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: 
February 20, 2013

 

  CUMMINS INC.
(Exact name of registrant as specified in its charter)

Indiana
(State or other Jurisdiction of
Incorporation)

1-4949
(Commission File Number)

35-0257090
(I.R.S. Employer Identification
 No.)


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.

 

Cummins Inc. and its consolidated subsidiaries are hereinafter sometimes referred to as “we,” “our,” “us” or “the Company.”

 

The Company’s fourth quarter and full year 2012 net income attributable to Cummins Inc. and diluted per share results are now each $12 million and $0.07 lower than reported on February 6, 2013.  A $20 million, net adjustment is reflected in “Other operating income (expense), net” on the Condensed Consolidated Statements of Income and in “Accrued expenses” on the Condensed Consolidated Balance Sheets.  The adjustment did not impact the results of the Company’s operating segments or the Condensed Consolidated Statements of Cash Flows.  In addition, income tax expense decreased $8 million for both periods.  These adjustments have been incorporated into our fourth quarter and full year results and will be reflected in our 2012 Form 10-K, which we will file later today.  For more information, a copy of the revised financial statements is attached hereto as Exhibit 99 and is furnished herewith.

 

Item 9.01. Financial Statements and Exhibits.

 

 

(d)

The following exhibit is furnished herewith:
 

99-Press Release dated February 20, 2013


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: February 20, 2013

 

CUMMINS INC.

 


 /s/ Marsha L. Hunt

______________________________

Marsha L. Hunt
Vice President - Corporate Controller
(Principal Accounting Officer)

 

 

 


 

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 amounts

 

2012

 

2012

 

2011

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 administrative expenses

 

 

 482

 

 

 456

 

 

 496

 

Research, development and engineering expenses

 

 

 174

 

 

 186

 

 

 179

 

Equity, royalty and interest income from investees  (Note 1)

 

 

 82

 

 

 94

 

 

 101

 

Gain on sale of businesses

 

 

 - 

 

 

 - 

 

 

 53

 

Other operating income (expense), net

 

 

 (19)

 

 

 (1)

 

 

 25

OPERATING INCOME

 

 

 465

 

 

 493

 

 

 745

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 5

 

 

 5

 

 

 9

 

Interest expense

 

 

 7

 

 

 9

 

 

 10

 

Other income (expense), net

 

 

 10

 

 

 (2)

 

 

 14

INCOME BEFORE INCOME TAXES

 

 

 473

 

 

 487

 

 

 758

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense  (Note 3)

 

 

 75

 

 

 117

 

 

 186

CONSOLIDATED NET INCOME

 

 

 398

 

 

 370

 

 

 572

 

 

 

 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests

 

 

 29

 

 

 18

 

 

 24

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

 369

 

$

 352

 

$

 548

 

 

 

 

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE

 

 

 

 

 

 

 

 

 

 

TO CUMMINS INC.

 

 

 

 

 

 

 

 

 

 

Basic

 

$

 1.96

 

$

 1.87

 

$

 2.87

 

Diluted

 

$

 1.95

 

$

 1.86

 

$

 2.86

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSANDING

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 188.4

 

 

 188.6

 

 

 190.9

 

Diluted

 

 

 188.8

 

 

 189.0

 

 

 191.5

 

 

 

 

 

 

 

 

 

 

 

CASH DIVIDENDS DECLARED PER COMMON SHARE

 

$

 0.50

 

$

 0.50

 

$

 0.40

 

(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 investees  (Note 1)

 

 384

 

 

 416

 

Gain on sale of businesses

 

 6

 

 

 121

 

Other operating income, net

 

 (16)

 

 

 21

OPERATING INCOME

 

 2,254

 

 

 2,681

 

 

 

 

 

 

 

 

Interest income

 

 25

 

 

 34

 

Interest expense

 

 32

 

 

 44

 

Other income, net

 

 24

 

 

 - 

INCOME BEFORE INCOME TAXES

 

 2,271

 

 

 2,671

 

 

 

 

 

 

 

 

Income tax expense  (Note 3)

 

 533

 

 

 725

CONSOLIDATED NET INCOME

 

 1,738

 

 

 1,946

 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests

 

 93

 

 

 98

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

$

 1,645

 

$

 1,848

 

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE

 

 

 

 

 

 

TO CUMMINS INC.

 

 

 

 

 

 

Basic

$

 8.69

 

$

 9.58

 

Diluted

$

 8.67

 

$

 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 marketable securities

 

 1,616

 

 

 1,761

 

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 method investees

 

 897

 

 

 838

 

Goodwill and other intangibles, net

 

 814

 

 

 566

 

Other assets

 

 946

 

 

 885

 

 

 

 

Total assets

$

 12,548

 

$

 11,668

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Loans payable

$

 16

 

$

 28

 

Accounts payable (principally trade)

 

 1,339

 

 

 1,546

 

Accrued expenses

 

 1,781

 

 

 2,083

 

 

 

Total current liabilities

 

 3,136

 

 

 3,657

Long-term liabilities

 

 

 

 

 

 

Long-term debt

 

 698

 

 

 658

 

Other liabilities

 

 1,740

 

 

 1,522

 

 

 

 

Total liabilities

 

 5,574

 

 

 5,837

 

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

Cummins Inc. shareholders’ equity

 

 

 

 

 

 

Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.2 shares issued

 

 2,058

 

 

 2,001

 

Retained earnings

 

 7,343

 

 

 6,038

 

Treasury stock, at cost, 32.6 and 30.2 shares

 

 (1,830)

 

 

 (1,587)

 

Common stock held by employee benefits trust, at cost, 1.5 and 1.8 shares

 

 (18)

 

 

 (22)

 

Accumulated other comprehensive loss

 

 (950)

 

 

 (938)

 

 

 

Total Cummins Inc. shareholders’ equity

 

 6,603

 

 

 5,492

Noncontrolling interests

 

 371

 

 

 339

 

 

 

 

Total equity

 

 6,974

 

 

 5,831

 

 

 

 

 

Total liabilities and equity

$

 12,548

 

$

 11,668

 

(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 and equipment

 

 11

 

 

 8

 

Investments in and advances to equity investees

 

 (70)

 

 

 (81)

 

Acquisition of businesses, net of cash acquired

 

 (215)

 

 

 - 

 

Proceeds from sale of businesses, net of cash sold

 

 10

 

 

 199

 

Investments in marketable securities-acquisitions

 

 (561)

 

 

 (729)

 

Investments in marketable securities-liquidations

 

 585

 

 

 750

 

Proceeds from sale of equity investment

 

 23

 

 

 - 

 

Cash flows from derivatives not designated as hedges

 

 12

 

 

 (18)

 

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 obligations

 

 (145)

 

 

 (237)

 

Net borrowings under short-term credit agreements

 

 11

 

 

 6

 

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 EQUIVALENTS

 

 29

 

 

 (35)

Net increase (decrease) in cash and cash equivalents

 

 (115)

 

 

 461

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 Generation

 

Distribution

 

Non-segment Items(1)

 

Total

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

Three months ended December 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

External sales

 

$

 2,177

 

$

 662

 

$

 549

 

$

 904

 

$

 - 

 

$

 4,292

Intersegment sales

 

 

 329

 

 

 277

 

 

 216

 

 

 3

 

 

 (825)

 

 

 - 

 

Total sales

 

 

 2,506

 

 

 939

 

 

 765

 

 

 907

 

 

 (825)

 

 

 4,292

Depreciation and amortization(2)

 

 

 50

 

 

 23

 

 

 13

 

 

 11

 

 

 - 

 

 

 97

Research, development and engineering expenses

 

 

 92

 

 

 60

 

 

 20

 

 

 2

 

 

 - 

 

 

 174

Equity, royalty and interest income from investees

 

 

 27

 

 

 6

 

 

 8

 

 

 41

 

 

 - 

 

 

 82

Interest income

 

 

 2

 

 

 - 

 

 

 2

 

 

 1

 

 

 - 

 

 

 5

Segment EBIT

 

 

 252

 

 

 78

 

 

 42

 

 

 84

 

 

 24

 

 

 480

Add back restructuring charges(3)

 

 

 20

 

 

 6

 

 

 12

 

 

 14

 

 

 - 

 

 

 52

 

Segment EBIT excluding restructuring charges

 

 

 272

 

 

 84

 

 

 54

 

 

 98

 

 

 24

 

 

 532

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

Segment EBIT as a percentage of total sales

 

 

10.1%

 

 

8.3%

 

 

5.5%

 

 

9.3%

 

 

  

 

 

11.2%

Segment EBIT excluding restructuring charges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

as a percentage of total sales

 

 

10.9%

 

 

8.9%

 

 

7.1%

 

 

10.8%

 

 

  

 

 

12.4%

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

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

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

Segment EBIT as a percentage of total sales

 

 

9.5%

 

 

9.5%

 

 

9.0%

 

 

12.4%

 

 

  

 

 

12.0%

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

Three months ended December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

External sales

 

$

 2,628

 

$

 781

 

$

 682

 

$

 830

 

$

 - 

 

$

 4,921

Intersegment sales

 

 

 433

 

 

 311

 

 

 238

 

 

 4

 

 

 (986)

 

 

 - 

 

Total sales

 

 

 3,061

 

 

 1,092

 

 

 920

 

 

 834

 

 

 (986)

 

 

 4,921

Depreciation and amortization (2)

 

 

 46

 

 

 18

 

 

 10

 

 

 8

 

 

 - 

 

 

 82

Research, development and engineering expenses

 

 

 112

 

 

 49

 

 

 17

 

 

 1

 

 

 - 

 

 

 179

Equity, royalty and interest income from investees

 

 

 40

 

 

 7

 

 

 10

 

 

 44

 

 

 - 

 

 

 101

Interest income

 

 

 4

 

 

 2

 

 

 2

 

 

 1

 

 

 - 

 

 

 9

Segment EBIT

 

 

 368

 

 

 132

 

 

 87

 

 

 87

 

 

 94

 

 

 768

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

Segment EBIT as a percentage of total sales

 

 

12.0%

 

 

12.1%

 

 

9.5%

 

 

10.4%

 

 

  

 

 

15.6%

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

(1)

Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses.  The three months ended December 31, 2012 includes a $20 million reserve ($12 million after-tax) related to legal matters.  There were no significant unallocated corporate expenses for the three months ended September 30, 2012.  The three months ended December 31, 2011 includes a $53 million gain ($33 million after-tax) recorded for the sale of 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.

(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."

(3)

See Note 2, "RESTRUCTURING CHARGES," for more details.


 

CUMMINS INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

In millions

 

Engine

 

Components

 

Power Generation

 

Distribution

 

Non-segment Items(1)

 

Total

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

For the year ended December 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

External sales

 

$

 9,101

 

$

 2,809

 

$

 2,163

 

$

 3,261

 

$

 - 

 

$

 17,334

Intersegment sales

 

 

 1,632

 

 

 1,203

 

 

 1,105

 

 

 16

 

 

 (3,956)

 

 

 - 

 

Total sales

 

 

 10,733

 

 

 4,012

 

 

 3,268

 

 

 3,277

 

 

 (3,956)

 

 

 17,334

Depreciation and amortization(2)

 

 

 192

 

 

 82

 

 

 47

 

 

 34

 

 

 - 

 

 

 355

Research, development and engineering expenses

 

 

 433

 

 

 213

 

 

 76

 

 

 6

 

 

 - 

 

 

 728

Equity, royalty and interest income from investees

 

 

 127

 

 

 29

 

 

 40

 

 

 188

 

 

 - 

 

 

 384

Interest income

 

 

 11

 

 

 3

 

 

 9

 

 

 2

 

 

 - 

 

 

 25

Segment EBIT

 

 

 1,248

 

 

 426

 

 

 285

 

 

 369

 

 

 (25)

 

 

 2,303

Add back restructuring charges(3)

 

 

 20

 

 

 6

 

 

 12

 

 

 14

 

 

 - 

 

 

 52

 

Segment EBIT excluding restructuring charges

 

 

 1,268

 

 

 432

 

 

 297

 

 

 383

 

 

 (25)

 

 

 2,355

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

Segment EBIT as a percentage of total sales

 

 

11.6%

 

 

10.6%

 

 

8.7%

 

 

11.3%

 

 

  

 

 

13.3%

Segment EBIT excluding restructuring charges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

as a percentage of total sales

 

 

11.8%

 

 

10.8%

 

 

9.1%

 

 

11.7%

 

 

  

 

 

13.6%

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

For the year ended December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

External sales

 

$

 9,649

 

$

 2,886

 

$

 2,492

 

$

 3,021

 

$

 - 

 

$

 18,048

Intersegment sales

 

 

 1,658

 

 

 1,177

 

 

 1,006

 

 

 23

 

 

 (3,864)

 

 

 - 

 

Total sales

 

 

 11,307

 

 

 4,063

 

 

 3,498

 

 

 3,044

 

 

 (3,864)

 

 

 18,048

Depreciation and amortization (2)

 

 

 181

 

 

 73

 

 

 42

 

 

 25

 

 

 - 

 

 

 321

Research, development and engineering expenses

 

 

 397

 

 

 175

 

 

 54

 

 

 3

 

 

 - 

 

 

 629

Equity, royalty and interest income from investees

 

 

 166

 

 

 31

 

 

 47

 

 

 172

 

 

 - 

 

 

 416

Interest income

 

 

 18

 

 

 5

 

 

 8

 

 

 3

 

 

 - 

 

 

 34

Segment EBIT

 

 

 1,384

 

 

 470

 

 

 373

 

 

 386

 

 

 102

 

 

 2,715

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

Segment EBIT as a percentage of total sales

 

 

12.2%

 

 

11.6%

 

 

10.7%

 

 

12.7%

 

 

  

 

 

15.0%

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

(1)

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 and a $20 million reserve ($12 million after-tax) related to legal matters.  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 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.

(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."

(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 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

In millions

 

2012

 

2012

 

2011

 

2012

 

2011

Segment EBIT excluding restructuring charges

 

$

 532

 

$

 496

 

$

 768

 

$

 2,355

 

$

 2,715

 

Add:  Restructuring charges

 

 

 (52)

 

 

 - 

 

 

 - 

 

 

 (52)

 

 

 - 

Segment EBIT

 

 

 480

 

 

 496

 

 

 768

 

 

 2,303

 

 

 2,715

 

Less:  Interest expense

 

 

 7

 

 

 9

 

 

 10

 

 

 32

 

 

 44

 

 

Income before income taxes

 

$

 473

 

$

 487

 

$

 758

 

$

 2,271

 

$

 2,671


 

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 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

In millions

 

2012

 

2012

 

2011

 

2012

 

2011

Distribution Entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North American distributors

 

$

 32

 

$

 37

 

$

 34

 

$

 147

 

$

 134

Komatsu Cummins Chile, Ltda.

 

 

 6

 

 

 9

 

 

 6

 

 

 26

 

 

 22

All other distributors

 

 

 1

 

 

 - 

 

 

 1

 

 

 4

 

 

 4

Manufacturing Entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chongqing Cummins Engine Company, Ltd.

 

 

 12

 

 

 14

 

 

 17

 

 

 61

 

 

 68

Dongfeng Cummins Engine Company, Ltd.

 

 

 10

 

 

 9

 

 

 16

 

 

 52

 

 

 80

Tata Cummins, Ltd.

 

 

 4

 

 

 - 

 

 

 5

 

 

 11

 

 

 14

Cummins Westport, Inc.

 

 

 3

 

 

 2

 

 

 6

 

 

 14

 

 

 14

Shanghai Fleetguard Filter Co., Ltd.

 

 

 3

 

 

 3

 

 

 3

 

 

 13

 

 

 15

Valvoline Cummins, Ltd.

 

 

 2

 

 

 2

 

 

 1

 

 

 8

 

 

 7

Beijing Foton Cummins Engine Co., Ltd.

 

 

 2

 

 

 3

 

 

 (2)

 

 

 5

 

 

 (7)

Komatsu manufacturing alliances

 

 

 (2)

 

 

 (1)

 

 

 2

 

 

 (3)

 

 

 3

All other manufacturers

 

 

 2

 

 

 7

 

 

 2

 

 

 9

 

 

 21

 

Cummins share of net income

 

 

 75

 

 

 85

 

 

 91

 

 

 347

 

 

 375

Royalty and interest income

 

 

 7

 

 

 9

 

 

 10

 

 

 37

 

 

 41

 

 

Equity, royalty and interest income from investees

 

$

 82

 

$

 94

 

$

 101

 

$

 384

 

$

 416

 

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 a $1 million charge for lease terminations and a $2 million charge for asset impairments and other non-cash charges.  During 2012, we recorded restructuring and other charges of $52 million ($35 million after-tax).  These restructuring actions included:

 

 

 

 

 

Year ended

In millions

 

December 31, 2012

Workforce reductions

 

$

 49

Exit activities

 

 

 1

Other

 

 

 2

 

Restructuring and other 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

 

Restructuring and other 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 16.1 percent and 23.5 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)