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Cummins Announces Results for 2012, Revenues of $17.3 Billion and EBIT of 13.7 Percent Excluding Special Items



  Cummins Announces Results for 2012, Revenues of $17.3 Billion and EBIT of
  13.7 Percent Excluding Special Items

  * Fourth quarter revenues of $4.3 billion, EBIT of 12.9 percent of sales
    excluding restructuring costs
  * Expects 2013 revenue to be flat to down 5 percent and EBIT to be in the
    range of 13 to 14 percent of sales

Business Wire

COLUMBUS, Ind. -- February 6, 2013

Cummins Inc. (NYSE: CMI) today reported results for the fourth quarter and
full year of 2012.

Fourth quarter revenue of $4.3 billion decreased 13 percent from the same
quarter in 2011 reflecting weakness in most major markets and geographies. The
decrease year-over-year was driven by weaker demand in truck, construction,
and oil and gas markets in North America. The Company also experienced lower
demand in international markets for power generation equipment and
construction, truck and mining engines.

Earnings before interest and taxes (EBIT) were $552 million for the fourth
quarter or 12.9 percent of sales, excluding $52 million of restructuring
costs. This compares to $677 million or 13.8 percent of sales a year ago,
excluding special items.

Net income attributable to Cummins in the fourth quarter was $381 million
($2.02 per diluted share). Results included restructuring costs of $0.19 per
diluted share and one-time tax benefits of $0.21 per diluted share.

Revenues for the full year were $17.3 billion, down 4 percent from 2011, with
revenues in North America up 9 percent offset by international sales which
declined by 15 percent, with the most significant declines in Brazil, China
and Europe.

EBIT for the year, excluding special items, was $2.37 billion or 13.7% of
sales, compared to $2.6 billion or 14.2% of sales in 2011.

Net income attributable to Cummins for the full year was $1.66 billion ($8.74
per diluted share), down from $1.85 billion ($9.55 per diluted share) in 2011.
Excluding the costs of restructuring actions ($0.18 per diluted share), and
the gain on the sale of the exhaust business ($0.02 per diluted share), the
Company reported full year net income of $1.69 billion ($8.90 per diluted
share).

“After a strong start to the year, demand declined across most geographies and
end markets in the second half of 2012 as the global economy slowed,” said Tom
Linebarger, Chairman and Chief Executive Officer. “I am pleased that we were
able to deliver improved gross margins in the fourth quarter and record gross
margins for the full year despite the weakness in demand. The work we have
undertaken to reduce costs and lower inventory should benefit the Company when
the global economy improves, however there is uncertainty surrounding the
timing and pace of improvement in end markets in 2013.”

Based on the current forecast, Cummins expects full year 2013 revenues to be
flat to down 5%, with EBIT in the range of 13 - 14 percent of sales.

2012 highlights:

  * The Company increased its dividend by 25% in the third quarter;
  * Fitch Rating Services raised its Long-term Issuer Default Rating and
    long-term debt ratings for Cummins to “A”;
  * For the sixth consecutive year, Cummins was named one of the world's most
    ethical companies by The Ethisphere Institute;
  * Cummins was awarded a perfect score in the 2013 Corporate Equality Index
    by the Human Rights Campaign as part of its Best Places to Work
    initiative;
  * In December Cummins delivered its 2 millionth engine to Chrysler for the
    Ram pickup;
  * Cummins was the first to receive certification from the EPA meeting both
    the 2013 regulations and the new greenhouse gas and fuel-efficiency rules
    for 2014;
  * Cummins Power Generation received EPA Tier 4 interim certification for the
    North American market three years ahead of deadline;
  * Cummins was ranked No. 1 among industrial companies in Newsweek’s 2012
    Green Rankings of business; and
  * Cummins was named one of the Top 50 Companies for Diversity by Diversity
    Inc. for the sixth consecutive year.

Fourth quarter 2012 detail (all comparisons to same period in 2011)

Segment results below exclude special items in 2012 and 2011

Engine Segment

  * Sales – $2.5 billion, down 18 percent.
  * Segment EBIT – $272 million, or 10.9 percent of sales, compared to $368
    million or 12.0 percent of sales.
  * Strong demand for bus and light-duty engines in North America was more
    than offset by reduced demand in the truck market in Brazil, the North
    American heavy-duty truck, global construction, as well as North American
    oil and gas and international mining markets.

Components Segment

  * Sales - $939 million, down 14 percent.
  * Segment EBIT - $84 million, or 8.9 percent of sales, compared to $132
    million or 12.1 percent of sales.
  * Reduced demand in the North American heavy-duty truck market and lower
    demand in Europe was partially offset by increased demand for
    aftertreatment systems in Brazil.

Power Generation Segment

  * Sales – $765 million, down 17 percent.
  * Segment EBIT – $54 million, or 7.1 percent of sales, compared to $87
    million or 9.5 percent of sales.
  * Lower revenues in several international markets including Europe, Middle
    East, Latin America and China were partially offset by increased demand in
    North America.

Distribution Segment

  * Sales – $907 million, up 9 percent, flat excluding acquisitions.
  * Segment EBIT – $98 million, or 10.8 percent of sales, compared to $87
    million or 10.4 percent of sales.
  * Higher revenues were primarily driven by acquisitions. Stronger demand for
    power generation equipment in the U.S. and Africa was largely offset by
    weaker demand in North American oil and gas markets and Europe.

About Cummins

Cummins Inc., a global power leader, is a corporation of complementary
business units that design, manufacture, distribute and service diesel and
natural gas engines and related technologies, including fuel systems,
controls, air handling, filtration, emission solutions and electrical power
generation systems. Headquartered in Columbus, Indiana, (USA) Cummins
currently employs approximately 44,000 people worldwide and serves customers
in approximately 190 countries and territories through a network of
approximately 600 company-owned and independent distributor locations and
approximately 6,500 dealer locations. Cummins earned $1.66 billion on sales of
$17.3 billion in 2012. Press releases can be found on the Web at
www.cummins.com. Follow Cummins on Twitter at @Cummins and on YouTube at
CumminsInc.

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 our forecasts,
guidance, preliminary results, expectations, hopes, beliefs and intentions on
strategies regarding the future. These forward looking statements include,
without limitation, statements relating to our plans and expectations for our
revenues for the full year of 2013. Our 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: the adoption and
implementation of global emission standards; the price and availability of
energy; the pace of infrastructure development; increasing global competition
among our customers; general economic, business and financing conditions;
governmental action; changes in our customers’ business strategies; competitor
pricing activity; expense volatility; labor relations; and other risks
detailed from time to time in our Securities and Exchange Commission filings,
including particularly in the Risk Factors section of our 2011 Annual Report
on Form 10-K. Shareholders, potential investors and other readers are urged to
consider these factors carefully in evaluating the forward-looking statements
and are cautioned not to place undue reliance on such forward-looking
statements. The forward-looking statements made herein are made only as of the
date of this press release and we undertake no obligation to publicly update
any forward-looking statements, whether as a result of new information, future
events or otherwise. More detailed information about factors that may affect
our performance may be found in our filings with the Securities and Exchange
Commission, which are available at http://www.sec.gov or at
http://www.cummins.com in the Investor Relations section of our website.

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.

 
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (a)
                                                                 
                                   Three months ended
                                   December 31,   September 30,   December 31,
In millions, except per share      2012           2012            2011
amounts
NET SALES                          $    4,292     $    4,118      $    4,921
  Cost of sales                         3,234          3,076           3,680
GROSS MARGIN                            1,058          1,042           1,241
                                                                        
OPERATING EXPENSES AND INCOME
  Selling, general and                  482            456             496
  administrative expenses
  Research, development and             174            186             179
  engineering expenses
  Equity, royalty and interest          82             94              101
  income from investees (Note 1)
  Gain on sale of businesses            -              -               53
  Other operating income                1              (1)             25
  (expense), net
OPERATING INCOME                        485            493             745
                                                                        
  Interest income                       5              5               9
  Interest expense                      7              9               10
  Other income (expense), net           10             (2)             14
INCOME BEFORE INCOME TAXES              493            487             758
                                                                        
  Income tax expense (Note 3)           83             117             186
CONSOLIDATED NET INCOME                 410            370             572
                                                                        
  Less: Net income attributable         29             18              24
  to noncontrolling interests
NET INCOME ATTRIBUTABLE TO         $    381       $    352        $    548
CUMMINS INC.
                                                                        
EARNINGS PER COMMON SHARE
ATTRIBUTABLE
  TO CUMMINS INC.
  Basic                            $    2.02      $    1.87       $    2.87
  Diluted                          $    2.02      $    1.86       $    2.86
                                                                        
WEIGHTED AVERAGE SHARES
OUTSTANDING
  Basic                                 188.4          188.6           190.9
  Diluted                               188.8          189.0           191.5
                                                                        
CASH DIVIDENDS DECLARED PER        $    0.50      $    0.50       $    0.40
COMMON SHARE
                                                                        

(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)
                                                                 
                                                   For the years ended
                                                   December 31,   December 31,
In millions, except per share amounts              2012           2011
NET SALES                                          $   17,334     $   18,048
  Cost of sales                                        12,826         13,459
GROSS MARGIN                                           4,508          4,589
                                                                       
OPERATING EXPENSES AND INCOME
  Selling, general and administrative expenses         1,900          1,837
  Research, development and engineering expenses       728            629
  Equity, royalty and interest income from             384            416
  investees (Note 1)
  Gain on sale of businesses                           6              121
  Other operating income, net                          4              21
OPERATING INCOME                                       2,274          2,681
                                                                       
  Interest income                                      25             34
  Interest expense                                     32             44
  Other income, net                                    24             -
INCOME BEFORE INCOME TAXES                             2,291          2,671
                                                                       
  Income tax expense (Note 3)                          541            725
CONSOLIDATED NET INCOME                                1,750          1,946
                                                                       
  Less: Net income attributable to                     93             98
  noncontrolling interests
NET INCOME ATTRIBUTABLE TO CUMMINS INC.            $   1,657      $   1,848
                                                                       
EARNINGS PER COMMON SHARE ATTRIBUTABLE
  TO CUMMINS INC.
  Basic                                            $   8.75       $   9.58
  Diluted                                          $   8.74       $   9.55
                                                                       
WEIGHTED AVERAGE SHARES OUTSTANDING
  Basic                                                189.3          193.0
  Diluted                                              189.7          193.6
                                                                       
CASH DIVIDENDS DECLARED PER COMMON SHARE           $   1.80       $   1.325
                                                                       

(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)
                                                                 
                                                   December 31,   December 31,
In millions, except par value                      2012           2011
ASSETS
Current assets
  Cash and cash equivalents                        $   1,369      $   1,484
  Marketable securities                                247            277
       Total cash, cash equivalents and                1,616          1,761
       marketable securities
  Accounts and notes receivable, net                   2,475          2,526
  Inventories                                          2,221          2,141
  Prepaid expenses and other current assets            855            663
            Total current assets                       7,167          7,091
Long-term assets
  Property, plant and equipment, net                   2,724          2,288
  Investments and advances related to equity           897            838
  method investees
  Goodwill and other intangibles, net                  814            566
  Other assets                                         939            885
                   Total assets                    $   12,541     $   11,668
                                                                       
LIABILITIES
Current liabilities
  Loans payable                                    $   16         $   28
  Accounts payable (principally trade)                 1,339          1,546
  Accrued expenses                                     1,761          2,083
            Total current liabilities                  3,116          3,657
Long-term liabilities
  Long-term debt                                       698            658
  Other liabilities                                    1,741          1,522
                   Total liabilities                   5,555          5,837
                                                                       
EQUITY
Cummins Inc. shareholders’ equity
  Common stock, $2.50 par value, 500 shares            2,058          2,001
  authorized, 222.4 and 222.2 shares issued
  Retained earnings                                    7,355          6,038
  Treasury stock, at cost, 32.6 and 30.2 shares        (1,830)        (1,587)
  Common stock held by employee benefits trust,        (18)           (22)
  at cost, 1.5 and 1.8 shares
  Accumulated other comprehensive loss                 (950)          (938)
            Total Cummins Inc. shareholders’           6,615          5,492
            equity
Noncontrolling interests                               371            339
                   Total equity                        6,986          5,831
                          Total liabilities and    $   12,541     $   11,668
                          equity
                                                                       

(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)
                                                                 
                                                   For the years ended
                                                   December 31,   December 31,
In millions                                        2012           2011
NET CASH PROVIDED BY OPERATING ACTIVITIES          $    1,532     $   2,073
                                                                       
CASH FLOWS FROM INVESTING ACTIVITIES
   Capital expenditures                                 (690)         (622)
   Investments in internal use software                 (87)          (60)
   Proceeds from disposals of property, plant           11            8
   and equipment
   Investments in and advances to equity                (70)          (81)
   investees
   Acquisition of businesses, net of cash               (215)         -
   acquired
   Proceeds from sale of businesses, net of cash        10            199
   sold
   Investments in marketable                            (561)         (729)
   securities-acquisitions
   Investments in marketable                            585           750
   securities-liquidations
   Proceeds from sale of equity investment              23            -
   Cash flows from derivatives not designated as        12            (18)
   hedges
   Other, net                                           -             1
Net cash used in investing activities                   (982)         (552)
                                                                       
CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from borrowings                             64            127
   Payments on borrowings and capital lease             (145)         (237)
   obligations
   Net borrowings under short-term credit               11            6
   agreements
   Distributions to noncontrolling interests            (62)          (56)
   Dividend payments on common stock                    (340)         (255)
   Repurchases of common stock                          (256)         (629)
   Excess tax benefits on stock-based awards            14            5
   Other, net                                           20            14
Net cash used in financing activities                   (694)         (1,025)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH        29            (35)
EQUIVALENTS
Net increase (decrease) in cash and cash                (115)         461
equivalents
Cash and cash equivalents at beginning of year          1,484         1,023
CASH AND CASH EQUIVALENTS AT END OF PERIOD         $    1,369     $   1,484
                                                                       

(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)
                                                                                     
In millions        Engine    Components   Power        Distribution   Non-segment   Total
                                          Generation                  Items^(1)
                                                                                     
Three months
ended December
31, 2012
External sales     $ 2,177   $   662      $   549      $    904       $   -         $ 4,292
Intersegment         329         277          216           3             (825)       -
sales
   Total sales       2,506       939          765           907           (825)       4,292
Depreciation and     50          23           13            11            -           97
amortization^(2)
Research,
development and      92          60           20            2             -           174
engineering
expenses
Equity, royalty
and interest         27          6            8             41            -           82
income from
investees
Interest income      2           -            2             1             -           5
Segment EBIT         252         78           42            84            44          500
Add back
restructuring        20          6            12            14            -           52
charges^(3)
   Segment EBIT
   excluding         272         84           54            98            44          552
   restructuring
   charges
                                                                                       
Segment EBIT as
a percentage of      10.1%       8.3%         5.5%          9.3%                      11.6%
total sales
Segment EBIT
excluding
restrucutring
charges
   as a
   percentage of     10.9%       8.9%         7.1%          10.8%                     12.9%
   total sales
                                                                                       
Three months
ended September
30, 2012
External sales     $ 2,131   $   663      $   526      $    798       $   -         $ 4,118
Intersegment         396         275          288           3             (962)       -
sales
   Total sales       2,527       938          814           801           (962)       4,118
Depreciation and     48          21           12            8             -           89
amortization^(2)
Research,
development and      115         51           19            1             -           186
engineering
expenses
Equity, royalty
and interest         25          7            12            50            -           94
income from
investees
Interest income      2           1            2             -             -           5
Segment EBIT         239         89           73            99            (4)         496
                                                                                       
Segment EBIT as
a percentage of      9.5%        9.5%         9.0%          12.4%                     12.0%
total sales
                                                                                       
Three months
ended December
31, 2011
External sales     $ 2,628   $   781      $   682      $    830       $   -         $ 4,921
Intersegment         433         311          238           4             (986)       -
sales
   Total sales       3,061       1,092        920           834           (986)       4,921
Depreciation and
amortization ^       46          18           10            8             -           82
(2)
Research,
development and      112         49           17            1             -           179
engineering
expenses
Equity, royalty
and interest         40          7            10            44            -           101
income from
investees
Interest income      4           2            2             1             -           9
Segment EBIT         368         132          87            87            94          768
                                                                                       
Segment EBIT as
a percentage of      12.0%       12.1%        9.5%          10.4%                     15.6%
total sales
                                                                                       

       Includes intersegment sales and profit in inventory eliminations and
       unallocated corporate expenses. There were no significant unallocated
       corporate expenses for the three months ended December 31, 2012 and
       September 30, 2012. The three months ended December 31, 2011 includes a
       $53 million gain ($33 million after-tax) recorded for the sale of
^(1)   certain assets and liabilities of our light-duty filtration business
       from the Components segment and a $38 million gain ($24 million
       after-tax) related to flood damage recoveries from the insurance
       settlement regarding a June 2008 flood in Southern Indiana. The gains
       have been excluded from segment results as they were not considered in
       our evaluation of operating results for the corresponding periods.
       There were no other significant unallocated corporate expenses.
       Depreciation and amortization as shown on a segment basis excludes the
^(2)   amortization of debt discount that is included in the Condensed
       Consolidated Statements of Income as "Interest expense."
^(3)   See Note 2, "RESTRUCTURING CHARGES," for more details.
        

                                                                                    
CUMMINS INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
                                                                                      
In millions        Engine     Components   Power        Distribution   Non-segment   Total
                                           Generation                  Items^(1)
                                                                                      
For the year
ended December
31, 2012
External sales     $ 9,101    $   2,809    $   2,163    $    3,261     $  -          $ 17,334
Intersegment         1,632        1,203        1,105         16           (3,956)      -
sales
   Total sales       10,733       4,012        3,268         3,277        (3,956)      17,334
Depreciation and     192          82           47            34           -            355
amortization^(2)
Research,
development and      433          213          76            6            -            728
engineering
expenses
Equity, royalty
and interest         127          29           40            188          -            384
income from
investees
Interest income      11           3            9             2            -            25
Segment EBIT         1,248        426          285           369          (5)          2,323
Add back
restructuring        20           6            12            14           -            52
charges^(3)
   Segment EBIT
   excluding         1,268        432          297           383          (5)          2,375
   restructuring
   charges
                                                                                        
Segment EBIT as
a percentage of      11.6%        10.6%        8.7%          11.3%                     13.4%
total sales
Segment EBIT
excluding
restrucutring
charges
   as a
   percentage of     11.8%        10.8%        9.1%          11.7%                     13.7%
   total sales
                                                                                        
For the year
ended December
31, 2011
External sales     $ 9,649    $   2,886    $   2,492    $    3,021     $  -          $ 18,048
Intersegment         1,658        1,177        1,006         23           (3,864)      -
sales
   Total sales       11,307       4,063        3,498         3,044        (3,864)      18,048
Depreciation and
amortization ^       181          73           42            25           -            321
(2)
Research,
development and      397          175          54            3            -            629
engineering
expenses
Equity, royalty
and interest         166          31           47            172          -            416
income from
investees
Interest income      18           5            8             3            -            34
Segment EBIT         1,384        470          373           386          102          2,715
                                                                                        
Segment EBIT as
a percentage of      12.2%        11.6%        10.7%         12.7%                     15.0%
total sales
                                                                                        

       Includes intersegment sales and profit in inventory eliminations and
       unallocated corporate expenses.  The year ended December 31, 2012
       includes a $6 million gain ($4 million after-tax) related to
       adjustments from our 2011 divestitures.  The year ended December 31,
       2011, includes a $121 million gain ($70 million after-tax) related to
       the sale of certain assets and liabilities of our exhaust business and
^(1)   light-duty filtration business, both from the Components segment, and a
       $38 million gain ($24 million after-tax) related to flood damage
       recoveries from the insurance settlement regarding a June 2008 flood in
       Southern Indiana.  The gains have been excluded from segment results as
       they were not considered in our evaluation of operating results for the
       corresponding periods.   There were no other significant unallocated
       corporate expenses.
       Depreciation and amortization as shown on a segment basis excludes the
^(2)   amortization of debt discount that is included in the Condensed
       Consolidated Statements of Income as "Interest expense."
^(3)   See Note 2, "RESTRUCTURING CHARGES," for more details.
        

                        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   September   December   December   December
                         31,        30,         31,        31,        31,
In millions              2012       2012        2011       2012       2011
Segment EBIT excluding   $  552     $   496     $   768    $  2,375   $  2,715
restructuring charges
   Add: Restructuring       (52)        -           -         (52)       -
   charges
Segment EBIT                500         496         768       2,323      2,715
   Less: Interest           7           9           10        32         44
   expense
         Income before   $  493     $   487     $   758    $  2,291   $  2,671
         income taxes
                                                                          

                        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   September   December   December    December
                        31,        30,         31,        31,         31,
In millions             2012       2012        2011       2012        2011
Distribution Entities
North American          $   32     $   37      $   34     $    147    $   134
distributors
Komatsu Cummins             6          9           6           26         22
Chile, Ltda.
All other                   1          -           1           4          4
distributors
Manufacturing
Entities
Chongqing Cummins           12         14          17          61         68
Engine Company, Ltd.
Dongfeng Cummins            10         9           16          52         80
Engine Company, Ltd.
Tata Cummins, Ltd.          4          -           5           11         14
Cummins Westport,           3          2           6           14         14
Inc.
Shanghai Fleetguard         3          3           3           13         15
Filter Co., Ltd.
Valvoline Cummins,          2          2           1           8          7
Ltd.
Beijing Foton Cummins       2          3           (2)         5          (7)
Engine Co., Ltd.
Komatsu manufacturing       (2)        (1)         2           (3)        3
alliances
All other                   2          7           2           9          21
manufacturers
  Cummins share of          75         85          91          347        375
  net income
Royalty and interest        7          9           10          37         41
income
    Equity, royalty
    and interest        $   82     $   94      $   101    $    384    $   416
    income from
    investees
                                                                           

NOTE 2. RESTRUCTURING CHARGES

We have executed restructuring actions primarily in the form of involuntary
separation programs in the fourth quarter of 2012. These actions were in
response to deterioration in our U.S. businesses and most key markets around
the world in the second half of 2012, as well as a reduction in orders in most
U.S. and global markets for 2013. We reduced our worldwide professional
workforce by approximately 650 employees, or 3 percent. We also reduced our
hourly workforce by approximately 650 employees. During 2012, we incurred a
pre-tax charge related to the professional and hourly workforce reductions of
approximately $49 million.

Employee termination and severance costs were recorded based on approved plans
developed by the businesses and corporate management which specified positions
to be eliminated, benefits to be paid under existing severance plans or
statutory requirements and the expected timetable for completion of the plan.
Estimates of restructuring were made based on information available at the
time charges were recorded. Due to the inherent uncertainty involved, actual
amounts paid for such activities may differ from amounts initially recorded
and we may need to revise previous estimates.

We incurred $1 million of restructuring expenses for lease terminations and $2
million of restructuring expenses for asset impairments and other non-cash
charges. During 2012, we recorded a total pre-tax restructuring charge of $52
million. These restructuring actions included:

                                Year ended
In millions                     December 31, 2012
Workforce reductions            $        49
Exit activities                          1
Other                                    2
  Total restructuring charges   $        52
                                          

If the 2012 restructuring actions are successfully implemented, we expect the
annualized savings from the professional actions to be approximately $39
million.

At December 31, 2012, of the approximately 1,300 employees to be affected by
this plan, 1,130 had been terminated.

Restructuring charges were included in each segment in our operating results.

The table below summarizes where the restructuring costs are located in our
Condensed Consolidated Statements of Income for the year ended December 31,
2012.

                                                 Year ended
In millions                                      December 31, 2012
Cost of sales                                    $        29
Selling, general and administrative expenses              20
Research, development and engineering expenses            3
           Total restructuring charges           $        52
                                                           

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 2012
was 16.8 percent and 23.6 percent, respectively. The tax rate for the fourth
quarter and full year includes one-time tax items that total a benefit of $39
million ($0.21 per diluted share) and $55 million ($0.29 per diluted share),
respectively. The one-time tax items for the fourth quarter and full year
related primarily to benefits resulting from transactions entered into and
elections made with respect to our U.K. operations. Our effective tax rate for
the fourth quarter and full year of 2011 was 24.5 percent and 27.1 percent,
respectively. Excluding the gain on sale of certain assets and liabilities of
the businesses and the flood insurance recovery, our effective tax rate for
the fourth quarter and full year of 2011 was 22.8 percent and 26.3 percent,
respectively.

A reconciliation of the U.S. federal income tax rate of 35 percent to the
actual effective tax rate is as follows:

                                                      Years ended December 31,
                                                      2012           2011
U.S. federal statutory rate                           35.0      %    35.0   %
State income tax, net of federal effect               1.0            0.4
Research tax credits                                  (0.4)          (4.7)
Differences in rates and taxability of foreign        (12.0)         (4.6)
subsidiaries and joint ventures
Other, net                                            -              1.0
               Effective tax rate                     23.6      %    27.1   %
                                                                             

On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted. This
legislation retroactively extended the U.S. federal research credit for two
years, from January 1, 2012 through December 31, 2013. We expect our 2013
effective tax rate, which will include an estimated 1 percent benefit for the
2013 research credit, to be 26 percent excluding any one-time tax items that
may arise. Additionally, we anticipate that our first quarter 2013 results
will include a one-time tax benefit of approximately $28 million representing
the net benefit attributable to the 2012 research credit.

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, 2012 and 2011, was $361 million and $325 million, respectively.

                        CUMMINS INC. AND SUBSIDIARIES
                   FINANCIAL MEASURES THAT SUPPLEMENT GAAP
                                 (Unaudited)

Net income and diluted earnings per share (EPS) attributable to Cummins Inc.
excluding special items.

We believe this is a useful measure of our operating performance for the
period presented as it illustrates our operating performance without regard to
special items including the gains related to restructuring charges, one-time
income tax items, the sale of certain assets and liabilities and a flood
insurance recovery. 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. to net income attributable to Cummins Inc.
excluding special items for the quarters ended December 31, 2012, September
30, 2012 and December 31, 2011 and for the years ended December 31, 2012 and
December 31, 2011.

                    Three months ended
                    December 31, 2012    September 30,       December 31, 2011
                                         2012
In millions         Net        Diluted   Net       Diluted   Net       Diluted
                    Income     EPS       Income    EPS       Income    EPS
Net income
attributable to     $   381    $ 2.02    $  352    $ 1.86    $  548    $  2.86
Cummins Inc.
Add
   Restructuring        35       0.19       -        -          -         -
   charges
Less
   One-time tax         39       0.21       16       0.08       -         -
   benefits^(1)
   Gain on sale
   of                   -        -          -        -          33        0.17
   business^(2)
   Flood
   insurance            -        -          -        -          24        0.13
   recovery^(3)
Net income
attributable to                                                            
Cummins Inc.
excluding
   special items    $   377    $ 2.00    $  336    $ 1.78    $  491    $  2.56
                                                                           
                               For the years ended
                               December 31, 2012   December 31, 2011
In millions                    Net       Diluted   Net       Diluted
                               Income    EPS       Income    EPS
Net income
attributable to                $ 1,657   $  8.74   $ 1,848   $  9.55
Cummins Inc.
Add
   Restructuring                 35         0.18     -          -
   charges
Less
   One-time tax                  55         0.29     -          -
   benefits^(1)
   Gain on sale
   of                            4          0.02     70         0.36
   business^(2)
   Flood
   insurance                     -          -        24         0.12
   recovery^(3)
Net income
attributable to                                                  
Cummins Inc.
excluding
   special items               $ 1,633   $  8.61   $ 1,754   $  9.07
                                                                           

       The one-time tax benefits for the three months ended December 31, 2012,
       and the year ended December 31, 2012, related primarily to benefits
       resulting from transactions entered into and elections made with
       respect to our U.K. operations. The three month period ended September
       30, 2012, included a $16 million one-time tax benefit for third quarter
^(1)   2012, $6 million of which related to a dividend distribution of
       accumulated foreign income earned in prior years. These one-time tax
       adjustments also included a one-time tax benefit of $13 million for
       prior year tax return true-up adjustments and a one-time tax charge of
       $3 million related to the third quarter enactment of U.K. tax law
       changes.
       In the second and fourth quarter of 2011 we sold certain assets and
       liabilities of our exhaust business and our light-duty filtration
       business. In the second quarter of 2011 we recognized a gain on the
^(2)   sale of $68 million ($37 million after-tax). In the fourth quarter of
       2011 we recognized a gain on the sale of $53 million ($33 million
       after-tax). In the second quarter of 2012 we recognized a $6 million
       gain ($4 million after-tax) related to adjustments from our 2011
       divestitures.
       In the fourth quarter of 2011 we recognized a gain of $38 million ($24
^(3)   million after-tax) on a flood settlement with our insurance carriers to
       settle 2008 flood claims.
        

                        CUMMINS INC. AND SUBSIDIARIES
                   FINANCIAL MEASURES THAT SUPPLEMENT GAAP
                                 (Unaudited)

Earnings before interest expense, income taxes, noncontrolling interests and
restructuring charges

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 and EBIT excluding restructuring and other charges,
non-GAAP financial measures, to “Net income attributable to Cummins Inc.,” for
each of the applicable periods:

                        Three months ended                 For the years ended
                        December    September   December   December   December
                        31,         30,         31,        31,        31,
In millions             2012        2012        2011       2012       2011
Earnings before
interest expense,
income taxes and
  special items         $  552      $  496      $  677     $  2,369   $  2,556
                                                                          
Earnings before
interest expense,
income taxes and
  special items as a
  percentage of net        12.9%       12.0%       13.8%      13.7%      14.2%
  sales
                                                                          
Less
  Restructuring            52          -           -          52         -
  charges
Add
  Gain on sale of          -           -           53         6          121
  businesses
  Flood insurance          -           -           38         -          38
  recovery
                                                                          
Earnings before
interest expense and    $  500      $  496      $  768     $  2,323   $  2,715
income taxes
                                                                          
EBIT as a percentage       11.6%       12.0%       15.6%      13.4%      15.0%
of net sales
                                                                          
Less
  Interest expense         7           9           10         32         44
  Income tax expense       83          117         186        541        725
Consolidated net           410         370         572        1,750      1,946
income
                                                                          
Less
  Net income
  attributable to          29          18          24         93         98
  noncontrolling
  interests
Net income
attributable to         $  381      $  352      $  548     $  1,657   $  1,848
Cummins Inc.
                                                                          
Net income
attributable to
Cummins Inc.
  as a percentage of       8.9%        8.5%        11.1%      9.6%       10.2%
  net sales
                                                                          

                                                                     
CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)
 
Engine segment net sales by market
                                                                         
2012
In millions                   Q1        Q2        Q3        Q4        YTD
Heavy-duty truck              $ 892     $ 807     $ 656     $ 609     $ 2,964
Medium-duty truck and bus       526       512       478       575       2,091
Light-duty automotive and       286       297       353       343       1,279
RV
Industrial                      861       859       766       747       3,233
Stationary power                294       366       274       232       1,166
           Total sales        $ 2,859   $ 2,841   $ 2,527   $ 2,506   $ 10,733
                                                                         
2011
In millions                   Q1        Q2        Q3        Q4        YTD
Heavy-duty truck              $ 485     $ 693     $ 748     $ 865     $ 2,791
Medium-duty truck and bus       474       608       640       598       2,320
Light-duty automotive and       296       310       271       299       1,176
RV
Industrial                      855       988       977       1,030     3,850
Stationary power                281       301       319       269       1,170
           Total sales        $ 2,391   $ 2,900   $ 2,955   $ 3,061   $ 11,307
                                                                         

Unit shipments by engine classification (including unit shipments to Power
Generation)

2012                                                               
Units             Q1          Q2          Q3          Q4          YTD
Mid-range           109,000     110,000     113,000     108,500     440,500
Heavy-duty          36,000      33,000      26,000      24,100      119,100
High horsepower     5,500       5,800       4,600       3,900       19,800
    Total units     150,500     148,800     143,600     136,500     579,400
                                                                     
2011
Units             Q1          Q2          Q3          Q4          YTD
Mid-range           109,400     131,300     130,600     138,100     509,400
Heavy-duty          20,000      29,900      31,100      35,300      116,300
High horsepower     4,900       5,700       5,600       5,400       21,600
    Total units     134,300     166,900     167,300     178,800     647,300
                                                                     

                                                             
CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)
 
Component segment sales by business
                                                                 
2012
In millions           Q1        Q2        Q3        Q4        YTD
Emission solutions    $ 404     $ 349     $ 325     $ 337     $ 1,415
Turbo technologies      298       297       257       254       1,106
Filtration              270       266       260       252       1,048
Fuel systems            127       124       96        96        443
      Total sales     $ 1,099   $ 1,036   $ 938     $ 939     $ 4,012
                                                                 
2011
In millions           Q1        Q2        Q3        Q4        YTD
Emission solutions    $ 273     $ 311     $ 306     $ 372     $ 1,262
Turbo technologies      297       314       298       314       1,223
Filtration              255       287       288       283       1,113
Fuel systems            99        120       123       123       465
      Total sales     $ 924     $ 1,032   $ 1,015   $ 1,092   $ 4,063
                                                                 

In the first quarter of 2012, our Power Generation segment reorganized its
operating structure to include the following businesses: power products, power
systems, generator technologies and power solutions. Sales for our Power
Generation segment by business (including 2011 reorganized balances) were as
follows:

2012                                                    
In millions              Q1      Q2      Q3      Q4      YTD
Power products           $ 375   $ 459   $ 425   $ 395   $ 1,654
Power systems              188     217     174     178     757
Generator technologies     141     160     138     127     566
Power solutions            76      73      77      65      291
       Total sales       $ 780   $ 909   $ 814   $ 765   $ 3,268
                                                            
2011
In millions              Q1      Q2      Q3      Q4      YTD
Power products           $ 377   $ 415   $ 433   $ 411   $ 1,636
Power systems              189     210     188     228     815
Generator technologies     154     189     166     164     673
Power solutions            75      95      87      117     374
       Total sales       $ 795   $ 909   $ 874   $ 920   $ 3,498
                                                            

                                                      
Distribution segment sales by business
                                                          
2012
In millions            Q1      Q2      Q3      Q4      YTD
Parts and filtration   $ 288   $ 302   $ 326   $ 319   $ 1,235
Power generation         186     201     178     242     807
Engines                  166     147     157     195     665
Service                  135     144     140     151     570
      Total sales      $ 775   $ 794   $ 801   $ 907   $ 3,277
                                                          
2011
In millions            Q1      Q2      Q3      Q4      YTD
Parts and filtration   $ 235   $ 271   $ 283   $ 296   $ 1,085
Power generation         145     195     191     191     722
Engines                  140     186     171     206     703
Service                  122     133     138     141     534
      Total sales      $ 642   $ 785   $ 783   $ 834   $ 3,044

Contact:

Cummins Inc.
Carole Casto, 317-610-2480
Executive Director - Corporate Communications
carole.casto@cummins.com
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