Cummins Announces Results for 2013; Shares Expectations for Revenue and EBIT Growth in 2014 and Reaffirms Commitment to Increase Cash Returned to Shareholders
COLUMBUS, IN -- (Marketwired) -- 02/06/14 --
- Fourth quarter revenues of $4.6 billion, EBIT of 12.3 percent of sales
- 2013 revenues of $17.3 billion, EBIT of 12.5 percent of sales
- Expects 2014 revenue to grow between 4 and 8 percent and EBIT to be in the range of 12.75 to 13.25 percent of sales
- Plans to return 50 percent of Operating Cash Flow to shareholders in 2014
Cummins Inc. (NYSE: CMI) today reported results for the fourth quarter and full year 2013.
Fourth quarter revenue of $4.6 billion increased 7 percent from the same quarter in 2012. The increase year-over-year was driven by higher revenues in North America, China and Brazil partially offset by weaker sales in Mexico, India and Australia.
Earnings before interest and taxes (EBIT) were $566 million for the fourth quarter or 12.3 percent of sales. This compares to $532 million or 12.4 percent of sales a year ago, excluding restructuring costs.
Net income attributable to Cummins in the fourth quarter was $432 million ($2.32 per diluted share), compared to $404 million ($2.14 per diluted share) in the fourth quarter of 2012 excluding restructuring charges. The effective tax rate in the fourth quarter of 2013 was 15.7 percent and reflects one-time benefits of $0.18 per diluted share, and a lower than expected operating rate in the fourth quarter that contributed $0.20 per diluted share.
Revenues for the full year were $17.3 billion, flat with 2012. Revenues in North America increased 3 percent but were offset by international sales which declined by 4 percent. Within international markets declines in Mexico, India, Australia and Europe offset growth in China and Brazil.
EBIT for the year was $2.16 billion or 12.5 percent of sales, compared to $2.35 billion or 13.6 percent of sales in 2012, excluding special items.
Net income attributable to Cummins for the full year was $1.48 billion ($7.91 per diluted share), down from $1.68 billion ($8.83 per diluted share) in 2012, excluding special items.
"We faced weak demand in important regions and end markets in 2013," said Tom Linebarger, Chairman and CEO. "Revenues for the year ended flat with 2012 as strong growth in the Components business, market share gains in the North American medium-duty truck market and distributor acquisitions offset weakness in global mining markets, international power generation and the North American heavy-duty truck market. I am pleased that in this environment of weak global growth, we were able to generate record cash flow from operations that allowed us to continue to invest in the business and increase the cash returned to shareholders by 34 percent in 2013. We expect revenues to grow between 4 percent and 8 percent in 2014, with earnings projected to grow faster than revenues and we expect to return to shareholders an amount of at least 50 percent of cash from operations."
Based on the current forecast, Cummins expects full year 2014 revenues to grow between 4 percent and 8 percent, with EBIT in the range of 12.75 - 13.25 percent of sales.
2013 highlights:
- The Company was named the 2013 Newsmaker of the Year award from Diesel Progress North American magazine for introducing a broad range of on- and off-highway engines and power systems
- The Company increased its dividend by 25 percent in the third quarter
- For the sixth consecutive year, Cummins has been named one of the world's most ethical companies by The Ethisphere Institute
- The Company repurchased 3.3 million shares in 2013
- Cummins was named one of the Top 50 companies for diversity by DiversityInc for the seventh consecutive year
Fourth quarter 2013 detail (all comparisons to same period in 2012)
Segment results and comparisons below exclude special items in 2012
Engine Segment
- Sales -- $2.6 billion, up 2 percent
- Segment EBIT -- $235 million, or 9.2 percent of sales, compared to $272 million or 10.9 percent of sales
- Strong demand for construction equipment in international markets and increased demand for medium duty trucks in North America offset weakness in global mining markets and lower demand in the North American bus market
Components Segment
- Sales -- $1.1 billion, up 21 percent
- Segment EBIT -- $140 million, or 12.3 percent of sales, compared to $84 million or 8.9 percent of sales
- Higher demand in on-highway markets in North America, Europe and China
Power Generation Segment
- Sales -- $759 million, down 1 percent
- Segment EBIT -- $46 million, or 6.1 percent of sales, compared to $54 million or 7.1 percent of sales
- Lower revenues in Europe and India offset increased demand in North America and the Middle East
Distribution Segment
- Sales -- $1.1 billion, up 18 percent, up 3 percent excluding acquisitions
- Segment EBIT -- $107 million, or 10.0 percent of sales, compared to $98 million or 10.8 percent of sales
- Higher revenues were primarily driven by acquisitions and stronger demand for power generation equipment and parts and service in the US
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 48,000 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 $1.48 billion on sales of $17.3 billion in 2013. 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 2014. 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 December 31, September 29, December 31,
amounts 2013 2013 2012
-------------- -------------- --------------
NET SALES $ 4,588 $ 4,266 $ 4,292
Cost of sales 3,424 3,157 3,234
-------------- -------------- --------------
GROSS MARGIN 1,164 1,109 1,058
OPERATING EXPENSES AND INCOME
Selling, general and
administrative expenses 500 492 482
Research, development and
engineering expenses 181 173 174
Equity, royalty and interest
income from investees (Note
1) 80 91 82
Other operating expense, net (10) (11) (19)
-------------- -------------- --------------
OPERATING INCOME 553 524 465
Interest income 6 6 5
Interest expense 19 8 7
Other income, net 7 6 10
-------------- -------------- --------------
INCOME BEFORE INCOME TAXES 547 528 473
Income tax expense (Note 2) 86 154 75
-------------- -------------- --------------
CONSOLIDATED NET INCOME 461 374 398
Less: Net income attributable
to noncontrolling interests 29 19 29
-------------- -------------- --------------
NET INCOME ATTRIBUTABLE TO
CUMMINS INC. $ 432 $ 355 $ 369
============== ============== ==============
EARNINGS PER COMMON SHARE
ATTRIBUTABLE TO CUMMINS INC.
Basic $ 2.33 $ 1.91 $ 1.96
Diluted $ 2.32 $ 1.90 $ 1.95
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic 185.7 186.0 188.4
Diluted 186.3 186.5 188.8
CASH DIVIDENDS DECLARED PER
COMMON SHARE $ 0.625 $ 0.625 $ 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)
Years ended December 31,
-------------------------
In millions, except per share amounts 2013 2012
------------ ------------
NET SALES $ 17,301 $ 17,334
Cost of sales 12,918 12,826
----------- -----------
GROSS MARGIN 4,383 4,508
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses 1,920 1,900
Research, development and engineering expenses 713 728
Equity, royalty and interest income from
investees (Note 1) 361 384
Gain on sale of businesses - 6
Other operating expense, net (10) (16)
----------- -----------
OPERATING INCOME 2,101 2,254
Interest income 27 25
Interest expense 41 32
Other income, net 32 24
----------- -----------
INCOME BEFORE INCOME TAXES 2,119 2,271
Income tax expense (Note 2) 531 533
----------- -----------
CONSOLIDATED NET INCOME 1,588 1,738
Less: Net income attributable to noncontrolling
interests 105 93
----------- -----------
NET INCOME ATTRIBUTABLE TO CUMMINS INC. $ 1,483 $ 1,645
=========== ===========
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS
INC.
Basic $ 7.93 $ 8.69
Diluted $ 7.91 $ 8.67
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 187.0 189.3
Diluted 187.4 189.7
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 2.25 $ 1.80
(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 2013 2012
------------- --------------
ASSETS
Current assets
Cash and cash equivalents $ 2,699 $ 1,369
Marketable securities 150 247
------------- --------------
Total cash, cash equivalents and marketable
securities 2,849 1,616
Accounts and notes receivable, net 2,649 2,475
Inventories 2,381 2,221
Prepaid expenses and other current assets 760 855
------------- --------------
Total current assets 8,639 7,167
------------- --------------
Long-term assets
Property, plant and equipment, net 3,156 2,724
Investments and advances related to equity
method investees 931 897
Goodwill and other intangibles, net 818 814
Other assets 1,184 946
------------- --------------
Total assets $ 14,728 $ 12,548
============= ==============
LIABILITIES
Current liabilities
Loans payable $ 17 $ 16
Accounts payable (principally trade) 1,557 1,339
Accrued expenses 1,794 1,781
------------- --------------
Total current liabilities 3,368 3,136
------------- --------------
Long-term liabilities
Long-term debt 1,672 698
Other liabilities 1,818 1,740
------------- --------------
Total liabilities 6,858 5,574
------------- --------------
EQUITY
Cummins Inc. shareholders' equity
Common stock, $2.50 par value, 500 shares
authorized, 222.3 and 222.4 shares issued 2,099 2,058
Retained earnings 8,406 7,343
Treasury stock, at cost, 35.6 and 32.6 shares (2,195) (1,830)
Common stock held by employee benefits trust,
at cost, 1.3 and 1.5 shares (16) (18)
Accumulated other comprehensive loss (784) (950)
------------- --------------
Total Cummins Inc. shareholders' equity 7,510 6,603
Noncontrolling interests 360 371
------------- --------------
Total equity 7,870 6,974
------------- --------------
Total liabilities and equity $ 14,728 $ 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)
----------------------------
Years ended December 31,
----------------------------
In millions 2013 2012
------------- --------------
------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 2,089 $ 1,532
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (676) (690)
Investments in internal use software (64) (87)
Investments in and advances to equity
investees (42) (70)
Acquisition of businesses, net of cash
acquired (147) (215)
Proceeds from sale of businesses, net of cash
sold - 10
Investments in marketable securities-
acquisitions (418) (561)
Investments in marketable securities-
liquidations 525 585
Proceeds from sale of equity investment - 23
Purchases of other investments (40) -
Cash flows from derivatives not designated as
hedges 1 12
Other, net 15 11
------------- --------------
Net cash used in investing activities (846) (982)
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 1,004 64
Payments on borrowings and capital lease
obligations (90) (145)
Net borrowings under short-term credit
agreements (3) 11
Distributions to noncontrolling interests (75) (62)
Dividend payments on common stock (420) (340)
Repurchases of common stock (381) (256)
Excess tax benefits on stock-based awards 13 14
Other, net 4 20
------------- --------------
Net cash provided by (used in) financing
activities 52 (694)
------------- --------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS 35 29
------------- --------------
Net increase (decrease) in cash and cash
equivalents 1,330 (115)
Cash and cash equivalents at beginning of year 1,369 1,484
------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,699 $ 1,369
============= ==============
(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)
Non-
Power segment
In millions Engine Components Generation Distribution Items(1) Total
--------------------------------------------------------------
Three months
ended
December 31,
2013
External
sales $ 2,131 $ 859 $ 533 $ 1,065 $ - $4,588
Intersegment
sales 431 276 226 8 (941) -
--------------------------------------------------------------
Total sales 2,562 1,135 759 1,073 (941) 4,588
Depreciation
and
amortization
(2) 49 25 13 14 - 101
Research,
development
and
engineering
expenses 106 53 20 2 - 181
Equity,
royalty and
interest
income from
investees 30 7 2 41 - 80
Interest
income 3 1 1 1 - 6
Segment EBIT 235 140 46 107 38 566
Segment EBIT
as a
percentage
of total
sales 9.2% 12.3% 6.1% 10.0% 12.3%
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
December 31,
2012
External
sales $ 2,177 $ 662 $ 549 $ 904 $ - $4,292
Intersegment
sales 329 277 216 3 (825) -
--------------------------------------------------------------
Total sales 2,506 939 765 907 (825) 4,292
Depreciation
and
amortization
(2) 50 23 13 11 - 97
Research,
development
and
engineering
expenses 92 60 20 2 - 174
Equity,
royalty and
interest
income from
investees 27 6 8 41 - 82
Interest
income 2 - 2 1 - 5
Segment EBIT 252 78 42 84 24 480
Add back
restructuring
charges 20 6 12 14 - 52
--------------------------------------------------------------
Segment EBIT
excluding
restructuring
charges 272 84 54 98 24 532
Segment EBIT
as a
percentage
of total
sales 10.1% 8.3% 5.5% 9.3% 11.2%
Segment EBIT
excluding
restructuring
charges
as a
percentage
of sales 10.9% 8.9% 7.1% 10.8% 12.4%
(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, 2013 and September 29, 2013. The three months ended December 31, 2012, included a $20 million charge ($12 million after-tax) related to legal matters. The charge was excluded from segment results as it was not considered in our evaluation of operating results for the corresponding period. There were no other significant unallocated corporate expenses.
(2) Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount that is included in the Condensed Consolidated Statements of Income as "Interest expense."
CUMMINS INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
Non-
Power segment
In millions Engine Components Generation Distribution Items(1) Total
--------------------------------------- ------------------
Year ended
December 31,
2013
External sales $ 8,270 $ 3,151 $ 2,154 $ 3,726 $ - $ 17,301
Intersegment
sales 1,743 1,191 877 23 (3,834) -
-------- --------- --------- --------- -------- --------
Total sales 10,013 4,342 3,031 3,749 (3,834) 17,301
Depreciation
and
amortization(2) 205 96 50 54 - 405
Research,
development
and
engineering
expenses 416 218 73 6 - 713
Equity,
royalty and
interest
income from
investees 136 28 32 165 - 361
Interest
income 16 3 6 2 - 27
Segment EBIT 1,041 527 218 388 (3) (14) 2,160
Segment EBIT
as a
percentage of
total sales 10.4% 12.1% 7.2% 10.3% 12.5%
Year ended
December 31,
2012
External sales $ 9,101 $ 2,809 $ 2,163 $ 3,261 $ - $ 17,334
Intersegment
sales 1,632 1,203 1,105 16 (3,956) -
-------- --------- --------- --------- -------- --------
Total sales 10,733 4,012 3,268 3,277 (3,956) 17,334
Depreciation
and
amortization(2) 192 82 47 34 - 355
Research,
development
and
engineering
expenses 433 213 76 6 - 728
Equity,
royalty and
interest
income from
investees 127 29 40 188 - 384
Interest
income 11 3 9 2 - 25
Segment EBIT 1,248 426 285 369 (3) (25) 2,303
Add back
restructuring
charges 20 6 12 14 - 52
-------- --------- --------- --------- -------- ---------
Segment EBIT
excluding
restructuring
charges 1,268 432 297 383 (25) 2,355
Segment EBIT
as a
percentage of
total sales 11.6% 10.6% 8.7% 11.3% 13.3%
Segment EBIT
excluding
restructuring
charges as a
percentage of
sales 11.8% 10.8% 9.1% 11.7% 13.6%
(1) Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the year ended December 31, 2013. The year ended December 31, 2012, included a $20 million charge ($12 million after-tax) related to legal matters and a $6 million gain ($4 million after-tax) related to adjustments from our 2011 divestitures. The gain and the charge were excluded from segment results as they were not considered in our evaluation of operating results for the corresponding periods. There were no other significant unallocated corporate expenses.
(2) Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount of $2 million and $6 million at December 31, 2013 and 2012, respectively. These amounts were included in the Condensed Consolidated Statements of Income as "Interest expense."
(3) Distribution segment EBIT for the year ended December 31, 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 year ended December 31, 2012, included a $7 million gain on the fair value adjustment resulting from the acquisition of a controlling interest in Cummins Central Power.
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 Years ended
---------------------------------- -----------------------
September
December 29, December December December
In millions 31, 2013 2013 31, 2012 31, 2013 31, 2012
---------- ----------- ----------- ----------- -----------
EBIT excluding
restructuring
charges $ 566 $ 536 $ 532 $ 2,160 $ 2,355
Add:
Restructuring
charges - - (52) - (52)
---------- ----------- ----------- ----------- -----------
Total EBIT
$ 566 $ 536 $ 480 $ 2,160 $ 2,303
Less: Interest
expense 19 8 7 41 32
---------- ----------- ----------- ----------- -----------
Income before
income taxes $ 547 $ 528 $ 473 $ 2,119 $ 2,271
========== =========== =========== =========== ===========
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
-------------------------------- ---------------------
December September December December December
In millions 31, 2013 29, 2013 31, 2012 31, 2013 31, 2012
---------- ---------- ---------- ---------- ----------
Distribution Entities
North American
distributors $ 31 $ 34 $ 32 $ 129 $ 147
Komatsu Cummins
Chile, Ltda. 8 6 6 25 26
All other
distributors - 1 1 1 4
Manufacturing
Entities
Dongfeng Cummins
Engine Company, Ltd. 18 13 10 63 52
Chongqing Cummins
Engine Company, Ltd. 14 15 12 58 61
Beijing Foton Cummins
Engine Co., Ltd.
(Heavy-duty) (7) (4) (4) (21) (13)
Beijing Foton Cummins
Engine Co., Ltd.
(Light-duty) 3 4 2 17 5
Shanghai Fleetguard
Filter Co., Ltd. 2 4 3 13 13
Tata Cummins, Ltd. 1 1 4 5 11
Cummins Westport,
Inc. (1) 2 3 4 14
All other
manufacturers 2 7 6 31 27
---------- ---------- ---------- ---------- ----------
Cummins share of
net income 71 83 75 325 347
Royalty and interest
income 9 8 7 36 37
---------- ---------- ---------- ---------- ----------
Equity, royalty
and interest
income from
investees $ 80 $ 91 $ 82 $ 361 $ 384
========== ========== ========== ========== ==========
NOTE 2. INCOME TAXES
Our income tax rates are generally less than the 35 percent U.S. income tax rate primarily because of lower taxes on foreign earnings and research tax credits. Our effective tax rate for the fourth quarter and full year of 2013 was 15.7 percent and 25.1 percent, respectively. We recorded $70 million or $0.38 per share of tax benefits in the fourth quarter of 2013.
Fourth quarter 2013 income tax provision is net of the following items:
One-time impacts of foreign legal entity restructuring activities $ 16
One-time impact of reconciliation of state income tax provision to
tax return 17
Lower operating rate primarily resulting from recognition of state
and federal research and development credits and the recurring
impacts of foreign legal entity restructuring activities 37
---------
Total $ 70
=========
The full year one-time tax items included these fourth quarter items, as well as a $7 million third quarter one-time net tax expense related primarily to adjustments to our income tax accounts based on our 2012 tax return filings, a first quarter one-time tax benefit of $28 million attributable to the reinstatement of the research credit back to 2012 and a one-time 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. Our effective tax rate for the fourth quarter and full year of 2012 was 16.1 percent and 23.5 percent, respectively.
A reconciliation of the U.S. federal income tax rate of 35 percent to the actual effective tax rate is as follows:
--------------------
Years ended December
31,
--------------------
2013 2012
--------- ---------
U.S. federal statutory rate 35.0% 35.0%
State income tax, net of federal effect 0.2 1.0
Research tax credits (3.7) (0.4)
Differences in rates and taxability of foreign
subsidiaries and joint ventures (6.0) (12.1)
Other, net (0.4) -
--------- ---------
Effective tax rate 25.1% 23.5%
========= =========
We expect our 2014 effective tax rate to be 28.5 percent excluding any discrete items that may arise. The research tax credit expired December 31, 2013, and has not yet been renewed by Congress. If the research credit is reinstated during 2014, we would anticipate the 2014 effective tax rate to be reduced to 27 percent. The increase in the effective tax rate from 2013 to 2014 is attributable primarily to one-time tax benefits in 2013 that will not repeat in 2014 as well as changes in tax legislation in the U.S. and U.K. that will unfavorably impact our 2014 effective tax rate.
CUMMINS INC. AND SUBSIDIARIES
FINANICAL 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, restructuring charges and gain on sale of businesses. 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 following periods:
Three months ended
----------------------------------------------------
December 31, September 29, December 31,
2013 2013 2012
---------------- ------------------ ----------------
In millions Net Diluted Net Diluted Net Diluted
Income EPS Income EPS Income EPS
------- -------- -------- --------- ------- --------
Net income attributable
to Cummins Inc. $ 432 $ 2.32 $ 355 $ 1.90 $ 369 $ 1.95
Add
Restructuring charges
(1) - - - - 35 0.19
Less
Tax items (2) 70 0.38 (7) (0.04) 39 0.21
------- -------- -------- --------- ------- --------
Net income attributable
to Cummins Inc.
excluding special
items $ 362 $ 1.94 $ 362 $ 1.94 $ 365 $ 1.93
======= ======== ======== ========= ======= ========
Years ended
------------------------------------------
December 31, 2013 December 31, 2012
-------------------- ---------------------
Net Diluted Diluted
In millions Income EPS Net Income EPS
--------- ---------- ---------- ----------
Net income attributable to
Cummins Inc. $ 1,483 $ 7.91 $ 1,645 $ 8.67
Add
Restructuring charges (1) - - 35 0.18
Less
Tax items (2) 74 0.39 55 0.29
Gain on sale of businesses (3) - - 4 0.02
--------- ---------- ---------- ----------
Net income attributable to
Cummins Inc. excluding special
items $ 1,409 $ 7.52 $ 1,621 $ 8.54
========= ========== ========== ==========
(1) In the fourth quarter of 2012, we recorded restructuring and other charges of $52 million ($35 million after tax).
(2) See Note 2, "INCOME TAXES."
The one-time tax benefits for the three months and full year ended December 31, 2012, related primarily to benefits resulting from transactions entered into and elections made with respect to our U.K. operations. The full year also included a $16 million one-time tax benefit from the third quarter, $6 million of which related to a dividend distribution of accumulated foreign income earned in prior years. These one-time tax adjustments also included a one-time tax benefit of $13 million for prior year tax return true-up adjustments and a one-time tax charge of $3 million related to the third quarter enactment of U.K. tax law changes.
(3) In the second quarter of 2012, we recognized a $6 million gain ($4 million after-tax) related to adjustments from our 2011 divestitures. The gains have been excluded from operating results as they were not considered in our evaluation of performance for the year ended December 31, 2012.
CUMMINS INC. AND SUBSIDIARIES
FINANICAL 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 Years ended
----------------------------- -------------------
December September December December December
In millions 31, 2013 29, 2013 31, 2012 31, 2013 31, 2012
--------- --------- --------- --------- ---------
Earnings before interest
expense, income taxes and
special items $ 566 $ 536 $ 532 $ 2,160 $ 2,349
Earnings before interest
expense, income taxes and
special items as a
percentage of net sales 12.3% 12.6% 12.4% 12.5% 13.6%
Less
Restructuring charges - - 52 - 52
Add
Gain on sale of
businesses - - - - 6
--------- --------- --------- --------- ---------
Earnings before interest
expense and income taxes $ 566 $ 536 $ 480 $ 2,160 $ 2,303
--------- --------- --------- --------- ---------
EBIT as a percentage of
net sales 12.3% 12.6% 11.2% 12.5% 13.3%
Less
Interest expense 19 8 7 41 32
Income tax expense 86 154 75 531 533
--------- --------- --------- --------- ---------
Consolidated net income 461 374 398 1,588 1,738
--------- --------- --------- --------- ---------
Less
Net income attributable
to noncontrolling
interests 29 19 29 105 93
--------- --------- --------- --------- ---------
Net income
attributable to
Cummins Inc. $ 432 $ 355 $ 369 $ 1,483 $ 1,645
========= ========= ========= ========= =========
Net income attributable to
Cummins Inc. as a
percentage of net sales 9.4% 8.3% 8.6% 8.6% 9.5%
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 $ 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
======== ======== ======== ======== ========
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 94,600 121,900 113,800 115,700 446,000
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
======== ======== ======== ======== ========
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
======== ======== ======== ======== ========
Component segment sales by business
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
======= ======== ======== ======== ========
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
======= ======== ======== ======== ========
CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)
Our Power Generation segment changed the name of the generator technologies business to alternators in the fourth quarter of 2013. Power Generation segment sales by business were as follows:
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
======== ======== ======== ======== ========
2012
In millions Q1 Q2 Q3 Q4 YTD
-------- -------- -------- -------- --------
Power products $ 375 $ 459 $ 425 $ 395 $ 1,654
Power systems 188 217 174 178 757
Alternators 141 160 138 127 566
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 $ 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
======= ======== ======== ======== ========
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
======= ======== ======== ======== ========
The following files are available for download:
Carole CastoExecutive Director - Corporate Communications(317) 610-2480carole.casto@cummins.com
Source: Cummins Inc.
Released February 6, 2014