Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2012


        Investments in and advances to equity investees and our ownership percentage was as follows:

  December 31,  
In millions
  Ownership %   2012   2011  

North American distributors

  30% - 50%   $ 139   $ 127  

Komatsu alliances

  20% - 50%     132     115  

Dongfeng Cummins Engine Company, Ltd. 

  50%     113     131  

Beijing Foton Cummins Engine Co. Ltd. 

  50%     91     87  

Cummins-Scania XPI Manufacturing, LLC

  50%     65     62  

Chongqing Cummins Engine Company, Ltd. 

  50%     58     71  

Tata Cummins, Ltd. 

  50%     52     49  

Cummins Olayan Energy

  49%     34     30  

Shanghai Fleetguard Filter Co., Ltd. 

  50%     31     29  

Guangxi Cummins Industiral Power Co., Ltd. 

  50%     30      

Valvoline Cummins, Ltd. 

  50%     25     20  

Fleetguard Filters Private, Ltd. 

  50%     23     22  


  Various     104     95  


      $ 897   $ 838  

        On January 1, 2010, with the adoption of the new FASB standard regarding consolidation of VIEs, we deconsolidated Cummins Komatsu Engine Corporation to account for it as an equity investee. The impact of the deconsolidation on our Consolidated Statements of Income was minimal as all sales were eliminated in consolidation in the past. The most significant impacts on our Consolidated Balance Sheets were to decrease current assets by $9 million, decrease long-term assets by $10 million, increase investments and advances related to equity method investees by $11 million and decrease noncontrolling interest by $11 million in 2010.

        Equity, royalty and interest income from investees, net of applicable taxes, was as follows:

  For the years ended
December 31,
In millions
  2012   2011   2010  

Distribution Entities


North American distributors

  $ 147   $ 134   $ 101  

Komatsu Cummins Chile, Ltda. 

    26     22     16  

All other distributors

    4     4     3  

Manufacturing Entities


Chongqing Cummins Engine Company, Ltd. 

    61     68     46  

Dongfeng Cummins Engine Company, Ltd. 

    52     80     99  

Cummins Westport, Inc. 

    14     14     10  

Shanghai Fleetguard Filter Co., Ltd. 

    13     15     12  

Tata Cummins, Ltd. 

    11     14     14  

Valvoline Cummins, Ltd. 

    8     7     8  

Beijing Foton Cummins Engine Co., Ltd. 

    5     (7 )   (16 )

Komatsu manufacturing alliances

    (3 )   3     11  

All other manufacturers

    9     21     17  

Cummins share of net income

    347     375     321  

Royalty and interest income

    37     41     30  

Equity, royalty and interest income from investees

  $ 384   $ 416   $ 351  

Distribution Entities

        We have an extensive worldwide distributor and dealer network through which we sell and distribute our products and services. Generally, our distributors are divided by geographic region with some of our distributors being wholly-owned by Cummins, some partially-owned and the majority independently owned. We consolidate all wholly-owned distributors and partially-owned distributors where we are the primary beneficiary and account for other partially-owned distributors using the equity method of accounting.

  • North American Distributors—Our distribution channel in North America includes 11 unconsolidated partially-owned distributors. Our equity interests in these nonconsolidated entities range from 30 percent to 50 percent. We also have more than a 50 percent ownership interest in four partially owned distributors which we consolidate. While each distributor is a separate legal entity, the business of each is substantially the same as that of our wholly-owned distributors based in other parts of the world. All of our distributors, irrespective of their legal structure or ownership, offer the full range of our products and services to customers and end-users in their respective markets.

    Komatsu Cummins Chile, Ltda.—Komatsu Cummins Chile, Ltda. is a joint venture with Komatsu America Corporation. The joint venture is a distributor that offers the full range of our products and services to customers and end-users in the Chilean and Peruvian markets.

        We also have 50 percent equity interests in six other international distributors.

        We are contractually obligated to repurchase new engines, parts and components, special tools and signage from our North American distributors following an ownership transfer or termination of the distributor. In addition, in certain cases where we own a partial interest in a distributor, we are obligated to purchase the other equity holders' interests if certain events occur (such as the death of the distributor principal or a change in control of Cummins Inc.). The purchase price of the equity interests is determined based on the fair value of the distributor's assets. Outside of North America, repurchase obligations and practices vary by region. All distributors that are partially-owned are considered to be related parties in our Consolidated Financial Statements.

Manufacturing Entities

        Our manufacturing joint ventures have generally been formed with customers and generally are intended to allow us to increase our market penetration in geographic regions, reduce capital spending, streamline our supply chain management and develop technologies. Our largest manufacturing joint ventures are based in China and are included in the list below. Our engine manufacturing joint ventures are supplied by our Components segment in the same manner as it supplies our wholly-owned Engine segment and Power Generation segment manufacturing facilities. Our Components segment joint ventures and wholly owned entities provide fuel system, filtration and turbocharger products that are used in our engines as well as some competitors' products. The results and investments in our joint ventures in which we have 50 percent or less ownership interest are included in "Equity, royalty and interest income from investees" and "Investments and advances related to equity method investees" in our Consolidated Statements of Income and Consolidated Balance Sheets, respectively.

  • Chongqing Cummins Engine Company, Ltd.—Chongqing Cummins Engine Company, Ltd. (CCEC) is a joint venture in China with Chongqing Machinery and Electric Co. Ltd. This joint venture manufactures several models of our heavy-duty and high-horsepower diesel engines, primarily serving the industrial and stationary power markets in China.

    Dongfeng Cummins Engine Company, Ltd.—Dongfeng Cummins Engine Company, Ltd. (DCEC) is a joint venture in China with Dongfeng Automotive Co. Ltd., a subsidiary of Dongfeng Motor Corporation (Dongfeng), one of the largest medium-duty and heavy-duty truck manufacturers in China. DCEC produces Cummins 4- to 13-liter mechanical engines, full-electronic diesel engines, with a power range from 125 to 545 horsepower, and natural gas engines.

    Cummins Westport, Inc.—Cummins Westport, Inc. is a joint venture in Canada with Westport Innovations Inc. to market and sell medium-duty automotive spark-ignited natural gas engines worldwide and to participate in joint technology projects on low-emission technologies.

    Shanghai Fleetguard Filter Co., Ltd.—Shanghai Fleetguard Filter Co., Ltd. is a joint venture in China with Dongfeng that manufactures filtration systems.

    Tata Cummins, Ltd.—Tata Cummins Ltd. is a joint venture in India with Tata Motors Ltd., the largest automotive company in India and a member of the Tata group of companies. This joint venture manufactures engines in India for use in trucks manufactured by Tata Motors, as well as for various industrial and power generation applications.

    Valvoline Cummins, Ltd.—Valvoline Cummins, Ltd. is a joint venture in India with Ashland Inc., USA. This joint venture manufactures and distributes lubricants and oil related products in India which are used in automotive and industrial applications. Products include transmission fluids, hydraulic lubricants, automotive filters, cooling system products, greases and specialty products.

    Beijing Foton Cummins Engine Co., Ltd.—Beijing Foton Cummins Engine Co., Ltd. is a joint venture in China with Beijing Foton Motor Co., Ltd., a commercial vehicle manufacturer, which produces ISF 2.8 liter and ISF 3.8 liter families of Cummins high performance light-duty diesel engines in Beijing. These engines are used in light-duty commercial trucks, pickup trucks, multipurpose and sport utility vehicles in China, Brazil and Russia. Certain types of marine, small construction equipment and industrial applications are also served by these engine families.

    Komatsu manufacturing alliances—Komatsu manufacturing alliances consists of two manufacturing joint ventures and one design joint venture including Komatsu Cummins Engine Company (KCEC) in Japan and Cummins Komatsu Engine Company (CKEC) in the United States (U.S.) with Komatsu Ltd. These joint ventures manufacture Cummins-designed medium-duty engines in Japan and Komatsu-designed high-horsepower engines in the U.S. The industrial engine design joint venture is located in Japan.

    Cummins-Scania XPI Manufacturing, LLC—Cummins-Scania XPI Manufacturing, LLC is a joint venture in the United States with Scania Holding, Inc. This joint venture manufactures several models of advanced fuel systems for heavy-duty and midrange diesel engines.

    Cummins Olayan Energy Ltd.—Cummins Olayan Energy Ltd. is a joint venture in the Kingdom of Saudi Arabia with General Contracting Company to operate certain rental power generation equipment, which is primarily utilized within the Kingdom of Saudi Arabia.

    Guangxi Cummins Industrial Power Co., Ltd.—Guangxi Cummins Industrial Power Co., Ltd. is a joint venture in China with Guangxi LiuGong Machinery Co. This joint venture manufactures 6.7 liter and 9.3 liter diesel engines for use in various construction equipment.

    Fleetguard Filters Private, Ltd.—Fleetguard Filters Private, Ltd. is a joint venture in India with Perfect Sealing System Private Limited that manufactures and sells filtration systems primarily for commercial vehicle applications.

    Cummins MerCruiser Diesel Marine, LLC—Cummins MerCruiser Diesel Marine, LLC (CMD) was a joint venture in the U.S. with Mercury Marine, a division of Brunswick Corporation, to develop, manufacture and sell recreational marine diesel products, including engines, sterndrive packages, inboard packages, instrument and controls, service systems and replacement and service parts and assemblies, complete integration systems and other related products. In April 2012, we executed our plans to dissolve the joint venture and to transition to a strategic supply arrangement between the two companies to more effectively and efficiently serve customers in the global diesel marine market. All business activities were moved from CMD to the parent companies at the time of the dissolution. We will continue to use Mercury Marine drives and control systems in conjunction with its extensive offering of mid-range and heavy-duty marine engines. The dissolution of the joint venture did not have a significant impact on our financial results.

Equity Investee Financial Summary

        We have approximately $469 million in our investment account at December 31, 2012, that represents cumulative undistributed income in our equity investees. Dividends from our unconsolidated equity investees were $329 million, $341 million and $178 million in 2012, 2011 and 2010, respectively. Summary financial information for our equity investees was as follows:

  As of and for the years ended
December 31,
In millions
  2012   2011   2010  

Net sales

  $ 8,296   $ 8,659   $ 7,107  

Gross margin

    1,870     1,948     1,651  

Net income

    747     788     668  

Cummins share of net income





Royalty and interest income

    37     41     30  

Total equity, royalty and interest income from investees

  $ 384   $ 416   $ 351  

Current assets

  $ 2,843   $ 2,892        

Non-current assets

    1,588     1,440        

Current liabilities

    (2,039 )   (2,055 )      

Non-current liabilities

    (431 )   (391 )      

Net assets

  $ 1,961   $ 1,886        

Cummins share of net assets

  $ 886   $ 855