Cummins Reports Strong Third Quarter Results

  • Sales increase 36 percent while EBIT grew by 43 percent
  • Company on track for full year sales and earnings records despite global macro-economic conditions

COLUMBUS, Ind.--(BUSINESS WIRE)-- Cummins Inc. (NYSE: CMI) today reported strong sales and earnings for the third quarter. Year-over-year growth was driven by global mining and oil & gas markets, on-highway markets in North America and Brazil, and construction demand in Asia.

Third quarter sales were $4.6 billion, up 36 percent from the same period last year. All segments delivered double-digit growth over the prior year.

Earnings before interest and taxes (EBIT) were $640 million, or 13.8 percent of sales, compared to $449 million, or 13.2 percent of sales, in the same period in 2010.

Net income attributable to Cummins Inc. in the third quarter was $452 million, an increase of 60 percent from a year ago, or $2.35 per diluted share. This compares to $283 million or $1.44 per diluted share a year ago.

"We delivered strong performance in the third quarter and 2011 will be a record year for the company,” said Tom Linebarger, President and Chief Operating Officer. "Many of our key markets continue to show strong growth, for example, mining, oil & gas, and North American on-highway markets. However, as discussed at our recent investor conference, there is some uncertainty around the macro-economic environment. Government actions to reduce inflation in India and China have resulted in softer near-term demand than we previously expected. This, along with the recent strengthening of the US Dollar, has caused us to slightly soften full year revenue guidance to a range of $17.5 to $18 billion, which would represent an increase of over $4 billion or over 30 percent compared to 2010”.

The Company now expects to deliver record profits of between 14 and 14.5 percent EBIT, compared to 12.5 percent in 2010. This guidance excludes gains from the sale of the exhaust and light-duty filtration businesses.

“Cummins is having its best year ever,” said Tim Solso, Chairman and Chief Executive Officer. “Achieving more than 30 percent revenue growth and record profitability this year, despite all the uncertainty in the world, says a lot about the performance culture at the Company. Cummins has the best technology in the industry, a very strong and experienced leadership team and great global partners. I am very confident in the Company’s future.”

Engine segment sales of $2.96 billion were up 43 percent compared to the same quarter a year ago. This increase was driven by on-highway markets in North America and Latin America, strong worldwide oil & gas, mining and construction activity. Engine segment EBIT was $349 million, or 11.8 percent of sales.

Power Generation segment had sales of $874 million, a year-over-year increase of 10 percent. Improvements in China, North America, Europe and the Middle East offset weaker demand in India. Power Generation segment EBIT was $92 million or 10.5 percent of sales.

Components segment sales of $1.02 billion were up 32 percent year-over-year. All businesses experienced strong growth driven primarily by higher demand in on-highway markets in the US and Europe. Components segment EBIT was $113 million, or 11.1 percent of sales.

Distribution segment sales were $783 million, an increase of 37 percent from the third quarter last year. Growth over the prior year was driven by oil & gas markets in North America, power generation demand in Asia, and industrial demand ahead of the Tier 4 emission change in North America and Europe. Distribution segment EBIT was $104 million, or 13.3 percent of sales.

Other third quarter highlights:

  • Cummins repurchased 1.9 million shares at a cost of $173 million.
  • Company increased its dividend 52 percent effective in July.
  • S&P increased Cummins’ credit rating to ‘A’. This follows an upgrade by Fitch Ratings in June.

Third quarter details (all comparisons to the same period in 2010)

Engine Segment

  • Sales - $2.96 billion, up 43 percent
  • Segment EBIT - $349 million, or 11.8 percent of sales, compared to $223 million or 10.8 percent of sales
  • Growth driven by on-highway markets in North America and Latin America, strong worldwide oil & gas and mining activity, and industrial engines in North America and Europe

Power Generation

  • Sales - $874 million, up 10 percent
  • Segment EBIT - $92 million or 10.5 percent of sales, compared to $97 million or 12.3 percent
  • Growth driven by China, North America, and Europe was partially offset by weaker demand in India and Latin America.

Components

  • Sales - $1.02 billion, up 32 percent
  • EBIT - $113 million, or 11.1 percent of sales, compared to $63 million or 8.2 percent of sales
  • Growth driven primarily by higher demand in on-highway markets in the United States and stronger growth in the emerging markets

Distribution

  • Sales - $783 million, up 37 percent
  • EBIT - $104 million or 13.3 percent of sales, compared to $74 million or 12.9 percent of sales
  • Growth was driven by oil and gas markets in North America, power generation demand in Asia, and industrial demand ahead of the Tier 4 emission change in North America and 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 our forecasts, expectations, hopes, beliefs and intentions on strategies regarding the future. 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 2010 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.

 
 
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (a)
             
Three months ended
September 25, June 26, September 26,
In millions, except per share amounts 2011 2011 2010
NET SALES $ 4,626 $ 4,641 $ 3,401
Cost of sales   3,438     3,438     2,571  
GROSS MARGIN 1,188 1,203 830
 
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses 489 463 375
Research, development and engineering expenses 164 157 103
Equity, royalty and interest income from investees (Note 1) 102 117 88
Gain on sale of business (Note 2) - 68 -
Other operating (expense) income, net   2     -     (5 )
OPERATING INCOME 639 768 435
 
Interest income 9 10 6
Interest expense 11 13 11
Other income (expense), net   (8 )   (3 )   8  
INCOME BEFORE INCOME TAXES 629 762 438
 
Income tax expense (Note 3)   157     225     129  
CONSOLIDATED NET INCOME 472 537 309
 
Less: Net income attributable to noncontrolling interests   20     32     26  
NET INCOME ATTRIBUTABLE TO CUMMINS INC. $ 452   $ 505   $ 283  
 

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.

Basic $ 2.35 $ 2.61 $ 1.45
Diluted $ 2.35 $ 2.60 $ 1.44
 
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 192.1 193.8 195.8
Diluted 192.7 194.4 196.3
 
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.40 $ 0.2625 $ 0.2625

(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)
         
Nine months ended
In millions, except per share amounts

September 25,
2011

September 26,
2010

NET SALES $ 13,127 $ 9,087
Cost of sales   9,779     6,903  
GROSS MARGIN 3,348 2,184
 
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses 1,341 1,064
Research, development and engineering expenses 450 291
Equity, royalty and interest income from investees (Note 1) 315 261
Gain on sale of business (Note 2) 68 -
Other operating (expense) income, net   (4 )   (13 )
OPERATING INCOME 1,936 1,077
 
Interest income 25 14
Interest expense 34 29
Other income (expense), net   (14 )   25  
INCOME BEFORE INCOME TAXES 1,913 1,087
 
Income tax expense (Note 3)   539     338  
CONSOLIDATED NET INCOME 1,374 749
 
Less: Net income attributable to noncontrolling interests   74     71  
NET INCOME ATTRIBUTABLE TO CUMMINS INC. $ 1,300   $ 678  
 

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.

Basic $ 6.71 $ 3.44
Diluted $ 6.69 $ 3.43
 
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 193.8 197.0
Diluted 194.4 197.4
 
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.925 $ 0.6125

(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)
            September 25,     December 31,
In millions, except par value 2011 2010
ASSETS
Current assets
Cash and cash equivalents $ 1,165 $ 1,023
Marketable securities   273     339  
Total cash, cash equivalents and marketable securities 1,438 1,362
Accounts and notes receivable, net 2,666 2,243
Inventories 2,295 1,977
Deferred income taxes 277 314
Prepaid expenses and other current assets   350     393  
Total current assets   7,026     6,289  
Long-term assets
Property, plant and equipment 5,131 4,927
Accumulated depreciation   (2,963 )   (2,886 )
Property, plant and equipment, net   2,168   2,041  
Investments and advances related to equity method investees 830 734
Goodwill 346 367
Other intangible assets, net 215 222
Deferred income taxes 125 203
Other assets   628     546  
Total assets $ 11,338   $ 10,402  
 
LIABILITIES
Current liabilities
Loans payable $ 48 $ 82
Accounts payable (principally trade) 1,659 1,362
Current portion of accrued product warranty 417 421
Accrued compensation, benefits and retirement costs 481 468
Deferred revenue 208 182
Taxes payable (including taxes on income) 251 202
Other accrued expenses   678     543  
Total current liabilities   3,742     3,260  
Long-term liabilities
Long-term debt 665 709
Pensions 75 195
Postretirement benefits other than pensions 446 439
Other liabilities and deferred revenue   866     803  
Total liabilities   5,794     5,406  
 
EQUITY
Cummins Inc. shareholders’ equity
Common stock, $2.50 par value, 500 shares authorized, 222.2 and 221.8 shares issued 1,982 1,934
Retained earnings 5,567 4,445
Treasury stock, at cost, 29.3 and 24.0 shares (1,505 ) (964 )
Common stock held by employee benefits trust, at cost, 1.9 and 2.1 shares (22 ) (25 )
Accumulated other comprehensive loss
Defined benefit postretirement plans (606 ) (646 )
Other   (205 )   (74 )
Total accumulated other comprehensive loss   (811 )   (720 )
Total Cummins Inc. shareholders’ equity 5,211 4,670
Noncontrolling interests   333     326  
Total equity   5,544     4,996  
Total liabilities and equity $ 11,338   $ 10,402  

(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)
        Nine months ended
September 25,     September 26,
In millions 2011 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income $ 1,374 $ 749
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization 243 239
Gain on sale of business (Note 2) (68 ) -
Gain on fair value adjustment for consolidated investee - (12 )
Deferred income taxes 148 83
Equity in income of investees, net of dividends 7 (95 )
Pension contributions in excess of expense (71 ) (114 )
Excess tax benefits on stock based awards (4 ) (8 )
Other post-retirement benefits payments in excess of expense (10 ) (22 )
Stock-based compensation expense 28 17
Translation and hedging activities (14 ) 10
Changes in current assets and liabilities, net of acquisitions and divestitures:
Accounts and notes receivable (469 ) (198 )
Inventories (367 ) (524 )
Other current assets (5 ) (16 )
Accounts payable 317 336
Accrued expenses 173 102
Changes in other liabilities and deferred revenue 93 97
Other, net   (7 )   (25 )
Net cash provided by operating activities   1,368     619  
 
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (377 ) (170 )
Investments in internal use software (31 ) (28 )
Proceeds from disposals of property, plant and equipment 5 46
Investments in and advances to equity investees (104 ) (17 )
Proceeds from sale of business, net of cash sold (Note 2) 111 -
Acquisition of businesses, net of cash acquired - (77 )
Investments in marketable securities—acquisitions (538 ) (560 )
Investments in marketable securities—liquidations 572 452
Purchases of other investments - (54 )
Cash flows from derivatives not designated as hedges 4 2
Other, net   2     -  
Net cash used in investing activities   (356 )   (406 )
 
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 96 163
Payments on borrowings and capital lease obligations (174 ) (64 )
Net borrowings under short-term credit agreements (5 ) (4 )
Distributions to noncontrolling interests (50 ) (21 )
Dividend payments on common stock (178 ) (120 )
Proceeds from sale of common stock held by employee benefit trust - 52
Repurchases of common stock (546 ) (241 )
Excess tax benefits on stock-based awards 4 8
Other, net   13     17  
Net cash used in financing activities   (840 )   (210 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS   (30 )   4  
Net increase (decrease) in cash and cash equivalents 142 7
Cash and cash equivalents at beginning of year   1,023     930  
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,165   $ 937  

(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)

 
    Engine

Power
Generation

  Components Distribution  

Non-segment
Items(1)

  Total
In millions  
Three months ended September 25, 2011
External sales $ 2,539 $ 604 $ 704 $ 779 $ - $ 4,626
Intersegment sales 416 270 311 4 (1,001 )   -
  Total sales 2,955 874 1,015 783 (1,001 ) 4,626
Depreciation and amortization(2) 46 11 19 6 - 82
Research, development and engineering expenses 103 14 46 1 - 164
Equity, royalty and interest income from investees 35 16 7 44 - 102
Interest income 5 2 1 1 - 9
Segment EBIT 349 92 113 104 (18 ) 640
 
Three months ended June 26, 2011
External sales $ 2,476 $ 649 $ 741 $ 775 $ - $ 4,641
Intersegment sales 424   260   291   10   (985 )   -
Total sales 2,900 909 1,032 785 (985 ) 4,641
Depreciation and amortization(2) 44 11 18 5 - 78
Research, development and engineering expenses 102 12 43 - - 157
Equity, royalty and interest income from investees 49 13 9 46 - 117
Interest income 6 3 1 - - 10
Segment EBIT 377 105 120 106 67 775
 
Three months ended September 26, 2010
External sales $ 1,727 $ 564 $ 540 $ 570 $ - $ 3,401
Intersegment sales 342 227 229 3 (801 )   -
Total sales 2,069 791 769 573 (801 ) 3,401
Depreciation and amortization(2) 42 10 20 5 - 77
Research, development and engineering expenses 65 8 30 - - 103
Equity, royalty and interest income from investees 37 12 6 33 - 88
Interest income 3 2 - 1 - 6
Segment EBIT 223 97 63 74 (8 ) 449
 
Nine months ended September 25, 2011
External sales $ 7,021 $ 1,810 $ 2,105 $ 2,191 $ - $ 13,127
Intersegment sales 1,225 768 866 19 (2,878 )   -
Total sales 8,246 2,578 2,971 2,210 (2,878 ) 13,127
Depreciation and amortization(2) 135 32 55 17 - 239
Research, development and engineering expenses 285 37 126 2 - 450
Equity, royalty and interest income from investees 126 37 24 128 - 315
Interest income 14 6 3 2 - 25
Segment EBIT 1,016 286 338 299 8 1,947
 
Nine months ended September 26, 2010
External sales $ 4,495 $ 1,460 $ 1,515 $ 1,617 $ - $ 9,087
Intersegment sales 896 556 613 8 (2,073 )   -
Total sales 5,391 2,016 2,128 1,625 (2,073 ) 9,087
Depreciation and amortization(2) 125 31 61 19 - 236
Research, development and engineering expenses 187 23 81 - - 291
Equity, royalty and interest income from investees 124 27 17 93 - 261
Interest income 7 4 1 2 - 14
Segment EBIT 553 207 195 215 (54 ) 1,116
 
(1)

Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. The three months ended June 26, 2011, and the nine months ended September 25, 2011, include a $68 million gain ($37 million after-tax) related to the sale of our exhaust business from the Components segment. The gain has been excluded from segment results as it was not considered by management in its evaluation of operating results for the three months ended June 26, 2011, and the nine months ended September 25, 2011. For the three and nine months ended September 26, 2010, unallocated corporate expenses included $32 million of Brazil tax recoveries ($21 million after-tax) and $2 million in flood damage expenses. In the third quarter of 2010, it was determined that we overpaid a Brazilian revenue based tax during 2004-2008. Our 2010 results include a pre-tax recovery related to tax credits on imported products arising from this overpayment. The recovery has been excluded from segment results as it was not considered by management in its evaluation of operating results for the quarter. There were no other significant unallocated corporate expenses for the three and nine months ended September 25, 2011 and September 26, 2010.

 
(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
RECONCILIATION OF SEGMENT INFORMATION
(Unaudited)
 

A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Income is shown in the table below:

 
      Three months ended   Nine months ended
September 25,   June 26,   September 26, September 25,   September 26,
In millions 2011 2011 2010 2011 2010
Segment EBIT $ 640 $ 775 $ 449 $ 1,947 $ 1,116
Less:
Interest expense   11   13   11   34   29
Income before income taxes $ 629 $ 762 $ 438 $ 1,913 $ 1,087
 
CUMMINS INC. AND SUBSIDIARIES
SELECTED FOOTNOTE DATA
(Unaudited)
 
NOTE 1. EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES
 

Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Income for the interim reporting periods was as follows:

 
      Three months ended     Nine months ended
September 25,     June 26,     September 26, September 25,     September 26,
In millions 2011 2011 2010 2011 2010
Distribution Entities
North American distributors $ 35 $ 35 $ 26 $ 100 $ 72
Komatsu Cummins Chile, Ltda 6 6 5 16 11
All other distributors 1 1 - 3 2
Manufacturing Entities
Chongqing Cummins Engine Company, Ltd. 20 19 12 51 35
Dongfeng Cummins Engine Company, Ltd. 15 26 24 64 76
Shanghai Fleetguard Filter Co., Ltd. 4 4 3 12 9
Cummins Westport, Inc. 4 3 2 8 7
Tata Cummins, Ltd. 2 3 4 9 11
Valvoline Cummins, Ltd. 2 2 2 6 7
Komatsu manufacturing alliances - (1 ) 2 1 7
Beijing Foton Cummins Engine Co., Ltd. (2 ) (1 ) (6 ) (5 ) (12 )
All other manufacturers   7     6     7     19     14  
Cummins share of net income 94 103 81 284 239
Royalty and interest income   8     14     7     31     22  
Equity, royalty and interest income from investees $ 102   $ 117   $ 88   $ 315   $ 261  
 

NOTE 2. SALE OF EXHAUST BUSINESS

In January 2011, we reached an agreement to sell certain assets and liabilities of our exhaust business which manufactures exhaust products and select components for emission systems for a variety of applications not core to our other product offerings. The transaction closed in the second quarter of 2011. This business was historically included in our Components segment. The sales price was $123 million. We recognized a pre-tax gain on the sale of $68 million, which included an allocation of goodwill of $19 million. The transaction had a working capital adjustment mechanism that was determined in the third quarter. There was not a significant change to the measurement of the gain. The gain was excluded from segment results as it was not considered by management in its evaluation of operating results for the nine months ended September 25, 2011.

Sales for this business were $171 million, $126 million and $169 million in 2010, 2009 and 2008, respectively. Income before income taxes for this business was approximately $22 million, $11 million and $19 million in 2010, 2009 and 2008, respectively.

We will enter into supply and other agreements with the operations that will represent ongoing involvement and as such, the results of these operations will not be presented as discontinued operations.

NOTE 3. INCOME TAXES

Our effective tax rate for the year is expected to approximate 29.5 percent, absent any discrete period activity. Our tax rate is generally less than the 35 percent U.S. income tax rate primarily due to lower income tax rates on foreign income and research tax credits. The tax rates for the three and nine month periods ended September 25, 2011, were 25.0 percent and 28.2 percent, respectively. The tax rate for the third quarter includes discrete items that total a benefit of $29 million (or $0.15 per share) related primarily to amended tax returns for prior periods. The tax rate for the nine months ended September 25, 2011, includes total discrete tax benefits of $25 million.

Our effective tax rates for the comparable prior year periods were 29.5 percent and 31.1 percent, respectively. In July 2010, the U.K. passed legislation which reduced our U.K. tax rate from 28 percent to 27 percent in 2011. We had an additional charge to our third quarter tax provision of approximately $2 million to reduce the value of our U.K. deferred tax assets. The tax rate for the nine month period included a discrete income tax charge of $7 million related to the enactment of the “Patient Protection and Affordable Care Act.” The lower rate in 2011 compared to 2010 is a result of the geographic mix of earnings.

 
CUMMINS INC. AND SUBSIDIARIES
FINANCIAL MEASURES THAT SUPPLEMENT GAAP
(Unaudited)
 
Earnings before interest, taxes and noncontrolling interests
 

We define EBIT as earnings before interest expense, income tax expense and noncontrolling interests in income of consolidated subsidiaries (EBIT). We use EBIT to assess and measure the performance of our operating segments and also as a component in measuring our variable compensation programs. Below is a reconciliation of EBIT, a non-GAAP financial measure, to “Net income attributable to Cummins Inc.,” for each of the applicable periods:

 
    Three months ended   Nine months ended
September 25,   June 26,   September 26, September 25,   September 26,
In millions 2011 2011 2010 2011 2010

Earnings before interest expense, income taxes and gain on sale of business

$ 640 $ 707 $ 449 $ 1,879 $ 1,116
 

Earnings before interest expense, income taxes and gain on sale of business as a percentage of net sales

13.8% 15.2% 13.2% 14.3% 12.3%
 
Add:
Gain on sale of business - 68 - 68 -
                   
Earnings before interest expense and income taxes   640   775   449   1,947   1,116
 
EBIT as a percentage of net sales 13.8% 16.7% 13.2% 14.8% 12.3%
 
Less:
Interest expense 11 13 11 34 29
Income tax expense   157   225   129   539   338
Consolidated net income   472   537   309   1,374   749
 
Less:
Net income attributable to noncontrolling interests   20   32   26   74   71
Net income attributable to Cummins Inc. $ 452 $ 505 $ 283 $ 1,300 $ 678
 

Net income attributable to Cummins Inc. as a percentage of net sales

9.8% 10.9% 8.3% 9.9% 7.5%
 

Net income and diluted earnings per share (EPS) attributable to Cummins Inc. excluding gain on sale of business and discrete income tax items

We believe this is a useful measure of our operating performance for the periods presented as it illustrates our underlying operating performance and trends without regard to discrete income tax items and the gain related to the sale of our exhaust business. 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 gain on sale of business and discrete income tax items to “Net income attributable to Cummins Inc.” for the three and nine month periods ended September 25, 2011.

     
  Three months ended   Nine months ended
  September 25, 2011   September 25, 2011
In millions Net Income  

Diluted
EPS

Net Income  

Diluted
EPS

Net income attributable to Cummins Inc. excluding discrete income tax items and the gain on sale of business

$ 423 $ 2.20 $ 1,234 $ 6.35
Add:
Third quarter discrete income tax items 29 0.15 29 0.15
Gain on sale of business(1)   -   -   37   0.19
Net income attributable to Cummins Inc. $ 452 $ 2.35 $ 1,300 $ 6.69
 
(1) The gain has been excluded from operating results as it was not considered by management in its evaluation of performance for the nine months ended September 25, 2011.
 
CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)
 

Engine segment net sales by market

 

2011

                             
In millions Q1 Q2 Q3 Q4 YTD
Heavy-duty truck $ 485 $ 693 $ 748 $ - $ 1,926
Medium-duty truck and bus 474 608 640 - 1,722
Light-duty auto and RV 296 310 271 - 877
Industrial 855 988 977 - 2,820
Stationary power   281   301   319   -   901
  Total sales $ 2,391 $ 2,900 $ 2,955 $ - $ 8,246
 

2010

In millions Q1 Q2 Q3 Q4 YTD
Heavy-duty truck $ 252 $ 340 $ 395 $ 516 $ 1,503
Medium-duty bus and truck 217 352 430 436 1,435
Light-duty auto and RV 207 296 239 280 1,022
Industrial 577 656 700 956 2,889
Stationary power   170   255   305   309   1,039
Total sales $ 1,423 $ 1,899 $ 2,069 $ 2,497 $ 7,888

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

2011

                                       
Units Q1 Q2 Q3 Q4 YTD
Midrange 109,400 131,300 130,600 - 371,300
Heavy-duty 20,000 29,900 31,100 - 81,000
High-horsepower   4,900   5,700   5,600   -   16,200
  Total units   134,300   166,900   167,300   -   468,500
 

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 units   81,200   109,800   113,600   144,000   448,600

Power generation segment sales by business

2011

                             
In millions Q1 Q2 Q3 Q4 YTD
Commercial products $ 505 $ 568 $ 579 $ - $ 1,652
Generator technologies 153 190 166 - 509
Consumer

50

53

48 -

151

Commercial projects

55

58

46 -

159

Power electronics   32   40   35   -   107
  Total sales $ 795 $ 909 $ 874 $ - $ 2,578
 

2010

In millions Q1 Q2 Q3 Q4 YTD
Commercial products $ 307 $ 436 $ 519 $ 569 $ 1,831
Generator technologies 107 135 140 167 549
Commercial projects 33 57 49 83 222
Consumer 43 49 49 45 186
Power electronics   27   31   34   39   131
Total sales $ 517 $ 708 $ 791 $ 903 $ 2,919
 
CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)
 

Component segment sales by business

 

2011

                             
In millions Q1 Q2 Q3 Q4 YTD
Turbo technologies $ 297 $ 314 $ 298 $ - $ 909
Emission solutions 273 311 306 - 890
Filtration 255 287 288 - 830
Fuel systems   99   120   123   -   342
  Total sales $ 924 $ 1,032 $ 1,015 $ - $ 2,971
 

2010

In millions Q1 Q2 Q3 Q4 YTD
Turbo technologies $ 200 $ 226 $ 239 $ 283 $ 948
Emission solutions 137 170 192 251 750
Filtration 228 250 248 285 1,011
Fuel systems   65   83   90   99   337
Total sales $ 630 $ 729 $ 769 $ 918 $ 3,046

Distribution segment sales by product

2011

                             
In millions Q1 Q2 Q3 Q4 YTD
Parts and filtration $ 235 $ 271 $ 283 $ - $ 789
Power generation 145 195 191 - 531
Engines 140 186 171 - 497
Service   122   133   138   -   393
  Total sales $ 642 $ 785 $ 783 $ - $ 2,210
 

2010

In millions Q1 Q2 Q3 Q4 YTD
Parts and filtration $ 193 $ 221 $ 220 $ 248 $ 882
Power generation 99 135 125 157 516
Engines 83 109 112 162 466
Service   101   111   116   132   460
Total sales $ 476 $ 576 $ 573 $ 699 $ 2,324

Cummins Inc.
Janet Williams, 317-610-2488
Director - Corporate Communications
janet.williams@cummins.com

Source: Cummins Inc.