Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2011


Loans Payable

        Loans payable at December 31, 2011 and 2010 were $ 28 million and $ 82 million, respectively, and consisted primarily of notes payable to financial institutions. The weighted-average interest rate for notes payable, bank overdrafts and current maturities of long-term debt at December 31, 2011, 2010 and 2009, was as follows:

  December 31,  
  2011   2010   2009  

Weighted average interest rate

    4.19     4.76     5.61  

        For the years ended December 31, 2011, 2010 and 2009, total interest incurred was $ 48 million, $ 45 million and $ 41 million, respectively. For the same respective periods, interest capitalized was $ 4 million, $ 5 million and $ 6 million.

Revolving Credit Facility

        On July 16, 2010, we entered into a four-year revolving credit agreement with a syndicate of lenders. The credit agreement provides us with a $1.24 billion senior unsecured revolving credit facility, the proceeds of which are to be used by us for working capital or other general corporate purposes.

        The credit facility matures on July 16, 2014. Amounts payable under our revolving credit facility will rank pro rata with all of our unsecured, unsubordinated indebtedness. Up to $150 million under our credit facility is available for swingline loans denominated in U.S. dollars. Advances under the facility bear interest at (i) a base rate or (ii) a rate equal to the LIBOR Rate plus an applicable margin based on the credit ratings of our outstanding senior unsecured long-term debt. Based on our current long-term debt ratings, the applicable margin on LIBOR Rate loans was 1.75 percent per annum as of December 31, 2011. Advances under the facility may be prepaid without premium or penalty, subject to customary breakage costs.

        The credit agreement includes various covenants, including, among others, maintaining a leverage ratio of no more than 3.0 to 1.0 and maintaining an interest coverage ratio of at least 1.5 to 1.0. As of December 31, 2011, we were in compliance with both covenants.

        The table below is a reconciliation of the maximum capacity of our revolver to the amount available under the facility as of December 31, 2011. There were no outstanding borrowings under this facility at December 31, 2011.

  Revolving Credit
at December 31,

In millions

Maximum credit capacity of the revolving credit facility

  $ 1,240  



Letters of credit against revolving credit facility


Amount available for borrowing under the revolving credit facility

  $ 1,203  

        As of December 31, 2011, we also had $300 million available for borrowings under our international and other domestic short-term credit facilities. Commitments against the other domestic and international facilities were $28 million as of December 31, 2011 and $82 million at the end of 2010.

Long-term Debt

  December 31,  
In millions
  2011   2010  

Long-term debt:


Export financing loan, 4.5%, due 2012

  $ 31   $ 52  

Export financing loan, 4.5%, due 2013

    44     55  

Debentures, 6.75%, due 2027

    58     58  

Debentures, 7.125%, due 2028

    250     250  

Debentures, 5.65%, due 2098 (effective interest rate 7.48%)

    165     165  


    90     56  


    638     636  

Unamortized discount

    (36 )   (36 )

Fair value adjustments due to hedge on indebtedness

    82     41  

Capital leases

    71     120  

Total long-term debt

    755     761  

Less current maturities of long-term debt

    (97 )   (52 )

Long-term debt

  $ 658   $ 709  

        Principal payments required on long-term debt during the next five years are:

  Required Principal Payments  
In millions
  2012   2013   2014   2015   2016  


  $ 97   $ 59   $ 18   $ 17   $ 17  

        Interest on the 6.75% debentures is payable on February 15 and August 15 each year.

        Interest on the $250 million 7.125% debentures and $165 million 5.65% debentures is payable on March 1 and September 1 of each year. The debentures are unsecured and are not subject to any sinking fund requirements. We can redeem the 7.125% debentures and the 5.65% debentures at any time prior to maturity at the greater of par plus accrued interest or an amount designed to ensure that the debenture holders are not penalized by the early redemption.

        During 2010, two of our wholly-owned Brazilian subsidiaries entered into a loan agreement for a loan in local currency in an amount equivalent to US $50 million, at drawdown, at a fixed rate of 4.5 percent to finance its exports over the next three years. The principal of the loan has a two-year grace period and will begin amortizing in 2012.

        In October 2009, one wholly-owned subsidiary, Cummins Brasil Ltda, entered into a loan agreement with the Brazil development bank, BNDES, for a loan in local currency in an amount equivalent to US $45 million, at drawdown, at a fixed rate of 4.5 percent to finance its exports over the next three years. The principal of the loan had a two-year grace period and began amortizing in 2011.

        Our debt agreements contain several restrictive covenants. The most restrictive of these covenants applies to our revolving credit facility which will upon default, among other things, limit our ability to incur additional debt or issue preferred stock, enter into sale-leaseback transactions, sell or create liens on our assets, make investments and merge or consolidate with any other person. In addition, we are subject to various financial covenants including a maximum debt-to-EBITDA ratio and a minimum interest coverage ratio. As of December 31, 2011, we were in compliance with all of the covenants under our borrowing agreements.