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:  April 27, 2010

 

  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 April 27, 2010, Cummins Inc. issued a press release regarding its release of first quarter results.


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 April 27, 2010, Cummins Inc. (“Cummins,” “the Company,” “our,” or “we”) issued the attached press release reporting its financial results for the first quarter of 2010. 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 April 27, 2010



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: April 27, 2010
 

  

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

 

 

 

March 28,

 

December 31,

 

March 29,

 

In millions, except per share amounts

 

2010

 

2009

 

2009

 

NET SALES

 

$

2,478

 

$

3,400

 

$

2,439

 

Cost of sales

 

1,877

 

2,627

 

1,994

 

GROSS MARGIN

 

601

 

773

 

445

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES AND INCOME

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

335

 

348

 

300

 

Research, development and engineering expenses

 

92

 

108

 

85

 

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

 

76

 

67

 

33

 

Restructuring and other charges

 

 

4

 

66

 

Other operating (expense) income, net

 

(4

)

5

 

2

 

OPERATING INCOME

 

246

 

385

 

29

 

 

 

 

 

 

 

 

 

Interest income

 

3

 

3

 

2

 

Interest expense

 

9

 

9

 

7

 

Other income (expense), net (Note 2)

 

17

 

(5

)

(3

)

INCOME BEFORE INCOME TAXES

 

257

 

374

 

21

 

                    

 

 

 

 

 

 

 

Income tax expense (Note 3)

 

87

 

84

 

7

 

CONSOLIDATED NET INCOME

 

170

 

290

 

14

 

 

 

 

 

 

 

 

 

Less: net income attributable to noncontrolling interests

 

21

 

20

 

7

 

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

149

 

$

270

 

$

7

 

 

 

 

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.

 

 

 

 

 

 

 

 

 

Basic

 

$

0.75

 

$

1.36

 

$

0.04

 

Diluted

 

$

0.75

 

$

1.36

 

$

0.04

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

Basic

 

 

198.4

 

 

198.4

 

 

196.8

 

Diluted

 

 

198.7

 

 

198.7

 

 

197.0

 

 

 

 

 

 

 

 

 

 

 

 

CASH DIVIDENDS DECLARED PER COMMON SHARE

 

$

0.175

 

$

0.175

 

$

0.175

 

 

(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)

 

 

 

March 28,

 

December 31,

 

In millions, except par value

 

2010

 

2009

 

ASSETS

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

885

 

 

$

930

 

 

Marketable securities

 

 

217

 

 

 

190

 

 

Accounts and notes receivable, net

 

 

1,727

 

 

 

2,004

 

 

Inventories

 

 

1,549

 

 

 

1,341

 

 

Deferred income taxes

 

 

302

 

 

 

295

 

 

Prepaid expenses and other current assets

 

 

240

 

 

 

243

 

 

Total current assets

 

 

4,920

 

 

 

5,003

 

 

Long-term assets

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

4,696

 

 

 

4,765

 

 

     Accumulated depreciation

 

 

(2,834

)

 

 

(2,879

)

 

     Property, plant and equipment, net

 

 

1,862

 

 

 

1,886

 

 

Investments and advances related to equity method investees

 

 

638

 

 

 

574

 

 

Goodwill

 

 

365

 

 

 

364

 

 

Other intangible assets, net

 

 

239

 

 

 

228

 

 

Deferred income taxes

 

 

413

 

 

 

436

 

 

Other assets

 

 

332

 

 

 

325

 

 

Total assets

 

$

8,769

 

 

$

8,816

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Loans payable

 

$

95

 

 

$

37

 

 

Accounts payable (principally trade)

 

 

1,030

 

 

 

957

 

 

Current portion of accrued product warranty

 

 

387

 

 

 

426

 

 

Accrued compensation, benefits and retirement costs

 

 

308

 

 

 

366

 

 

Deferred revenue

 

 

144

 

 

 

128

 

 

Other accrued expenses

 

 

522

 

 

 

518

 

 

Total current liabilities

 

 

2,486

 

 

 

2,432

 

 

Long-term liabilities

 

 

 

 

 

 

 

 

 

Long-term debt

 

 

640

 

 

 

637

 

 

Pensions

 

 

406

 

 

 

514

 

 

Postretirement benefits other than pensions

 

 

466

 

 

 

453

 

 

Other liabilities and deferred revenue

 

 

719

 

 

 

760

 

 

Total liabilities

 

 

4,717

 

 

 

4,796

 

 

EQUITY

 

 

 

 

 

 

 

 

 

Cummins Inc. shareholders’ equity

 

 

 

 

 

 

 

 

 

Common stock, $2.50 par value, 500 shares authorized, 221.9 and 222.0 shares issued

 

 

1,862

 

 

 

1,860

 

 

Retained earnings

 

 

3,689

 

 

 

3,575

 

 

Treasury stock, at cost, 21.3 and 20.7 shares

 

 

(769

)

 

 

(731

)

 

Common stock held by employee benefits trust, at cost, 3.0 and 3.0 shares

 

 

(36

)

 

 

(36

)

 

Accumulated other comprehensive loss

 

 

 

 

 

 

 

 

 

Defined benefit postretirement plans

 

 

(794

)

 

 

(788

)

 

Other

 

 

(161

)

 

 

(107

)

 

Total accumulated other comprehensive loss

 

 

(955

)

 

 

(895

)

 

Total Cummins Inc. shareholders’ equity

 

 

3,791

 

 

 

3,773

 

 

Noncontrolling interests

 

 

261

 

 

 

247

 

 

Total equity

 

 

4,052

 

 

 

4,020

 

 

Total liabilities and equity

 

$

8,769

 

 

$

8,816

 

 

 

(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)

 

 

 

Three months ended

 

 

 

March 28,

 

March 29,

 

In millions

 

2010

 

2009

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

Consolidated net income

 

$

170

 

$

14

 

Adjustments to reconcile consolidated net income to net cash provided by operating activities:

 

 

 

 

 

Restructuring charges, net of cash payments

 

 

48

 

Depreciation and amortization

 

79

 

76

 

Gain on fair value adjustment for consolidated investee

 

(12

)

 

Deferred income tax provision (benefit)        

 

13

 

(21

)

Equity in income of investees, net of dividends

 

(53

)

52

 

Pension expense, net of pension contributions

 

(93

)

15

 

Other post-retirement benefits expense, net of cash payments

 

(1

)

(8

)

Stock-based compensation expense

 

6

 

6

 

Translation and hedging activities

 

(9

)

19

 

Changes in current assets and liabilities, net of acquisitions and divestitures:

 

 

 

 

 

Accounts and notes receivable

 

275

 

49

 

Inventories

 

(189

)

44

 

Other current assets

 

3

 

9

 

Accounts payable

 

54

 

(103

)

Accrued expenses

 

(154

)

(173

)

Changes in long-term liabilities

 

29

 

36

 

Other, net

 

8

 

13

 

Net cash provided by operating activities

 

126

 

76

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

Capital expenditures

 

(47

)

(64

)

Investments in internal use software

 

(17

)

(11

)

Proceeds from disposals of property, plant and equipment

 

38

 

6

 

Investments in and advances (to) from equity investees

 

(11

)

5

 

Acquisition of businesses, net of cash acquired

 

(71

)

(2

)

Investments in marketable securities—acquisitions

 

(133

)

(69

)

Investments in marketable securities—liquidations

 

108

 

78

 

Cash flows from derivatives not designated as hedges

 

(11

)

(33

)

Net cash used in investing activities

 

(144

)

(90

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Proceeds from borrowings

 

70

 

7

 

Payments on borrowings and capital lease obligations

 

(20

)

(19

)

Net borrowings under short-term credit agreements

 

5

 

4

 

Distributions to noncontrolling interests

 

(1

)

(9

)

Dividend payments on common stock

 

(35

)

(35

)

Repurchases of common stock

 

(39

)

 

Other, net

 

13

 

(1

)

Net cash used in financing activities

 

(7

)

(53

)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

(20

)

(6

)

Net decrease in cash and cash equivalents

 

(45

)

(73

)

Cash and cash equivalents at beginning of year

 

930

 

426

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

885

 

$

353

 

 

(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)

 

In millions

Engine

 

Power Generation

 

Components

 

Distribution

 

Non-segment items (1)

 

Total

 

Three months ended March 28, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

$

1,173

 

 

$

378

 

 

$

453

 

 

$

474

 

 

$

 

 

$

2,478

 

Intersegment sales

250

 

 

139

 

 

177

 

 

2

 

 

(568

)

 

 

Total sales

1,423

 

 

517

 

 

630

 

 

476

 

 

(568

)

 

2,478

 

Depreciation and amortization (2)

41

 

 

10

 

 

20

 

 

7

 

 

 

 

78

 

Research, development and engineering expenses

60

 

 

7

 

 

25

 

 

 

 

 

 

92

 

Equity, royalty and interest income from investees

35

 

 

6

 

 

5

 

 

30

 

 

 

 

76

 

Interest income

2

 

 

1

 

 

 

 

 

 

 

 

3

 

Segment EBIT

133

 

 

34

 

 

57

 

 

72

 

 

(30

)

 

266

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended December 31, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

$

1,974

 

 

$

477

 

 

$

466

 

 

$

483

 

 

$

 

 

$

3,400

 

Intersegment sales

194

 

 

124

 

 

266

 

 

3

 

 

(587

)

 

 

Total sales

2,168

 

 

601

 

 

732

 

 

486

 

 

(587

)

 

3,400

 

Depreciation and amortization (2)

50

 

 

14

 

 

20

 

 

3

 

 

 

 

87

 

Research, development and engineering expenses

73

 

 

8

 

 

27

 

 

 

 

 

 

108

 

Equity, royalty and interest income from investees

24

 

 

6

 

 

4

 

 

33

 

 

 

 

67

 

Restructuring and other charges

 

 

 

 

 

 

 

 

4

 

 

4

 

Interest income

1

 

 

2

 

 

 

 

 

 

 

 

3

 

Segment EBIT

211

 

 

34

 

 

73

 

 

67

 

 

(2

)

 

383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 29, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

$

1,205

 

 

$

477

 

 

$

346

 

 

$

411

 

 

$

 

 

$

2,439

 

Intersegment sales

287

 

 

180

 

 

184

 

 

2

 

 

(653

)

 

 

Total sales

1,492

 

 

657

 

 

530

 

 

413

 

 

(653

)

 

2,439

 

Depreciation and amortization (2)

41

 

 

11

 

 

18

 

 

5

 

 

 

 

75

 

Research, development and engineering expenses

58

 

 

8

 

 

19

 

 

 

 

 

 

85

 

Equity, royalty and interest income from investees

(3

)

 

5

 

 

1

 

 

30

 

 

 

 

33

 

Restructuring and other charges

 

 

 

 

 

 

 

 

66

 

 

66

 

Interest income

1

 

 

1

 

 

 

 

 

 

 

 

2

 

Segment EBIT

(16

)

 

69

 

 

1

 

 

58

 

 

(84

)

 

28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 March 28, 2010.  For the three months ended December 31, 2009, unallocated corporate expenses included $4 million of restructuring and other charges and a gain of $7 million related to flood damage recoveries.  For the three months ended March 29, 2009, unallocated corporate expenses included $66 million of restructuring charges and a $6 million gain related to flood damage recoveries.

 

(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

 

 

 

March 28,

 

December 31,

 

March 29,

 

In millions

 

2010

 

2009

 

2009

 

Segment EBIT

 

$

266

 

$

383

 

$

28

 

Less:

 

 

 

 

 

 

 

Interest expense

 

9

 

9

 

7

 

Income before income taxes

 

$

257

 

$

374

 

$

21

 

 




FINANCIAL MEASURES THAT SUPPLEMENT GAAP

(Unaudited)

 

Earnings before interest, taxes, noncontrolling interests and restructuring and other charges

 

We define EBIT as earnings or loss before interest expense, income tax expense 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

 

 

March 28,

 

December 31,

 

March 29,

 

In millions

2010

 

2009

 

2009

 

Earnings before interest expense, income taxes and restructuring and other charges

$

266

 

$

387

 

$

94

 

 

 

 

 

 

 

 

Earnings before interest expense, income taxes and restructuring and other charges as a percentage of sales

10.7

%

11.4

%

3.9

%

Less:

 

 

 

 

 

 

Restructuring and other charges

 

4

 

66

 

 

 

 

 

 

 

 

Earnings before interest and income taxes

$

266

 

$

383

 

$

28

 

 

 

 

 

 

 

 

EBIT as a percentage of net sales

10.7

%

11.3

%

1.1

%

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

Interest expense

9

 

9

 

7

 

Income tax expense

87

 

84

 

7

 

Consolidated net income

170

 

290

 

14

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

Net income attributable to noncontrolling interests

21

 

20

 

7

 

Net income attributable to Cummins Inc.

$

149

 

$

270

 

$

7

 

 

 

 

 

 

 

 

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

6.0

%

7.9

%

0.3

%

 



 CUMMINS INC. AND SUBSIDIARIES

FINANCIAL MEASURES THAT SUPPLEMENT GAAP

(Unaudited)

 

Net income and diluted earnings per share (EPS) attributable to Cummins Inc. excluding restructuring and other charges

 

We believe this is a useful measure of our operating performance for the periods presented as it illustrates our operating performance without regard to restructuring.  This measure is not in accordance with, or an alternative for, accounting principles generally accepted in the United States of America and may not be consistent with measures used by other companies.  It should be considered supplemental data.  The following table reconciles net income attributable to Cummins Inc. excluding restructuring and other charges to “Net income attributable to Cummins Inc.” for the three months ended December 31, 2009, and the three months ended March 29, 2009.  There were no restructuring actions taken in the three months ended March 28, 2010.
 

 

 

Three months ended

 

 

December 31, 2009

 

March 29, 2009

 

In millions

Net Income

 

Diluted EPS

 

Net Income

 

Diluted EPS

 

Net income attributable to Cummins Inc. excluding restructuring and other charges

$

272

 

$

1.37

 

$

51

 

$

0.26

 

Less:

 

 

 

 

 

 

 

 

Restructuring and other charges, net (1)

2

 

0.01

 

44

 

0.22

 

Net income attributable to Cummins Inc.

$

270

 

$

1.36

 

$

7

 

$

0.04

 

   

(1) During the three months ended December 31, 2009, and March 29, 2009, management approved and committed to undertake restructuring actions, which resulted in pretax charges of $4 million and $66 million, respectively.  These charges included employee-related liabilities for severance and benefits, exit costs and pension and other postretirement benefit curtailment charges.

 

 

 

 

 



 

CUMMINS INC. AND SUBSIDIARIES

SELECTED FOOTNOTE DATA

(Unaudited)

 

NOTE 1.  EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES

 

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

 

 

Three months ended

 

 

March 28,

 

December 31,

 

March 29,

 

In millions

2010

 

2009

 

2009

 

Distribution Entities

 

 

 

 

 

 

North American distributors

$

23

 

$

26

 

$

26

 

Komatsu Cummins Chile, Ltda.

3

 

3

 

2

 

All other distributors

1

 

1

 

1

 

 

 

 

 

 

 

 

Manufacturing Entities

 

 

 

 

 

 

Dongfeng Cummins Engine Company, Ltd.

18

 

15

 

 

Chongqing Cummins Engine Company, Ltd.

10

 

8

 

8

 

Tata Cummins Ltd.

4

 

3

 

(2

)

All other manufacturers

10

 

4

 

(5

)

Cummins share of net income

69

 

60

 

30

 

Royalty and interest income

7

 

7

 

3

 

Equity, royalty and interest income from investees

$

76

 

$

67

 

$

33

 

 


NOTE 2.  OTHER INCOME (EXPENSE)

 

Other income (expense) included the following:

 

 

 

Three months ended

 

 

 

March 28,

 

December 31,

 

March 29,

 

In millions

 

2010

 

2009

 

2009

 

Gain on acquisition of Cummins Western Canada

 

$

12

 

$

 

$

 

Foreign currency gains (losses)

 

7

 

(2

)

(8

)

Other, net

 

(2

)

(3

)

5

 

Total other income (expense), net

 

$

17

 

$

(5

)

$

(3

)

 


NOTE 3.  INCOME TAXES

 

Our effective tax rate for the year is expected to approximate 31 percent, absent discrete period activity.  Our tax rate is generally less than the 35 percent U.S. income tax rate primarily due to lower tax rates on foreign income.  The tax rate for the three month period ended March 28, 2010, was 34 percent and includes a discrete tax charge of $7 million (3 percent) related to the enactment of the “Patient Protection and Affordable Care Act.”

 

Our effective tax rate for March 29, 2009 was 33 percent.  This rate is less than the 35 percent U.S. income tax rate primarily due to lower tax rates on foreign income.