Cummins Reports Best Year in Company History in 2010; Expects to Earn 13.5 Percent EBIT on $16 Billion in Sales in 2011
COLUMBUS, Ind.--(BUSINESS WIRE)-- Cummins Inc. (NYSE: CMI) today reported record profits for all of 2010, as well as record quarterly sales and profits for the fourth quarter, on the strength of significant growth in key international markets and improved productivity in its global manufacturing operations.
Fourth quarter sales were $4.14 billion, up 22 percent from $3.40 billion during the same period in 2009. Earnings Before Interest and taxes (EBIT) were $541 million, or 13.1 percent of sales, a 41 percent increase from $383 million, or 11.3 percent of sales. The fourth quarter 2009 results include a pre-tax charge of $4 million to cover the costs associated with restructuring.
Net income attributable to Cummins Inc. was $362 million ($1.84 per share) compared to $270 million ($1.36 per share) in the fourth quarter 2009.
For the fourth quarter, the Engine, Components and Distribution segments all reported record sales and segment EBIT. The Power Generation segment, which was affected by the recession later than the Company's other business segments, continued to rebound and reported strongly higher sales and segment EBIT than during the same period in 2009.
For the full year, sales were $13.23 billion, up 22 percent from $10.80 billion in 2009. EBIT of $1.66 billion, or 12.5 percent of sales, increased 114 percent from $774 million, or 7.2 percent of sales excluding restructuring and other charges, in 2009.
Net income attributable to Cummins Inc. was $1.04 billion ($5.28 per share) from $428 million ($2.16 per share) in 2009. Results for 2009 included restructuring and other charges of $0.33 per share.
Full-year 2010 sales were second only to 2008, while EBIT and net income attributable to Cummins Inc. were Company records. Three of the Company's four business segments - Engine, Components and Distribution - reported full-year record earnings, while Power Generation also posted strong sales and profit gains from the previous year.
The Company's strong performance in 2010 came despite a significant decline in its important North American truck engine markets, which were affected by the continued weakness in the U.S. economy and a change in emissions standards. Engine shipments to the North American heavy-duty truck market fell 61 percent and 44 percent to the North American medium-duty truck and bus markets.
Those decreases were more than offset by growth in international markets, particularly China, India and Brazil, and the Company continues to benefit from actions taken over the past two years to improve the productivity of its manufacturing operations around the world.
Sales in China and Brazil increased by more than 70 percent, while sales in India rose 37 percent for the year. Cummins' total international sales increased by 48 percent from 2009 and accounted for 64 percent of the Company's total sales in 2010.
"2010 was the best year in the Company's history," said Chairman and Chief Executive Officer Tim Solso. "The fact that we were able to achieve record profitability in the face of a sharp decline in large North American on-highway markets speaks to the global strength of our business and the work we did to keep the Company strong during the recession.
"Given our strong balance sheet, the expected recovery of our North American markets and the global growth opportunities in front of us, we are forecasting further significant growth in 2011 and beyond."
Based on its current forecasts, Cummins expects sales to grow to $16 billion in 2011 and EBIT to be 13.5 percent of sales.
The Company is forecasting sales to grow by 25 percent in its Engine and Components segments in 2011, led by recovery in the North American truck markets. The Company expects sales to increase by 15 percent in both its Power Generation and Distribution segments, driven by improving markets in North America and continued strength in key international markets.
In addition to the expected economic recovery in North America, the Company also is forecasting further strong growth in China, India and Brazil as well as in other parts of the world, including Mexico, the Middle East and Europe.
The Company expects to invest $600-$650 million in capital expenditures in its consolidated operations. In addition, the Company expects its joint ventures to make $300 million worth of capital investments in their operations to expand their businesses.
"We have significant growth opportunities in markets around the world, and we are well positioned to take advantage of those opportunities," said President and Chief Operating Officer Tom Linebarger. "In particular, we expect a significant recovery in the North American truck markets this year, where our new engines are performing very well.
"We shipped 62,000 engines to the North American truck markets in 2010 equipped with Selective Catalytic Reduction systems, which have allowed us to meet the stringent EPA emission standards and provide improved fuel economy to our customers."
In other recent highlights:
-- In mid-January, Cummins dedicated its new "megasite" facility in
Phaltan, India. The site will allow Cummins to significantly expand
production capacity for engines, components and generators, and
eventually use India as a base for exports to Asia, the Middle East and
Africa. The Company plans to invest $300 million in the 300-acre campus
over the next several years.
-- Cummins finished 2010 as one of the top performing stocks in the
Standard & Poor's 500 index. Cummins' stock price appreciated by nearly
140 percent in 2010 and the Company further returned value to
shareholders by increasing its dividend by 50 percent in the third
quarter of 2010.
Fourth quarter details (all comparisons to same period in 2009)
Engine Segment
-- Sales - $2.5 billion, up 15 percent
-- Segment EBIT - $256 million, or 10.3 percent of sales, compared to $211
million or 9.7 percent of sales.
-- Total on-highway engine sales decreased 18 percent
o Medium-duty truck engine sales increased 11 percent on strength of
Brazilian truck market; North American medium-duty truck engine sales
declined 42 percent.
o Light-duty auto sales increased 1 percent.
o Global heavy-duty truck engine sales declined 45 percent as result of
continued weakness in North America.
-- Industrial sales increased 89 percent
o Worldwide construction sales rose 138 percent, led by market recovery
in North America and continued infrastructure investment in China,
India and Brazil.
o Mining sales rose 163 percent
o Agriculture market sales increased 87 percent
-- Stationary power engine sales increased by 86 percent, primarily due to
increased power generation demand, especially for high horsepower
engines.
Power Generation
-- Sales - $903 million, up 50 percent
-- Segment EBIT - $92 million, or 10.2 percent of sales, compared to $34
million or 5.7 percent of sales.
-- Commercial Products sales rose 59 percent; Commercial Projects up 66
percent; Consumer sales increased 15 percent; Generator Technologies
rose 42 percent; and Power Electronics increased 8 percent.
-- Segment continues to recover from low point of economic cycle in Q3 2009
as sales increased in most geographic markets.
Components
-- Sales - $918 million up 25 percent
-- Segment EBIT - $83 million, or 9.0 percent of sales, compared to $73
million, or 10.0 percent of sales
-- Emission Solutions sales increased by 70 percent; Filtration up 18
percent; Turbo Technologies rose 17 percent; Fuel Systems decreased 2
percent.
-- Increased aftertreatment content on 2010 North American truck engines
led Emission Solutions sales gains; Filtration sales benefited from
strong increase in aftermarket sales; Turbo Technologies led by gains in
China, India and Europe.
Distribution
-- Sales - $699 million, an increase of 44 percent
-- Segment EBIT - $82 million, or 11.7 percent of sales, compared to $67
million, or 13.8 percent of sales
-- Consolidation of Western Canada and the Cummins Northeast distributors
accounted for $102 million in sales during quarter.
-- Sales increased in all product/service segments (engines, power
generation, parts, and service), led by strong gains for engines and
power generation in Western Europe.
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.
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 employs approximately 40,000 people worldwide and serves customers in approximately 190 countries and territories through a network of more than 600 company-owned and independent distributor locations and approximately 6,000 dealer locations. Cummins earned $1.0 billion on sales of $13.2 billion in 2010. 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 26, December 31,
In millions, except per share amounts 2010 2010 2009
NET SALES $ 4,139 $ 3,401 $ 3,400
Cost of sales 3,155 2,571 2,627
GROSS MARGIN 984 830 773
OPERATING EXPENSES AND INCOME
Selling, general and administrative 423 375 348
expenses
Research, development and 123 103 108
engineering expenses
Equity, royalty and interest income 90 88 67
from investees (Note 1)
Restructuring and other charges - - 4
Other operating (expense) income, (3 ) (5 ) 5
net
OPERATING INCOME 525 435 385
Interest income 7 6 3
Interest expense 11 11 9
Other income (expense), net (Note 2) 9 8 (5 )
INCOME BEFORE INCOME TAXES 530 438 374
Income tax expense (Note 3) 139 129 84
CONSOLIDATED NET INCOME 391 309 290
Less: Net income attributable to 29 26 20
noncontrolling interests
NET INCOME ATTRIBUTABLE TO CUMMINS $ 362 $ 283 $ 270
INC.
EARNINGS PER COMMON SHARE
ATTRIBUTABLE TO CUMMINS INC.
Basic $ 1.85 $ 1.45 $ 1.36
Diluted $ 1.84 $ 1.44 $ 1.36
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 195.8 195.8 198.4
Diluted 196.4 196.3 198.7
CASH DIVIDENDS DECLARED PER COMMON $ 0.2625 $ 0.2625 $ 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
CONSOLIDATED STATEMENTS OF INCOME
Unaudited (a)
For the years ended
December 31, December 31,
In millions, except per share amounts 2010 2009
NET SALES $ 13,226 10,800
Cost of sales 10,058 8,631
GROSS MARGIN 3,168 2,169
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses 1,487 1,239
Research, development and engineering expenses 414 362
Equity, royalty and interest income from investees 351 214
(Note 1)
Restructuring and other charges - 99
Other operating (expense) income, net (16 ) (1 )
OPERATING INCOME 1,602 682
Interest income 21 8
Interest expense 40 35
Other income (expense), net (Note 2) 34 (15 )
INCOME BEFORE INCOME TAXES 1,617 640
Income tax expense (Note 3) 477 156
CONSOLIDATED NET INCOME 1,140 484
Less: Net income attributable to noncontrolling 100 56
interests
NET INCOME ATTRIBUTABLE TO CUMMINS INC. $ 1,040 $ 428
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS
INC.
Basic $ 5.29 $ 2.17
Diluted $ 5.28 $ 2.16
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 196.7 197.4
Diluted 197.1 197.7
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.875 $ 0.70
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America (GAAP).
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (a)
December 31, December 31,
In millions, except par value 2010 2009
ASSETS
Current assets
Cash and cash equivalents $ 1,023 $ 930
Marketable securities 339 190
Accounts and notes receivable, net 2,243 2,004
Inventories 1,977 1,341
Prepaid expenses and other current assets 707 538
Total current assets 6,289 5,003
Long-term assets
Property, plant and equipment, net 2,041 1,886
Investments and advances related to equity method 734 574
investees
Goodwill and other intangibles, net 589 592
Other assets 749 761
Total assets $ 10,402 $ 8,816
LIABILITIES
Current liabilities
Loans payable $ 82 $ 37
Accounts payable (principally trade) 1,362 957
Accrued expenses 1,816 1,438
Total current liabilities 3,260 2,432
Long-term liabilities
Long-term debt 709 637
Other liabilities 1,437 1,727
Total liabilities 5,406 4,796
EQUITY
Cummins Inc. shareholders' equity
Common stock, $2.50 par value, 500 shares 1,934 1,860
authorized, 221.8 and 222.0 shares issued
Retained earnings 4,445 3,575
Treasury stock, at cost, 24.0 and 20.7 shares (964 ) (731 )
Common stock held by employee benefits trust, at (25 ) (36 )
cost, 2.1 and 3.0 shares
Accumulated other comprehensive loss (720 ) (895 )
Total Cummins Inc. shareholders' equity 4,670 3,773
Noncontrolling interests 326 247
Total equity 4,996 4,020
Total liabilities and equity $ 10,402 $ 8,816
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America (GAAP).
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (a)
For the years ended
December 31, December 31,
In millions 2010 2009
NET CASH PROVIDED BY OPERATING ACTIVITIES (Note 4) $ 1,006 $ 1,137
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (364 ) (310 )
Investments in internal use software (43 ) (35 )
Proceeds from disposals of property, plant and 55 10
equipment
Investments in and advances to equity investees (2 ) (3 )
Acquisition of businesses, net of cash acquired (104 ) (2 )
Investments in marketable securities-acquisitions (823 ) (431 )
Investments in marketable securities-liquidations 690 335
Purchases of other investments (62 ) (62 )
Cash flows from derivatives not designated as 2 (18 )
hedges
Other, net - 7
Net cash used in investing activities (651 ) (509 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 214 76
Payments on borrowings and capital lease (143 ) (97 )
obligations
Net borrowings (payments) under short-term credit 9 (2 )
agreements
Distributions to noncontrolling interests (28 ) (34 )
Dividend payments on common stock (172 ) (141 )
Proceeds from sale of common stock held by 58 72
employee benefit trust
Repurchases of common stock (241 ) (20 )
Other, net 36 5
Net cash used in financing activities (267 ) (141 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH 5 17
EQUIVALENTS
Net increase in cash and cash equivalents 93 504
Cash and cash equivalents at beginning of year 930 426
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,023 $ 930
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America (GAAP).
CUMMINS INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
Power Non-segment
In millions Engine Components Distribution Total
Generation Items(1)
Three months
ended
December 31,
2010
External $ 2,099 $ 690 $ 656 $ 694 $ - $ 4,139
sales
Intersegment 398 213 262 5 (878 ) -
sales
Total sales 2,497 903 918 699 (878 ) 4,139
Depreciation
and 46 10 18 6 - 80
amortization
(2)
Research,
development
and 76 13 33 1 - 123
engineering
expenses
Equity,
royalty and
interest 37 8 6 39 - 90
income from
investees
Interest 5 1 1 - - 7
income
Segment EBIT 256 92 83 82 28 541
Three months
ended
September 26,
2010
External $ 1,727 $ 564 $ 540 $ 570 $ - $ 3,401
sales
Intersegment 342 227 229 3 (801 ) -
sales
Total sales 2,069 791 769 573 (801 ) 3,401
Depreciation
and 42 10 20 5 - 77
amortization
(2)
Research,
development
and 65 8 30 - - 103
engineering
expenses
Equity,
royalty and
interest 37 12 6 33 - 88
income from
investees
Interest 3 2 - 1 - 6
income
Segment EBIT 223 97 63 74 (8 ) 449
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
expenses
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
For the year
ended
December 31,
2010
External $ 6,594 $ 2,150 $ 2,171 $ 2,311 $ - $ 13,226
sales
Intersegment 1,294 769 875 13 (2,951 ) -
sales
Total sales 7,888 2,919 3,046 2,324 (2,951 ) 13,226
Depreciation
and 171 41 79 25 - 316
amortization
(2)
Research,
development
and 263 36 114 1 - 414
engineering
expenses
Equity,
royalty and
interest 161 35 23 132 - 351
income from
investees
Interest 12 5 2 2 - 21
income
Segment EBIT 809 299 278 297 (26 ) 1,657
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
expenses
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
Includes intersegment sales and profit in inventory eliminations and unallocated
corporate expenses. For the three months ended December 31, 2010, there were no
unallocated corporate expenses. For the three months ended September 26, 2010 and
the year ended December 31, 2010 unallocated corporate expenses included $32
million in Brazil tax recoveries ($21 million after-tax) and $2 million in flood
(1) damage expenses. This tax recovery has been excluded from segment results as it was
not considered by management in its evaluation of operating results for the three
months ended September 26, 2010 or the year ended December 31, 2010. For the three
months and the year ended December 31, 2009, unallocated corporate expenses
included $4 million and $99 million of restructuring and other charges and gains of
$7 million and $12 million related to flood damages, respectively.
Depreciation and amortization as shown on a segment basis excludes the amortization
(2) of debt discount that is included in theConsolidated Statements of Incomeas
"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 Statements of Income is shown in the table below:
Three months ended For the years ended
December 31, September December 31, December 31, December 31,
26,
In millions 2010 2010 2009 2010 2009
Segment $ 541 $ 449 $ 383 $ 1,657 $ 675
EBIT
Less:
Interest 11 11 9 40 35
expense
Income
before $ 530 $ 438 $ 374 $ 1,617 $ 640
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, noncontrolling interests in income of consolidated subsidiaries and
restructuring and other charges (EBIT). We use EBIT to assess and measure the
performance of our operating segments and also as a component in measuring
our variable compensation programs. Below is a reconciliation of EBIT, a
non-GAAP financial measure, to "Net income attributable to Cummins Inc.," for
each of the applicable periods:
Three months ended For the years ended
December September December 31, December 31, December 31,
31, 26,
In millions 2010 2010 2009 2010 2009
Earnings before
interest
expense, income
taxes and $ 541 $ 449 $ 387 $ 1,657 $ 774
restructuring
and other
charges
Earnings before
interest
expense, income
taxes and
restructuring 13.1% 13.2% 11.4% 12.5% 7.2%
and other
charges as a
percentage of
net sales
Less:
Restructuring
and other - - 4 - 99
charges
Earnings before
interest and $ 541 $ 449 $ 383 $ 1,657 $ 675
income taxes
EBIT as a
percentage of 13.1% 13.2% 11.3% 12.5% 6.3%
net sales
Less:
Interest 11 11 9 40 35
expense
Income tax 139 129 84 477 156
expense
Consolidated 391 309 290 1,140 484
net income
Less:
Net income
attributable
to 29 26 20 100 56
noncontrolling
interests
Net income
attributable to $ 362 $ 283 $ 270 $ 1,040 $ 428
Cummins Inc.
Net income
attributable to
Cummins Inc. as 8.7% 8.3% 7.9% 7.9% 4.0%
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.
Three months ended Year ended
December 31, 2009 December 31, 2009
In millions Net Income Diluted EPS Net Income Diluted EPS
Net income attributable to
Cummins Inc. excluding $ 272 $ 1.37 $ 493 $ 2.49
restructuring and other charges
Less:
Restructuring and other 2 0.01 65 0.33
charges, net(1)
Net income attributable to $ 270 $ 1.36 $ 428 $ 2.16
Cummins Inc.
(1) During the three months ended December 31, 2009, management approved and
committed to undertake restructuring actions. These actions resulted in pretax
restructuring and other charges of $4 million. For the year ended December 31,
2009, the total pretax restructuring and other charges were $99 million. These
charges included employee-related liabilities for severance and benefits, exit
costs and pension and other postretirement benefit curtailment charges.
CUMMINS INC. AND SUBSIDIARIES
SELECTED FOOTNOTE DATA
(Unaudited)
NOTE 1. EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES
Equity, royalty and interest income from investees included in our Condensed
Consolidated Statements of Income for the interim reporting periods was as
follows:
Three months ended For the years ended
December 31, September December 31, December 31, December 31,
26,
In millions 2010 2010 2009 2010 2009
Distribution
Entities
North
American $ 29 $ 26 $ 26 $ 101 $ 100
distributors
Komatsu
Cummins 5 4 3 16 12
Chile, Ltda
All other 1 1 1 3 3
distributors
Manufacturing
Entities
Dongfeng
Cummins 23 24 15 99 33
Engine
Company, Ltd.
Chongqing
Cummins 11 12 8 46 36
Engine
Company, Ltd.
Tata Cummins, 3 4 3 14 5
Ltd.
Shanghai
Fleetguard 3 3 2 12 7
Filter Co.,
Ltd.
Komatsu
manufacturing 4 2 - 11 (2 )
alliances
Cummins 3 2 1 10 3
Westport, Inc
Valvoline 1 2 2 8 7
Cummins, Ltd.
Cummins
MerCruiser (2 ) (1 ) (5 ) (3 ) (10 )
Diesel
Marine, LLC
Beijing Foton
Cummins (4 ) (6 ) - (16 ) (5 )
Engine Co.,
Ltd.
All other 5 8 4 20 7
manufacturers
Cummins
share of net 82 81 60 321 196
income
Royalty and
interest 8 7 7 30 18
income
Equity,
royalty and
interest $ 90 $ 88 $ 67 $ 351 $ 214
income from
investees
NOTE 2. OTHER INCOME (EXPENSE)
Other income (expense) included the following:
Three months ended For the years ended
December 31, September December 31, December 31, December 31,
26,
In millions 2010 2010 2009 2010 2009
Change in
cash
surrender
value of $ 1 $ 11 $ (5 ) $ 12 $ (4 )
corporate
owned life
insurance
Gain on
acquisition
of Cummins - - - 12 -
Western
Canada
(CWC)
Dividend 2 2 2 7 5
income
Life
insurance 7 - - 7 -
proceeds
Foreign
currency (5 ) (5 ) (2 ) (1 ) (20 )
losses, net
Bank (4 ) (4 ) (4 ) (15 ) (14 )
charges
Other, net 8 4 4 12 18
$ 9 $ 8 $ (5 ) $ 34 $ (15 )
NOTE 3. 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 2010 was 26.2 percent and 29.5 percent, respectively. Our income tax provision for the fourth quarter includes benefits totaling $17 million related to the legislative reinstatement of the U.S. research tax credit. Our effective tax rate for the fourth quarter and full year of 2009 was 22.5 percent and 24.4 percent, respectively. In 2009, 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.
We expect our 2011 effective tax rate to be 30 percent excluding any discrete items that may arise.
NOTE 4. 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, 2010 and 2009, was $320 million and $326 million, respectively.
SUPPLEMENTAL INFORMATION
TABLES FOR MARK LAND, NOT BE INCLUDED IN FILED 8-K
Sales
2010
In millions Q1 Q2 Q3 Q4 YTD
Engine business
Heavy-duty truck $ 252 $ 340 $ 395 $ 516 $ 1,503
Medium-duty bus 217 352 430 436 1,435
and truck
Light-duty auto 207 296 239 280 1,022
and RV
Industrial 577 656 700 956 2,889
Stationary power 170 255 305 309 1,039
Total Engine 1,423 1,899 2,069 2,497 7,888
business
Power Generation 517 708 791 903 2,919
Components 630 729 769 918 3,046
Distribution 476 576 573 699 2,324
Eliminations (568 ) (704 ) (801 ) (878 ) (2,951 )
Total $ 2,478 $ 3,208 $ 3,401 $ 4,139 $ 13,226
2009
In millions Q1 Q2 Q3 Q4 YTD
Engine business
Heavy-duty truck $ 394 $ 395 $ 493 $ 714 $ 1,996
Medium-duty bus 229 240 294 469 1,232
and truck
Light-duty auto 156 94 120 318 688
and 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
Engine Shipments
2010
Units Q1 Q2 Q3 Q4 YTD
Mid-range 69,100 90,500 93,500 115,800 368,900
Heavy-duty 8,700 14,500 15,200 22,800 61,200
High horsepower 3,400 4,800 4,900 5,400 18,500
Total 81,200 109,800 113,600 144,000 448,600
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
Source: Cummins Inc.
Released February 1, 2011