EXHIBIT 12
 
CUMMINS INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
 
 
 
Years ended December 31,
In millions
 
2016
 
2015
 
2014
 
2013
 
2012
Earnings
 
 

 
 

 
 
 
 
 
 
Income before income taxes (1)
 
$
1,930

 
$
2,025

 
$
2,434

 
$
2,119

 
$
2,271

Add
 
 

 
 

 
 
 
 
 
 
Fixed charges
 
148

 
140

 
138

 
112

 
104

Amortization of capitalized interest
 
2

 
2

 
1

 
1

 
2

Distributed income of equity investees
 
212

 
248

 
228

 
271

 
329

Less
 
 

 
 

 
 
 
 
 
 
Equity in earnings of investees
 
260

 
273

 
330

 
325

 
347

Capitalized interest
 
6

 
3

 
7

 
7

 
7

Earnings before fixed charges
 
$
2,026

 
$
2,139

 
$
2,464

 
$
2,171

 
$
2,352

 
 
 
 
 
 
 
 
 
 
 
Fixed charges
 
 

 
 
 
 
 
 
 
 
Interest expense (2)
 
$
69

 
$
65

 
$
64

 
$
41

 
$
32

Capitalized interest
 
6

 
3

 
7

 
7

 
7

Amortization of debt discount and deferred costs
 
3

 
3

 
3

 
2

 
6

Interest portion of rental expense (3)
 
70

 
69

 
64

 
62

 
59

Total fixed charges
 
$
148

 
$
140

 
$
138

 
$
112

 
$
104

 
 
 
 
 
 
 
 
 
 
 
Ratio of earnings to fixed charges (4)
 
13.7

 
15.3

 
17.9

 
19.4

 
22.6

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(1) For the year ended December 31, 2016, income before income taxes included a $138 million charge related to a loss contingency. For the year ended December 31, 2015, income before income taxes included a $211 million charge related to impairment of light-duty diesel assets, $90 million of restructuring actions and other charges and a $60 million charge related to a loss contingency. For the year ended December 31, 2012, consolidated net income included $52 million of restructuring and other charges, a $6 million gain related to adjustments from our 2011 divestitures and a $20 million charge related to legal matters.
(2) The interest amount in the table above does not include interest expense associated with uncertain tax positions. In 2015, we adopted new rules related to balance sheet debt issuance costs, which resulted in the reclassification of our December 31, 2014, debt balance, reducing our long-term debt by $12 million. In September 2013, we issued $1 billion of senior unsecured debt.
(3) Amounts represent those portions of rent expense that are reasonable approximations of interest costs.
(4) We have not issued preferred stock. Therefore, the ratio of earnings to combined fixed charges and preferred stock dividends are the same as the ratios presented above.