UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: October 31,
2012
CUMMINS
INC.
(Exact name of registrant as
specified in its charter)
Indiana |
1-4949 |
35-0257090 |
500 Jackson Street
P. O. Box 3005
Columbus, IN 47202-3005
(Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (812) 377-5000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
[ ] |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
[ ] |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
[ ] |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On October 31, 2012, Cummins Inc. (Cummins, the
Company, the registrant, we, our, or us) issued the attached press
release reporting its financial results for the third quarter of 2012. A
copy of Cummins' press release is attached hereto as Exhibit 99 and hereby
incorporated by reference.
Item 9.01. Financial Statements and Exhibits.
|
(d) |
The following exhibit is furnished pursuant to Item
2.02 herewith: |
99-Press Release dated October 31, 2012
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: October 31, 2012
CUMMINS INC. |
|
/s/ Marsha L. Hunt Marsha L. Hunt |
|
CUMMINS INC. AND SUBSIDIARIES |
||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
||||||||||
(Unaudited) (a) |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|||||||
|
|
|
September 30, |
|
July 1, |
|
September 25, |
|||
In millions, except per share amounts |
|
2012 |
|
2012 |
|
2011 |
||||
NET SALES |
|
$ |
4,118 |
|
$ |
4,452 |
|
$ |
4,626 |
|
|
Cost of sales |
|
|
3,076 |
|
|
3,242 |
|
|
3,438 |
GROSS MARGIN |
|
|
1,042 |
|
|
1,210 |
|
|
1,188 |
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES AND INCOME |
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
456 |
|
|
487 |
|
|
489 |
|
Research, development and engineering expenses |
|
|
186 |
|
|
187 |
|
|
164 |
|
Equity, royalty and interest income from investees (Note 1) |
|
|
94 |
|
|
104 |
|
|
102 |
|
Gain on sale of businesses |
|
|
- |
|
|
6 |
|
|
- |
|
Other operating income (expense), net |
|
|
(1) |
|
|
2 |
|
|
2 |
OPERATING INCOME |
|
|
493 |
|
|
648 |
|
|
639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
5 |
|
|
7 |
|
|
9 |
|
Interest expense |
|
|
9 |
|
|
8 |
|
|
11 |
|
Other income (expense), net |
|
|
(2) |
|
|
14 |
|
|
(8) |
INCOME BEFORE INCOME TAXES |
|
|
487 |
|
|
661 |
|
|
629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (Note 2) |
|
|
117 |
|
|
166 |
|
|
157 |
CONSOLIDATED NET INCOME |
|
|
370 |
|
|
495 |
|
|
472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income attributable to noncontrolling interests |
|
|
18 |
|
|
26 |
|
|
20 |
NET INCOME ATTRIBUTABLE TO CUMMINS INC. |
|
$ |
352 |
|
$ |
469 |
|
$ |
452 |
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER COMMON SHARE ATTRIBUTABLE |
|
|
|
|
|
|
|
|
|
|
|
TO CUMMINS INC. |
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.87 |
|
$ |
2.47 |
|
$ |
2.35 |
|
Diluted |
|
$ |
1.86 |
|
$ |
2.47 |
|
$ |
2.35 |
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
188.6 |
|
|
189.8 |
|
|
192.1 |
|
Diluted |
|
|
189.0 |
|
|
190.1 |
|
|
192.7 |
|
|
|
|
|
|
|
|
|
|
|
CASH DIVIDENDS DECLARED PER COMMON SHARE |
|
$ |
0.50 |
|
$ |
0.40 |
|
$ |
0.40 |
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.
CUMMINS INC. AND SUBSIDIARIES |
||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
||||||
(Unaudited) (a) |
||||||
|
|
|
|
|
|
|
|
|
Nine months ended |
||||
In millions, except per share amounts |
September 30, 2012 |
|
September 25, 2011 |
|||
NET SALES |
$ |
13,042 |
|
$ |
13,127 |
|
|
Cost of sales |
|
9,592 |
|
|
9,779 |
GROSS MARGIN |
|
3,450 |
|
|
3,348 |
|
|
|
|
|
|
|
|
OPERATING EXPENSES AND INCOME |
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
1,418 |
|
|
1,341 |
|
Research, development and engineering expenses |
|
554 |
|
|
450 |
|
Equity, royalty and interest income from investees (Note 1) |
|
302 |
|
|
315 |
|
Gain on sale of businesses |
|
6 |
|
|
68 |
|
Other operating income (expense), net |
|
3 |
|
|
(4) |
OPERATING INCOME |
|
1,789 |
|
|
1,936 |
|
|
|
|
|
|
|
|
|
Interest income |
|
20 |
|
|
25 |
|
Interest expense |
|
25 |
|
|
34 |
|
Other income (expense), net |
|
14 |
|
|
(14) |
INCOME BEFORE INCOME TAXES |
|
1,798 |
|
|
1,913 |
|
|
|
|
|
|
|
|
|
Income tax expense (Note 2) |
|
458 |
|
|
539 |
CONSOLIDATED NET INCOME |
|
1,340 |
|
|
1,374 |
|
|
|
|
|
|
|
|
|
Less: Net income attributable to noncontrolling interests |
|
64 |
|
|
74 |
NET INCOME ATTRIBUTABLE TO CUMMINS INC. |
$ |
1,276 |
|
$ |
1,300 |
|
|
|
|
|
|
|
|
EARNINGS PER COMMON SHARE ATTRIBUTABLE |
|
|
|
|
|
|
|
TO CUMMINS INC. |
|
|
|
|
|
|
Basic |
$ |
6.73 |
|
$ |
6.71 |
|
Diluted |
$ |
6.72 |
|
$ |
6.69 |
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING |
|
|
|
|
|
|
|
Basic |
|
189.6 |
|
|
193.8 |
|
Diluted |
|
190.0 |
|
|
194.4 |
|
|
|
|
|
|
|
CASH DIVIDENDS DECLARED PER COMMON SHARE |
$ |
1.30 |
|
$ |
0.925 |
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.
CUMMINS INC. AND SUBSIDIARIES |
|||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||||||||
(Unaudited) (a) |
|||||||||||
|
|
September 30, |
|
December 31, |
|||||||
In millions, except par value |
|
2012 |
|
2011 |
|||||||
ASSETS |
|
|
|
|
|
|
|||||
Current assets |
|
|
|
|
|
|
|||||
|
Cash and cash equivalents |
|
$ |
1,033 |
|
$ |
1,484 |
||||
|
Marketable securities |
|
|
239 |
|
|
277 |
||||
|
|
Total cash, cash equivalents and marketable securities |
|
|
1,272 |
|
|
1,761 |
|||
|
Accounts and notes receivable, net |
|
|
2,503 |
|
|
2,526 |
||||
|
Inventories |
|
|
2,570 |
|
|
2,141 |
||||
|
Prepaid expenses and other current assets |
|
|
770 |
|
|
663 |
||||
|
|
|
Total current assets |
|
|
7,115 |
|
|
7,091 |
||
Long-term assets |
|
|
|
|
|
|
|||||
|
Property, plant and equipment |
|
|
5,691 |
|
|
5,245 |
||||
|
|
Accumulated depreciation |
|
|
(3,134) |
|
|
(2,957) |
|||
|
|
Property, plant and equipment, net |
|
|
2,557 |
|
|
2,288 |
|||
|
Investments and advances related to equity method investees |
|
|
962 |
|
|
838 |
||||
|
Goodwill |
|
|
443 |
|
|
339 |
||||
|
Other intangible assets, net |
|
|
365 |
|
|
227 |
||||
|
Other assets |
|
|
972 |
|
|
885 |
||||
|
|
|
|
Total assets |
|
$ |
12,414 |
|
$ |
11,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|||||
Current liabilities |
|
|
|
|
|
|
|||||
|
Loans payable |
|
$ |
54 |
|
$ |
28 |
||||
|
Accounts payable (principally trade) |
|
|
1,460 |
|
|
1,546 |
||||
|
Current portion of accrued product warranty |
|
|
406 |
|
|
422 |
||||
|
Accrued compensation, benefits and retirement costs |
|
|
388 |
|
|
511 |
||||
|
Deferred revenue |
|
|
208 |
|
|
208 |
||||
|
Taxes payable (including taxes on income) |
|
|
172 |
|
|
282 |
||||
|
Other accrued expenses |
|
|
621 |
|
|
660 |
||||
|
|
|
Total current liabilities |
|
|
3,309 |
|
|
3,657 |
||
Long-term liabilities |
|
|
|
|
|
|
|||||
|
Long-term debt |
|
|
670 |
|
|
658 |
||||
|
Postretirement benefits other than pensions |
|
|
417 |
|
|
432 |
||||
|
Other liabilities and deferred revenue |
|
|
1,184 |
|
|
1,090 |
||||
|
|
|
|
Total liabilities |
|
|
5,580 |
|
|
5,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
|||||
Cummins Inc. shareholders equity |
|
|
|
|
|
|
|||||
|
Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.2 shares issued |
|
|
2,046 |
|
|
2,001 |
||||
|
Retained earnings |
|
|
7,068 |
|
|
6,038 |
||||
|
Treasury stock, at cost, 32.3 and 30.2 shares |
|
|
(1,809) |
|
|
(1,587) |
||||
|
Common stock held by employee benefits trust, at cost, 1.6 and 1.8 shares |
|
|
(19) |
|
|
(22) |
||||
|
Accumulated other comprehensive loss |
|
|
|
|
|
|
||||
|
|
Defined benefit postretirement plans |
|
|
(694) |
|
|
(724) |
|||
|
|
Other |
|
|
(114) |
|
|
(214) |
|||
|
|
Total accumulated other comprehensive loss |
|
|
(808) |
|
|
(938) |
|||
|
|
|
Total Cummins Inc. shareholders equity |
|
|
6,478 |
|
|
5,492 |
||
|
Noncontrolling interests |
|
|
356 |
|
|
339 |
||||
|
|
|
|
Total equity |
|
|
6,834 |
|
|
5,831 |
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
12,414 |
|
$ |
11,668 |
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.
CUMMINS INC. AND SUBSIDIARIES |
||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
(Unaudited) (a) |
||||||||
|
|
|
|
Nine months ended |
||||
|
|
|
|
September 30, |
|
September 25, |
||
In millions |
|
2012 |
|
2011 |
||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
||
|
Consolidated net income |
|
$ |
1,340 |
|
$ |
1,374 |
|
|
Adjustments to reconcile consolidated net income to net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
262 |
|
|
243 |
|
|
Gain on sale of businesses |
|
|
(6) |
|
|
(68) |
|
|
Gain on fair value adjustment for consolidated investee |
|
|
(7) |
|
|
- |
|
|
Deferred income taxes |
|
|
91 |
|
|
148 |
|
|
Equity in income of investees, net of dividends |
|
|
(51) |
|
|
7 |
|
|
Pension contributions in excess of expense |
|
|
(74) |
|
|
(71) |
|
|
Other post-retirement benefits payments in excess of expense |
|
|
(16) |
|
|
(10) |
|
|
Stock-based compensation expense |
|
|
29 |
|
|
28 |
|
|
Excess tax benefits on stock-based awards |
|
|
(12) |
|
|
(4) |
|
|
Translation and hedging activities |
|
|
16 |
|
|
(14) |
|
Changes in current assets and liabilities, net of acquisitions and divestitures: |
|
|
|
|
|
|
|
|
|
Accounts and notes receivable |
|
|
66 |
|
|
(469) |
|
|
Inventories |
|
|
(367) |
|
|
(367) |
|
|
Other current assets |
|
|
(54) |
|
|
(5) |
|
|
Accounts payable |
|
|
(145) |
|
|
317 |
|
|
Accrued expenses |
|
|
(398) |
|
|
173 |
|
Changes in other liabilities and deferred revenue |
|
|
154 |
|
|
93 |
|
|
Other, net |
|
|
(41) |
|
|
(7) |
|
Net cash provided by operating activities |
|
|
787 |
|
|
1,368 |
||
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
||
|
Capital expenditures |
|
|
(424) |
|
|
(377) |
|
|
Investments in internal use software |
|
|
(62) |
|
|
(31) |
|
|
Investments in and advances to equity investees |
|
|
(92) |
|
|
(104) |
|
|
Proceeds from sale of business, net of cash sold |
|
|
10 |
|
|
111 |
|
|
Acquisition of businesses, net of cash acquired |
|
|
(215) |
|
|
- |
|
|
Investments in marketable securitiesacquisitions |
|
|
(433) |
|
|
(538) |
|
|
Investments in marketable securitiesliquidations |
|
|
475 |
|
|
572 |
|
|
Cash flows from derivatives not designated as hedges |
|
|
13 |
|
|
4 |
|
|
Other, net |
|
|
9 |
|
|
7 |
|
Net cash used in investing activities |
|
|
(719) |
|
|
(356) |
||
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
||
|
Proceeds from borrowings |
|
|
64 |
|
|
96 |
|
|
Payments on borrowings and capital lease obligations |
|
|
(120) |
|
|
(174) |
|
|
Net borrowings under short-term credit agreements |
|
|
5 |
|
|
(5) |
|
|
Distributions to noncontrolling interests |
|
|
(50) |
|
|
(50) |
|
|
Dividend payments on common stock |
|
|
(246) |
|
|
(178) |
|
|
Repurchases of common stock |
|
|
(231) |
|
|
(546) |
|
|
Excess tax benefits on stock-based awards |
|
|
12 |
|
|
4 |
|
|
Other, net |
|
|
16 |
|
|
13 |
|
Net cash used in financing activities |
|
|
(550) |
|
|
(840) |
||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
|
|
31 |
|
|
(30) |
||
Net increase (decrease) in cash and cash equivalents |
|
|
(451) |
|
|
142 |
||
Cash and cash equivalents at beginning of year |
|
|
1,484 |
|
|
1,023 |
||
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
|
$ |
1,033 |
|
$ |
1,165 |
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.
CUMMINS INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
|
|
Engine |
|
Components |
|
Power Generation |
|
Distribution |
|
Non-segment Items(1) |
|
Total |
||||||||
|
In millions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales |
|
$ |
2,131 |
|
$ |
663 |
|
$ |
526 |
|
$ |
798 |
|
$ |
- |
|
$ |
4,118 |
|
|
Intersegment sales |
|
396 |
|
275 |
|
288 |
|
3 |
|
(962) |
|
|
- |
||||||
|
|
Total sales |
|
|
2,527 |
|
|
938 |
|
|
814 |
|
|
801 |
|
|
(962) |
|
|
4,118 |
|
Depreciation and amortization(2) |
|
|
48 |
|
|
21 |
|
|
12 |
|
|
8 |
|
|
- |
|
|
89 |
|
|
Research, development and engineering expenses |
|
|
115 |
|
|
51 |
|
|
19 |
|
|
1 |
|
|
- |
|
|
186 |
|
|
Equity, royalty and interest income from investees |
|
|
25 |
|
|
7 |
|
|
12 |
|
|
50 |
|
|
- |
|
|
94 |
|
|
Interest income |
|
|
2 |
|
|
1 |
|
|
2 |
|
|
- |
|
|
- |
|
|
5 |
|
|
Segment EBIT |
|
|
239 |
|
|
89 |
|
|
73 |
|
|
99 |
|
|
(4) |
|
|
496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended July 1, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales |
|
$ |
2,381 |
|
$ |
710 |
|
$ |
572 |
|
$ |
789 |
|
$ |
- |
|
$ |
4,452 |
|
|
Intersegment sales |
|
460 |
|
|
326 |
|
|
337 |
|
|
5 |
|
|
(1,128) |
|
|
- |
||
|
|
Total sales |
|
|
2,841 |
|
|
1,036 |
|
|
909 |
|
|
794 |
|
|
(1,128) |
|
|
4,452 |
|
Depreciation and amortization(2) |
|
|
47 |
|
|
19 |
|
|
11 |
|
|
8 |
|
|
- |
|
|
85 |
|
|
Research, development and engineering expenses |
|
|
115 |
|
|
51 |
|
|
19 |
|
|
2 |
|
|
- |
|
|
187 |
|
|
Equity, royalty and interest income from investees |
|
|
37 |
|
|
8 |
|
|
10 |
|
|
49 |
|
|
- |
|
|
104 |
|
|
Interest income |
|
|
3 |
|
|
1 |
|
|
3 |
|
|
- |
|
|
- |
|
|
7 |
|
|
Segment EBIT |
|
|
376 |
|
|
116 |
|
|
94 |
|
|
92 |
|
|
(9) |
|
|
669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 25, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales |
|
$ |
2,539 |
|
$ |
704 |
|
$ |
604 |
|
$ |
779 |
|
$ |
- |
|
$ |
4,626 |
|
|
Intersegment sales |
|
416 |
|
311 |
|
270 |
|
4 |
|
(1,001) |
|
|
- |
||||||
|
|
Total sales |
|
|
2,955 |
|
|
1,015 |
|
|
874 |
|
|
783 |
|
|
(1,001) |
|
|
4,626 |
|
Depreciation and amortization(2) |
|
|
46 |
|
|
19 |
|
|
11 |
|
|
6 |
|
|
- |
|
|
82 |
|
|
Research, development and engineering expenses |
|
|
103 |
|
|
46 |
|
|
14 |
|
|
1 |
|
|
- |
|
|
164 |
|
|
Equity, royalty and interest income from investees |
|
|
35 |
|
|
7 |
|
|
16 |
|
|
44 |
|
|
- |
|
|
102 |
|
|
Interest income |
|
|
5 |
|
|
1 |
|
|
2 |
|
|
1 |
|
|
- |
|
|
9 |
|
|
Segment EBIT |
|
|
349 |
|
|
113 |
|
|
92 |
|
|
104 |
|
|
(18) |
|
|
640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales |
|
$ |
6,924 |
|
$ |
2,147 |
|
$ |
1,614 |
|
$ |
2,357 |
|
$ |
- |
|
$ |
13,042 |
|
|
Intersegment sales |
|
1,303 |
|
926 |
|
889 |
|
13 |
|
(3,131) |
|
|
- |
||||||
|
|
Total sales |
|
|
8,227 |
|
|
3,073 |
|
|
2,503 |
|
|
2,370 |
|
|
(3,131) |
|
|
13,042 |
|
Depreciation and amortization(2) |
|
|
142 |
|
|
59 |
|
|
34 |
|
|
23 |
|
|
- |
|
|
258 |
|
|
Research, development and engineering expenses |
|
|
341 |
|
|
153 |
|
|
56 |
|
|
4 |
|
|
- |
|
|
554 |
|
|
Equity, royalty and interest income from investees |
|
|
100 |
|
|
23 |
|
|
32 |
|
|
147 |
|
|
- |
|
|
302 |
|
|
Interest income |
|
|
9 |
|
|
3 |
|
|
7 |
|
|
1 |
|
|
- |
|
|
20 |
|
|
Segment EBIT |
|
|
996 |
|
|
348 |
|
|
243 |
|
|
285 |
|
|
(49) |
|
|
1,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 25, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales |
|
$ |
7,021 |
|
$ |
2,105 |
|
$ |
1,810 |
|
$ |
2,191 |
|
$ |
- |
|
$ |
13,127 |
|
|
Intersegment sales |
|
1,225 |
|
866 |
|
768 |
|
19 |
|
(2,878) |
|
|
- |
||||||
|
|
Total sales |
|
|
8,246 |
|
|
2,971 |
|
|
2,578 |
|
|
2,210 |
|
|
(2,878) |
|
|
13,127 |
|
Depreciation and amortization(2) |
|
|
135 |
|
|
55 |
|
|
32 |
|
|
17 |
|
|
- |
|
|
239 |
|
|
Research, development and engineering expenses |
|
|
285 |
|
|
126 |
|
|
37 |
|
|
2 |
|
|
- |
|
|
450 |
|
|
Equity, royalty and interest income from investees |
|
|
126 |
|
|
24 |
|
|
37 |
|
|
128 |
|
|
- |
|
|
315 |
|
|
Interest income |
|
|
14 |
|
|
3 |
|
|
6 |
|
|
2 |
|
|
- |
|
|
25 |
|
|
Segment EBIT |
|
|
1,016 |
|
|
338 |
|
|
286 |
|
|
299 |
|
|
8 |
|
|
1,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended September 30, 2012 and September 25, 2011. The three months ended July 1, 2012, and nine months ended September 30, 2012, include a $6 million gain ($4 million after-tax) related to adjustments from our 2011 divestitures. The nine months ended September 25, 2011, include a $68 million gain ($37 million after-tax) related to the sale of certain assets and liabilities of our exhaust business from the Components segment. 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. |
|||||||||||||||||||
(2) |
Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount that is included in the Condensed Consolidated Statements of Income as Interest expense. |
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 |
|
Nine months ended |
|||||||||||
|
|
|
September 30, |
|
July 1, |
|
September 25, |
|
September 30, |
|
September 25, |
|||||
In millions |
|
2012 |
|
2012 |
|
2011 |
|
2012 |
|
2011 |
||||||
Segment EBIT |
|
$ |
496 |
|
$ |
669 |
|
$ |
640 |
|
$ |
1,823 |
|
$ |
1,947 |
|
Less: Interest expense |
|
|
9 |
|
|
8 |
|
|
11 |
|
|
25 |
|
|
34 |
|
|
Income before income taxes |
|
$ |
487 |
|
$ |
661 |
|
$ |
629 |
|
$ |
1,798 |
|
$ |
1,913 |
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 |
|
Nine months ended |
|||||||||||
|
|
|
|
September 30, |
|
July 1, |
|
September 25, |
|
September 30, |
|
September 25, |
|||||
In millions |
|
2012 |
|
2012 |
|
2011 |
|
2012 |
|
2011 |
|||||||
Distribution Entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
North American distributors |
|
$ |
37 |
|
$ |
38 |
|
$ |
35 |
|
$ |
115 |
|
$ |
100 |
||
Komatsu Cummins Chile, Ltda. |
|
|
9 |
|
|
6 |
|
|
6 |
|
|
20 |
|
|
16 |
||
All other distributors |
|
|
- |
|
|
2 |
|
|
1 |
|
|
3 |
|
|
3 |
||
Manufacturing Entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Chongqing Cummins Engine Company, Ltd. |
|
|
14 |
|
|
17 |
|
|
20 |
|
|
49 |
|
|
51 |
||
Dongfeng Cummins Engine Company, Ltd. |
|
|
9 |
|
|
17 |
|
|
15 |
|
|
42 |
|
|
64 |
||
Shanghai Fleetguard Filter Co., Ltd. |
|
|
3 |
|
|
4 |
|
|
4 |
|
|
10 |
|
|
12 |
||
Beijing Foton Cummins Engine Co., Ltd. |
|
|
3 |
|
|
2 |
|
|
(2) |
|
|
3 |
|
|
(5) |
||
Cummins Westport, Inc. |
|
|
2 |
|
|
4 |
|
|
4 |
|
|
11 |
|
|
8 |
||
Valvoline Cummins, Ltd. |
|
|
2 |
|
|
2 |
|
|
2 |
|
|
6 |
|
|
6 |
||
Tata Cummins, Ltd. |
|
|
- |
|
|
3 |
|
|
2 |
|
|
7 |
|
|
9 |
||
Komatsu manufacturing alliances |
|
|
(1) |
|
|
1 |
|
|
- |
|
|
(1) |
|
|
1 |
||
All other manufacturers |
|
|
7 |
|
|
(1) |
|
|
7 |
|
|
7 |
|
|
19 |
||
|
Cummins share of net income |
|
|
85 |
|
|
95 |
|
|
94 |
|
|
272 |
|
|
284 |
|
Royalty and interest income |
|
|
9 |
|
|
9 |
|
|
8 |
|
|
30 |
|
|
31 |
||
|
|
Equity, royalty and interest income from investees |
|
$ |
94 |
|
$ |
104 |
|
$ |
102 |
|
$ |
302 |
|
$ |
315 |
NOTE 2. INCOME TAXES
Our effective tax
rate for the year is expected to approximate 26.5 percent, absent any discrete
period activity. Our tax rate is generally less than the 35 percent U.S.
income tax rate primarily due to lower tax rates on foreign income. The tax
rates for the three and nine month periods ended September 30, 2012, were 24.1
percent and 25.5 percent, respectively. These tax rates include a $16 million
tax benefit for third quarter discrete tax adjustments, $6 million of which
related to a dividend distribution of accumulated foreign income earned in
prior years. These discrete tax adjustments also included a discrete tax
benefit of $13 million for prior year tax return true-up adjustments and a
discrete tax charge of $3 million related to the third quarter enactment of
U.K. tax law changes.
The effective tax rate for the three month period ended July 1, 2012, was 25.1
percent and with less than the 35 percent U.S. income tax rate primarily due to
lower tax rates on foreign income.
The tax rates for the three and nine month periods ended September 25, 2011, were 25.0 percent and 28.2 percent, respectively, and included a net discrete income tax benefit of $29 million (net of additional reserves for uncertain tax positions of $39 million) related to prior year refund claims filed for additional research tax credits, additional foreign income and foreign tax credits, as well as other adjustments. This benefit also included discrete income tax charges of $2 million for prior year tax return true-up adjustments and $3 million related to the third quarter enactment of U.K. tax law changes in the three and nine month periods ended September 25, 2011. Additionally, the tax rate for the nine month period included a second quarter discrete income tax charge of $4 million related to the enactment of state tax law changes in Indiana. The decrease in the 2012 effective tax rates versus the comparable periods in 2011 is due primarily to our assertion that income earned after 2011 by our China operations is permanently reinvested, as well as certain tax planning strategies implemented in our U.K. subsidiaries.
CUMMINS INC. AND SUBSIDIARIES
SELECTED FOOTNOTE DATA
(Unaudited)
NOTE 3. ACQUISITIONS
In April 2012, we reached an agreement to acquire the doser technology and business assets from Hilite Germany GmbH (Hilite) in a cash transaction. Dosers are products that enable compliance with emission standards in certain aftertreatment systems and complement our current product offerings. The transaction was approved by German regulators in June and closed on July 18, 2012. The purchase price was $176 million and is summarized below. There was no contingent consideration associated with this transaction. During the first nine months of 2012 we expensed approximately $4 million of acquisition related costs.
The acquisition of Hilite was accounted for as a business combination, with the results of the acquired entity and the goodwill included in the Components operating segment in the third quarter of 2012. The majority of the purchase price was allocated to technology and customer related intangible assets and goodwill, most of which is expected to be fully deductible for tax purposes. We expect the Hilite acquisition to strengthen our aftertreatment product offerings. This acquisition enhances our technical capabilities and keeps us in a strong position to meet the needs of current customers and grow into new markets, especially as an increasing number of regions around the world adopt tougher emission standards.
Intangible assets by asset class, including weighted average amortization life, are as follows:
Dollars in millions |
|
Purchase price allocation |
|
Weighted average amortization life in years |
||
Technology |
|
$ |
52 |
|
10.6 |
|
Customer |
|
|
23 |
|
4.5 |
|
License arrangements |
|
|
8 |
|
6.0 |
|
|
Total intangible assets |
|
$ |
83 |
|
8.5 |
The purchase price was allocated as follows:
In millions |
|
|
|
|
Inventory |
|
$ |
5 |
|
Fixed assets |
|
|
5 |
|
Intangible assets |
|
|
83 |
|
Goodwill |
|
|
91 |
|
Liabilities |
|
|
(8) |
|
|
Total purchase price |
|
$ |
176 |
Net sales for Hilite were $77 million for the 12 months ended December 31, 2011.
In July 2012, we acquired an additional 45 percent interest in Cummins Central Power from the former principal for consideration of approximately $20 million. The acquisition was accounted for as a business combination, with the results of the acquired entity included in the Distribution operating segment in the third quarter of 2012. Distribution segment results also included a $7 million gain, as we were required to re-measure our pre-existing 35 percent ownership interest in Cummins Central Power to fair value in accordance with GAAP. Net sales for Cummins Central Power were $209 million for the 12 months ended December 31, 2011.
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 periods presented as it illustrates our operating performance without regard to special items including the gain related to the sale of certain assets and liabilities and discrete income tax items. This measure is not in accordance with, or an alternative for, GAAP 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 three month periods ended September 30, 2012, July 1, 2012 and September 25, 2011.
|
|
Three months ended |
||||||||||||||||
|
|
September 30, 2012 |
|
July 1, 2012 |
|
September 25, 2011 |
||||||||||||
In millions |
Net Income |
|
Diluted EPS |
|
Net Income |
|
Diluted EPS |
|
Net Income |
|
Diluted EPS |
|||||||
Net income attributable to Cummins Inc. |
$ |
352 |
|
$ |
1.86 |
|
$ |
469 |
|
$ |
2.47 |
|
$ |
452 |
|
$ |
2.35 |
|
Subtract |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of businesses(1) |
|
- |
|
|
- |
|
|
4 |
|
|
0.02 |