.3 % 8.5 %
net sales
Less:
Interest 9 9 9 35 42
expense
Income tax
expense 84 36 (12 ) 156 360
(benefit)
Net income 290 110 59 484 818
Less:
Net income
attributable
to 20 15 16 56 63
noncontrolling
interests
Net income
attributable $ 270 $ 95 $ 43 $ 428 $ 755
to Cummins
Inc.
Net income
attributable
to Cummins 7.9 % 3.8 % 1.3 % 4.0 % 5.3 %
Inc. as a
percentage of
net sales
CUMMINS INC. AND SUBSIDIARIES
FINANCIAL MEASURES THAT SUPPLEMENT GAAP
(Unaudited)
Net income and diluted earnings per share (EPS) attributable to Cummins Inc. excluding
restructuring and other charges
We believe this is a useful measure of our operating performance for the period presented as it
illustrates our operating performance without regard to restructuring. This measure is not in
accordance with, or an alternative for, accounting principles generally accepted in the United
States of America and may not be consistent with measures used by other companies. It should be
considered supplemental data. The following table reconciles net income attributable to Cummins
Inc. excluding restructuring and other charges to Net income attributable to Cummins Inc. for the
three months and the year ended December 31, 2009, the three months and year ended December 31,
2008, and the three months ended September 27, 2009.
Three months ended For the years ended
December 31, September 27, December 31, December 31, December 31,
2009 2009 2008 2009 2008
In millions Net Diluted Net Diluted Net Diluted Net Diluted Net Diluted
Income EPS Income EPS Income EPS Income EPS Income EPS
Net income
attributable
to Cummins
Inc. $ 272 $ 1.37 $ 110 $ 0.56 $ 69 $ 0.35 $ 493 $ 2.49 $ 781 $ 3.97
excluding
restructuring
and other
charges
Less:
Restructuring
and other 2 0.01 15 0.08 26 0.13 65 0.33 26 0.13
charges, net
(1)
Net income
attributable $ 270 $ 1.36 $ 95 $ 0.48 $ 43 $ 0.22 $ 428 $ 2.16 $ 755 $ 3.84
to Cummins
Inc.
During the three months ended December 31, 2009, September 27, 2009, and
December 31, 2008, management approved and committed to undertake
restructuring actions. These actions resulted in pretax restructuring and
other charges of $4 million, $22 million and $37 million, respectively. For
(1) the years ended December 31, 2009 and 2008, the total pretax restructuring
and other charges were $99 million and $37 million, respectively. These
charges included employee-related liabilities for severance and benefits,
exit costs and pension and other postretirement benefit curtailment
charges.
SUPPLEMENTAL INFORMATION
In 2009, the Power Generation segment reorganized its reporting structure to
include the following businesses: Commercial Products, Alternators, Commercial
Projects, Power Electronics and Consumer. Sales by quarter for our Power
Generation segment by business for the years 2008 and 2007 were as follows:
2008 Three months ended Year ended
In millions March 30, June 29, 2008 September 28, December 31, December 31,
2008 2008 2008 2008
Commercial $ 444 $ 555 $ 559 $ 558 $ 2,116
Products
Alternator 156 178 174 178 686
Commercial 86 111 63 68 328
Projects
Power 27 31 35 39 132
Electronics
Consumer 74 63 57 44 238
Total sales $ 787 $ 938 $ 888 $ 887 $ 3,500
2007 Three months ended Year ended
In millions April 1, July 1, 2007 September 30, December 31, December 31,
2007 2007 2007 2007
Commercial $ 383 $ 448 $ 449 $ 481 $ 1,761
Products
Alternator 132 156 163 172 623
Commercial 45 44 49 81 219
Projects
Power 26 26 28 28 108
Electronics
Consumer 89 95 87 78 349
Total sales $ 675 $ 769 $ 776 $ 840 $ 3,060
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 was as follows:
Three months ended For the years ended
December 31, September December 31, December December
27, 31, 31,
In millions 2009 2009 2008 2009 2008
Distribution
Entities
North
American $ 26 $ 25 $ 28 $ 100 $ 100
distributors
Komatsu
Cummins 3 3 2 12 7
Chile, Ltda.
All others 1 1 2 3 5
Manufacturing
Entities
Dongfeng
Cummins 15 11 5 33 55
Engine
Company, Ltd.
Chongqing
Cummins 8 8 7 36 30
Engine
Company, Ltd.
Tata Cummins 3 2 5 7
Ltd.
Valvoline 2 3 7 2
Cummins, Ltd.
Shanghai
Fleetguard 2 2 1 7 8
Filter Co.
Ltd.
Cummins
MerCruiser (5 ) (2 ) (2 ) (10 ) 3
Diesel Marine
LLC
All others 5 2 3 14
Cummins share 60 53 45 196 231
of net income
Royalty and
interest 7 4 6 18 22
income
Equity,
royalty and
interest $ 67 $ 57 $ 51 $ 214 $ 253
income from
investees
NOTE 2. OTHER (EXPENSE) INCOME
Other (expense) income included the following:
Three months ended For the years ended
December 31, September December 31, December December
27, 31, 31,
In millions 2009 2009 2008 2009 2008
Other
(expense)
income:
Change in
cash
surrender
value of $ (5 ) $ 3 $ (36 ) $ (4 ) $ (36 )
corporate
owned life
insurance
Foreign
currency (2 ) (1 ) (23 ) (20 ) (46 )
(losses)
gains
Other, net 2 4 9 9 12
Total other
(expense) $ (5 ) $ 6 $ (50 ) $ (15 ) $ (70 )
income, net
NOTE 3. INCOME TAXES
Our effective tax rate for the fourth quarter and full year of 2009 was 22.5 percent and 24.4 percent, respectively. Our income tax provision for the fourth quarter includes benefits totaling $29 million related to adjustments to deferred tax accounts. Absent these benefits, the effective tax rate for the quarter is 30 percent and the year is 29 percent. We released $19 million of deferred tax liabilities on foreign earnings now considered to be permanently reinvested outside of the United States and recorded a deferred tax asset of $10 million related to prior period matters.
NOTE 4. NONCONTROLLING INTERESTS
On January 1, 2009, we adopted changes issued by the Financial Accounting Standards Board to consolidation accounting and reporting. These changes, among others, require that minority interests be renamed noncontrolling interests and a company present a consolidated net income measure that includes the amount attributable to such noncontrolling interests for all periods presented.
CUMMINS INC. AND SUBSIDIARIES
SELECTED FOOTNOTE DATA
(Unaudited)
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, 2009 and 2008, was $326 million and $314 million, respectively.
CUMMINS INC. AND SUBSIDIARIES SUPPLEMENTAL INFORMATION (Unaudited) Sales 2009 In millions Q1 Q2 Q3 Q4 YTD Engine business: Heavy-duty truck $ 394 $ 395 $ 493 $ 714 $ 1,996 Medium-duty bus and 229 240 294 469 1,232 truck Light-duty auto and 156 94 120 318 688 RV Industrial 467 440 407 507 1,821 Stationary power 246 137 125 160 668 Total Engine 1,492 1,306 1,439 2,168 6,405 business Power Generation 657 610 549 601 2,417 Components 530 502 591 732 2,355 Distribution 413 463 422 486 1,784 Eliminations (653 ) (450 ) (471 ) (587 ) (2,161 ) Total $ 2,439 $ 2,431 $ 2,530 $ 3,400 $ 10,800 2008 In millions Q1 Q2 Q3 Q4 YTD Engine business: Heavy-duty truck $ 536 $ 672 $ 630 $ 470 $ 2,308 Medium-duty bus and 397 422 406 325 1,550 truck Light-duty auto and 275 205 170 154 804 RV Industrial 733 804 788 704 3,029 Stationary power 268 283 285 283 1,119 Total Engine 2,209 2,386 2,279 1,936 8,810 business Power Generation 787 938 888 887 3,500 Components 820 855 801 676 3,152 Distribution 445 581 581 557 2,164 Eliminations (787 ) (873 ) (856 ) (768 ) (3,284 ) Total $ 3,474 $ 3,887 $ 3,693 $ 3,288 $ 14,342 Engine Shipments 2009 Units Q1 Q2 Q3 Q4 YTD Mid-range $ 60,600 $ 49,200 $ 58,800 $ 100,600 $ 269,200 Heavy-duty 16,600 16,400 20,600 32,300 85,900 High horsepower 3,900 3,200 2,600 3,700 13,400 Total $ 81,100 $ 68,800 $ 82,000 $ 136,600 $ 368,500 2008 Units Q1 Q2 Q3 Q4 YTD Mid-range $ 114,200 $ 114,800 $ 102,400 $ 86,900 $ 418,300 Heavy-duty 24,700 31,700 29,400 22,500 108,300 High horsepower 4,600 5,500 5,300 5,200 20,600 Total $ 143,500 $ 152,000 $ 137,100 $ 114,600 $ 547,200
Source: Cummins Inc.
Released February 2, 2010