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: 
July 26, 2011

 

  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 July 26, 2011, Cummins Inc. issued a press release regarding its release of second 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 July 26, 2011, Cummins Inc. (“Cummins,” “the Company,” “the registrant,” “we,” “our,” or, “us”) issued the attached press release reporting its financial results for the second quarter of 2011.  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 July 26, 2011


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: July 26, 2011

 

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

 

 

 

June 26,

 

March 27,

 

June 27,

In millions, except per share amounts

 

2011 

 

2011 

 

2010 

NET SALES

 

$

 4,641 

 

$

 3,860 

 

$

 3,208 

Cost of  sales

 

 

 3,438 

 

 

 2,903 

 

 

 2,455 

GROSS MARGIN

 

 

 1,203 

 

 

 957 

 

 

 753 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES AND INCOME

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

 463 

 

 

 389 

 

 

 354 

 

Research, development and engineering expenses

 

 

 157 

 

 

 129 

 

 

 96 

 

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

 

 

 117 

 

 

 96 

 

 

 97 

 

Gain on sale of business (Note 2)

 

 

 68 

 

 

 - 

 

 

 - 

 

Other operating (expense) income, net

 

 

 - 

 

 

 (6)

 

 

 (4)

OPERATING INCOME

 

 

 768 

 

 

 529 

 

 

 396 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 10 

 

 

 6 

 

 

 5 

Interest expense

 

 

 13 

 

 

 10 

 

 

 9 

Other income (expense), net

 

 

 (3)

 

 

 (3)

 

 

 - 

INCOME BEFORE INCOME TAXES

 

 

 762 

 

 

 522 

 

 

 392 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (Note 3)

 

 

 225 

 

 

 157 

 

 

 122 

CONSOLIDATED NET INCOME

 

 

 537 

 

 

 365 

 

 

 270 

 

 

 

 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests

 

 

 32 

 

 

 22 

 

 

 24 

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

 505 

 

$

 343 

 

$

 246 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE

 

 

 

 

 

 

 

 

 

 

TO CUMMINS INC.

 

 

 

 

 

 

 

 

 

 

Basic

 

$

 2.61 

 

$

 1.75 

 

$

 1.25 

 

Diluted

 

$

 2.60 

 

$

 1.75 

 

$

 1.25 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 193.8 

 

 

 195.5 

 

 

 196.9 

 

Diluted

 

 

 194.4 

 

 

 196.1 

 

 

 197.3 

 

 

 

 

 

 

 

 

 

 

 

CASH DIVIDENDS DECLARED PER COMMON SHARE

 

$

 0.2625 

 

$

 0.2625 

 

$

 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 STATEMENTS OF INCOME

(Unaudited) (a)

 

 

 

 

 

 

 

 

 

Six months ended

In millions, except per share amounts

 

June 26, 2011

 

 

June 27, 2010

NET SALES

$

 8,501 

 

$

 5,686 

Cost of  sales

 

 6,341 

 

 

 4,332 

GROSS MARGIN

 

 2,160 

 

 

 1,354 

 

 

 

 

 

 

 

OPERATING EXPENSES AND INCOME

 

 

 

 

 

 

Selling, general and administrative expenses

 

 852 

 

 

 689 

 

Research, development and engineering expenses

 

 286 

 

 

 188 

 

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

 

 213 

 

 

 173 

 

Gain on sale of business (Note 2)

 

 68 

 

 

 - 

 

Other operating (expense) income, net

 

 (6)

 

 

 (8)

OPERATING INCOME

 

 1,297 

 

 

 642 

 

 

 

 

 

 

 

Interest income

 

 16 

 

 

 8 

Interest expense

 

 23 

 

 

 18 

Other income (expense), net

 

 (6)

 

 

 17 

INCOME BEFORE INCOME TAXES

 

 1,284 

 

 

 649 

 

 

 

 

 

 

 

Income tax expense (Note 3)

 

 382 

 

 

 209 

CONSOLIDATED NET INCOME

 

 902 

 

 

 440 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests

 

 54 

 

 

 45 

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

$

 848 

 

$

 395 

 

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE

 

 

 

 

 

 

TO CUMMINS INC.

 

 

 

 

 

 

Basic

$

 4.36 

 

$

 2.00 

 

Diluted

$

 4.34 

 

$

 2.00 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

Basic

 

 194.6 

 

 

 197.6 

 

Diluted

 

 195.2 

 

 

 197.9 

 

 

 

 

 

 

 

CASH DIVIDENDS DECLARED PER COMMON SHARE

$

 0.525 

 

$

 0.35 

 

(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)

 

 

 

 

 

June 26,

 

December 31,

 In millions, except par value

2011 

 

2010 

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

$

 1,111 

 

$

 1,023 

 

Marketable securities

 

 363 

 

 

 339 

 

 

Total cash, cash equivalents and marketable securities

 

 1,474 

 

 

 1,362 

 

Accounts and notes receivable, net

 

 2,780 

 

 

 2,243 

 

Inventories

 

 2,275 

 

 

 1,977 

 

Deferred income taxes

 

 305 

 

 

 314 

 

Prepaid expenses and other current assets

 

 303 

 

 

 393 

 

 

 

Total current assets

 

 7,137 

 

 

 6,289 

Long-term assets

 

 

 

 

 

 

Property, plant and equipment

 

 5,103 

 

 

 4,927 

 

 

Accumulated depreciation

 

 (2,986)

 

 

 (2,886)

 

 

Property, plant and equipment, net

 

 2,117 

 

 

 2,041 

 

Investments and advances related to equity method investees

 

 761 

 

 

 734 

 

Goodwill

 

 348 

 

 

 367 

 

Other intangible assets, net

 

 216 

 

 

 222 

 

Deferred income taxes

 

 115 

 

 

 203 

 

Other assets

 

 619 

 

 

 546 

 

 

Total assets

$

 11,313 

 

$

 10,402 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Loans payable

$

 59 

 

$

 82 

 

Accounts payable (principally trade)

 

 1,686 

 

 

 1,362 

 

Current portion of accrued product warranty

 

 429 

 

 

 421 

 

Accrued compensation, benefits and retirement costs

 

 419 

 

 

 468 

 

Deferred revenue

 

 202 

 

 

 182 

 

Taxes payable (including taxes on income)

 

 255 

 

 

 202 

 

Other accrued expenses

 

 663 

 

 

 543 

 

 

Total current liabilities

 

 3,713 

 

 

 3,260 

Long-term liabilities

 

 

 

 

 

 

Long-term debt

 

 702 

 

 

 709 

 

Pensions

 

 110 

 

 

 195 

 

Postretirement benefits other than pensions

 

 432 

 

 

 439 

 

Other liabilities and deferred revenue

 

 839 

 

 

 803 

 

 

Total liabilities

 

 5,796 

 

 

 5,406 

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Cummins Inc. shareholders’ equity

 

 

 

 

 

 

 

Common stock, $2.50 par value, 500 shares authorized, 222.1 and 221.8 shares issued

 

 1,968 

 

 

 1,934 

 

 

Retained earnings

 

 5,191 

 

 

 4,445 

 

 

Treasury stock, at cost, 27.4 and 24.0 shares

 

 (1,333)

 

 

 (964)

 

 

Common stock held by employee benefits trust, at cost, 1.9 and 2.1 shares

 

 (23)

 

 

 (25)

 

 

Accumulated other comprehensive loss

 

 

 

 

 

 

 

 

Defined benefit postretirement plans

 

 (613)

 

 

 (646)

 

 

 

Other

 

 (32)

 

 

 (74)

 

 

 

 

Total accumulated other comprehensive loss

 

 (645)

 

 

 (720)

 

 

 

Total Cummins Inc. shareholders’ equity

 

 5,158 

 

 

 4,670 

 

Noncontrolling interests

 

 359 

 

 

 326 

 

 

 

Total equity

 

 5,517 

 

 

 4,996 

Total liabilities and equity

$

 11,313 

 

$

 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)

 

 

 

Six months ended

 

 

 

June 26,

 

June 27,

In millions

2011 

 

2010 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Consolidated net income

$

 902 

 

$

 440 

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

 159 

 

 

 161 

 

 

Gain on sale of business (Note 2)

 

 (68)

 

 

 - 

 

 

Gain on fair value adjustment for consolidated investee

 

 - 

 

 

 (12)

 

 

Deferred income taxes

 

 87 

 

 

 43 

 

 

Equity in income of investees, net of dividends

 

 2 

 

 

 (49)

 

 

Pension contributions in excess of expense

 

 (47)

 

 

 (116)

 

 

Excess tax benefits on stock based awards

 

 (4)

 

 

 (7)

 

 

Other post-retirement benefits payments in excess of expense

 

 (10)

 

 

 (7)

 

 

Stock-based compensation expense

 

 18 

 

 

 11 

 

 

Translation and hedging activities

 

 (6)

 

 

 3 

 

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

 

 

 

 

 

 

 

Accounts and notes receivable

 

 (513)

 

 

 (57)

 

 

Inventories

 

 (290)

 

 

 (301)

 

 

Other current assets

 

 11 

 

 

 1 

 

 

Accounts payable

 

 307 

 

 

 239 

 

 

Accrued expenses

 

 169 

 

 

 (14)

 

Changes in other liabilities and deferred revenue

 

 58 

 

 

 66 

 

Other, net

 

 (31)

 

 

 26 

Net cash provided by operating activities

 

 744 

 

 

 427 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Capital expenditures

 

 (215)

 

 

 (91)

 

Investments in internal use software

 

 (22)

 

 

 (22)

 

Proceeds from disposals of property, plant and equipment

 

 5 

 

 

 42 

 

Investments in and advances to equity investees

 

 (20)

 

 

 (1)

 

Proceeds from sale of business, net of cash sold (Note 2)

 

 111 

 

 

 - 

 

Acquisition of businesses, net of cash acquired

 

 - 

 

 

 (71)

 

Investments in marketable securities—acquisitions

 

 (361)

 

 

 (358)

 

Investments in marketable securities—liquidations

 

 343 

 

 

 278 

 

Cash flows from derivatives not designated as hedges

 

 6 

 

 

 (18)

 

Other, net

 

 2 

 

 

 (2)

Net cash used in investing activities

 

 (151)

 

 

 (243)

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Proceeds from borrowings

 

 60 

 

 

 85 

 

Payments on borrowings and capital lease obligations

 

 (94)

 

 

 (37)

 

Net borrowings under short-term credit agreements

 

 11 

 

 

 (1)

 

Distributions to noncontrolling interests

 

 (26)

 

 

 (4)

 

Dividend payments on common stock

 

 (102)

 

 

 (70)

 

Repurchases of common stock

 

 (373)

 

 

 (162)

 

Excess tax benefits on stock-based awards

 

 4 

 

 

 7 

 

Other, net

 

 7 

 

 

 9 

Net cash used in financing activities

 

 (513)

 

 

 (173)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

 8 

 

 

 (17)

Net increase (decrease) in cash and cash equivalents

 

 88 

 

 

 (6)

Cash and cash equivalents at beginning of year

 

 1,023 

 

 

 930 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

 1,111 

 

$

 924 

 

(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 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 March 27, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

External sales

 

$

 2,006 

 

$

 557 

 

$

 660 

 

$

 637 

 

$

 - 

$

 3,860 

 

 

Intersegment sales

 

 385 

 

 

 238 

 

 

 264 

 

 

 5 

 

 

 (892)

 

 - 

 

 

 

   Total sales

 

 

 2,391 

 

 

 795 

 

 

 924 

 

 

 642 

 

 

 (892)

 

 3,860 

 

 

Depreciation and amortization(2)

 

 

 45 

 

 

 10 

 

 

 18 

 

 

 6 

 

 

 - 

 

 79 

 

 

Research, development and engineering expenses

 

 

 80 

 

 

 11 

 

 

 37 

 

 

 1 

 

 

 - 

 

 129 

 

 

Equity, royalty and interest income from investees

 

 

 42 

 

 

 8 

 

 

 8 

 

 

 38 

 

 

 - 

 

 96 

 

 

Interest income

 

 

 3 

 

 

 1 

 

 

 1 

 

 

 1 

 

 

 - 

 

 6 

 

 

Segment EBIT

 

 

 290 

 

 

 89 

 

 

 105 

 

 

 89 

 

 

 (41)

 

 532 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

Three months ended June 27, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

External sales

 

$

 1,595 

 

$

 518 

 

$

 522 

 

$

 573 

 

$

 - 

$

 3,208 

 

 

Intersegment sales

 

 304 

 

 190 

 

 207 

 

 3 

 

 (704)

 

 - 

 

 

 

   Total sales

 

 

 1,899 

 

 

 708 

 

 

 729 

 

 

 576 

 

 

 (704)

 

 3,208 

 

 

Depreciation and amortization(2)

 

 

 42 

 

 

 11 

 

 

 21 

 

 

 7 

 

 

 - 

 

 81 

 

 

Research, development and engineering expenses

 

 

 62 

 

 

 8 

 

 

 26 

 

 

 - 

 

 

 - 

 

 96 

 

 

Equity, royalty and interest income from investees

 

 

 52 

 

 

 9 

 

 

 6 

 

 

 30 

 

 

 - 

 

 97 

 

 

Interest income

 

 

 2 

 

 

 1 

 

 

 1 

 

 

 1 

 

 

 - 

 

 5 

 

 

Segment EBIT

 

 

 197 

 

 

 76 

 

 

 75 

 

 

 69 

 

 

 (16)

 

 401 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

Six months ended June 26, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

External sales

 

$

 4,482 

 

$

 1,206 

 

$

 1,401 

 

$

 1,412 

 

$

 - 

$

 8,501 

 

 

Intersegment sales

 

 809 

 

 498 

 

 555 

 

 15 

 

 (1,877)

 

 - 

 

 

 

   Total sales

 

 

 5,291 

 

 

 1,704 

 

 

 1,956 

 

 

 1,427 

 

 

 (1,877)

 

 8,501 

 

 

Depreciation and amortization(2)

 

 

 89 

 

 

 21 

 

 

 36 

 

 

 11 

 

 

 - 

 

 157 

 

 

Research, development and engineering expenses

 

 

 182 

 

 

 23 

 

 

 80 

 

 

 1 

 

 

 - 

 

 286 

 

 

Equity, royalty and interest income from investees

 

 

 91 

 

 

 21 

 

 

 17 

 

 

 84 

 

 

 - 

 

 213 

 

 

Interest income

 

 

 9 

 

 

 4 

 

 

 2 

 

 

 1 

 

 

 - 

 

 16 

 

 

Segment EBIT

 

 

 667 

 

 

 194 

 

 

 225 

 

 

 195 

 

 

 26 

 

 1,307 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

Six months ended  June 27, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

External sales

 

$

 2,768 

 

$

 896 

 

$

 975 

 

$

 1,047 

 

$

 - 

$

 5,686 

 

 

Intersegment sales

 

 554 

 

 329 

 

 384 

 

 5 

 

 (1,272)

 

 - 

 

 

 

   Total sales

 

 

 3,322 

 

 

 1,225 

 

 

 1,359 

 

 

 1,052 

 

 

 (1,272)

 

 5,686 

 

 

Depreciation and amortization(2)

 

 

 83 

 

 

 21 

 

 

 41 

 

 

 14 

 

 

 - 

 

 159 

 

 

Research, development and engineering expenses

 

 

 122 

 

 

 15 

 

 

 51 

 

 

 - 

 

 

 - 

 

 188 

 

 

Equity, royalty and interest income from investees

 

 

 87 

 

 

 15 

 

 

 11 

 

 

 60 

 

 

 - 

 

 173 

 

 

Interest income

 

 

 4 

 

 

 2 

 

 

 1 

 

 

 1 

 

 

 - 

 

 8 

 

 

Segment EBIT

 

 

 330 

 

 

 110 

 

 

 132 

 

 

 141 

 

 

 (46)

 

 667 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 (1)





 

 (2)

Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses.  The three and six months ended June 26, 2011, include a $68 million gain 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 and six months ended June 26, 2011.  There were no other significant unallocated corporate expenses for the three and six months ended June 26, 2011 and June 27, 2010.

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

 

Six months ended

 

 

 

June 26,

 

March 27,

 

June 27,

 

June 26,

 

June 27,

In millions

 

2011 

 

2011 

 

2010 

 

2011 

 

2010 

Segment EBIT

 

$

 775 

 

$

 532 

 

$

 401 

 

$

 1,307 

 

$

 667 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 13 

 

 

 10 

 

 

 9 

 

 

 23 

 

 

 18 

Income before income taxes

 

$

 762 

 

$

 522 

 

$

 392 

 

$

 1,284 

 

$

 649 

 


 


 

 

 

 

 

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 26,

 

March 27,

 

June 27,

 

June 26,

 

June 27,

In millions

 

2011 

 

2011 

 

2010 

 

2011 

 

2010 

Distribution Entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North American distributors

 

$

 35 

 

$

 30 

 

$

 23 

 

$

 65 

 

$

 46 

Komatsu Cummins Chile, Ltda

 

 

 6 

 

 

 4 

 

 

 3 

 

 

 10 

 

 

 6 

All other distributors

 

 

 1 

 

 

 1 

 

 

 1 

 

 

 2 

 

 

 2 

Manufacturing Entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dongfeng Cummins Engine Company, Ltd.

 

 

 26 

 

 

 23 

 

 

 34 

 

 

 49 

 

 

 52 

Chongqing Cummins Engine Company, Ltd.

 

 

 19 

 

 

 12 

 

 

 13 

 

 

 31 

 

 

 23 

Shanghai Fleetguard Filter Co., Ltd.

 

 

 4 

 

 

 4 

 

 

 4 

 

 

 8 

 

 

 6 

Tata Cummins, Ltd.

 

 

 3 

 

 

 4 

 

 

 3 

 

 

 7 

 

 

 7 

Cummins Westport, Inc.

 

 

 3 

 

 

 1 

 

 

 2 

 

 

 4 

 

 

 5 

Valvoline Cummins, Ltd.

 

 

 2 

 

 

 2 

 

 

 3 

 

 

 4 

 

 

 5 

Komatsu manufacturing alliances

 

 

 (1)

 

 

 2 

 

 

 3 

 

 

 1 

 

 

 5 

Bejing Foton Cummins Engine Co., Ltd.

 

 

 (1)

 

 

 (2)

 

 

 (4)

 

 

 (3)

 

 

 (6)

All other manufacturers

 

 

 6 

 

 

 6 

 

 

 4 

 

 

 12 

 

 

 7 

 

Cummins share of net income

 

 

 103 

 

 

 87 

 

 

 89 

 

 

 190 

 

 

 158 

Royalty and interest income

 

 

 14 

 

 

 9 

 

 

 8 

 

 

 23 

 

 

 15 

Equity, royalty and interest income from investees

 

$

 117 

 

$

 96 

 

$

 97 

 

$

 213 

 

$

 173 

 

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.  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 has a working capital adjustment mechanism that will be determined in the third quarter.  We do not expect a significant change to the measurement of the gain. The gain has been excluded from segment results as it was not considered by management in its evaluation of operating results for the three and six months ended June 26, 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 tax rates on foreign income and research tax credits.  The tax rates for the three and six month periods ended June 26, 2011, were 29.5 percent and 29.8 percent.  The tax rate for the three and six month periods ended June 26, 2011, includes a discrete tax charge of $4 million related to the enactment of state law changes in Indiana.

 

Our effective tax rates for the comparable prior year periods were 31.1 percent and 32.2 percent, respectively.  The tax rate for the six month period includes a discrete tax charge of $7 million (one percent) 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 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

 

Six months ended

 

 

June 26,

 

March 27,

 

June 27,

 

June 26,

 

June 27,

In millions

2011 

 

2011 

 

2010 

 

2011 

 

2010 

Earnings before interest expense, income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and gain on sale of business

$

 707 

 

$

 532 

 

$

 401 

 

$

 1,239 

 

$

 667 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before interest expense, income taxes and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 gain on divestiture as a percentage of net sales

 

15.2%

 

 

13.8%

 

 

12.5%

 

 

14.6%

 

 

11.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of business

 

 68 

 

 

 - 

 

 

 - 

 

 

 68 

 

 

 - 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before interest expense and income taxes

 

 775 

 

 

532 

 

 

 401 

 

 

 1,307 

 

 

 667 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBIT as a percentage of net sales

 

16.7%

 

 

13.8%

 

 

12.5%

 

 

15.4%

 

 

11.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 13 

 

 

 10 

 

 

 9 

 

 

 23 

 

 

 18 

 

Income tax expense

 

 225 

 

 

 157 

 

 

 122 

 

 

 382 

 

 

 209 

Consolidated net income

 

 537 

 

 

 365 

 

 

 270 

 

 

 902 

 

 

 440 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling interests

 

 32 

 

 

22 

 

 

 24 

 

 

 54 

 

 

 45 

Net income attributable to Cummins Inc.

$

 505 

 

$

 343 

 

$

 246 

 

$

 848 

 

$

 395 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Cummins Inc. as a

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

percentage of net sales

 

10.9%

 

 

8.9%

 

 

7.7%

 

 

10.0%

 

 

6.9%

 

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

 

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 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 to “Net income attributable to Cummins Inc.” for the three and six months ended June 26, 2011. 

 

 

Three months ended

 

Six months ended

 

 

June 26, 2011

 

June 26, 2011

 

In millions

Net Income

 

Diluted EPS

 

Net Income

 

Diluted EPS

 

Net income attributable to Cummins Inc. excluding the gain on sale of business

$

468

 

$

2.41

 

$

811

 

$

4.15

 

Add:

 

 

 

 

 

 

 

 

Gain on sale of business(1)

37

 

0.19

 

37

 

0.19

 

Net income attributable to Cummins Inc.

$

505

 

$

2.60

 

$

848

 

$

4.34

 

(1)The gain has been excluded from operating results as it was not considered by management in its evaluation of performance for the three and six months ended June 26, 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 

 

$

 - 

 

$

 - 

 

$

 1,178 

Medium-duty truck and bus

 

 474 

 

 

 608 

 

 

 - 

 

 

 - 

 

 

 1,082 

Light-duty auto and RV

 

 296 

 

 

 310 

 

 

 - 

 

 

 - 

 

 

 606 

Industrial

 

 855 

 

 

 988 

 

 

 - 

 

 

 - 

 

 

 1,843 

Stationary power

 

 281 

 

 

 301 

 

 

 - 

 

 

 - 

 

 

 582 

 

Total sales

$

 2,391 

 

$

 2,900 

 

$

 - 

 

$

 - 

 

$

 5,291 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 

 

 

 - 

 

 

 - 

 

 

 240,700 

Heavy-duty

 

 20,000 

 

 

 29,900 

 

 

 - 

 

 

 - 

 

 

 49,900 

High-horsepower

 

 4,900 

 

 

 5,700 

 

 

 - 

 

 

 - 

 

 

 10,600 

 

Total units

 

 134,300 

 

 

 166,900 

 

 

 - 

 

 

 - 

 

 

 301,200 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 

 

$

 - 

 

$

 - 

 

$

 1,073 

Generator technologies

 

 153 

 

 

 190 

 

 

 - 

 

 

 - 

 

 

 343 

Commercial projects

 

 55 

 

 

 58 

 

 

 - 

 

 

 - 

 

 

 113 

Consumer

 

 50 

 

 

 53 

 

 

 - 

 

 

 - 

 

 

 103 

Power electronics

 

 32 

 

 

 40 

 

 

 - 

 

 

 - 

 

 

 72 

 

Total sales

$

 795 

 

$

 909 

 

$

 - 

 

$

 - 

 

$

 1,704 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 

 

$

 - 

 

$

 - 

 

$

 611 

Emission solutions

 

 273 

 

 

 319 

 

 

 - 

 

 

 - 

 

 

 592 

Filtration

 

 255 

 

 

 287 

 

 

 - 

 

 

 - 

 

 

 542 

Fuel systems

 

 99 

 

 

 120 

 

 

 - 

 

 

 - 

 

 

 219 

Elimination

 

 - 

 

 

 (8)

 

 

 - 

 

 

 - 

 

 

 (8)

 

Total sales

$

 924 

 

$

 1,032 

 

$

 - 

 

$

 - 

 

$

 1,956 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 

 

$

 - 

 

$

 - 

 

$

 506 

Power generation

 

 145 

 

 

 195 

 

 

 - 

 

 

 - 

 

 

 340 

Engines

 

 140 

 

 

 186 

 

 

 - 

 

 

 - 

 

 

 326 

Service

 

 122 

 

 

 133 

 

 

 - 

 

 

 - 

 

 

 255 

 

Total sales

$

 642 

 

$

 785 

 

$

 - 

 

$

 - 

 

$

 1,427 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 

 


 

 

=