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: February 6, 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 February 6, 2013, Cummins Inc. issued a press release regarding its release of fourth quarter and full year 2012 results.

Item 9.01. Financial Statements and Exhibits.

(d)

The following exhibit is furnished herewith:

99-Press Release dated February 6, 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 6, 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		1		(1)		25
OPERATING INCOME			485		493		745

	Interest income		5		5		9
	Interest expense		7		9		10
	Other income (expense), net		10		(2)		14
INCOME BEFORE INCOME TAXES			493		487		758

	Income tax expense (Note 3)		83		117		186
CONSOLIDATED NET INCOME			410		370		572

	Less: Net income attributable to noncontrolling interests		29		18		24
NET INCOME ATTRIBUTABLE TO CUMMINS INC.		$	381	$	352	$	548

EARNINGS PER COMMON SHARE ATTRIBUTABLE
	TO CUMMINS INC.
	Basic	$	2.02	$	1.87	$	2.87
	Diluted	$	2.02	$	1.86	$	2.86

WEIGHTED AVERAGE SHARES 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		4		21
OPERATING INCOME			2,274		2,681

	Interest income		25		34
	Interest expense		32		44
	Other income, net		24		-
INCOME BEFORE INCOME TAXES			2,291		2,671

	Income tax expense (Note 3)		541		725
CONSOLIDATED NET INCOME			1,750		1,946

	Less: Net income attributable to noncontrolling interests		93		98
NET INCOME ATTRIBUTABLE TO CUMMINS INC.		$	1,657	$	1,848

EARNINGS PER COMMON SHARE ATTRIBUTABLE
	TO CUMMINS INC.
	Basic	$	8.75	$	9.58
	Diluted	$	8.74	$	9.55

WEIGHTED AVERAGE SHARES OUTSTANDING
	Basic		189.3		193.0
	Diluted		189.7		193.6

CASH DIVIDENDS DECLARED PER COMMON SHARE		$	1.80	$	1.325

(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America (GAAP).

CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (a)

						December 31,		December 31,
In millions, except par value						2012		2011
ASSETS
Current assets
	Cash and cash equivalents					$	1,369	$	1,484
	Marketable securities						247		277
		Total cash, cash equivalents and 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						939		885
				Total assets		$	12,541	$	11,668

LIABILITIES
Current liabilities
	Loans payable					$	16	$	28
	Accounts payable (principally trade)						1,339		1,546
	Accrued expenses						1,761		2,083
			Total current liabilities				3,116		3,657
Long-term liabilities
	Long-term debt						698		658
	Other liabilities						1,741		1,522
				Total liabilities			5,555		5,837

EQUITY
Cummins Inc. shareholders’ equity
	Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.2 shares issued						2,058		2,001
	Retained earnings						7,355		6,038
	Treasury stock, at cost, 32.6 and 30.2 shares						(1,830)		(1,587)
	Common stock held by employee benefits trust, at cost, 1.5 and 1.8 shares						(18)		(22)
	Accumulated other comprehensive loss						(950)		(938)
			Total Cummins Inc. shareholders’ equity				6,615		5,492
Noncontrolling interests							371		339
				Total equity			6,986		5,831
					Total liabilities and equity	$	12,541	$	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		44		500
Add back restructuring charges⁽³⁾			20		6		12		14		-		52
	Segment EBIT excluding restructuring charges		272		84		54		98		44		552

Segment EBIT as a percentage of total sales			10.1%		8.3%		5.5%		9.3%				11.6%
Segment EBIT excluding restrucutring charges
	as a percentage of total sales		10.9%		8.9%		7.1%		10.8%				12.9%

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. There were no significant unallocated corporate expenses for the three months ended December 31, 2012 and September 30, 2012. The three months ended December 31, 2011 includes a $53 million gain ($33 million after-tax) recorded for the sale of 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		(5)		2,323
Add back restructuring charges⁽³⁾			20		6		12		14		-		52
	Segment EBIT excluding restructuring charges		1,268		432		297		383		(5)		2,375

Segment EBIT as a percentage of total sales			11.6%		10.6%		8.7%		11.3%				13.4%
Segment EBIT excluding restrucutring charges
	as a percentage of total sales		11.8%		10.8%		9.1%		11.7%				13.7%

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. 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			$	552	$	496	$	768	$	2,375	$	2,715
	Add: Restructuring charges			(52)		-		-		(52)		-
Segment EBIT				500		496		768		2,323		2,715
	Less: Interest expense			7		9		10		32		44
		Income before income taxes	$	493	$	487	$	758	$	2,291	$	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 $1 million of restructuring expenses for lease terminations and $2 million of restructuring expenses for asset impairments and other non-cash charges. During 2012, we recorded a total pre-tax restructuring charge of $52 million. These restructuring actions included:

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

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

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

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

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

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

NOTE 3. INCOME TAXES

Our income tax rates are generally less than the 35 percent U.S. income tax rate primarily because of lower taxes on foreign earnings and research tax credits. Our effective tax rate for the fourth quarter and full year of 2012 was 16.8 percent and 23.6 percent, respectively. The tax rate for the fourth quarter and full year includes one-time tax items that total a benefit of $39 million ($0.21 per diluted share) and $55 million ($0.29 per diluted share), respectively. The one-time tax items for the fourth quarter and full year related primarily to benefits resulting from transactions entered into and elections made with respect to our U.K. operations. Our effective tax rate for the fourth quarter and full year of 2011 was 24.5 percent and 27.1 percent, respectively. Excluding the gain on sale of certain assets and liabilities of the businesses and the flood insurance recovery, our effective tax rate for the fourth quarter and full year of 2011 was 22.8 percent and 26.3 percent, respectively.

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

		Years ended December 31,
		2012