Cummins Reports Strong Results for the Second Quarter of 2013, Expects Full Year Revenues to Be in Line With 2012

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Second Quarter Revenues of $4.5 Billion and EBIT of 13.7 Percent of Sales; Maintains Full Year EBIT Guidance to Be in the Range of 13 to 14 Percent of Sales

COLUMBUS, IN -- (Marketwired) -- 07/30/13 --  Cummins Inc. (NYSE: CMI) today reported results for the second quarter of 2013.

Cummins Inc. (NYSE: CMI) today reported results for the second quarter of 2013.

Second quarter revenues of $4.5 billion increased 2 percent from the second quarter of 2012. Revenues in North America increased by 7 percent and international revenues declined by 4 percent. Within international markets, growth in Brazil and China was offset by weaker demand in Europe, India and Mexico.

Earnings before interest and taxes (EBIT) were $621 million or 13.7 percent of sales, compared to $663 million or 14.9 percent of sales a year ago, excluding special items.

Net income attributable to Cummins in the second quarter was $414 million ($2.20 per diluted share), compared to $465 million ($2.45 per diluted share) in the second quarter of 2012 excluding special items.

Second quarter revenues increased 15 percent from the first quarter of 2013 and EBIT improved to 13.7 percent of sales from 11.1 percent.

"Revenues increased primarily due to higher demand in North America, helped by market share gains in the medium duty truck market," said Chairman and CEO Tom Linebarger. "I am pleased with our execution this quarter and profitability improved significantly from first quarter levels. The recent increase in our dividend, coupled with our ongoing share repurchase program, underscore our confidence in the Company's future."

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

Recent highlights include:

  • Cummins increased its dividend by 25%
  • The Company repurchased 2.6 million shares of common stock
  • Cummins was one of only two industrial companies to be ranked among Gartner's Top 25 Supply Chain companies
  • Cummins was named one of the Top 50 companies for diversity by DiversityInc for the seventh consecutive year

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

Engine Segment

  • Sales - $2.7 billion, down 7 percent
  • Segment EBIT - $339 million, or 12.8 percent of sales, compared to $376 million or 13.2 percent of sales
  • Lower demand in stationary power, global mining and the heavy-duty truck market in North America were the most significant drivers of the lower revenues
  • Demand increased for medium duty truck engines in North America and Brazil

Components

  • Sales - $1.1 billion, an increase of 8 percent
  • Segment EBIT - $136 million, or 12.2 percent of sales, compared to $116 million or 11.2 percent of sales
  • Higher revenues primarily related to higher on-highway demand in Brazil, China and North America

Power Generation

  • Sales - $814 million, down 10 percent
  • Segment EBIT - $76 million, or 9.3 percent of sales, compared to $94 million or 10.3 percent of sales
  • Weaker demand in most international markets offsetting stronger revenues in North America

Distribution

  • Sales - $954 million, up 1% excluding acquisitions
  • Segment EBIT - $100 million, or 10.5 percent of sales, compared to $92 million or 11.6 percent of sales
  • Higher power generation and parts sales in North America offset by lower power generation sales in Europe and the Middle East

About Cummins

Cummins Inc., a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service diesel and natural gas engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Headquartered in Columbus, Indiana, (USA) Cummins currently employs approximately 46,000 people worldwide and serves customers in approximately 190 countries and territories through a network of approximately 600 company-owned and independent distributor locations and approximately 6,500 dealer locations. Cummins earned $1.65 billion on sales of $17.3 billion in 2012. Press releases can be found on the Web at www.cummins.com. Follow Cummins on Twitter at @Cummins and on YouTube at CumminsInc.

Forward-looking disclosure statement

Information provided in this release that is not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our forecasts, guidance, preliminary results, expectations, hopes, beliefs and intentions on strategies regarding the future. These forward looking statements include, without limitation, statements relating to our plans and expectations for our revenues for the full year of 2013. Our actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including, but not limited to: the adoption and implementation of global emission standards; the price and availability of energy; the pace of infrastructure development; increasing global competition among our customers; general economic, business and financing conditions; governmental action; changes in our customers' business strategies; competitor pricing activity; expense volatility; labor relations; and other risks detailed from time to time in our Securities and Exchange Commission filings, including particularly in the Risk Factors section of our 2012 Annual Report on Form 10-K. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this press release and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the Securities and Exchange Commission, which are available at http://www.sec.gov or at http://www.cummins.com in the Investor Relations section of our website.

Presentation of Non-GAAP Financial Information
  EBIT is a non-GAAP measure used in this release, and is defined and reconciled to what management believes to be the most comparable GAAP measure in a schedule attached to this release. Cummins presents this information as it believes it is useful to understanding the Company's operating performance, and because EBIT is a measure used internally to assess the performance of the operating units.

Webcast information
Cummins management will host a teleconference to discuss these results today at 10 a.m. EDT. 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.

The following files are available for download:

 
 
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (a)
 
    Three months ended
    June 30,   March 31,   July 1,
In millions, except per share amounts   2013   2013   2012
NET SALES   $ 4,525   $ 3,922   $ 4,452
  Cost of sales     3,372     2,965     3,242
GROSS MARGIN     1,153     957     1,210
                   
OPERATING EXPENSES AND INCOME                  
  Selling, general and administrative expenses     484     444     487
  Research, development and engineering expenses     177     182     187
  Equity, royalty and interest income from investees (Note 1)     108     82     104
  Other operating income (expense), net     10     1     8
OPERATING INCOME     610     414     648
                   
  Interest income     10     5     7
  Interest expense     8     6     8
  Other income (expense), net     1     18     14
INCOME BEFORE INCOME TAXES     613     431     661
                   
  Income tax expense (Note 2)     172     119     166
CONSOLIDATED NET INCOME     441     312     495
                   
  Less: Net income attributable to noncontrolling interests     27     30     26
NET INCOME ATTRIBUTABLE TO CUMMINS INC.   $ 414   $ 282   $ 469
                   
EARNINGS PER COMMON SHARE ATTRIBUTABLE  TO CUMMINS INC.                  
  Basic   $ 2.20   $ 1.50   $ 2.47
  Diluted   $ 2.20   $ 1.49   $ 2.47
                   
WEIGHTED AVERAGE SHARES OUTSTANDING                  
  Basic     187.8     188.4     189.8
  Diluted     188.2     188.8     190.1
                   
CASH DIVIDENDS DECLARED PER COMMON SHARE   $ 0.50   $ 0.50   $ 0.40
     
 (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)
 
    Six months ended
In millions, except per share amounts   June 30, 2013   July 1, 2012
NET SALES   $ 8,447   $ 8,924
  Cost of sales     6,337     6,516
GROSS MARGIN     2,110     2,408
             
OPERATING EXPENSES AND INCOME            
  Selling, general and administrative expenses     928     962
  Research, development and engineering expenses     359     368
  Equity, royalty and interest income from investees (Note 1)     190     208
  Other operating income (expense), net     11     10
OPERATING INCOME     1,024     1,296
             
  Interest income     15     15
  Interest expense     14     16
  Other income (expense), net     19     16
INCOME BEFORE INCOME TAXES     1,044     1,311
             
  Income tax expense (Note 2)     291     341
CONSOLIDATED NET INCOME     753     970
             
  Less: Net income attributable to noncontrolling interests     57     46
NET INCOME ATTRIBUTABLE TO CUMMINS INC.   $ 696   $ 924
             
EARNINGS PER COMMON SHARE ATTRIBUTABLE  TO CUMMINS INC.            
  Basic   $ 3.70   $ 4.86
  Diluted   $ 3.69   $ 4.85
             
WEIGHTED AVERAGE SHARES OUTSTANDING            
  Basic     188.1     190.1
  Diluted     188.5     190.5
             
CASH DIVIDENDS DECLARED PER COMMON SHARE   $ 1.00   $ 0.80
     
(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)  
        
In millions, except par value   June 30, 2013     December 31, 2012  
ASSETS                
Current assets                
  Cash and cash equivalents   $ 1,382     $ 1,369  
  Marketable securities     205       247  
    Total cash, cash equivalents and marketable securities     1,587       1,616  
  Accounts and notes receivable, net     2,745       2,475  
  Inventories     2,475       2,221  
  Prepaid expenses and other current assets     597       855  
      Total current assets     7,404       7,167  
Long-term assets                
  Property, plant and equipment     6,077       5,876  
    Accumulated depreciation     (3,195 )     (3,152 )
    Property, plant and equipment, net     2,882       2,724  
  Investments and advances related to equity method investees     924       897  
  Goodwill     450       445  
  Other intangible assets, net     360       369  
  Other assets     1,028       946  
        Total assets   $ 13,048     $ 12,548  
                 
LIABILITIES                
Current liabilities                
  Loans payable   $ 40     $ 16  
  Accounts payable (principally trade)     1,669       1,339  
  Current maturities of long-term debt     43       61  
  Current portion of accrued product warranty     393       386  
  Accrued compensation, benefits and retirement costs     348       400  
  Deferred revenue     243       215  
  Taxes payable (including taxes on income)     159       173  
  Other accrued expenses     567       546  
      Total current liabilities     3,462       3,136  
Long-term liabilities                
  Long-term debt     754       698  
  Postretirement benefits other than pensions     414       432  
  Other liabilities and deferred revenue     1,325       1,308  
        Total liabilities     5,955       5,574  
                 
EQUITY                
Cummins Inc. shareholders' equity                
  Common stock, $2.50 par value, 500 shares authorized, 222.3 and 222.4 shares issued     2,082       2,058  
  Retained earnings     7,850       7,343  
  Treasury stock, at cost, 35.0 and 32.6 shares     (2,112 )     (1,830 )
  Common stock held by employee benefits trust, at cost, 1.4 and 1.5 shares     (17 )     (18 )
  Accumulated other comprehensive loss                
    Defined benefit postretirement plans     (754 )     (794 )
    Other     (345 )     (156 )
    Total accumulated other comprehensive loss     (1,099 )     (950 )
      Total Cummins Inc. shareholders' equity     6,704       6,603  
  Noncontrolling interests     389       371  
        Total equity     7,093       6,974  
          Total liabilities and equity   $ 13,048     $ 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)  
   
    Six months ended  
In millions   June 30, 2013     July 1, 2012  
CASH FLOWS FROM OPERATING ACTIVITIES                
  Consolidated net income   $ 753     $ 970  
  Adjustments to reconcile consolidated net income to net cash provided by operating activities                
    Restructuring payments, net     (23 )     -  
    Depreciation and amortization     200       171  
    Gain on sale of businesses     -       (6 )
    Gain on fair value adjustment for consolidated investees     (12 )     -  
    Deferred income taxes     20       (39 )
    Equity in income of investees, net of dividends     (57 )     (25 )
    Pension contributions in excess of expense     (78 )     (52 )
    Other post-retirement benefits payments in excess of expense     (15 )     (7 )
    Stock-based compensation expense     19       21  
    Excess tax benefits on stock-based awards     (8 )     (11 )
    Translation and hedging activities     3       7  
  Changes in current assets and liabilities, net of acquisitions:                
    Accounts and notes receivable     (265 )     (116 )
    Inventories     (184 )     (439 )
    Other current assets     214       (47 )
    Accounts payable     310       61  
    Accrued expenses     (87 )     (173 )
  Changes in other liabilities and deferred revenue     100       103  
  Other, net     70       (21 )
Net cash provided by operating activities     960       397  
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
  Capital expenditures     (275 )     (266 )
  Investments in internal use software     (24 )     (40 )
  Investments in and advances to equity investees     (4 )     (40 )
  Acquisition of businesses, net of cash acquired     (134 )     (12 )
  Investments in marketable securities-acquisitions     (243 )     (276 )
  Investments in marketable securities-liquidations     280       280  
  Cash flows from derivatives not designated as hedges     (23 )     1  
  Other, net     12       3  
Net cash used in investing activities     (411 )     (350 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from borrowings     2       46  
Payments on borrowings and capital lease obligations     (51 )     (75 )
Net borrowings under short-term credit agreements     56       3  
Distributions to noncontrolling interests     (28 )     (32 )
Dividend payments on common stock     (189 )     (152 )
Repurchases of common stock     (289 )     (196 )
Excess tax benefits on stock-based awards     8       11  
Other, net     18       9  
Net cash used in financing activities     (473 )     (386 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS     (63 )     -  
Net increase (decrease) in cash and cash equivalents     13       (339 )
Cash and cash equivalents at beginning of year     1,369       1,484  
CASH AND CASH EQUIVALENTS AT END OF PERIOD   $ 1,382     $ 1,145  
     
 (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)  
   
    Engine     Components     Power Generation     Distribution     Non-segment Items  (1)     Total  
In millions                                                
Three months ended June 30, 2013                                                
External sales   $ 2,209     $ 786     $ 583     $ 947     $ -     $ 4,525  
Intersegment sales     447       331       231       7       (1,016 )     -  
  Total sales     2,656       1,117       814       954       (1,016 )     4,525  
Depreciation and amortization(2)     51       23       12       15       -       101  
Research, development and engineering expenses     102       57       17       1       -       177  
Equity, royalty and interest income from investees     52       9       10       37       -       108  
Interest income     7       -       2       1       -       10  
Segment EBIT     339       136       76       100 (3)       (30 )     621  
                                                 
Segment EBIT as a percentage of total sales     12.8 %     12.2 %     9.3 %     10.5 %             13.7 %
                                                 
Three months ended March 31, 2013                                                
External sales   $ 1,885     $ 722     $ 539     $ 776     $ -     $ 3,922  
Intersegment sales     418       296       207       2       (923 )     -  
  Total sales     2,303       1,018       746       778       (923 )     3,922  
Depreciation and amortization(2)     52       24       12       10       -       98  
Research, development and engineering expenses     105       57       18       2       -       182  
Equity, royalty and interest income from investees     23       7       7       45       -       82  
Interest income     2       1       2       -       -       5  
Segment EBIT     195       119       51       95(3)       (23 )     437  
                                                 
Segment EBIT as a percentage of total sales     8.5 %     11.7 %     6.8 %     12.2 %             11.1 %
                                                 
Three months ended July 1, 2012                                                
External sales   $ 2,381     $ 710     $ 572     $ 789     $ -     $ 4,452  
Intersegment sales     460       326       337       5       (1,128 )     -  
  Total sales     2,841       1,036       909       794       (1,128 )     4,452  
Depreciation and amortization(2)     47       19       11       8       -       85  
Research, development and engineering expenses     115       51       19       2       -       187  
Equity, royalty and interest income from investees     37       8       10       49       -       104  
Interest income     3       1       3       -       -       7  
Segment EBIT     376       116       94       92       (9 )     669  
                                                 
Segment EBIT as a percentage of total sales     13.2 %     11.2 %     10.3 %     11.6 %             15.0 %
                                                 

 

   
(1) Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended June 30, 2013 and March 31, 2013. The three months ended July 1, 2012, include a $6 million gain ($4 million after-tax) related to adjustments from our 2011 divestitures within the Components segment. The gain has been excluded from segment results as it was not considered in our evaluation of operating results for the corresponding periods. There were no other significant unallocated corporate expenses.
(2) Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount that is included in the Condensed Consolidated Statements of Income as "Interest expense."
(3) Distribution segment EBIT includes a $7 million gain on the fair value adjustment resulting from the acquisition of a controlling interest in Cummins Northwest LLC for the three months ended March 31, 2013 and a $5 million gain on the fair value adjustment resulting from the acquisition of a controlling interest in Cummins Rocky Mountain LLC for the three months ended June 30, 2013.
   
   
   
   
CUMMINS INC. AND SUBSIDIARIES  
SEGMENT INFORMATION  
(Unaudited)  
   
    Engine     Components     Power Generation     Distribution     Non-segment Items  (1)     Total  
In millions                                                
Six months ended June 30, 2013                                                
External sales   $ 4,094     $ 1,508     $ 1,122     $ 1,723     $ -     $ 8,447  
Intersegment sales     865       627       438       9       (1,939 )     -  
  Total sales     4,959       2,135       1,560       1,732       (1,939 )     8,447  
Depreciation and amortization(2)     103       47       24       25       -       199  
Research, development and engineering expenses     207       114       35       3       -       359  
Equity, royalty and interest income from investees     75       16       17       82       -       190  
Interest income     9       1       4       1       -       15  
Segment EBIT     534       255       127       195 (3 )     (53 )     1,058  
                                                 
Segment EBIT as a percentage of total sales     10.8 %     11.9 %     8.1 %     11.3 %             12.5 %
                                                 
Six months ended July 1, 2012                                                
External sales   $ 4,793     $ 1,484     $ 1,088     $ 1,559     $ -     $ 8,924  
Intersegment sales     907       651       601       10       (2,169 )     -  
  Total sales     5,700       2,135       1,689       1,569       (2,169 )     8,924  
Depreciation and amortization(2)     94       38       22       15       -       169  
Research, development and engineering expenses     226       102       37       3       -       368  
Equity, royalty and interest income from investees     75       16       20       97       -       208  
Interest income     7       2       5       1       -       15  
Segment EBIT     757       259       170       186       (45 )     1,327  
                                                 
Segment EBIT as a percentage of total sales     13.3 %     12.1 %     10.1 %     11.9 %             14.9 %

 

   
(1) Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the six months ended June 30, 2013. The six months ended July 1, 2012, includes a $6 million gain ($4 million after-tax) related to adjustments from our 2011 divestitures within the Components segment. The gain has been excluded from segment results as it was not considered in our evaluation of operating results for the corresponding periods. There were no other significant unallocated corporate expenses.
(2) Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount that is included in the Condensed Consolidated Statements of Income as "Interest expense."
(3) Distribution segment EBIT for the six months ended June 30, 2013, includes a $7 million gain and a $5 million gain on the fair value adjustments resulting from the acquisitions of a controlling interest in Cummins Northwest LLC and Cummins Rocky Mountain LLC, respectively.
 
 
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   Six months ended
    June 30,   March 31,   July 1,   June 30,   July 1,
In millions   2013   2013   2012   2013   2012
Segment EBIT   $ 621   $ 437   $ 669   $ 1,058   $ 1,327
Less: Interest expense     8     6     8     14     16
  Income before income taxes   $ 613   $ 431   $ 661   $ 1,044   $ 1,311
                               
                               

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     Six months ended  
    June 30,   March 31,     July 1,     June 30,   July 1,  
In millions   2013   2013     2012     2013   2012  
Distribution Entities                                    
North American distributors   $ 29   $ 35     $ 38     $ 64   $ 78  
Komatsu Cummins Chile, Ltda.     6     5       6       11     11  
All other distributors     -     -       2       -     3  
Manufacturing Entities                                    
Dongfeng Cummins Engine Company, Ltd.     20     12       17       32     33  
Chongqing Cummins Engine Company, Ltd.     17     12       17       29     35  
Beijing Foton Cummins Engine Co., Ltd.     9     1       2       10     -  
Shanghai Fleetguard Filter Co., Ltd.     4     3       4       7     7  
Komatsu manufacturing alliances     4     (1 )     1       3     -  
Cummins Westport, Inc.     3     -       4       3     9  
Valvoline Cummins, Ltd.     2     3       2       5     4  
Tata Cummins, Ltd.     2     1       3       3     7  
Xian Cummins Engine Company Ltd.     1     -       (5 )     1     (6 )
All other manufacturers     1     2       4       3     6  
  Cummins share of net income     98     73       95       171     187  
Royalty and interest income     10     9       9       19     21  
    Equity, royalty and interest income from investees   $ 108   $ 82     $ 104     $ 190   $ 208  
                                     
                                     

NOTE 2. INCOME TAXES

Our effective tax rate for the year is expected to approximate 29.1 percent, excluding any one-time items that may arise. Our tax rate is generally less than the 35 percent U.S. statutory income tax rate primarily due to lower tax rates on foreign income and research tax credits. The tax rates for the three and six month periods ended June 30, 2013, were 28.1 percent and 27.9 percent, respectively. These tax rates include a discrete tax benefit in the first quarter of 2013 of $28 million attributable to the reinstatement of the research credit back to 2012 as well as a discrete tax expense in the first quarter of 2013 of $17 million, which primarily relates to the write-off of a deferred tax asset deemed unrecoverable. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law and reinstated the research tax credit. As tax law changes are accounted for in the period of enactment, we recognized the discrete tax benefit in the first quarter of 2013.

Our tax rates for the three and six month periods ended July 1, 2012, were 25.1 percent and 26.0 percent, respectively. The increase in the 2013 effective tax rates compared to 2012 is due primarily to an unfavorable change in the pre-tax mix of income taxed in higher rate jurisdictions, partially offset by $11 million of net discrete tax benefits in the first quarter of 2013.

CUMMINS INC. AND SUBSIDIARIES
SELECTED FOOTNOTE DATA
(Unaudited)

NOTE 3. ACQUISITIONS

Cummins Rocky Mountain LLC

 In May 2013, we acquired the remaining 67 percent interest in Cummins Rocky Mountain LLC (Rocky Mountain) from the former principal for consideration of approximately $62 million in cash and an additional $74 million in cash paid to creditors to eliminate all debt related to the entity. The purchase price was approximately $136 million as presented below. The intangible assets are primarily customer related and are being amortized over periods ranging from 1 to 4 years. The acquisition was accounted for as a business combination, with the results of the acquired entity included in the Distribution operating segment in the second quarter of 2013. 

Distribution segment results also included a $5 million gain, as we were required to re-measure our pre-existing 33 percent ownership interest in Rocky Mountain to fair value in accordance with GAAP. Net sales for Rocky Mountain were $384 million for the 12 months ended December 31, 2012. This amount is not fully incremental to Cummins Inc. as the amount would be reduced by the elimination of sales to the previously unconsolidated entity. Approximately $14 million of the purchase price will be distributed in future quarters.

The preliminary purchase price allocation, subject to finalization, was as follows:

In millions      
Accounts receivable   $ 48  
Inventory     99  
Fixed assets     34  
Intangible assets     7  
Goodwill     6  
Other assets     9  
Current liabilities     (36 )
  Total business valuation     167  
Fair value of pre-existing 33 percent interest     (31 )
    Purchase price   $ 136  
         

Cummins Northwest LLC

In January 2013, we acquired an additional 50 percent interest in Cummins Northwest LLC (Northwest) from the former principal for consideration of approximately $18 million. We formed a new partnership with a new distributor principal. We own 79.99 percent of Northwest and the new distributor principal owns 20.01 percent. The acquisition was accounted for as a business combination, with the results of the acquired entity included in the Distribution operating segment in the first quarter of 2013. Distribution segment results also included a $7 million gain, as we were required to re-measure our pre-existing 50 percent ownership interest in Northwest to fair value in accordance with GAAP. The transaction generated $3 million of goodwill. Net sales for Northwest were $137 million for the 12 months ended December 31, 2012. This amount is not fully incremental to Cummins Inc. as the amount would be reduced by the elimination of sales to the previously unconsolidated entity.

CUMMINS INC. AND SUBSIDIARIES
FINANCIAL MEASURES THAT SUPPLEMENT GAAP
(Unaudited)

Net income and diluted earnings per share (EPS) attributable to Cummins Inc. excluding special items

We believe this is a useful measure of our operating performance for the periods presented as it illustrates our operating performance without regard to special items including the one-time tax benefits and gain related to the sale of certain assets and liabilities. This measure is not in accordance with, or an alternative for, accounting principles generally accepted in the United States of America and may not be consistent with measures used by other companies. It should be considered supplemental data. The following table reconciles net income attributable to Cummins Inc. to net income attributable to Cummins Inc. excluding special items for the quarters ended June 30, 2013, March 31, 2013 and July 1, 2012. 

     
    Three months ended
    June 30, 2013
  March 31, 2013
 		  July 1, 2012
In millions   Net Income   Diluted EPS   Net Income   Diluted EPS   Net Income   Diluted EPS
Net income attributable to Cummins Inc.   $ 414   $ 2.20   $ 282   $ 1.49   $ 469   $ 2.47
Less                                    
  One-time tax benefits(1)     -     -     11     0.05     -     -
  Gain on sale of businesses(2)     -     -     -     -     4     0.02
Net income attributable to Cummins Inc. excluding special items   $ 414   $ 2.20   $ 271   $ 1.44   $ 465   $ 2.45
                                     
        Six months ended
 		   
        June 30, 2013
 		  July 1, 2012
 		   
In millions       Net Income   Diluted EPS   Net Income   Diluted EPS    
Net income attributable to Cummins Inc.         $ 696   $ 3.69   $ 924   $ 4.85      
Less                                    
  One-time tax benefits(1)           11     0.06     -     -      
  Gain on sale of businesses(2)           -     -     4     0.02      
Net income attributable to Cummins Inc. excluding special items         $ 685   $ 3.63   $ 920   $ 4.83      
                                     
(1)   The one-time tax items for the three months ended March 31, 2013 and six months ended June 30, 2013, included a discrete tax benefit of $28 million attributable to the 2012 research credit as well as a discrete tax expense of $17 million, which relates to the write-off of a deferred tax asset deemed unrecoverable.
(2)   The gain has been excluded from operating results as it was not considered in our evaluation of performance for the three and six months ended July 1, 2012.
     

CUMMINS INC. AND SUBSIDIARIES
FINANCIAL MEASURES THAT SUPPLEMENT GAAP
(Unaudited)

Earnings before interest, taxes and noncontrolling interests

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

             
             
    Three months ended     Six months ended  
    June 30,     March 31,     July 1,     June 30,     July 1,  
In millions   2013     2013     2012     2013     2012  
Earnings before interest expense, income taxes and special items   $ 621     $ 437     $ 663     $ 1,058     $ 1,321  
                                         
Earnings before interest expense, income taxes and special items as a percentage of net sales     13.7 %     11.1 %     14.9 %     12.5 %     14.8 %
                                         
Add                                        
  Gain on sale of businesses     -       -       6       -       6  
                                         
Earnings before interest expense and income taxes   $ 621     $ 437     $ 669     $ 1,058     $ 1,327  
                                         
EBIT as a percentage of net sales     13.7 %     11.1 %     15.0 %     12.5 %     14.9 %
                                         
Less                                        
  Interest expense     8       6       8       14       16  
  Income tax expense     172       119       166       291       341  
Consolidated net income     441       312       495       753       970  
                                         
Less                                        
  Net income attributable to noncontrolling interests     27       30       26       57       46  
    Net income attributable to Cummins Inc.   $ 414     $ 282     $ 469     $ 696     $ 924  
                                         
Net income attributable to Cummins Inc. as a percentage of net sales     9.1 %     7.2 %     10.5 %     8.2 %     10.4 %
                                         
                                         
 
 
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   $ -   $ -   $ 1,377
Medium-duty truck and bus     448     595     -     -     1,043
Light-duty automotive and RV     260     345     -     -     605
Industrial     714     762     -     -     1,476
Stationary power     227     231     -     -     458
  Total sales   $ 2,303   $ 2,656   $ -   $ -   $ 4,959
                               
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     -     -     216,500
Heavy-duty     24,900     28,300     -     -     53,200
High horsepower     4,200     3,600     -     -     7,800
  Total units     123,700     153,800     -     -     277,500
                               
2012                              
Units   Q1   Q2   Q3   Q4   YTD
Midrange     109,000     110,000     113,000     108,500     440,500
Heavy-duty     36,000     33,000     26,000     24,100     119,100
High horsepower     5,500     5,800     4,600     3,900     19,800
  Total units     150,500     148,800     143,600     136,500     579,400
                                 
                                 
 
 
CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)
 
Component segment sales by business
 
2013                    
In millions   Q1   Q2   Q3   Q4   YTD
Emission solutions   $ 400   $ 444   $ -   $ -   $ 844
Turbo technologies     266     294     -     -     560
Filtration     255     271     -     -     526
Fuel systems     97     108     -     -     205
  Total sales   $ 1,018   $ 1,117   $ -   $ -   $ 2,135
                               
2012                              
In millions   Q1   Q2   Q3   Q4   YTD
Emission solutions   $ 404   $ 349   $ 325   $ 337   $ 1,415
Turbo technologies     298     297     257     254     1,106
Filtration     270     266     260     252     1,048
Fuel systems     127     124     96     96     443
  Total sales   $ 1,099   $ 1,036   $ 938   $ 939   $ 4,012
 
Power Generation segment sales by business
 
2013                              
In millions   Q1   Q2   Q3   Q4   YTD
Power products   $ 409   $ 474   $ -   $ -   $ 883
Power systems     179     187     -     -     366
Generator technologies     126     125     -     -     251
Power solutions     32     28     -     -     60
  Total sales   $ 746   $ 814   $ -   $ -   $ 1,560
                               
2012                              
In millions   Q1   Q2   Q3   Q4   YTD
Power products   $ 375   $ 459   $ 425   $ 395   $ 1,654
Power systems     188     217     174     178     757
Generator technologies     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   $ -   $ -   $ 691
Power generation     163     241     -     -     404
Engines     152     183     -     -     335
Service     141     161     -     -     302
  Total sales   $ 778   $ 954   $ -   $ -   $ 1,732
                               
2012                              
In millions   Q1   Q2   Q3   Q4   YTD
Parts and filtration   $ 288   $ 302   $ 326   $ 319   $ 1,235
Power generation     186     201     178     242     807
Engines     166     147     157     195     665
Service     135     144     140     151     570
  Total sales   $ 775   $ 794   $ 801   $ 907   $ 3,277
                               

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

Source: Cummins Inc.

Released July 30, 2013