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: 
July 30, 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.

 

On July 30, 2013, Cummins Inc. (“Cummins,” “the Company,” “the registrant,” “we,” “our,” or “us”) issued the attached press release reporting its financial results for the second quarter of 2013.  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 July 30, 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: July 30, 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

 

 

 

June 30,

 

March 31,

 

July 1,

In millions, except per share amounts

 

2013

 

2013

 

2012

NET SALES

 

$

 4,525

 

$

 3,922

 

$

 4,452

 

Cost of sales

 

 

 3,372

 

 

 2,965

 

 

 3,242

GROSS MARGIN

 

 

 1,153

 

 

 957

 

 

 1,210

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES AND INCOME

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

 484

 

 

 444

 

 

 487

 

Research, development and engineering expenses

 

 

 177

 

 

 182

 

 

 187

 

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

 

 

 108

 

 

 82

 

 

 104

 

Other operating income (expense), net

 

 

 10

 

 

 1

 

 

 8

OPERATING INCOME

 

 

 610

 

 

 414

 

 

 648

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 10

 

 

 5

 

 

 7

 

Interest expense

 

 

 8

 

 

 6

 

 

 8

 

Other income (expense), net

 

 

 1

 

 

 18

 

 

 14

INCOME BEFORE INCOME TAXES

 

 

 613

 

 

 431

 

 

 661

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense  (Note 2)

 

 

 172

 

 

 119

 

 

 166

CONSOLIDATED NET INCOME

 

 

 441

 

 

 312

 

 

 495

 

 

 

 

 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests

 

 

 27

 

 

 30

 

 

 26

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

 414

 

$

 282

 

$

 469

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE

 

 

 

 

 

 

 

 

 

 

TO CUMMINS INC.

 

 

 

 

 

 

 

 

 

 

Basic

 

$

 2.20

 

$

 1.50

 

$

 2.47

 

Diluted

 

$

 2.20

 

$

 1.49

 

$

 2.47

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 187.8

 

 

 188.4

 

 

 189.8

 

Diluted

 

 

 188.2

 

 

 188.8

 

 

 190.1

 

 

 

 

 

 

 

 

 

 

 

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.


 

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited) (a)

 

 

 

 

 

 

 

 

 

Six months ended

In millions, except per share amounts

June 30, 2013

 

July 1, 2012

NET SALES

$

 8,447

 

$

 8,924

 

Cost of sales

 

 6,337

 

 

 6,516

GROSS MARGIN

 

 2,110

 

 

 2,408

 

 

 

 

 

 

 

OPERATING EXPENSES AND INCOME

 

 

 

 

 

 

Selling, general and administrative expenses

 

 928

 

 

 962

 

Research, development and engineering expenses

 

 359

 

 

 368

 

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

 

 190

 

 

 208

 

Other operating income (expense), net

 

 11

 

 

 10

OPERATING INCOME

 

 1,024

 

 

 1,296

 

 

 

 

 

 

 

 

Interest income

 

 15

 

 

 15

 

Interest expense

 

 14

 

 

 16

 

Other income (expense), net

 

 19

 

 

 16

INCOME BEFORE INCOME TAXES

 

 1,044

 

 

 1,311

 

 

 

 

 

 

 

 

Income tax expense  (Note 2)

 

 291

 

 

 341

CONSOLIDATED NET INCOME

 

 753

 

 

 970

 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests

 

 57

 

 

 46

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

$

 696

 

$

 924

 

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE

 

 

 

 

 

 

TO CUMMINS INC.

 

 

 

 

 

 

Basic

$

 3.70

 

$

 4.86

 

Diluted

$

 3.69

 

$

 4.85

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

Basic

 

 188.1

 

 

 190.1

 

Diluted

 

 188.5

 

 

 190.5

 

 

 

 

 

 

 

CASH DIVIDENDS DECLARED PER COMMON SHARE

$

 1.00

 

$

 0.80

 

(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)

 In millions, except par value

 

June 30, 2013

 

December 31, 2012

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 1,382

 

$

 1,369

 

Marketable securities

 

 

 205

 

 

 247

 

 

Total cash, cash equivalents and marketable securities

 

 

 1,587

 

 

 1,616

 

Accounts and notes receivable, net

 

 

 2,745

 

 

 2,475

 

Inventories

 

 

 2,475

 

 

 2,221

 

Prepaid expenses and other current assets

 

 

 597

 

 

 855

 

 

 

Total current assets

 

 

 7,404

 

 

 7,167

Long-term assets

 

 

 

 

 

 

 

Property, plant and equipment

 

 

 6,077

 

 

 5,876

 

 

Accumulated depreciation

 

 

 (3,195)

 

 

 (3,152)

 

 

Property, plant and equipment, net

 

 

 2,882

 

 

 2,724

 

Investments and advances related to equity method investees

 

 

 924

 

 

 897

 

Goodwill

 

 

 450

 

 

 445

 

Other intangible assets, net

 

 

 360

 

 

 369

 

Other assets

 

 

 1,028

 

 

 946

 

 

 

 

Total assets

 

$

 13,048

 

$

 12,548

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Loans payable

 

$

 40

 

$

 16

 

Accounts payable (principally trade)

 

 

 1,669

 

 

 1,339

 

Current maturities of long-term debt

 

 

 43

 

 

 61

 

Current portion of accrued product warranty

 

 

 393

 

 

 386

 

Accrued compensation, benefits and retirement costs

 

 

 348

 

 

 400

 

Deferred revenue

 

 

 243

 

 

 215

 

Taxes payable (including taxes on income)

 

 

 159

 

 

 173

 

Other accrued expenses

 

 

 567

 

 

 546

 

 

 

Total current liabilities

 

 

 3,462

 

 

 3,136

Long-term liabilities

 

 

 

 

 

 

 

Long-term debt

 

 

 754

 

 

 698

 

Postretirement benefits other than pensions

 

 

 414

 

 

 432

 

Other liabilities and deferred revenue

 

 

 1,325

 

 

 1,308

 

 

 

 

Total liabilities

 

 

 5,955

 

 

 5,574

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Cummins Inc. shareholders’ equity

 

 

 

 

 

 

 

Common stock, $2.50 par value, 500 shares authorized, 222.3 and 222.4 shares issued

 

 

 2,082

 

 

 2,058

 

Retained earnings

 

 

 7,850

 

 

 7,343

 

Treasury stock, at cost, 35.0 and 32.6 shares

 

 

 (2,112)

 

 

 (1,830)

 

Common stock held by employee benefits trust, at cost, 1.4 and 1.5 shares

 

 

 (17)

 

 

 (18)

 

Accumulated other comprehensive loss

 

 

 

 

 

 

 

 

Defined benefit postretirement plans

 

 

 (754)

 

 

 (794)

 

 

Other

 

 

 (345)

 

 

 (156)

 

 

Total accumulated other comprehensive loss

 

 

 (1,099)

 

 

 (950)

 

 

 

Total Cummins Inc. shareholders’ equity

 

 

 6,704

 

 

 6,603

 

Noncontrolling interests

 

 

 389

 

 

 371

 

 

 

 

Total equity

 

 

 7,093

 

 

 6,974

 

 

 

 

 

Total liabilities and equity

 

$

 13,048

 

$

 12,548

 

(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)

 

 

 

 

Six months ended

In millions

 

June 30, 2013

 

July 1, 2012

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

Consolidated net income

 

$

 753

 

$

 970

 

Adjustments to reconcile consolidated net income to net cash provided by operating activities

 

 

 

 

 

 

 

 

Restructuring payments, net

 

 

 (23)

 

 

 - 

 

 

Depreciation and amortization

 

 

 200

 

 

 171

 

 

Gain on sale of businesses

 

 

 - 

 

 

 (6)

 

 

Gain on fair value adjustment for consolidated investees

 

 

 (12)

 

 

 - 

 

 

Deferred income taxes

 

 

 20

 

 

 (39)

 

 

Equity in income of investees, net of dividends

 

 

 (57)

 

 

 (25)

 

 

Pension contributions in excess of expense

 

 

 (78)

 

 

 (52)

 

 

Other post-retirement benefits payments in excess of expense

 

 

 (15)

 

 

 (7)

 

 

Stock-based compensation expense

 

 

 19

 

 

 21

 

 

Excess tax benefits on stock-based awards

 

 

 (8)

 

 

 (11)

 

 

Translation and hedging activities

 

 

 3

 

 

 7

 

Changes in current assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

Accounts and notes receivable

 

 

 (265)

 

 

 (116)

 

 

Inventories

 

 

 (184)

 

 

 (439)

 

 

Other current assets

 

 

 214

 

 

 (47)

 

 

Accounts payable

 

 

 310

 

 

 61

 

 

Accrued expenses

 

 

 (87)

 

 

 (173)

 

Changes in other liabilities and deferred revenue

 

 

 100

 

 

 103

 

Other, net

 

 

 70

 

 

 (21)

Net cash provided by operating activities

 

 

 960

 

 

 397

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

Capital expenditures

 

 

 (275)

 

 

 (266)

 

Investments in internal use software

 

 

 (24)

 

 

 (40)

 

Investments in and advances to equity investees

 

 

 (4)

 

 

 (40)

 

Acquisition of businesses, net of cash acquired

 

 

 (134)

 

 

 (12)

 

Investments in marketable securities—acquisitions

 

 

 (243)

 

 

 (276)

 

Investments in marketable securities—liquidations

 

 

 280

 

 

 280

 

Cash flows from derivatives not designated as hedges

 

 

 (23)

 

 

 1

 

Other, net

 

 

 12

 

 

 3

Net cash used in investing activities

 

 

 (411)

 

 

 (350)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

Proceeds from borrowings

 

 

 2

 

 

 46

 

Payments on borrowings and capital lease obligations

 

 

 (51)

 

 

 (75)

 

Net borrowings under short-term credit agreements

 

 

 56

 

 

 3

 

Distributions to noncontrolling interests

 

 

 (28)

 

 

 (32)

 

Dividend payments on common stock

 

 

 (189)

 

 

 (152)

 

Repurchases of common stock

 

 

 (289)

 

 

 (196)

 

Excess tax benefits on stock-based awards

 

 

 8

 

 

 11

 

Other, net

 

 

 18

 

 

 9

Net cash used in financing activities

 

 

 (473)

 

 

 (386)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

 

 (63)

 

 

 - 

Net increase (decrease) in cash and cash equivalents

 

 

 13

 

 

 (339)

Cash and cash equivalents at beginning of year

 

 

 1,369

 

 

 1,484

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

 1,382

 

$

 1,145

 

(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 June 30, 2013

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

External sales

 

$

 2,209

 

$

 786

 

$

 583

 

$

 947

 

$

 - 

 

$

 4,525

 

Intersegment sales

 

 447

 

 331

 

 231

 

 7

 

 (1,016)

 

 

 - 

 

 

Total sales

 

 

 2,656

 

 

 1,117

 

 

 814

 

 

 954

 

 

 (1,016)

 

 

 4,525

 

Depreciation and amortization(2)

 

 

 51

 

 

 23

 

 

 12

 

 

 15

 

 

 - 

 

 

 101

 

Research, development and engineering expenses

 

 

 102

 

 

 57

 

 

 17

 

 

 1

 

 

 - 

 

 

 177

 

Equity, royalty and interest income from investees

 

 

 52

 

 

 9

 

 

 10

 

 

 37

 

 

 - 

 

 

 108

 

Interest income

 

 

 7

 

 

 - 

 

 

 2

 

 

 1

 

 

 - 

 

 

 10

 

Segment EBIT

 

 

 339

 

 

 136

 

 

 76

 

 

 100(3)

 

 

 (30)

 

 

 621

 

 

  

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

Segment EBIT as a percentage of total sales

 

 

12.8%

 

 

12.2%

 

 

9.3%

 

 

10.5%

 

 

  

 

 

13.7%

 

 

  

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

Three months ended March 31, 2013

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

External sales

 

$

 1,885

 

$

 722

 

$

 539

 

$

 776

 

$

 - 

 

$

 3,922

 

Intersegment sales

 

 418

 

 

 296

 

 

 207

 

 

 2

 

 

 (923)

 

 

 - 

 

 

Total sales

 

 

 2,303

 

 

 1,018

 

 

 746

 

 

 778

 

 

 (923)

 

 

 3,922

 

Depreciation and amortization(2)

 

 

 52

 

 

 24

 

 

 12

 

 

 10

 

 

 - 

 

 

 98

 

Research, development and engineering expenses

 

 

 105

 

 

 57

 

 

 18

 

 

 2

 

 

 - 

 

 

 182

 

Equity, royalty and interest income from investees

 

 

 23

 

 

 7

 

 

 7

 

 

 45

 

 

 - 

 

 

 82

 

Interest income

 

 

 2

 

 

 1

 

 

 2

 

 

 - 

 

 

 - 

 

 

 5

 

Segment EBIT

 

 

 195

 

 

 119

 

 

 51

 

 

 95(3)

 

 

 (23)

 

 

 437

 

 

  

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

Segment EBIT as a percentage of total sales

 

 

8.5%

 

 

11.7%

 

 

6.8%

 

 

12.2%

 

 

  

 

 

11.1%

 

 

  

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

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

 

 

  

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

Segment EBIT as a percentage of total sales

 

 

13.2%

 

 

11.2%

 

 

10.3%

 

 

11.6%

 

 

  

 

 

15.0%

 

 

  

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 (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 June 30, 2013 and March 31, 2013.  The three months ended July 1, 2012, include a $6 million gain ($4 million after-tax) related to adjustments from our 2011 divestitures within the Components segment.  The gain has been excluded from segment results as it was 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)

Distribution segment EBIT includes a $7 million gain on the fair value adjustment resulting from the acquisition of a controlling interest in Cummins Northwest LLC for the three months ended March 31, 2013 and a $5 million gain on the fair value adjustment resulting from the acquisition of a controlling interest in Cummins Rocky Mountain LLC for the three months ended June 30, 2013.


 

CUMMINS INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

 

  

Engine

 

Components

 

Power Generation

 

Distribution

Non-segment Items(1)

 

Total

 

In millions

 

 

 

 

 

 

 

 

 

 

 

  

 

  

 

 

 

 

Six months ended June 30, 2013

 

 

 

 

 

 

 

 

 

 

 

  

 

  

 

 

 

 

External sales

 

$

 4,094

 

$

 1,508

 

$

 1,122

 

$

 1,723

$

 - 

 

$

 8,447

 

Intersegment sales

 

 865

 

 627

 

 438

 

 9

 (1,939)

 

 

 - 

 

 

Total sales

 

 

 4,959

 

 

 2,135

 

 

 1,560

 

 

 1,732

 

 (1,939)

 

 

 8,447

 

Depreciation and amortization(2)

 

 

 103

 

 

 47

 

 

 24

 

 

 25

 

 - 

 

 

 199

 

Research, development and engineering expenses

 

 

 207

 

 

 114

 

 

 35

 

 

 3

 

 - 

 

 

 359

 

Equity, royalty and interest income from investees

 

 

 75

 

 

 16

 

 

 17

 

 

 82

 

 - 

 

 

 190

 

Interest income

 

 

 9

 

 

 1

 

 

 4

 

 

 1

 

 - 

 

 

 15

 

Segment EBIT

 

 

 534

 

 

 255

 

 

 127

 

 

 195(3)

 

 (53)

 

 

 1,058

 

 

  

 

 

 

 

 

 

 

 

 

 

 

  

 

  

 

 

 

 

Segment EBIT as a percentage of total sales

 

 

10.8%

 

 

11.9%

 

 

8.1%

 

 

11.3%

 

  

 

 

12.5%

 

 

  

 

 

 

 

 

 

 

 

 

 

 

  

 

  

 

 

 

 

Six months ended July 1, 2012

 

 

 

 

 

 

 

 

 

 

 

  

 

  

 

 

 

 

External sales

 

$

 4,793

 

$

 1,484

 

$

 1,088

 

$

 1,559

$

 - 

 

$

 8,924

 

Intersegment sales

 

 907

 

 651

 

 601

 

 10

 (2,169)

 

 

 - 

 

 

Total sales

 

 

 5,700

 

 

 2,135

 

 

 1,689

 

 

 1,569

 

 (2,169)

 

 

 8,924

 

Depreciation and amortization(2)

 

 

 94

 

 

 38

 

 

 22

 

 

 15

 

 - 

 

 

 169

 

Research, development and engineering expenses

 

 

 226

 

 

 102

 

 

 37

 

 

 3

 

 - 

 

 

 368

 

Equity, royalty and interest income from investees

 

 

 75

 

 

 16

 

 

 20

 

 

 97

 

 - 

 

 

 208

 

Interest income

 

 

 7

 

 

 2

 

 

 5

 

 

 1

 

 - 

 

 

 15

 

Segment EBIT

 

 

 757

 

 

 259

 

 

 170

 

 

 186

 

 (45)

 

 

 1,327

 

 

  

 

 

 

 

 

 

 

 

 

 

 

  

 

  

 

 

 

 

Segment EBIT as a percentage of total sales

 

 

13.3%

 

 

12.1%

 

 

10.1%

 

 

11.9%

 

  

 

 

14.9%

 

 

  

 

 

 

 

 

 

 

 

 

 

 

  

 

  

 

 

 

 (1)

Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses.  There were no significant unallocated corporate expenses for the six months ended June 30, 2013.  The six months ended July 1, 2012, includes a $6 million gain ($4 million after-tax) related to adjustments from our 2011 divestitures within the Components segment.  The gain has been excluded from segment results as it was 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)

Distribution segment EBIT for the six months ended June 30, 2013, includes a $7 million gain and a $5 million gain on the fair value adjustments resulting from the acquisitions of a controlling interest in Cummins Northwest LLC and Cummins Rocky Mountain LLC, respectively.


 

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

 

Six months ended

 

 

 

June 30,

 

March 31,

 

July 1,

 

June 30,

 

July 1,

In millions

 

2013

 

2013

 

2012

 

2013

 

2012

Segment EBIT

 

$

 621

 

$

 437

 

$

 669

 

$

 1,058

 

$

 1,327

Less:  Interest expense

 

 

 8

 

 

 6

 

 

 8

 

 

 14

 

 

 16

 

Income before income taxes

 

$

 613

 

$

 431

 

$

 661

 

$

 1,044

 

$

 1,311


 

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

 

Six months ended

 

 

 

 

June 30,

 

March 31,

 

July 1,

 

June 30,

 

July 1,

In millions

 

2013

 

2013

 

2012

 

2013

 

2012

Distribution Entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North American distributors

 

$

 29

 

$

 35

 

$

 38

 

$

 64

 

$

 78

Komatsu Cummins Chile, Ltda.

 

 

 6

 

 

 5

 

 

 6

 

 

 11

 

 

 11

All other distributors

 

 

 - 

 

 

 - 

 

 

 2

 

 

 - 

 

 

 3

Manufacturing Entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dongfeng Cummins Engine Company, Ltd.

 

 

 20

 

 

 12

 

 

 17

 

 

 32

 

 

 33

Chongqing Cummins Engine Company, Ltd.

 

 

 17

 

 

 12

 

 

 17

 

 

 29

 

 

 35

Beijing Foton Cummins Engine Co., Ltd.

 

 

 9

 

 

 1

 

 

 2

 

 

 10

 

 

 - 

Shanghai Fleetguard Filter Co., Ltd.

 

 

 4

 

 

 3

 

 

 4

 

 

 7

 

 

 7

Komatsu manufacturing alliances

 

 

 4

 

 

 (1)

 

 

 1

 

 

 3

 

 

 - 

Cummins Westport, Inc.

 

 

 3

 

 

 - 

 

 

 4

 

 

 3

 

 

 9

Valvoline Cummins, Ltd.

 

 

 2

 

 

 3

 

 

 2

 

 

 5

 

 

 4

Tata Cummins, Ltd.

 

 

 2

 

 

 1

 

 

 3

 

 

 3

 

 

 7

Xian Cummins Engine Company Ltd.

 

 

 1

 

 

 - 

 

 

 (5)

 

 

 1

 

 

 (6)

All other manufacturers

 

 

 1

 

 

 2

 

 

 4

 

 

 3

 

 

 6

 

Cummins share of net income

 

 

 98

 

 

 73

 

 

 95

 

 

 171

 

 

 187

Royalty and interest income

 

 

 10

 

 

 9

 

 

 9

 

 

 19

 

 

 21

 

 

Equity, royalty and interest income from investees

 

$

 108

 

$

 82

 

$

 104

 

$

 190

 

$

 208

 

 

 

NOTE 2.  INCOME TAXES

Our effective tax rate for the year is expected to approximate 29.1 percent, excluding any one-time items that may arise.  Our tax rate is generally less than the 35 percent U.S. statutory income tax rate primarily due to lower tax rates on foreign income and research tax credits.  The tax rates for the three and six month periods ended June 30, 2013, were 28.1 percent and 27.9 percent, respectively.  These tax rates include a discrete tax benefit in the first quarter of 2013 of $28 million attributable to the reinstatement of the research credit back to 2012 as well as a discrete tax expense in the first quarter of 2013 of $17 million, which primarily relates to the write-off of a deferred tax asset deemed unrecoverable.  On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law and reinstated the research tax credit.  As tax law changes are accounted for in the period of enactment, we recognized the discrete tax benefit in the first quarter of 2013.

 

Our tax rates for the three and six month periods ended July 1, 2012, were 25.1 percent and 26.0 percent, respectively.  The increase in the 2013 effective tax rates compared to 2012 is due primarily to an unfavorable change in the pre-tax mix of income taxed in higher rate jurisdictions, partially offset by $11 million of net discrete tax benefits in the first quarter of 2013.


 

CUMMINS INC. AND SUBSIDIARIES

SELECTED FOOTNOTE DATA

(Unaudited)

 

NOTE 3.  ACQUISITIONS

Cummins Rocky Mountain LLC

 

In May 2013, we acquired the remaining 67 percent interest in Cummins Rocky Mountain LLC (Rocky Mountain) from the former principal for consideration of approximately $62 million in cash and an additional $74 million in cash paid to creditors to eliminate all debt related to the entity.  The purchase price was approximately $136 million as presented below.  The intangible assets are primarily customer related and are being amortized over periods ranging from 1 to 4 years.  The acquisition was accounted for as a business combination, with the results of the acquired entity included in the Distribution operating segment in the second quarter of 2013. 

 

Distribution segment results also included a $5 million gain, as we were required to re-measure our pre-existing 33 percent ownership interest in Rocky Mountain to fair value in accordance with GAAP.  Net sales for Rocky Mountain were $384 million for the 12 months ended December 31, 2012.  This amount is not fully incremental to Cummins Inc. as the amount would be reduced by the elimination of sales to the previously unconsolidated entity.  Approximately $14 million of the purchase price will be distributed in future quarters.

 

The preliminary purchase price allocation, subject to finalization, was as follows:

 

In millions

 

 

Accounts receivable

$

48

Inventory

 

99

Fixed assets

 

34

Intangible assets

 

7

Goodwill

 

6

Other assets

 

9

Current liabilities

 

(36)

 

Total business valuation

 

167

Fair value of pre-existing 33 percent interest

 

(31)

 

 

Purchase price

$

136

 

Cummins Northwest LLC

 

In January 2013, we acquired an additional 50 percent interest in Cummins Northwest LLC (Northwest) from the former principal for consideration of approximately $18 million.   We formed a new partnership with a new distributor principal.  We own 79.99 percent of Northwest and the new distributor principal owns 20.01 percent. The acquisition was accounted for as a business combination, with the results of the acquired entity included in the Distribution operating segment in the first quarter of 2013.  Distribution segment results also included a $7 million gain, as we were required to re-measure our pre-existing 50 percent ownership interest in Northwest to fair value in accordance with GAAP.  The transaction generated $3 million of goodwill.  Net sales for Northwest were $137 million for the 12 months ended December 31, 2012.  This amount is not fully incremental to Cummins Inc. as the amount would be reduced by the elimination of sales to the previously unconsolidated entity.


 

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 one-time tax benefits and gain related to the sale of certain assets and liabilities.  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 June 30, 2013, March 31, 2013 and July 1, 2012. 

 

 

  

Three months ended

 

  

June 30, 2013

 

March 31, 2013

 

July 1, 2012

In millions

Net Income

 

Diluted EPS

 

Net Income

 

Diluted EPS

 

Net Income

 

Diluted EPS

Net income attributable to Cummins Inc.

$

 414

 

$

2.20

 

$

 282

 

$

1.49

 

$

 469

 

$

 2.47

Less