UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 WASHINGTON, DC  20549

  

FORM 8-K

  

CURRENT REPORT

  

PURSUANT TO SECTION 13 OR 15(d) OF THE

  SECURITIES EXCHANGE ACT OF 1934

  

Date of Report: February 25, 2009

 

  CUMMINS INC.

 (Exact name of registrant as specified in its charter)

  

Indiana

 (State or other Jurisdiction of

 Incorporation)

1-4949

 (Commission File Number)

35-0257090

 (I.R.S. Employer Identification

  No.)

 

500 Jackson Street

 P. O. Box 3005

 Columbus, IN  47202-3005

 (Principal Executive Office)  (Zip Code)

Registrant's telephone number, including area code:  (812) 377-5000

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see  General Instruction A.2. below):

  

[  ]

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[  ]

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[  ]

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[  ]

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 


Item 2.02.  Results of Operations and Financial Condition.

On February 25, 2009, Cummins Inc. issued a press release regarding its February 3, 2009, release of fourth quarter and full year 2008 results.  The Company’s fourth quarter and full-year 2008 per diluted share results are now $0.23 and $0.24 lower, respectively, than was reported on February 3, 2009.  In February, analysis of recent warranty payments indicated that a revision to our initial warranty liability estimate is appropriate.  The change in income reflects an $82 million increase in warranty liability, offset by a $9 million reduction in variable and incentive compensation as a result of this change.  These adjustments are reflected in cost of sales and selling, general and administrative expenses, respectively, on the Condensed Consolidated Statements of Income and in accrued expenses on the Condensed Consolidated Balance Sheets.  The total decrease to compensation accruals is $9 million.  In addition, income tax expense decreased $27 million as a result of the adjustments above.  These adjustments have been incorporated into our fourth-quarter and full year results and will be reflected in our 2008 Form 10-K which will be filed no later than March 2, 2009.  For more information, a copy of the revised financial statements is attached hereto as Exhibit 99 and is furnished herewith.

 

Item 7.01.  Regulation FD Disclosure

 

The following information is furnished pursuant to Item 2.02, "Results of Operations and Financial Condition" and Item 7.01, "Regulation FD Disclosure."

  

On February 25, 2009, Cummins Inc. (“Cummins,” “the Company,” “our,” or “we”) issued the attached press release reporting its revised fourth quarter and full year financial results for 2008.  A copy of Cummins’ press release is attached hereto as Exhibit 99 and hereby incorporated by reference.

 

Item 9.01. Financial Statements and Exhibits.

 

 

(d)

The following exhibit is furnished herewith:

  

99-Press Release dated February 25, 2009

 

 


SIGNATURE
 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 

Date: February 25, 2009

  

CUMMINS INC.

 

 

 

 /s/ Marsha L. Hunt

 ______________________________

Marsha L. Hunt

 Vice President - Corporate Controller

 (Principal Accounting Officer)

 

 


 


CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited) (a)

 

 

 

Three months ended

 

 

 

December 31,

 

September 28,

 

December 31,

 

 

 

2008

 

2008

 

2007

 

 

 

in millions (except per share amounts)

NET SALES

 

$

3,288

 

$

3,693

 

$

3,516

 

Cost of sales

 

2,754

 

2,873

 

2,834

 

GROSS MARGIN

 

534

 

820

 

682

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES AND INCOME

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

341

 

388

 

359

 

Research, development and engineering expenses

 

102

 

113

 

93

 

Equity, royalty and interest income from investees (Note 1)

 

51

 

66

 

59

 

Restructuring charges (Note 2)

 

37

 

 

 

Other operating (expense) income, net

 

(3

)

(2

)

13

 

 

 

 

 

 

 

 

 

OPERATING INCOME

 

102

 

383

 

302

 

 

 

 

 

 

 

 

 

Interest income

 

4

 

4

 

9

 

Interest expense

 

9

 

10

 

14

 

Other (expense) income, net (Note 3)

 

(50

)

(7

)

13

 

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

 

47

 

370

 

310

 

                    

 

 

 

 

 

 

 

Income tax (benefit) expense (Note 4)

 

(12

)

123

 

97

 

Minority interests in income of consolidated subsidiaries

 

16

 

18

 

15

 

NET INCOME

 

$

43

 

$

229

 

$

198

 

 

 

 

 

 

 

 

 

 

EARNINGS PER COMMON SHARE

 

 

 

 

 

 

 

 

 

Basic

 

$

0.22

 

$

1.18

 

$

1.01

 

Diluted

 

$

0.22

 

$

1.17

 

$

1.00

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

Basic

 

 

194.7

 

 

194.9

 

 

195.7

 

Diluted

 

 

196.6

 

 

196.5

 

 

197.5

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

 

$

0.175

 

$

0.175

 

$

0.125

 

 

(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)

 

 

 

For the years ended

 

 

 

December 31,

 

December 31,

 

 

 

2008

 

2007

 

 

 

in millions (except per share amounts)

 

NET SALES

 

$

14,342

 

$

13,048

 

Cost of sales

 

11,402

 

10,492

 

GROSS MARGIN

 

2,940

 

2,556

 

 

 

 

 

 

 

OPERATING EXPENSES AND INCOME

 

 

 

 

 

Selling, general and administrative expenses

 

1,450

 

1,296

 

Research, development and engineering expenses

 

422

 

329

 

Equity, royalty and interest income from investees (Note 1)

 

253

 

205

 

Restructuring charges (Note 2)

 

37

 

 

Other operating (expense) income, net

 

(12

)

22

 

 

 

 

 

 

 

OPERATING INCOME

 

1,272

 

1,158

 

 

 

 

 

 

 

Interest income

 

18

 

36

 

Interest expense

 

42

 

58

 

Other (expense) income, net (Note 3)

 

(70

)

33

 

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

 

1,178

 

1,169

 

                    

 

 

 

 

 

Income tax expense (Note 4)

 

360

 

381

 

Minority interests in income of consolidated subsidiaries

 

63

 

49

 

NET INCOME

 

$

755

 

$

739

 

 

 

 

 

 

 

 

 

EARNINGS PER COMMON SHARE

 

 

 

 

 

 

 

Basic

 

$

3.87

 

$

3.72

 

Diluted

 

$

3.84

 

$

3.70

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

Basic

 

 

195.0

 

 

198.4

 

Diluted

 

 

196.5

 

 

199.9

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

 

$

0.60

 

$

0.43

 

 

(a)     Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.

 

 



CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (a)

 

 

 

December 31,

 

December 31,

 

 

 

       2008       

 

       2007       

 

 

 

in millions
(except par value)

 

ASSETS

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

$

426

 

 

 

$

577

 

 

Marketable securities

 

 

77

 

 

 

120

 

 

Accounts and notes receivable, net

 

 

1,782

 

 

 

1,998

 

 

Inventories

 

 

1,783

 

 

 

1,692

 

 

Other current assets

 

 

645

 

 

 

428

 

 

Total current assets

 

 

4,713

 

 

 

4,815

 

 

Long-term assets

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

1,841

 

 

 

1,645

 

 

Investments and advances related to equity method investees

 

 

588

 

 

 

514

 

 

Goodwill and other intangible assets, net

 

 

585

 

 

 

538

 

 

Other assets

 

 

792

 

 

 

683

 

 

Total assets

 

 

$

8,519

 

 

 

$

8,195

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Current portion of long-term debt and loans payable

 

 

$

69

 

 

 

$

119

 

 

Accounts payable (principally trade)

 

 

1,009

 

 

 

1,263

 

 

Accrued expenses

 

 

1,561

 

 

 

1,329

 

 

Total current liabilities

 

 

2,639

 

 

 

2,711

 

 

Long-term liabilities

 

 

 

 

 

 

 

 

 

Long-term debt

 

 

629

 

 

 

555

 

 

Other liabilities

 

 

1,771

 

 

 

1,227

 

 

Total liabilities

 

 

5,039

 

 

 

4,493

 

 

MINORITY INTERESTS

 

 

250

 

 

 

293

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Common stock, $2.50 par value, 500 and 300 shares authorized, 221.7 and 220.4 shares issued

 

 

1,793

 

 

 

1,719

 

 

Retained earnings

 

 

3,288

 

 

 

2,660

 

 

Treasury stock, at cost, 20.4 and 18.2 shares

 

 

(715

)

 

 

(593

)

 

Common stock held by employee benefits trust, at cost, 5.1 and 6.5 shares

 

 

(61

)

 

 

(79

)

 

Unearned compensation

 

 

(5

)

 

 

(11

)

 

Accumulated other comprehensive loss

 

 

(1,070

 

 

(287

)

 

Total shareholders’ equity

 

 

3,230

 

 

 

3,409

 

 

Total liabilities, minority interests and shareholders’ equity

 

 

$

8,519

 

 

 

$

8,195

 

 

 

(a)     Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.

 



CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (a)

 

 

For the years ended

 

 

 

December 31,

 

December 31,

 

 

 

2008

 

2007

 

 

 

in millions

 

NET CASH PROVIDED BY OPERATING ACTIVITIES (Note 5)

 

$

987

 

$

810

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

Capital expenditures

 

(543

)

(353

)

Investments in internal use software

 

(82

)

(67

)

Investments in and advances to equity investees

 

(89

)

(66

)

Acquisition of businesses, net of cash acquired

 

(142

)

(20

)

Proceeds from the sale of an equity investment

 

64

 

35

 

Investments in marketable securities—acquisitions

 

(390

)

(405

)

Investments in marketable securities—liquidations

 

409

 

395

 

Purchases of other investments

 

(62

)

(57

)

Other, net

 

(13

)

23

 

Net cash used in investing activities

 

(848

)

(515

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Proceeds from borrowings

 

76

 

15

 

Payments on borrowings and capital lease obligations

 

(152

)

(144

)

Dividend payments on common stock

 

(122

)

(89

)

Proceeds from sale of common stock held by employee benefit trust

 

63

 

13

 

Repurchases of common stock

 

(128

)

(335

)

Other, net

 

26

 

(36

)

Net cash used in financing activities

 

(237

)

(576

)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

(53

)

18

 

Net decrease in cash and cash equivalents

 

(151

)

(263

)

Cash and cash equivalents at beginning of year

 

577

 

840

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

426

 

$

577

 

 

(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

 

Power Generation

 

Components

 

Distribution

 

Non-segment items (1)

 

Total

 

 

in millions

 

Three months ended December 31, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 External sales

$

1,590

 

 

$

675

 

 

$

468

 

 

$

555

 

 

$

 

 

$

3,288

 

 Intersegment sales

 

346

 

 

 

212

 

 

 

208

 

 

 

2

 

 

 

(768

)

 

 

 

   Total sales

 

1,936

 

 

 

887

 

 

 

676

 

 

 

557

 

 

 

(768

)

 

 

3,288

 

Depreciation and amortization(2)

47

 

 

10

 

 

16

 

 

8

 

 

 

 

81

 

Research, development and engineering expense

71

 

 

10

 

 

21

 

 

 

 

 

 

102

 

Equity, royalty and interest income from investees

8

 

 

6

 

 

4

 

 

33

 

 

 

 

51

 

Restructuring charges

 

 

 

 

 

 

 

 

37

 

 

37

 

Interest income

3

 

 

 

 

 

 

1

 

 

 

 

4

 

Segment EBIT

(40

)

 

75

 

 

(6

)

 

64

 

 

(37

)

 

56

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 28, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

$

1,927

 

 

$

653

 

 

$

535

 

 

$

578

 

 

$

 

 

$

3,693

 

Intersegment sales

352

 

 

235

 

 

266

 

 

3

 

 

(856

)

 

 

   Total sales

2,279

 

 

888

 

 

801

 

 

581

 

 

(856

)

 

3,693

 

Depreciation and amortization(2)

43

 

 

9

 

 

16

 

 

6

 

 

 

 

74

 

Research, development and engineering expense

75

 

 

11

 

 

27

 

 

 

 

 

 

113

 

Equity, royalty and interest income from investees

26

 

 

6

 

 

3

 

 

31

 

 

 

 

66

 

Interest income

2

 

 

1

 

 

1

 

 

 

 

 

 

4

 

Segment EBIT

160

 

 

108

 

 

61

 

 

61

 

 

(10

)

 

380

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended December 31, 2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

$

1,862

 

 

$

645

 

 

$

542

 

 

$

467

 

 

$

 

 

$

3,516

 

Intersegment sales

 

293

 

 

 

195

 

 

 

235

 

 

 

1

 

 

 

(724

)

 

 

 

   Total sales

 

2,155

 

 

 

840

 

 

 

777

 

 

 

468

 

 

 

(724

)

 

 

3,516

 

Depreciation and amortization(2)

44

 

 

11

 

 

16

 

 

3

 

 

 

 

74

 

Research, development and engineering expense

63

 

 

9

 

 

21

 

 

 

 

 

 

93

 

Equity, royalty and interest income from investees

26

 

 

5

 

 

3

 

 

25

 

 

 

 

59

 

Interest income

6

 

 

2

 

 

1

 

 

 

 

 

 

9

 

Segment EBIT

120

 

 

86

 

 

47

 

 

56

 

 

15

 

 

324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended December 31, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

$

7,432

 

 

$

2,601

 

 

$

2,154

 

 

$

2,155

 

 

$

 

 

$

14,342

 

Intersegment sales

 

1,378

 

 

 

899

 

 

 

998

 

 

 

9

 

 

 

(3,284

)

 

 

 

   Total sales

 

8,810

 

 

 

3,500

 

 

 

3,152

 

 

 

2,164

 

 

 

(3,284

)

 

 

14,342

 

Depreciation and amortization(2)

180

 

 

41

 

 

65

 

 

25

 

 

 

 

311

 

Research, development and engineering expense

286

 

 

41

 

 

95

 

 

 

 

 

 

422

 

Equity, royalty and interest income from investees

99

 

 

23

 

 

14

 

 

117

 

 

 

 

253

 

Restructuring charges

 

 

 

 

 

 

 

 

37

 

 

37

 

Interest income

10

 

 

3

 

 

3

 

 

2

 

 

 

 

18

 

Segment EBIT

535

 

 

376

 

 

169

 

 

242

 

 

(102

)

 

1,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended December 31, 2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

$

7,129

 

 

$

2,375

 

 

$

2,007

 

 

$

1,537

 

 

$

 

 

$

13,048

 

Intersegment sales

 

1,053

 

 

 

685

 

 

 

925

 

 

 

3

 

 

 

(2,666

)

 

 

 

   Total sales

 

8,182

 

 

 

3,060

 

 

 

2,932

 

 

 

1,540

 

 

 

(2,666

)

 

 

13,048

 

Depreciation and amortization(2)

176

 

 

42

 

 

59

 

 

11

 

 

 

 

288

 

Research, development and engineering expense

222

 

 

34

 

 

73

 

 

 

 

 

 

329

 

Equity, royalty and interest income from investees

92

 

 

17

 

 

4

 

 

92

 

 

 

 

205

 

Interest income

26

 

 

6

 

 

3

 

 

1

 

 

 

 

36

 

Segment EBIT

589

 

 

334

 

 

153

 

 

187

 

 

(36

)

 

1,227

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes intercompany eliminations and unallocated corporate expenses. For the three months ended and the year ended December 31, 2008, Non-segment includes a $36 million decrease in cash surrender value in corporate owned life insurance (COLI).

 (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 Financial Statements is shown in the table below:
 

 

 

Three months ended

 

For the years ended

 

 

 

December 31,

 

September 28,

 

December 31,

 

December 31,

 

December 31,

 

 

 

2008

 

2008

 

2007

 

2008

 

2007

 

 

 

in millions

 

Segment EBIT

 

$

56

 

$

380

 

$

324

 

$

1,220

 

$

1,227

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

9

 

10

 

14

 

42

 

58

 

Income before income taxes and minority interests

 

$

47

 

$

370

 

$

310

 

$

1,178

 

$

1,169

 

 


FINANCIAL MEASURES THAT SUPPLEMENT GAAP

(Unaudited)
 

Earnings before interest, taxes and minority interests (EBIT)

We define EBIT as earnings before interest expense, income tax expense and minority interests in income of consolidated subsidiaries.  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 our consolidated net income, for each of the applicable periods:

 

 

 

Three Months Ended

 

For the years ended

 

 

 

December 31,

 

September 28,

 

December 31,

 

December 31,

 

December 31,

 

 

 

2008

 

2008

 

2007

 

2008

 

2007

 

 

 

in millions

 

Earnings before interest, income taxes and minority interests

 

$

56

 

$

380

 

$

324

 

$

1,220

 

$

1,227

 

 

 

 

 

 

 

 

 

 

 

 

 

EBIT as a percentage of net sales

 

1.7

%

10.3

%

9.2

%

8.5

%

9.4

%

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

9

 

10

 

14

 

42

 

58

 

Income tax expense

 

(12

)

123

 

97

 

360

 

381

 

Minority interests in income of consolidated subsidiaries

 

16

 

18

 

15

 

63

 

49

 

Net income

 

$

43

 

$

229

 

$

198

 

$

755

 

$

739

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income as a percentage of net sales

 

1.3

%

6.2

%

5.6

%

5.3

%

5.7

%

 

 

 

 

 

 

 

 

 

 

 

 

We believe EBIT is a useful measure of our operating performance for the periods presented as it illustrates our operating performance without regard to financing methods, capital structure or income taxes.  This measure is not in accordance with, or an alternative for, accounting principles generally accepted in the United States of America (GAAP) and may not be consistent with measures used by other companies.  It should be considered supplemental data.

 



CUMMINS INC. AND SUBSIDIARIES

SELECTED FOOTNOTE DATA

(Unaudited)

 

 

NOTE 1.  EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES

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

 

 

Three months ended

 

For the years ended

 

 

 

 

December 31,

 

September 28,

 

December 31,

 

December 31,

 

December 31,

 

 

 

 

2008

 

2008

 

2007

 

2008

 

2007

 

 

 

 

in millions

 

North American distributors

 

$

28

 

$

26

 

$

24

 

$

100

 

$

83

 

Dongfeng Cummins Engine Company, Ltd.

 

5

 

16

 

12

 

55

 

41

 

Chongqing Cummins Engine Company, Ltd.

 

7

 

9

 

7

 

30

 

22

 

Shanghai Fleetguard Filter Co. Ltd.

 

1

 

2

 

2

 

8

 

6

 

Tata Cummins Ltd.

 

 

 

4

 

7

 

13

 

Cummins MerCruiser Diesel Marine LLC

 

(2

)

(1

)

2

 

3

 

11

 

All others

 

6

 

9

 

4

 

28

 

16

 

Cummins share of net income

 

45

 

61

 

55

 

231

 

192

 

Royalty and interest income

 

6

 

5

 

4

 

22

 

13

 

Equity, royalty and interest income from investees

 

$

51

 

$

66

 

$

59

 

$

253

 

$

205

 

 

 

NOTE 2.  RESTRUCTURING CHARGES

 

We have executed restructuring actions primarily in the form of voluntary and involuntary separation programs in the fourth quarter of 2008. These actions were in response to the continued deterioration we saw in our U.S. businesses and most key markets around the world in the second half of 2008, as well as a reduction in orders in most U.S. and global markets for 2009.  We reduced our worldwide professional workforce by approximately 650 employees.  We offered a voluntary retirement package to certain active professional employees in the United States based on a clearly defined set of criteria.  We also took involuntary actions which included certain hourly employees.  The compensation packages contained salary and continuation of benefits, including health care, life insurance and outplacement services. The voluntary retirement package was accepted by approximately 150 employees.  The remaining reductions of approximately 500 employees were involuntary. The expenses recorded during the year ended December 31, 2008 included severance costs related to both voluntary and involuntary terminations.  During 2008, we incurred total pretax expenses related to the restructuring initiative of approximately $37 million. 

 

Employee termination and severance costs were recorded based on approved plans developed by the businesses and corporate management which specified positions to be eliminated, benefits to be paid under existing severance plans or statutory requirements and the expected timetable for completion of the plan.  Estimates of restructuring were made based on information available at the time charges were recorded.  Due to the inherent uncertainty involved, actual amounts paid for such activities may differ from amounts initially recorded and we may need to revise previous estimates.

 



CUMMINS INC. AND SUBSIDIARIES

SELECTED FOOTNOTE DATA

(Unaudited)

 

NOTE 3.  OTHER (EXPENSE) INCOME

Other (expense) income included the following:

 

 

Three months ended

 

For the years ended

 

 

 

December 31,

 

September 28,

 

December 31,

 

December 31,

 

December 31,

 

 

 

2008

 

2008

 

2007

 

2008

 

2007

 

 

 

in millions

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

Change in cash surrender value of corporate owned life insurance

 

$

(36

)

$

 

$

 

$

(36

)

$

 

Foreign currency (losses) gains

 

(23

)

(10

)

12

 

(46

)

28

 

Other, net

 

9

 

3

 

1

 

12

 

5

 

Total other (expense) income, net

 

$

(50

)

$

(7

)

$

13

 

$

(70

)

$

33

 

 

NOTE 4.  INCOME TAXES

Our effective benefit rate in the fourth quarter of 2008 was 25.5 percent compared to an effective tax rate of 31.3 percent for 2007.  The change is primarily due to greater foreign earnings in 2008, which are subject to lower tax rates.  The fourth quarter effective benefit rate also includes a $10 million (0.8 percent) reduction due to the legislative reinstatement of the U.S. research tax credit. The full-year 2008 effective tax rate was 30.6 percent and we expect our full-year 2009 effective tax rate to be sustained at approximately 31 percent.

 

NOTE 5.  DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense included in operating activities of the Condensed Consolidated Statements of Cash Flows for the years ended December 31, 2008 and 2007 was $314 million and $290 million, respectively.

 



About Cummins

Cummins Inc., a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Headquartered in Columbus, Indiana, (USA) Cummins serves customers in approximately 190 countries and territories through a network of more than 500 company-owned and independent distributor locations and approximately 5,200 dealer locations. Cummins reported net income of $755 million on sales of $14.34 billion in 2008. Press releases can be found on the Web at www.cummins.com

 

Presentation of Non-GAAP Financial Information

EBIT is a non-GAAP measure used in this release.  EBIT 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.

 

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.