Contact:

 

Mark Land

Executive Director - Corporate Communications

(317) 610-2456

mark.d.land@cummins.com

 

February 1, 2011

 

Cummins reports best year in Company history in 2010; expects to earn 13.5 percent EBIT on $16 billion in sales in 2011

 

COLUMBUS, IND – Cummins Inc. (NYSE: CMI) today reported record profits for all of 2010, as well as record quarterly sales and profits for the fourth quarter, on the strength of significant growth in key international markets and improved productivity in its global manufacturing operations.

 

Fourth quarter sales were $4.14 billion, up 22 percent from $3.40 billion during the same period in 2009. Earnings Before Interest and taxes (EBIT) were $541 million, or 13.1 percent of sales, a 41 percent increase from $383 million, or 11.3 percent of sales. The fourth quarter 2009 results include a pre-tax charge of $4 million to cover the costs associated with restructuring.

 

Net income attributable to Cummins Inc. was $362 million ($1.84 per share) compared to $270 million ($1.36 per share) in the fourth quarter 2009.

For the fourth quarter, the Engine, Components and Distribution segments all reported record sales and segment EBIT. The Power Generation segment, which was affected by the recession later than the Company’s other business segments, continued to rebound and reported strongly higher sales and segment EBIT than during the same period in 2009.

 

For the full year, sales were $13.23 billion, up 22 percent from $10.80 billion in 2009. EBIT of $1.66 billion, or 12.5 percent of sales, increased 114 percent from $774 million, or 7.2 percent of sales excluding restructuring and other charges, in 2009.

 

Net income attributable to Cummins Inc. was $1.04 billion ($5.28 per share) from $428 million ($2.16 per share) in 2009. Results for 2009 included restructuring and other charges of $0.33 per share.

 

1
 


 


 

 

Full-year 2010 sales were second only to 2008, while EBIT and net income attributable to Cummins Inc. were Company records. Three of the Company’s four business segments – Engine, Components and Distribution – reported full-year record earnings, while Power Generation also posted strong sales and profit gains from the previous year.

The Company’s strong performance in 2010 came despite a significant decline in its important North American truck engine markets, which were affected by the continued weakness in the U.S. economy and a change in emissions standards. Engine shipments to the North American heavy-duty truck market fell 61 percent and 44 percent to the North American medium-duty truck and bus markets.

Those decreases were more than offset by growth in international markets, particularly China, India and Brazil, and the Company continues to benefit from actions taken over the past two years to improve the productivity of its manufacturing operations around the world.

Sales in China and Brazil increased by more than 70 percent, while sales in India rose 37 percent for the year. Cummins’ total international sales increased by 48 percent from 2009 and accounted for 64 percent of the Company’s total sales in 2010.

 “2010 was the best year in the Company’s history,” said Chairman and Chief Executive Officer Tim Solso. “The fact that we were able to achieve record profitability in the face of a sharp decline in large North American on-highway markets speaks to the global strength of our business and the work we did to keep the Company strong during the recession.

“Given our strong balance sheet, the expected recovery of our North American markets and the global growth opportunities in front of us, we are forecasting further significant growth in 2011 and beyond.”

Based on its current forecasts, Cummins expects sales to grow to $16 billion in 2011 and EBIT to be 13.5 percent of sales.

The Company is forecasting sales to grow by 25 percent in its Engine and Components segments in 2011, led by recovery in the North American truck markets. The Company expects sales to increase by 15 percent in both its Power Generation and Distribution segments, driven by improving markets in North America and continued strength in key international markets.

In addition to the expected economic recovery in North America, the Company also is forecasting further strong growth in China, India and Brazil as well as in other parts of the world, including Mexico, the Middle East and Europe.

The Company expects to invest $600-$650 million in capital expenditures in its consolidated operations. In addition, the Company expects its joint ventures to make $300 million worth of capital investments in their operations to expand their businesses.

“We have significant growth opportunities in markets around the world, and we are well positioned to take advantage of those opportunities,” said President and Chief Operating Officer Tom Linebarger. “In particular, we expect a significant recovery in the North American truck markets this year, where our new engines are performing very well.

“We shipped 62,000 engines to the North American truck markets in 2010 equipped with Selective Catalytic Reduction systems, which have allowed us to meet the stringent EPA emission standards and provide improved fuel economy to our customers.”

 

2
 


 


 

 

 

 

In other recent highlights:

Fourth quarter details (all comparisons to same period in 2009)

 

Engine Segment

Sales - $2.5 billion, up 15 percent

Segment EBIT – $256 million, or 10.3 percent of sales, compared to $211 million or 9.7 percent of sales.

Total on-highway engine sales decreased 18 percent

 

Medium-duty truck engine sales increased 11 percent on strength of Brazilian truck market; North American medium-duty truck engine sales declined 42 percent.

 

Light-duty auto sales increased 1 percent.

 

Global heavy-duty truck engine sales declined 45 percent as result of continued weakness in North America.

Industrial sales increased 89 percent

 

Worldwide construction sales rose 138 percent, led by market recovery in North America and continued infrastructure investment in China, India and Brazil.

 

Mining sales rose 163 percent

 

Agriculture market sales increased 87 percent

Stationary power engine sales increased by 86 percent, primarily due to increased power generation demand, especially for high horsepower engines.

 

Power Generation

Sales – $903 million, up 50 percent

Segment EBIT – $92 million, or 10.2 percent of sales, compared to $34 million or 5.7 percent of sales.

Commercial Products sales rose 59 percent; Commercial Projects up 66 percent; Consumer sales increased 15 percent; Generator Technologies rose 42 percent; and Power Electronics increased 8 percent.

Segment continues to recover from low point of economic cycle in Q3 2009 as sales increased in most geographic markets.

 

Components

Sales – $918 million up 25 percent

Segment EBIT – $83 million, or 9.0 percent of sales, compared to $73 million, or 10.0 percent of sales

Emission Solutions sales increased by 70 percent; Filtration up 18 percent; Turbo Technologies rose 17 percent; Fuel Systems decreased 2 percent.

 

3
 


 


 

 

Increased aftertreatment content on 2010 North American truck engines led Emission Solutions sales gains; Filtration sales benefited from strong increase in aftermarket sales; Turbo Technologies led by gains in China, India and Europe.

 

Distribution

Sales – $699 million, an increase of 44 percent

Segment EBIT – $82 million, or 11.7 percent of sales, compared to $67 million, or 13.8 percent of sales

Consolidation of Western Canada and the Cummins Northeast distributors accounted for $102 million in sales during quarter.

Sales increased in all product/service segments (engines, power generation, parts, and service), led by strong gains for engines and power generation in Western Europe.

 

Presentation of Non-GAAP Financial Information

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

 

Webcast information

Cummins management will host a teleconference to discuss these results today at 10 a.m. EST. This teleconference will be webcast and available on the Investor Relations section of the Cummins website at www.cummins.com. Participants wishing to view the visuals available with the audio are encouraged to sign-in a few minutes prior to the start of the teleconference.

 

 

About Cummins

Cummins Inc., a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Headquartered in Columbus, Indiana, (USA) Cummins employs approximately 40,000 people worldwide and serves customers in approximately 190 countries and territories through a network of more than 600 company-owned and independent distributor locations and approximately 6,000 dealer locations. Cummins earned $1.0 billion on sales of $13.2 billion in 2010. Press releases can be found on the Web at www.cummins.com

 

 

Forward-looking disclosure statement

Information provided in this release that is not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding 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.

 

 

 

4
 


 


 

 

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited) (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

December 31,

 

September 26,

 

December 31,

In millions, except per share amounts

 

2010 

 

2010 

 

2009 

NET SALES

 

$

 4,139 

 

$

 3,401 

 

$

 3,400 

Cost of  sales

 

 

 3,155 

 

 

 2,571 

 

 

 2,627 

GROSS MARGIN

 

 

 984 

 

 

 830 

 

 

 773 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES AND INCOME

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

 423 

 

 

 375 

 

 

 348 

 

Research, development and engineering expenses

 

 

 123 

 

 

 103 

 

 

 108 

 

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

 

 

 90 

 

 

 88 

 

 

 67 

 

Restructuring and other charges

 

 

 - 

 

 

 - 

 

 

 4 

 

Other operating (expense) income, net

 

 

 (3)

 

 

 (5)

 

 

 5 

OPERATING INCOME

 

 

 525 

 

 

 435 

 

 

 385 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 7 

 

 

 6 

 

 

 3 

Interest expense

 

 

 11 

 

 

 11 

 

 

 9 

Other income (expense), net  (Note 2)

 

 

 9 

 

 

 8 

 

 

 (5)

INCOME BEFORE INCOME TAXES

 

 

 530 

 

 

 438 

 

 

 374 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense  (Note 3)

 

 

 139 

 

 

 129 

 

 

 84 

CONSOLIDATED NET INCOME

 

 

 391 

 

 

 309 

 

 

 290 

  

 

 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests

 

 

 29 

 

 

 26 

 

 

 20 

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

 362 

 

$

 283 

 

$

 270 

  

 

 

 

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE

 

 

 

 

 

 

 

 

 

 

TO CUMMINS INC.

 

 

 

 

 

 

 

 

 

 

Basic

 

$

 1.85 

 

$

 1.45 

 

$

 1.36 

 

Diluted

 

$

 1.84 

 

$

 1.44 

 

$

 1.36 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSANDING

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 195.8 

 

 

 195.8 

 

 

 198.4 

 

Diluted

 

 

 196.4 

 

 

 196.3 

 

 

 198.7 

 

 

 

 

 

 

 

 

 

 

 

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).

 

5

 


 


 

 

 

 

 

CUMMINS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Unaudited (a)

 

 

 

 

 

 

 

 

 

For the years ended

 

 

December 31,

 

December 31,

In millions, except per share amounts

2010 

 

2009 

NET SALES

$

 13,226 

 

 

 10,800 

Cost of  sales

 

 10,058 

 

 

 8,631 

GROSS MARGIN

 

 3,168 

 

 

 2,169 

 

 

 

 

 

 

 

OPERATING EXPENSES AND INCOME

 

 

 

 

 

 

Selling, general and administrative expenses

 

 1,487 

 

 

 1,239 

 

Research, development and engineering expenses

 

 414 

 

 

 362 

 

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

 

 351 

 

 

 214 

 

Restructuring and other charges

 

 - 

 

 

 99 

 

Other operating (expense) income, net

 

 (16)

 

 

 (1)

OPERATING INCOME

 

 1,602 

 

 

 682 

 

 

 

 

 

 

 

Interest income

 

 21 

 

 

 8 

Interest expense

 

 40 

 

 

 35 

Other income (expense), net  (Note 2)

 

 34 

 

 

 (15)

INCOME BEFORE INCOME TAXES

 

 1,617 

 

 

 640 

 

 

 

 

 

 

 

Income tax expense  (Note 3)

 

 477 

 

 

 156 

CONSOLIDATED NET INCOME

 

 1,140 

 

 

 484 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests

 

 100 

 

 

 56 

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

$

 1,040 

 

$

 428 

 

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE

 

 

 

 

 

 

TO CUMMINS INC.

 

 

 

 

 

 

Basic

$

 5.29 

 

$

 2.17 

 

Diluted

$

 5.28 

 

$

 2.16 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

Basic

 

 196.7 

 

 

 197.4 

 

Diluted

 

 197.1 

 

 

 197.7 

 

 

 

 

 

 

 

CASH DIVIDENDS DECLARED PER COMMON SHARE

$

 0.875 

 

$

 0.70 

 

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

 

6

 


 


 

 

 

 

 

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 In millions, except par value

2010 

 

2009 

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

$

 1,023 

 

$

 930 

 

Marketable securities

 

 339 

 

 

 190 

 

Accounts and notes receivable, net

 

 2,243 

 

 

 2,004 

 

Inventories

 

 1,977 

 

 

 1,341 

 

Prepaid expenses and other current assets

 

 707 

 

 

 538 

 

 

Total current assets

 

 6,289 

 

 

 5,003 

Long-term assets

 

 

 

 

 

 

Property, plant and equipment, net

 

 2,041 

 

 

 1,886 

 

Investments and advances related to equity method investees

 

 734 

 

 

 574 

 

Goodwill and other intangibles, net

 

 589 

 

 

 592 

 

Other assets

 

 749 

 

 

 761 

 

 

Total assets

$

 10,402 

 

$

 8,816 

 

 

 

 

  

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Loans payable

$

 82 

 

$

 37 

 

Accounts payable (principally trade)

 

 1,362 

 

 

 957 

 

Accrued expenses

 

 1,816 

 

 

 1,438 

 

 

Total current liabilities

 

 3,260 

 

 

 2,432 

Long-term liabilities

 

 

 

 

 

 

Long-term debt

 

 709 

 

 

 637 

 

Other liabilities

 

 1,437 

 

 

 1,727 

 

 

Total liabilities

 

 5,406 

 

 

 4,796 

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Cummins Inc. shareholders’ equity

 

 

 

 

 

 

 

Common stock, $2.50 par value, 500 shares authorized, 221.8 and 222.0 shares issued

 

 1,934 

 

 

 1,860 

 

 

Retained earnings

 

 4,445 

 

 

 3,575 

 

 

Treasury stock, at cost, 24.0 and 20.7 shares

 

 (964)

 

 

 (731)

 

 

Common stock held by employee benefits trust, at cost, 2.1 and 3.0 shares

 

 (25)

 

 

 (36)

 

 

Accumulated other comprehensive loss

 

 (720)

 

 

 (895)

 

 

 

Total Cummins Inc. shareholders’ equity

 

 4,670 

 

 

 3,773 

 

Noncontrolling interests

 

 326 

 

 

 247 

 

 

 

 

Total equity

 

 4,996 

 

 

 4,020 

Total liabilities and equity

$

 10,402 

 

$

 8,816 

 

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

 

7

 


 


 

 

 

 

 

CUMMINS INC. AND SUBSIDIARIES

CONDENSED  CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (a)

 

 

 

 

 

 

 

 

 

For the years ended

 

 

December 31,

 

December 31,

In millions

2010 

 

2009 

NET CASH PROVIDED BY OPERATING ACTIVITIES (Note 4)

$

 1,006 

 

$

 1,137 

 

  

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Capital expenditures

 

 (364)

 

 

 (310)

 

Investments in internal use software

 

 (43)

 

 

 (35)

 

Proceeds from disposals of property, plant and equipment

 

 55 

 

 

 10 

 

Investments in and advances to equity investees

 

 (2)

 

 

 (3)

 

Acquisition of businesses, net of cash acquired

 

 (104)

 

 

 (2)

 

Investments in marketable securities-acquisitions

 

 (823)

 

 

 (431)

 

Investments in marketable securities-liquidations

 

 690 

 

 

 335 

 

Purchases of other investments

 

 (62)

 

 

 (62)

 

Cash flows from derivatives not designated as hedges

 

 2 

 

 

 (18)

 

Other, net

 

 - 

 

 

 7 

Net cash used in investing activities

 

 (651)

 

 

 (509)

 

  

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Proceeds from borrowings

 

 214 

 

 

 76 

 

Payments on borrowings and capital lease obligations

 

 (143)

 

 

 (97)

 

Net borrowings (payments) under short-term credit agreements

 

 9 

 

 

 (2)

 

Distributions to noncontrolling interests

 

 (28)

 

 

 (34)

 

Dividend payments on common stock

 

 (172)

 

 

 (141)

 

Proceeds from sale of common stock held by employee benefit trust

 

 58 

 

 

 72 

 

Repurchases of common stock

 

 (241)

 

 

 (20)

 

Other, net

 

 36 

 

 

 5 

Net cash used in financing activities

 

 (267)

 

 

 (141)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

 5 

 

 

 17 

Net increase in cash and cash equivalents

 

 93 

 

 

 504 

Cash and cash equivalents at beginning of year

 

 930 

 

 

 426 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

 1,023 

 

$

 930 

 

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

 

8

 


 


 

 

 

 

 

CUMMINS INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

 

In millions

 

Engine

 

Power
Generation

 

Components

 

Distribution

 

Non-segment
Items(1)

Total

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

Three months ended December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

External sales

 

$

 2,099 

 

$

 690 

 

$

 656 

 

$

 694 

 

$

 - 

 

$

 4,139 

 

Intersegment sales

 

 

 398 

 

 

 213 

 

 

 262 

 

 

 5 

 

 

 (878)

 

 

 - 

 

   Total sales

 

 

 2,497 

 

 

 903 

 

 

 918 

 

 

 699 

 

 

 (878)

 

 

 4,139 

 

Depreciation and amortization(2)

 

 

 46 

 

 

 10 

 

 

 18 

 

 

 6 

 

 

 - 

 

 

 80 

 

Research, development and engineering expenses

 

 

 76 

 

 

 13 

 

 

 33 

 

 

 1 

 

 

 - 

 

 

 123 

 

Equity, royalty and interest income from investees

 

 

 37 

 

 

 8 

 

 

 6 

 

 

 39 

 

 

 - 

 

 

 90 

 

Interest income

 

 

 5 

 

 

 1 

 

 

 1 

 

 

 - 

 

 

 - 

 

 

 7 

 

Segment EBIT

 

 

 256 

 

 

 92 

 

 

 83 

 

 

 82 

 

 

 28 

 

 

 541 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

Three months ended September 26, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

External sales

 

$

 1,727 

 

$

 564 

 

$

 540 

 

$

 570 

 

$

 - 

 

$

 3,401 

 

Intersegment sales

 

 

 342 

 

 

 227 

 

 

 229 

 

 

 3 

 

 

 (801)

 

 

 - 

 

 

   Total sales

 

 

 2,069 

 

 

 791 

 

 

 769 

 

 

 573 

 

 

 (801)

 

 

 3,401 

 

Depreciation and amortization(2)

 

 

 42 

 

 

 10 

 

 

 20 

 

 

 5 

 

 

 - 

 

 

 77 

 

Research, development and engineering expenses

 

 

 65 

 

 

 8 

 

 

 30 

 

 

 - 

 

 

 - 

 

 

 103 

 

Equity, royalty and interest income from investees

 

 

 37 

 

 

 12 

 

 

 6 

 

 

 33 

 

 

 - 

 

 

 88 

 

Interest income

 

 

 3 

 

 

 2 

 

 

 - 

 

 

 1 

 

 

 - 

 

 

 6 

 

Segment EBIT

 

 

 223 

 

 

 97 

 

 

 63 

 

 

 74 

 

 

 (8)

 

 

 449 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

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 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

For the year ended December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

External sales

 

$

 6,594 

 

$

 2,150 

 

$

 2,171 

 

$

 2,311 

 

$

 - 

 

$

 13,226 

 

Intersegment sales

 

 

 1,294 

 

 

 769 

 

 

 875 

 

 

 13 

 

 

 (2,951)

 

 

 - 

 

 

Total sales

 

 

 7,888 

 

 

 2,919 

 

 

 3,046 

 

 

 2,324 

 

 

 (2,951)

 

 

 13,226 

 

Depreciation and amortization (2)

 

 

 171 

 

 

 41 

 

 

 79 

 

 

 25 

 

 

 - 

 

 

 316 

 

Research, development and engineering expenses

 

 

 263 

 

 

 36 

 

 

 114 

 

 

 1 

 

 

 - 

 

 

 414 

 

Equity, royalty and interest income from investees

 

 

 161 

 

 

 35 

 

 

 23 

 

 

 132 

 

 

 - 

 

 

 351 

 

Interest income

 

 

 12 

 

 

 5 

 

 

 2 

 

 

 2 

 

 

 - 

 

 

 21 

 

Segment EBIT

 

 

 809 

 

 

 299 

 

 

 278 

 

 

 297 

 

 

 (26)

 

 

 1,657 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

For the year ended December 31, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

External sales

 

$

 5,582 

 

$

 1,879 

 

$

 1,562 

 

$

 1,777 

 

$

 - 

 

$

 10,800 

 

Intersegment sales

 

 

 823 

 

 

 538 

 

 

 793 

 

 

 7 

 

 

 (2,161)

 

 

 - 

 

 

Total sales

 

 

 6,405 

 

 

 2,417 

 

 

 2,355 

 

 

 1,784 

 

 

 (2,161)

 

 

 10,800 

 

Depreciation and amortization (2)

 

 

 185 

 

 

 49 

 

 

 73 

 

 

 17 

 

 

 - 

 

 

 324 

 

Research, development and engineering expenses

 

 

 241 

 

 

 33 

 

 

 88 

 

 

 - 

 

 

 - 

 

 

 362 

 

Equity, royalty and interest income from investees

 

 

 54 

 

 

 22 

 

 

 13 

 

 

 125 

 

 

 - 

 

 

 214 

 

Restructuring and other charges

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 99 

 

 

 99 

 

Interest income

 

 

 3 

 

 

 3 

 

 

 1 

 

 

 1 

 

 

 - 

 

 

 8 

 

Segment EBIT

 

 

 252 

 

 

 167 

 

 

 95 

 

 

 235 

 

 

 (74)

 

 

 675 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 (1)

Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses.  For the three months ended December 31, 2010, there were no unallocated corporate expenses.  For the three months ended September 26, 2010 and the year ended December 31, 2010 unallocated corporate expenses included $32 million in Brazil tax recoveries ($21 million after-tax) and $2 million in flood damage expenses.  This tax recovery has been excluded from segment results as it was not considered by management in its evaluation of operating results for the three months ended September 26, 2010 or the year ended December 31, 2010.  For the three months and the year ended December 31, 2009, unallocated corporate expenses included $4 million and $99 million of restructuring and other charges and gains of $7 million and $12 million related to flood damages, respectively. 

 (2)

Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount that is included in the Consolidated Statements of Income as “interest expense.”

9

 


 


 

 

 

 

 

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

 

For the years ended

 

 

 

December 31,

 

September 26,

 

December 31,

 

December 31,

 

December 31,

In millions

 

2010 

 

2010 

 

2009 

 

2010 

 

2009 

Segment EBIT

 

$

 541 

 

$

 449 

 

$

 383 

 

$

 1,657 

 

$

 675 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 11 

 

 

 11 

 

 

 9 

 

 

 40 

 

 

 35 

Income before income taxes

 

$

 530 

 

$

 438 

 

$

 374 

 

$

 1,617 

 

$

 640 

 

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, noncontrolling interests in income of consolidated subsidiaries and restructuring and other charges (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

 

For the years ended

 

 

December 31,

 

September 26,

 

December 31,

 

December 31,

 

December 31,

In millions

2010 

 

2010 

 

2009 

 

2010 

 

2009 

Earnings before interest expense, income taxes and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

restructuring and other charges

$

 541 

 

$

 449 

 

$

 387 

 

$

 1,657 

 

$

 774 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before interest expense, income taxes and restructuring

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and other charges as a percentage of net sales

 

13.1%

 

 

13.2%

 

 

11.4%

 

 

12.5%

 

 

7.2%

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and other charges

 

 - 

 

 

 - 

 

 

 4 

 

 

 - 

 

 

 99 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before interest and income taxes

$

 541 

 

$

 449 

 

$

 383 

 

$

 1,657 

 

$

 675 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBIT as a percentage of net sales

 

13.1%

 

 

13.2%

 

 

11.3%

 

 

12.5%

 

 

6.3%

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 11 

 

 

 11 

 

 

 9 

 

 

 40 

 

 

 35 

 

Income tax expense

 

 139 

 

 

 129 

 

 

 84 

 

 

 477 

 

 

 156 

Consolidated net income

 

 391 

 

 

 309 

 

 

 290 

 

 

 1,140 

 

 

 484 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling interests

 

 29 

 

 

 26 

 

 

 20 

 

 

 100 

 

 

 56 

Net income attributable to Cummins Inc.

$

 362 

 

$

 283 

 

$

 270 

 

$

 1,040 

 

$

 428 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Cummins Inc. as a percentage of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

net sales

 

8.7%

 

 

8.3%

 

 

7.9%

 

 

7.9%

 

 

4.0%

 

10

 


 


 

 

 

 

 

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 period 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 and the year ended December 31, 2009.

 

 

Three months ended

 

Year ended

 

 

December 31, 2009

 

December 31, 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

 

$

493

 

$

2.49

 

Less:

 

 

 

 

 

 

 

 

Restructuring and other charges, net(1)

2

 

0.01

 

65

 

0.33

 

Net income attributable to Cummins Inc.

$

270

 

$

1.36

 

$

428

 

$

2.16

 

 

(1) During the three months ended December 31, 2009, management approved and committed to undertake restructuring actions.  These actions resulted in pretax restructuring and other charges of $4 million.  For the year ended December 31, 2009, the total pretax restructuring and other charges were $99 million.  These charges included employee-related liabilities for severance and benefits, exit costs and pension and other postretirement benefit curtailment charges.

 

 

 

 

11

 


 


 

 

 

 

 

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

 

For the years ended

 

 

 

December 31,

 

September 26,

 

December 31,

 

December 31,

 

December 31,

In millions

 

2010 

 

2010 

 

2009 

 

2010 

 

2009 

Distribution Entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North American distributors

 

$

 29 

 

$

 26 

 

$

 26 

 

$

 101 

 

$

 100 

Komatsu Cummins Chile, Ltda

 

 

 5 

 

 

 4 

 

 

 3 

 

 

 16 

 

 

 12 

All other distributors

 

 

 1 

 

 

 1 

 

 

 1 

 

 

 3 

 

 

 3 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Manufacturing Entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dongfeng Cummins Engine Company, Ltd.

 

 

 23 

 

 

 24 

 

 

 15 

 

 

 99 

 

 

 33 

Chongqing Cummins Engine Company, Ltd.

 

 

 11 

 

 

 12 

 

 

 8 

 

 

 46 

 

 

 36 

Tata Cummins, Ltd.

 

 

 3 

 

 

 4 

 

 

 3 

 

 

 14 

 

 

 5 

Shanghai Fleetguard Filter Co., Ltd.

 

 

 3 

 

 

 3 

 

 

 2 

 

 

 12 

 

 

 7 

Komatsu manufacturing alliances

 

 

 4 

 

 

 2 

 

 

 - 

 

 

 11 

 

 

 (2)

Cummins Westport, Inc

 

 

 3 

 

 

 2 

 

 

 1 

 

 

 10 

 

 

 3 

Valvoline Cummins, Ltd.

 

 

 1 

 

 

 2 

 

 

 2 

 

 

 8 

 

 

 7 

Cummins MerCruiser Diesel Marine, LLC

 

 

 (2)

 

 

 (1)

 

 

 (5)

 

 

 (3)

 

 

 (10)

Beijing Foton Cummins Engine Co., Ltd.

 

 

 (4)

 

 

 (6)

 

 

 - 

 

 

 (16)

 

 

 (5)

All other manufacturers

 

 

 5 

 

 

 8 

 

 

 4 

 

 

 20 

 

 

 7 

 

Cummins share of net income

 

 

 82 

 

 

 81 

 

 

 60 

 

 

 321 

 

 

 196 

Royalty and interest income

 

 

 8 

 

 

 7 

 

 

 7 

 

 

 30 

 

 

 18 

Equity, royalty and interest income from investees

 

$

 90 

 

$

 88 

 

$

 67 

 

$

 351 

 

$

 214 

 

NOTE 2.  OTHER INCOME (EXPENSE)

 

Other income (expense) included the following:

 

 

 

Three months ended

 

For the years ended

 

 

December 31,

 

September 26,

 

December 31,

 

December 31,

 

December 31,

In millions

 

2010 

 

2010 

 

2009 

 

2010 

 

2009 

Change in cash surrender value of corporate owned life insurance

 

$

 1 

 

$

 11 

 

$

 (5)

 

$

 12 

 

$

 (4)

Gain on acquisition of Cummins Western Canada (CWC)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 12 

 

 

 - 

Dividend income

 

 

 2 

 

 

 2 

 

 

 2 

 

 

 7 

 

 

 5 

Life insurance proceeds

 

 

 7 

 

 

 - 

 

 

 - 

 

 

 7 

 

 

 - 

Foreign currency losses, net

 

 

 (5)

 

 

 (5)

 

 

 (2)

 

 

 (1)

 

 

 (20)

Bank charges

 

 

 (4)

 

 

 (4)

 

 

 (4)

 

 

 (15)

 

 

 (14)

Other, net

 

 

 8 

 

 

 4 

 

 

 4 

 

 

 12 

 

 

 18 

 

 

$

 9 

 

$

 8 

 

$

 (5)

 

$

 34 

 

$

 (15)

 

NOTE 3.  INCOME TAXES

 

Our income tax rates are generally less than the 35 percent U.S. income tax rate primarily because of lower taxes on foreign earnings and research tax credits. Our effective tax rate for the fourth quarter and full year of 2010 was 26.2 percent and 29.5 percent, respectively.  Our income tax provision for the fourth quarter includes benefits totaling $17 million related to the legislative reinstatement of the U.S. research tax credit.  Our effective tax rate for the fourth quarter and full year of 2009 was 22.5 percent and 24.4 percent, respectively.  In 2009, we released $19 million of deferred tax liabilities on foreign earnings now considered to be permanently reinvested outside of the United States and recorded a deferred tax asset of $10 million related to prior period matters. 

 

We expect our 2011 effective tax rate to be 30 percent excluding any discrete items that may arise. 

 

 

 

12

 


 


 

NOTE 4.  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, 2010 and 2009, was $320 million and $326 million, respectively.

 

 

 

 

 

 

 

 

 

 

 

 

13