Edgar Filing: CUMMINS INC

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: May 1, 2012

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 May 1, 2012, Cummins Inc. (“Cummins,” “the Company,” “the registrant,” “we,” “our,” or, “us”) issued the attached press release reporting its financial results for the first 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 May 1, 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: May 1, 2012

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
		April 1,		December 31,		March 27,
In millions, except per share amounts		2012		2011		2011
NET SALES		$	4,472	$	4,921	$	3,860
	Cost of sales		3,274		3,680		2,903
GROSS MARGIN			1,198		1,241		957

OPERATING EXPENSES AND INCOME
	Selling, general and administrative expenses		475		496		389
	Research, development and engineering expenses		181		179		129
	Equity, royalty and interest income from investees (Note 1)		104		101		96
	Gain on sale of business		-		53		-
	Other operating income (expense), net		2		25		(6)
OPERATING INCOME			648		745		529

	Interest income		8		9		6
	Interest expense		8		10		10
	Other income (expense), net		2		14		(3)
INCOME BEFORE INCOME TAXES			650		758		522

	Income tax expense (Note 2)		175		186		157
CONSOLIDATED NET INCOME			475		572		365

	Less: Net income attributable to noncontrolling interests		20		24		22
NET INCOME ATTRIBUTABLE TO CUMMINS INC.		$	455	$	548	$	343

EARNINGS PER COMMON SHARE ATTRIBUTABLE
	TO CUMMINS INC.
	Basic	$	2.39	$	2.87	$	1.75
	Diluted	$	2.38	$	2.86	$	1.75

WEIGHTED AVERAGE SHARES OUTSTANDING
	Basic		190.4		190.9		195.5
	Diluted		190.8		191.5		196.1

CASH DIVIDENDS DECLARED PER COMMON SHARE		$	0.40	$	0.40	$	0.2625

(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)

In millions, except par value						April 1, 2012		December 31, 2011
ASSETS
Current assets
	Cash and cash equivalents					$	1,317	$	1,484
	Marketable securities						252		277
		Total cash, cash equivalents and marketable securities					1,569		1,761
	Accounts and notes receivable, net						2,684		2,526
	Inventories						2,382		2,141
	Prepaid expenses and other current assets						682		663
			Total current assets				7,317		7,091
Long-term assets
	Property, plant and equipment						5,416		5,245
		Accumulated depreciation					(3,025)		(2,957)
		Property, plant and equipment, net					2,391		2,288
	Investments and advances related to equity method investees						903		838
	Goodwill						342		339
	Other intangible assets, net						250		227
	Other assets						916		885
				Total assets		$	12,119	$	11,668

LIABILITIES
Current liabilities
	Loans payable					$	33	$	28
	Accounts payable (principally trade)						1,731		1,546
	Current portion of accrued product warranty						418		422
	Accrued compensation, benefits and retirement costs						289		511
	Deferred revenue						211		208
	Taxes payable (including taxes on income)						297		282
	Other accrued expenses						651		660
			Total current liabilities				3,630		3,657
Long-term liabilities
	Long-term debt						650		658
	Pensions						157		205
	Postretirement benefits other than pensions						428		432
	Other liabilities and deferred revenue						896		885
				Total liabilities			5,761		5,837

EQUITY
Cummins Inc. shareholders’ equity
	Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.2 shares issued						2,017		2,001
	Retained earnings						6,416		6,038
	Treasury stock, at cost, 30.2 and 30.2 shares						(1,590)		(1,587)
	Common stock held by employee benefits trust, at cost, 1.7 and 1.8 shares						(20)		(22)
	Accumulated other comprehensive loss
		Defined benefit postretirement plans					(713)		(724)
		Other					(100)		(214)
		Total accumulated other comprehensive loss					(813)		(938)
			Total Cummins Inc. shareholders’ equity				6,010		5,492
	Noncontrolling interests						348		339
				Total equity			6,358		5,831
					Total liabilities and equity	$	12,119	$	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)

			Three months ended
In millions			April 1, 2012		March 27, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
	Consolidated net income		$	475	$	365
	Adjustments to reconcile consolidated net income to net cash provided by operating activities
		Depreciation and amortization		85		79
		Deferred income taxes		(27)		21
		Equity in income of investees, net of dividends		(59)		(62)
		Pension contributions in excess of expense		(27)		(24)
		Other post-retirement benefits payments in excess of expense		(4)		(5)
		Stock-based compensation expense		7		5
		Excess tax benefits on stock-based awards		(11)		(2)
		Translation and hedging activities		10		4
	Changes in current assets and liabilities, net of acquisitions
		Accounts and notes receivable		(135)		(306)
		Inventories		(209)		(210)
		Other current assets		(28)		(2)
		Accounts payable		148		251
		Accrued expenses		(196)		(28)
	Changes in other liabilities and deferred revenue			29		24
	Other, net			(37)		(22)
Net cash provided by operating activities				21		88

CASH FLOWS FROM INVESTING ACTIVITIES
	Capital expenditures			(126)		(91)
	Investments in internal use software			(16)		(10)
	Investments in and advances to equity investees			(5)		(21)
	Acquisition of businesses, net of cash acquired			(5)		-
	Investments in marketable securities—acquisitions			(146)		(101)
	Investments in marketable securities—liquidations			184		134
	Cash flows from derivatives not designated as hedges			11		4
	Other, net			1		7
Net cash used in investing activities				(102)		(78)

CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from borrowings			12		38
	Payments on borrowings and capital lease obligations			(38)		(45)
	Net borrowings (payments) under short-term credit agreements			-		1
	Distributions to noncontrolling interests			(22)		(21)
	Dividend payments on common stock			(77)		(51)
	Repurchases of common stock			(8)		(190)
	Excess tax benefits on stock-based awards			11		2
	Other, net			9		4
Net cash used in financing activities				(113)		(262)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS				27		8
Net increase (decrease) in cash and cash equivalents				(167)		(244)
Cash and cash equivalents at beginning of year				1,484		1,023
CASH AND CASH EQUIVALENTS AT END OF PERIOD			$	1,317	$	779

(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 April 1, 2012
		External sales		$	2,412	$	774	$	516	$	770	$	-	$	4,472
		Intersegment sales		447		325		264		5		(1,041)			-
			Total sales		2,859		1,099		780		775		(1,041)		4,472
		Depreciation and amortization⁽²⁾			47		19		11		7		-		84
		Research, development and engineering expenses			111		51		18		1		-		181
		Equity, royalty and interest income from investees			38		8		10		48		-		104
		Interest income			4		1		2		1		-		8
		Segment EBIT			381		143		76		94		(36)		658

		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

		Three months ended March 27, 2011
		External sales		$	2,006	$	660	$	557	$	637	$	-	$	3,860
		Intersegment sales		385		264		238		5		(892)			-
			Total sales		2,391		924		795		642		(892)		3,860
		Depreciation and amortization⁽²⁾			45		18		10		6		-		79
		Research, development and engineering expenses			80		37		11		1		-		129
		Equity, royalty and interest income from investees			42		8		8		38		-		96
		Interest income			3		1		1		1		-		6
		Segment EBIT			290		105		89		89		(41)		532

(1)		Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three month periods ended April 1, 2012 and March 27, 2011. For the three months ended December 31, 2011, unallocated corporate expenses include a $53 million gain ($33 million after-tax) recorded for the sale of certain assets and liabilities of our light-duty filtration business from our 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.
(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.”

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
		April 1,		December 31,		March 27,
In millions		2012		2011		2011
Segment EBIT		$	658	$	768	$	532
Less
	Interest expense		8		10		10
Income before income taxes		$	650	$	758	$	522

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
		April 1,		December 31,		March 27,
In millions		2012		2011		2011
Distribution Entities
North American distributors		$	40	$	34	$	30
Komatsu Cummins Chile, Ltda.			5		6		4
All other distributors			1		1		1
Manufacturing Entities
Chongqing Cummins Engine Company, Ltd.			18		17		12
Dongfeng Cummins Engine Company, Ltd.			16		16		23
Cummins Westport, Inc.			5		6		1
Tata Cummins, Ltd.			4		5		4
Shanghai Fleetguard Filter Co., Ltd.			3		3		4
Valvoline Cummins, Ltd.			2		1		2
Komatsu manufacturing alliances			(1)		2		2
Beijing Foton Cummins Engine Co., Ltd.			(2)		(2)		(2)
All other manufacturers			1		2		6
	Cummins share of net income		92		91		87
Royalty and interest income			12		10		9
	Equity, royalty and interest income from investees	$	104	$	101	$	96

NOTE 2. INCOME TAXES

Our effective tax rate for the year is expected to approximate 27 percent, absent any discrete period activity. 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. The tax rate for the three month period ended April 1, 2012, was 27 percent.

Our effective tax rate for the three months ended March 27, 2011, was 30 percent. The decrease in the 2012 effective tax rate compared to 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

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 the sale of certain assets and liabilities and 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 April 1, 2012, December 31, 2011 and March 27, 2011.

		Three months ended
		April 1, 2012				December 31, 2011				March 27, 2011
In millions		Net Income		Diluted EPS		Net Income		Diluted EPS		Net Income		Diluted EPS
Net income attributable to Cummins Inc.		$	455	$	2.38	$	548	$	2.86	$	343	$	1.75
Subtract
	Gain on sale of business ⁽¹⁾		-		-		33		0.17		-		-
	Flood insurance recovery⁽¹⁾		-		-		24		0.13		-		-
Net income attributable to Cummins Inc. excluding
	special items	$	455	$	2.38	$	491	$	2.56	$	343	$	1.75

(1)	The gains have been excluded from operating results as they were not considered in our evaluation of performance for the quarter ended December 31, 2011.

CUMMINS INC. AND SUBSIDIARIES

FINANCIAL MEASURES THAT SUPPLEMENT GAAP

(Unaudited)

Earnings before interest expense, taxes and noncontrolling interests

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, a non-GAAP financial measure, to “Net income attributable to Cummins Inc.,” for each of the applicable periods:

				Three months ended
				April 1,		December 31,		March 27,
In millions				2012		2011		2011
Earnings before interest expense, income taxes and
	special items			$	658	$	677	$	532

Earnings before interest expense, income taxes and
	special items as a percentage of net sales				*14.7%*		13.8%		13.8%

Add
	Gain on sale of business				-		53		-
	Flood insurance recovery				-		38		-

Earnings before interest expense and income taxes				$	658	$	768	$	532

EBIT as a percentage of net sales					*14.7%*		15.6%		13.8%

Less
	Interest expense				8		10		10
	Income tax expense				175		186		157
		Consolidated net income			475		572		365

Less
	Net income attributable to noncontrolling interests				20		24		22
			Net income attributable to Cummins Inc.	$	455	$	548	$	343

Net income attributable to Cummins Inc. as a
	percentage of net sales				*10.2%*		11.1%		8.9%

CUMMINS INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

Engine segment net sales by market

2012
In millions		Q1		Q2		Q3		Q4		YTD
Heavy-duty truck		$	892	$	-	$	-	$	-	$	892
Medium-duty truck and bus			526		-		-		-		526
Light-duty automotive and RV			286		-		-		-		286
Industrial			861		-		-		-		861
Stationary power			294		-		-		-		294
	Total sales	$	2,859	$	-	$	-	$	-	$	2,859

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 RV			296		310		271		299		1,176
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
Midrange		109,000	-	-	-	109,000
Heavy-duty		36,000	-	-	-	36,000
High-horsepower		5,500	-	-	-	5,500
	Total units	150,500	-	-	-	150,500

2011
Units		Q1	Q2	Q3	Q4	YTD
Midrange		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

SEGMENT INFORMATION

(Unaudited)

Component segment sales by business

2012
In millions		Q1		Q2		Q3		Q4		YTD
Emission solutions		$	404	$	-	$	-	$	-	$	404
Turbo technologies			298		-		-		-		298
Filtration			270		-		-		-		270
Fuel systems			127		-		-		-		127
	Total sales	$	1,099	$	-	$	-	$	-	$	1,099

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 reporting 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 and 2010 reorganized balances) were as follows:

2012
In millions		Q1		Q2		Q3		Q4		YTD
Power products		$	375	$	-	$	-	$	-	$	375
Power systems			188		-		-		-		188
Generator technologies			141		-		-		-		141
Power solutions			76		-		-		-		76
	Total sales	$	780	$	-	$	-	$	-	$	780

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

2010
In millions		YTD
Power products		$	1,465
Power systems			616
Generator technologies			550
Power solutions			288
	Total sales	$	2,919

CUMMINS INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

Distribution segment sales by product

2012
In millions		Q1		Q2		Q3		Q4		YTD
Parts and filtration		$	288	$	-	$	-	$	-	$	288
Power generation			186		-		-		-		186
Engines			166		-		-		-		166
Service			135		-		-		-		135
	Total sales	$	775	$	-	$	-	$	-	$	775

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