COLUMBUS, Ind.--(BUSINESS WIRE)--Cummins Inc. (NYSE: CMI) today reported record sales and earnings for the second quarter on strong growth in nearly every global market. The Company’s Engine, Components and Distribution segments each delivered record sales and earnings.
Second quarter sales were $4.6 billion, up 45 percent from the same period last year. Earnings before interest and taxes (EBIT) were $775 million and included a $68 million gain on the sale of the exhaust business from our Components segment. Excluding the gain from the sale of the exhaust business, EBIT was $707 million, or 15.2 percent of sales, the highest level and percent of sales the company has reported in any quarterly period in its history.
Net income attributable to Cummins Inc. in the second quarter was $505 million or $2.60 per diluted share. Excluding the $68 million gain ($37 million after tax or $0.19 per share), the Company reported earnings of $2.41 per share compared to $1.25 per share in the second quarter of 2010.
"The Company's performance in the second quarter underscores the success of our long-term strategy to diversify and seek profitable growth across geographies and end markets," says Tim Solso, Chairman and Chief Executive Officer. "As a result of our efforts over the last 10 years, Cummins is better positioned than ever to grow in this global economy."
As a result of the Company’s performance in the quarter and its outlook for the remainder of the year, Cummins today increased both its sales and EBIT forecast for 2011. The Company now expects to earn 14.5 percent EBIT on $18 billion in sales in 2011. This forecast excludes any current or future gains from the sale of businesses.
Engine segment sales of $2.9 billion were up 53 percent compared to the same quarter a year ago. They were driven by strong growth in global truck markets and off-highway markets including mining and oil and gas. Engine EBIT was $377 million, or 13 percent of sales.
Within the Engine segment, Cummins’ EPA-2010 engines continue to perform well in terms of reliability and fuel economy. In North America, Cummins has shipped 126,000 medium- and heavy-duty engines equipped with Selective Catalytic Reduction aftertreatment devices to truck and bus customers.
The Components segment, driven by recovery in North American on-highway markets, had its first billion-plus sales quarter. Sales of $1 billion were up 42 percent year-over-year, and segment EBIT was a record $120 million or 11.6 percent of sales. The gain on the sale of the exhaust business was not included in the segment results.
The Distribution segment saw a sales increase of 36 percent compared to the second quarter of 2010 to $785 million as a result of strong demand in oil and gas, mining and power generation markets. Segment EBIT of $106 million, or 13.5 percent of sales, was a quarterly record.
Cummins’ Power Generation segment had sales of $909 million, a year-over-year increase of 28 percent, while segment EBIT was $105 million or 11.6 percent of sales. Revenue growth was strongest in the U.S., Europe and China.
The Company’s non- U.S. markets continued to show strong growth and Cummins had record sales in Brazil, India and China.
“I am very optimistic about Cummins’ future,” said Tom Linebarger, President and Chief Operating Officer. “We are experiencing strong global demand in most of our markets. Our products are performing very well, we have strong leadership positions, and we are delivering strong profitability in all four businesses.”
In other developments:
- The Company increased its dividend by 52 percent.
- Cummins repurchased $183 million worth of stock, or 1.6 million shares.
- Fitch Ratings increased Cummins’ credit rating to A-.
Second quarter details (all comparisons to the same period in 2010)
Engine Segment
- Sales - $2.9 billion, up 53 percent
- Segment EBIT - $377 million, or 13 percent of sales, compared to $197 million or 10.4 percent of sales
- Engine shipments to the worldwide medium-duty truck markets were up by 84 percent
- Shipments to worldwide heavy-duty truck markets were up 159 percent
- Oil and gas shipments rose 174 percent
Power Generation
- Sales - $909 million, up 28 percent
- Segment EBIT - $105 million or 11.6 percent of sales, compared to $76 million or 10.7 percent
- Commercial products business sales increased because of improving economic conditions in most regions, particularly in Asia, North America, Brazil and the U.K.
- Generator technologies sales increased in most regions, especially in Western Europe, Eastern Asia and the U.K.
Components
- Sales - $1.0 billion, up 42 percent
- EBIT - $120 million, or 11.6 percent of sales, compared to $75 million or 10.3 percent of sales
- Emission solutions business sales were driven by higher volume and technology content in North American EPA 2010 aftertreatment systems and increased demand for Euro V aftertreatment systems in Europe
- Turbo technologies business sales were up because of increased demand in North America, Europe and India from OEMs
Distribution
- Sales - $785 million, up 36 percent
- EBIT - $106 million or 13.5 percent of sales, compared to $69 million or 12 percent of sales
- Revenue growth was driven by strong demand for industrial engines, power generation equipment and parts
Presentation of Non-GAAP Financial Information
EBIT
is a non-GAAP measure used in this release, and is defined and reconciled
to what management believes to be the most comparable GAAP measure in a
schedule attached to this release. Cummins presents this information as
it believes it is useful to understanding the Company's operating
performance, and because EBIT is a measure used internally to assess the
performance of the operating units.
Webcast information
Cummins management will host a
teleconference to discuss these results today at 10 a.m. EDT. This
teleconference will be webcast and available on the Investor Relations
section of the Cummins website at www.cummins.com.
Participants wishing to view the visuals available with the audio are
encouraged to sign-in a few minutes prior to the start of the
teleconference.
About Cummins
Cummins Inc., a global power leader,
is a corporation of complementary business units that design,
manufacture, distribute and service engines and related technologies,
including fuel systems, controls, air handling, filtration, emission
solutions and electrical power generation systems. Headquartered in
Columbus, Indiana, (USA) Cummins employs approximately 40,000 people
worldwide and serves customers in approximately 190 countries and
territories through a network of more than 600 company-owned and
independent distributor locations and approximately 6,000 dealer
locations. Cummins earned $1.0 billion on sales of $13.2 billion in
2010. Press releases can be found on the Web at www.cummins.com.
Forward-looking disclosure statement
Information
provided in this release that is not purely historical are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, including statements regarding the
company's expectations, hopes, beliefs and intentions on strategies
regarding the future. It is important to note that the company's actual
future results could differ materially from those projected in such
forward-looking statements because of a number of factors, including,
but not limited to, general economic, business and financing conditions,
labor relations, governmental action, competitor pricing activity,
expense volatility and other risks detailed from time to time in Cummins
Securities and Exchange Commission filings.
| CUMMINS INC. AND SUBSIDIARIES | ||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||
| (Unaudited) (a) | ||||||||||||||||||
| Three months ended | ||||||||||||||||||
| June 26, | March 27, | June 27, | ||||||||||||||||
| In millions, except per share amounts | 2011 | 2011 | 2010 | |||||||||||||||
| NET SALES | $ | 4,641 | $ | 3,860 | $ | 3,208 | ||||||||||||
| Cost of sales | 3,438 | 2,903 | 2,455 | |||||||||||||||
| GROSS MARGIN | 1,203 | 957 | 753 | |||||||||||||||
| OPERATING EXPENSES AND INCOME | ||||||||||||||||||
| Selling, general and administrative expenses | 463 | 389 | 354 | |||||||||||||||
| Research, development and engineering expenses | 157 | 129 | 96 | |||||||||||||||
| Equity, royalty and interest income from investees (Note 1) | 117 | 96 | 97 | |||||||||||||||
| Gain on sale of business (Note 2) | 68 | - | - | |||||||||||||||
| Other operating (expense) income, net | - | (6 | ) | (4 | ) | |||||||||||||
| OPERATING INCOME | 768 | 529 | 396 | |||||||||||||||
| Interest income | 10 | 6 | 5 | |||||||||||||||
| Interest expense | 13 | 10 | 9 | |||||||||||||||
| Other income (expense), net | (3 | ) | (3 | ) | - | |||||||||||||
| INCOME BEFORE INCOME TAXES | 762 | 522 | 392 | |||||||||||||||
| Income tax expense (Note 3) | 225 | 157 | 122 | |||||||||||||||
| CONSOLIDATED NET INCOME | 537 | 365 | 270 | |||||||||||||||
| Less: Net income attributable to noncontrolling interests | 32 | 22 | 24 | |||||||||||||||
| NET INCOME ATTRIBUTABLE TO CUMMINS INC. | $ | 505 | $ | 343 | $ | 246 | ||||||||||||
|
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. |
||||||||||||||||||
| Basic | $ | 2.61 | $ | 1.75 | $ | 1.25 | ||||||||||||
| Diluted | $ | 2.60 | $ | 1.75 | $ | 1.25 | ||||||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING | ||||||||||||||||||
| Basic | 193.8 | 195.5 | 196.9 | |||||||||||||||
| Diluted | 194.4 | 196.1 | 197.3 | |||||||||||||||
| CASH DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.2625 | $ | 0.2625 | $ | 0.175 | ||||||||||||
(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) | |||||||||||||
| Six months ended | |||||||||||||
| In millions, except per share amounts | June 26, 2011 | June 27, 2010 | |||||||||||
| NET SALES | $ | 8,501 | $ | 5,686 | |||||||||
| Cost of sales | 6,341 | 4,332 | |||||||||||
| GROSS MARGIN | 2,160 | 1,354 | |||||||||||
| OPERATING EXPENSES AND INCOME | |||||||||||||
| Selling, general and administrative expenses | 852 | 689 | |||||||||||
| Research, development and engineering expenses | 286 | 188 | |||||||||||
| Equity, royalty and interest income from investees (Note 1) | 213 | 173 | |||||||||||
| Gain on sale of business (Note 2) | 68 | - | |||||||||||
| Other operating (expense) income, net | (6 | ) | (8 | ) | |||||||||
| OPERATING INCOME | 1,297 | 642 | |||||||||||
| Interest income | 16 | 8 | |||||||||||
| Interest expense | 23 | 18 | |||||||||||
| Other income (expense), net | (6 | ) | 17 | ||||||||||
| INCOME BEFORE INCOME TAXES | 1,284 | 649 | |||||||||||
| Income tax expense (Note 3) | 382 | 209 | |||||||||||
| CONSOLIDATED NET INCOME | 902 | 440 | |||||||||||
| Less: Net income attributable to noncontrolling interests | 54 | 45 | |||||||||||
| NET INCOME ATTRIBUTABLE TO CUMMINS INC. | $ | 848 | $ | 395 | |||||||||
|
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. |
|||||||||||||
| Basic | $ | 4.36 | $ | 2.00 | |||||||||
| Diluted | $ | 4.34 | $ | 2.00 | |||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING | |||||||||||||
| Basic | 194.6 | 197.6 | |||||||||||
| Diluted | 195.2 | 197.9 | |||||||||||
| CASH DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.5250 | $ | 0.35 | |||||||||
(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) | ||||||||||||||||
| June 26, | December 31, | |||||||||||||||
| In millions, except par value | 2011 | 2010 | ||||||||||||||
| ASSETS | ||||||||||||||||
| Current assets | ||||||||||||||||
| Cash and cash equivalents | $ | 1,111 | $ | 1,023 | ||||||||||||
| Marketable securities | 363 | 339 | ||||||||||||||
| Total cash, cash equivalents and marketable securities | 1,474 | 1,362 | ||||||||||||||
| Accounts and notes receivable, net | 2,780 | 2,243 | ||||||||||||||
| Inventories | 2,275 | 1,977 | ||||||||||||||
| Deferred income taxes | 305 | 314 | ||||||||||||||
| Prepaid expenses and other current assets | 303 | 393 | ||||||||||||||
| Total current assets | 7,137 | 6,289 | ||||||||||||||
| Long-term assets | ||||||||||||||||
| Property, plant and equipment | 5,103 | 4,927 | ||||||||||||||
| Accumulated depreciation | (2,986 | ) | (2,886 | ) | ||||||||||||
| Property, plant and equipment, net | 2,117 | 2,041 | ||||||||||||||
| Investments and advances related to equity method investees | 761 | 734 | ||||||||||||||
| Goodwill | 348 | 367 | ||||||||||||||
| Other intangible assets, net | 216 | 222 | ||||||||||||||
| Deferred income taxes | 115 | 203 | ||||||||||||||
| Other assets | 619 | 546 | ||||||||||||||
| Total assets | $ | 11,313 | $ | 10,402 | ||||||||||||
| LIABILITIES | ||||||||||||||||
| Current liabilities | ||||||||||||||||
| Loans payable | $ | 59 | $ | 82 | ||||||||||||
| Accounts payable (principally trade) | 1,686 | 1,362 | ||||||||||||||
| Current portion of accrued product warranty | 429 | 421 | ||||||||||||||
| Accrued compensation, benefits and retirement costs | 419 | 468 | ||||||||||||||
| Deferred revenue | 202 | 182 | ||||||||||||||
| Taxes payable (including taxes on income) | 255 | 202 | ||||||||||||||
| Other accrued expenses | 663 | 543 | ||||||||||||||
| Total current liabilities | 3,713 | 3,260 | ||||||||||||||
| Long-term liabilities | ||||||||||||||||
| Long-term debt | 702 | 709 | ||||||||||||||
| Pensions | 110 | 195 | ||||||||||||||
| Postretirement benefits other than pensions | 432 | 439 | ||||||||||||||
| Other liabilities and deferred revenue | 839 | 803 | ||||||||||||||
| Total liabilities | 5,796 | 5,406 | ||||||||||||||
| EQUITY | ||||||||||||||||
| Cummins Inc. shareholders’ equity | ||||||||||||||||
| Common stock, $2.50 par value, 500 shares authorized, 222.1 and 221.8 shares issued | 1,968 | 1,934 | ||||||||||||||
| Retained earnings | 5,191 | 4,445 | ||||||||||||||
| Treasury stock, at cost, 27.4 and 24.0 shares | (1,333 | ) | (964 | ) | ||||||||||||
| Common stock held by employee benefits trust, at cost, 1.9 and 2.1 shares | (23 | ) | (25 | ) | ||||||||||||
| Accumulated other comprehensive loss | ||||||||||||||||
| Defined benefit postretirement plans | (613 | ) | (646 | ) | ||||||||||||
| Other | (32 | ) | (74 | ) | ||||||||||||
| Total accumulated other comprehensive loss | (645 | ) | (720 | ) | ||||||||||||
| Total Cummins Inc. shareholders’ equity | 5,158 | 4,670 | ||||||||||||||
| Noncontrolling interests | 359 | 326 | ||||||||||||||
| Total equity | 5,517 | 4,996 | ||||||||||||||
| Total liabilities and equity | $ | 11,313 | $ | 10,402 | ||||||||||||
(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) | ||||||||||||||
| Six months ended | ||||||||||||||
| June 26, | June 27, | |||||||||||||
| In millions | 2011 | 2010 | ||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||
| Consolidated net income | $ | 902 | $ | 440 | ||||||||||
| Adjustments to reconcile consolidated net income to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | 159 | 161 | ||||||||||||
| Gain on sale of business (Note 2) | (68 | ) | - | |||||||||||
| Gain on fair value adjustment for consolidated investee | - | (12 | ) | |||||||||||
| Deferred income taxes | 87 | 43 | ||||||||||||
| Equity in income of investees, net of dividends | 2 | (49 | ) | |||||||||||
| Pension contributions in excess of expense | (47 | ) | (116 | ) | ||||||||||
| Excess tax benefits on stock based awards | (4 | ) | (7 | ) | ||||||||||
| Other post-retirement benefits payments in excess of expense | (10 | ) | (7 | ) | ||||||||||
| Stock-based compensation expense | 18 | 11 | ||||||||||||
| Translation and hedging activities | (6 | ) | 3 | |||||||||||
| Changes in current assets and liabilities, net of acquisitions and divestitures: | ||||||||||||||
| Accounts and notes receivable | (513 | ) | (57 | ) | ||||||||||
| Inventories | (290 | ) | (301 | ) | ||||||||||
| Other current assets | 11 | 1 | ||||||||||||
| Accounts payable | 307 | 239 | ||||||||||||
| Accrued expenses | 169 | (14 | ) | |||||||||||
| Changes in other liabilities and deferred revenue | 58 | 66 | ||||||||||||
| Other, net | (31 | ) | 26 | |||||||||||
| Net cash provided by operating activities | 744 | 427 | ||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||||
| Capital expenditures | (215 | ) | (91 | ) | ||||||||||
| Investments in internal use software | (22 | ) | (22 | ) | ||||||||||
| Proceeds from disposals of property, plant and equipment | 5 | 42 | ||||||||||||
| Investments in and advances to equity investees | (20 | ) | (1 | ) | ||||||||||
| Proceeds from sale of business, net of cash sold (Note 2) | 111 | - | ||||||||||||
| Acquisition of businesses, net of cash acquired | - | (71 | ) | |||||||||||
| Investments in marketable securities—acquisitions | (361 | ) | (358 | ) | ||||||||||
| Investments in marketable securities—liquidations | 343 | 278 | ||||||||||||
| Cash flows from derivatives not designated as hedges | 6 | (18 | ) | |||||||||||
| Other, net | 2 | (2 | ) | |||||||||||
| Net cash used in investing activities | (151 | ) | (243 | ) | ||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||||
| Proceeds from borrowings | 60 | 85 | ||||||||||||
| Payments on borrowings and capital lease obligations | (94 | ) | (37 | ) | ||||||||||
| Net borrowings under short-term credit agreements | 11 | (1 | ) | |||||||||||
| Distributions to noncontrolling interests | (26 | ) | (4 | ) | ||||||||||
| Dividend payments on common stock | (102 | ) | (70 | ) | ||||||||||
| Repurchases of common stock | (373 | ) | (162 | ) | ||||||||||
| Excess tax benefits on stock-based awards | 4 | 7 | ||||||||||||
| Other, net | 7 | 9 | ||||||||||||
| Net cash used in financing activities | (513 | ) | (173 | ) | ||||||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 8 | (17 | ) | |||||||||||
| Net increase (decrease) in cash and cash equivalents | 88 | (6 | ) | |||||||||||
| Cash and cash equivalents at beginning of year | 1,023 | 930 | ||||||||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 1,111 | $ | 924 | ||||||||||
(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) |
|||||||||||||||||||||
| Engine |
Power |
Components | Distribution |
Non-segment |
Total | ||||||||||||||||
| In millions | |||||||||||||||||||||
| Three months ended June 26, 2011 | |||||||||||||||||||||
| External sales | $ | 2,476 | $ | 649 | $ | 741 | $ | 775 | $ | - | $ | 4,641 | |||||||||
| Intersegment sales | 424 | 260 | 291 | 10 | (985) | - | |||||||||||||||
| Total sales | 2,900 | 909 | 1,032 | 785 | (985) | 4,641 | |||||||||||||||
| Depreciation and amortization(2) | 44 | 11 | 18 | 5 | - | 78 | |||||||||||||||
| Research, development and engineering expenses | 102 | 12 | 43 | - | - | 157 | |||||||||||||||
| Equity, royalty and interest income from investees | 49 | 13 | 9 | 46 | - | 117 | |||||||||||||||
| Interest income | 6 | 3 | 1 | - | - | 10 | |||||||||||||||
| Segment EBIT | 377 | 105 | 120 | 106 | 67 | 775 | |||||||||||||||
| Three months ended March 27, 2011 | |||||||||||||||||||||
| External sales | $ | 2,006 | $ | 557 | $ | 660 | $ | 637 | $ | - | $ | 3,860 | |||||||||
| Intersegment sales | 385 | 238 | 264 | 5 | (892) | - | |||||||||||||||
| Total sales | 2,391 | 795 | 924 | 642 | (892) | 3,860 | |||||||||||||||
| Depreciation and amortization(2) | 45 | 10 | 18 | 6 | - | 79 | |||||||||||||||
| Research, development and engineering expenses | 80 | 11 | 37 | 1 | - | 129 | |||||||||||||||
| Equity, royalty and interest income from investees | 42 | 8 | 8 | 38 | - | 96 | |||||||||||||||
| Interest income | 3 | 1 | 1 | 1 | - | 6 | |||||||||||||||
| Segment EBIT | 290 | 89 | 105 | 89 | (41) | 532 | |||||||||||||||
| Three months ended June 27, 2010 | |||||||||||||||||||||
| External sales | $ | 1,595 | $ | 518 | $ | 522 | $ | 573 | $ | - | $ | 3,208 | |||||||||
| Intersegment sales | 304 | 190 | 207 | 3 | (704) | - | |||||||||||||||
| Total sales | 1,899 | 708 | 729 | 576 | (704) | 3,208 | |||||||||||||||
| Depreciation and amortization(2) | 42 | 11 | 21 | 7 | - | 81 | |||||||||||||||
| Research, development and engineering expenses | 62 | 8 | 26 | - | - | 96 | |||||||||||||||
| Equity, royalty and interest income from investees | 52 | 9 | 6 | 30 | - | 97 | |||||||||||||||
| Interest income | 2 | 1 | 1 | 1 | - | 5 | |||||||||||||||
| Segment EBIT | 197 | 76 | 75 | 69 | (16) | 401 | |||||||||||||||
| Six months ended June 26, 2011 | |||||||||||||||||||||
| External sales | $ | 4,482 | $ | 1,206 | $ | 1,401 | $ | 1,412 | $ | - | $ | 8,501 | |||||||||
| Intersegment sales | 809 | 498 | 555 | 15 | (1,877) | - | |||||||||||||||
| Total sales | 5,291 | 1,704 | 1,956 | 1,427 | (1,877) | 8,501 | |||||||||||||||
| Depreciation and amortization(2) | 89 | 21 | 36 | 11 | - | 157 | |||||||||||||||
| Research, development and engineering expenses | 182 | 23 | 80 | 1 | - | 286 | |||||||||||||||
| Equity, royalty and interest income from investees | 91 | 21 | 17 | 84 | - | 213 | |||||||||||||||
| Interest income | 9 | 4 | 2 | 1 | - | 16 | |||||||||||||||
| Segment EBIT | 667 | 194 | 225 | 195 | 26 | 1,307 | |||||||||||||||
| Six months ended June 27, 2010 | |||||||||||||||||||||
| External sales | $ | 2,768 | $ | 896 | $ | 975 | $ | 1,047 | $ | - | $ | 5,686 | |||||||||
| Intersegment sales | 554 | 329 | 384 | 5 | (1,272) | - | |||||||||||||||
| Total sales | 3,322 | 1,225 | 1,359 | 1,052 | (1,272) | 5,686 | |||||||||||||||
| Depreciation and amortization(2) | 83 | 21 | 41 | 14 | - | 159 | |||||||||||||||
| Research, development and engineering expenses | 122 | 15 | 51 | - | - | 188 | |||||||||||||||
| Equity, royalty and interest income from investees | 87 | 15 | 11 | 60 | - | 173 | |||||||||||||||
| Interest income | 4 | 2 | 1 | 1 | - | 8 | |||||||||||||||
| Segment EBIT | 330 | 110 | 132 | 141 | (46) | 667 | |||||||||||||||
| (1) | Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. The three and six months ended June 26, 2011, include a $68 million gain related to the sale of our exhaust business from the Components segment. The gain has been excluded from segment results as it was not considered by management in its evaluation of operating results for the three and six months ended June 26, 2011. There were no other significant unallocated corporate expenses for the three and six months ended June 26, 2011 and June 27, 2010. | |
| (2) | Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount that is included in the Condensed Consolidated Statements of Income as “Interest expense.” | |
CUMMINS INC. AND SUBSIDIARIES
RECONCILIATION OF SEGMENT
INFORMATION
(Unaudited)
A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Income is shown in the table below:
| Three months ended | Six months ended | ||||||||||||||||||
| June 26, | March 27, | June 27, | June 26, | June 27, | |||||||||||||||
| In millions | 2011 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||
| Segment EBIT | $ | 775 | $ | 532 | $ | 401 | $ | 1,307 | $ | 667 | |||||||||
| Less: | |||||||||||||||||||
| Interest expense | 13 | 10 | 9 | 23 | 18 | ||||||||||||||
| Income before income taxes | $ | 762 | $ | 522 | $ | 392 | $ | 1,284 | $ | 649 | |||||||||
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 26, | March 27, | June 27, | June 26, | June 27, | ||||||||||||||||||||
| In millions | 2011 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||
| Distribution Entities | ||||||||||||||||||||||||
| North American distributors | $ | 35 | $ | 30 | $ | 23 | $ | 65 | $ | 46 | ||||||||||||||
| Komatsu Cummins Chile, Ltda | 6 | 4 | 3 | 10 | 6 | |||||||||||||||||||
| All other distributors | 1 | 1 | 1 | 2 | 2 | |||||||||||||||||||
| Manufacturing Entities | ||||||||||||||||||||||||
| Dongfeng Cummins Engine Company, Ltd. | 26 | 23 | 34 | 49 | 52 | |||||||||||||||||||
| Chongqing Cummins Engine Company, Ltd. | 19 | 12 | 13 | 31 | 23 | |||||||||||||||||||
| Shanghai Fleetguard Filter Co., Ltd. | 4 | 4 | 4 | 8 | 6 | |||||||||||||||||||
| Tata Cummins, Ltd. | 3 | 4 | 3 | 7 | 7 | |||||||||||||||||||
| Cummins Westport, Inc. | 3 | 1 | 2 | 4 | 5 | |||||||||||||||||||
| Valvoline Cummins, Ltd. | 2 | 2 | 3 | 4 | 5 | |||||||||||||||||||
| Komatsu manufacturing alliances | (1 | ) | 2 | 3 | 1 | 5 | ||||||||||||||||||
| Bejing Foton Cummins Engine Co., Ltd. | (1 | ) | (2 | ) | (4 | ) | (3 | ) | (6 | ) | ||||||||||||||
| All other manufacturers | 6 | 6 | 4 | 12 | 7 | |||||||||||||||||||
| Cummins share of net income | 103 | 87 | 89 | 190 | 158 | |||||||||||||||||||
| Royalty and interest income | 14 | 9 | 8 | 23 | 15 | |||||||||||||||||||
| Equity, royalty and interest income from investees | $ | 117 | $ | 96 | $ | 97 | $ | 213 | $ | 173 | ||||||||||||||
NOTE 2. SALE OF EXHAUST BUSINESS
In January 2011, we reached an agreement to sell certain assets and liabilities of our exhaust business which manufactures exhaust products and select components for emission systems for a variety of applications. The transaction closed in the second quarter of 2011. This business was historically included in our Components segment. The sales price was $123 million. We recognized a pre-tax gain on the sale of $68 million, which included an allocation of goodwill of $19 million. The transaction has a working capital adjustment mechanism that will be determined in the third quarter. We do not expect a significant change to the measurement of the gain. The gain has been excluded from segment results as it was not considered by management in its evaluation of operating results for the three and six months ended June 26, 2011.
Sales for this business were $171 million, $126 million and $169 million in 2010, 2009 and 2008, respectively. Income before income taxes for this business was approximately $22 million, $11 million and $19 million in 2010, 2009 and 2008, respectively.
We will enter into supply and other agreements with the operations that will represent ongoing involvement and as such, the results of these operations will not be presented as discontinued operations.
NOTE 3. INCOME TAXES
Our effective tax rate for the year is expected to approximate 29.5 percent, absent any discrete period activity. Our tax rate is generally less than the 35 percent U.S. income tax rate primarily due to lower tax rates on foreign income and research tax credits. The tax rates for the three and six month periods ended June 26, 2011, were 29.5 percent and 29.8 percent. The tax rate for the three and six month periods ended June 26, 2011, includes a discrete tax charge of $4 million related to the enactment of state law changes in Indiana.
Our effective tax rates for the comparable prior year periods were 31.1 percent and 32.2 percent, respectively. The tax rate for the six month period includes a discrete tax charge of $7 million related to the enactment of the “Patient Protection and Affordable Care Act.” The lower rate in 2011 compared to 2010 is a result of the geographic mix of earnings.
CUMMINS INC. AND SUBSIDIARIES
FINANCIAL MEASURES THAT
SUPPLEMENT GAAP
(Unaudited)
Earnings before interest, 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 | Six months ended | ||||||||||||||||||||||||
| June 26, | March 27, | June 27, | June 26, | June 27, | |||||||||||||||||||||
| In millions | 2011 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||||||
| Earnings before interest expense, income taxes | |||||||||||||||||||||||||
| and gain on sale of business | $ | 707 | $ | 532 | $ | 401 | $ | 1,239 | $ | 667 | |||||||||||||||
| Earnings before interest expense, income taxes and | |||||||||||||||||||||||||
| gain on divestiture as a percentage of net sales | 15.2 | % | 13.8 | % | 12.5 | % | 14.6 | % | 11.7 | % | |||||||||||||||
| Add: | |||||||||||||||||||||||||
| Gain on sale of business | 68 | - | - | 68 | - | ||||||||||||||||||||
| Earnings before interest expense and income taxes | 775 | 532 | 401 | 1,307 | 667 | ||||||||||||||||||||
| EBIT as a percentage of net sales | 16.7 | % | 13.8 | % | 12.5 | % | 15.4 | % | 11.7 | % | |||||||||||||||
| Less: | |||||||||||||||||||||||||
| Interest expense | 13 | 10 | 9 | 23 | 18 | ||||||||||||||||||||
| Income tax expense | 225 | 157 | 122 | 382 | 209 | ||||||||||||||||||||
| Consolidated net income | 537 | 365 | 270 | 902 | 440 | ||||||||||||||||||||
| Less: | |||||||||||||||||||||||||
| Net income attributable to noncontrolling interests | 32 | 22 | 24 | 54 | 45 | ||||||||||||||||||||
| Net income attributable to Cummins Inc. | $ | 505 | $ | 343 | $ | 246 | $ | 848 | $ | 395 | |||||||||||||||
| Net income attributable to Cummins Inc. as a | |||||||||||||||||||||||||
| percentage of net sales | 10.9 | % | 8.9 | % | 7.7 | % | 10.0 | % | 6.9 | % | |||||||||||||||
Net income and diluted earnings per share (EPS) attributable to Cummins Inc. excluding gain on sale of business
We believe this is a useful measure of our operating performance for the periods presented as it illustrates our underlying operating performance and trends without regard to the gain related to the sale of our exhaust business. 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. excluding gain on sale of business to “Net income attributable to Cummins Inc.” for the three and six months ended June 26, 2011.
| Three months ended | Six months ended | ||||||||||||
| June 26, 2011 | June 26, 2011 | ||||||||||||
| In millions | Net Income | Diluted EPS | Net Income | Diluted EPS | |||||||||
| Net income attributable to Cummins Inc. excluding the gain on sale of business | $ | 468 | $ | 2.41 | $ | 811 | $ | 4.15 | |||||
| Add: | |||||||||||||
| Gain on sale of business(1) | 37 | 0.19 | 37 | 0.19 | |||||||||
| Net income attributable to Cummins Inc. | $ | 505 | $ | 2.60 | $ | 848 | $ | 4.34 | |||||
| (1) The gain has been excluded from operating results as it was not considered by management in its evaluation of performance for the three and six months ended June 26, 2011. | |||||||||||||
CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)
Engine segment net sales by market
| 2011 | ||||||||||||||||||
| In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||
| Heavy-duty truck | $ | 485 | $ | 693 | $ | - | $ | - | $ | 1,178 | ||||||||
| Medium-duty truck and bus | 474 | 608 | - | - | 1,082 | |||||||||||||
| Light-duty auto and RV | 296 | 310 | - | - | 606 | |||||||||||||
| Industrial | 855 | 988 | - | - | 1,843 | |||||||||||||
| Stationary power | 281 | 301 | - | - | 582 | |||||||||||||
| Total sales | $ | 2,391 | $ | 2,900 | $ | - | $ | - | $ | 5,291 | ||||||||
| 2010 | ||||||||||||||||||
| In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||
| Heavy-duty truck | $ | 252 | $ | 340 | $ | 395 | $ | 516 | $ | 1,503 | ||||||||
| Medium-duty bus and truck | 217 | 352 | 430 | 436 | 1,435 | |||||||||||||
| Light-duty auto and RV | 207 | 296 | 239 | 280 | 1,022 | |||||||||||||
| Industrial | 577 | 656 | 700 | 956 | 2,889 | |||||||||||||
| Stationary power | 170 | 255 | 305 | 309 | 1,039 | |||||||||||||
| Total sales | $ | 1,423 | $ | 1,899 | $ | 2,069 | $ | 2,497 | $ | 7,888 | ||||||||
Unit shipments by engine classification (including unit shipments to Power Generation)
| 2011 | ||||||||||||||||||
| Units | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||
| Midrange | 109,400 | 131,300 | - | - | 240,700 | |||||||||||||
| Heavy-duty | 20,000 | 29,900 | - | - | 49,900 | |||||||||||||
| High-horsepower | 4,900 | 5,700 | - | - | 10,600 | |||||||||||||
| Total units | 134,300 | 166,900 | - | - | 301,200 | |||||||||||||
| 2010 | ||||||||||||||||||
| Units | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||
| Mid-range | 69,100 | 90,500 | 93,500 | 115,800 | 368,900 | |||||||||||||
| Heavy-duty | 8,700 | 14,500 | 15,200 | 22,800 | 61,200 | |||||||||||||
| High horsepower | 3,400 | 4,800 | 4,900 | 5,400 | 18,500 | |||||||||||||
| Total units | 81,200 | 109,800 | 113,600 | 144,000 | 448,600 | |||||||||||||
Power generation segment sales by business
| 2011 | ||||||||||||||||||
| In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||
| Commercial products | $ | 505 | $ | 568 | $ | - | $ | - | $ | 1,073 | ||||||||
| Generator technologies | 153 | 190 | - | - | 343 | |||||||||||||
| Commercial projects | 55 | 58 | - | - | 113 | |||||||||||||
| Consumer | 50 | 53 | - | - | 103 | |||||||||||||
| Power electronics | 32 | 40 | - | - | 72 | |||||||||||||
| Total sales | $ | 795 | $ | 909 | $ | - | $ | - | $ | 1,704 | ||||||||
| 2010 | ||||||||||||||||||
| In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||
| Commercial products | $ | 307 | $ | 436 | $ | 519 | $ | 569 | $ | 1,831 | ||||||||
| Generator technologies | 107 | 135 | 140 | 167 | 549 | |||||||||||||
| Commercial projects | 33 | 57 | 49 | 83 | 222 | |||||||||||||
| Consumer | 43 | 49 | 49 | 45 | 186 | |||||||||||||
| Power electronics | 27 | 31 | 34 | 39 | 131 | |||||||||||||
| Total sales | $ | 517 | $ | 708 | $ | 791 | $ | 903 | $ | 2,919 | ||||||||
CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)
Component segment sales by business
| 2011 | ||||||||||||||||||
| In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||
| Turbo technologies | $ | 297 | $ | 314 | $ | - | $ | - | $ | 611 | ||||||||
| Emission solutions | 273 | 319 | - | - | 592 | |||||||||||||
| Filtration | 255 | 287 | - | - | 542 | |||||||||||||
| Fuel systems | 99 | 120 | - | - | 219 | |||||||||||||
| Elimination | - | (8) | - | - | (8) | |||||||||||||
| Total sales | $ | 924 | $ | 1,032 | $ | - | $ | - | $ | 1,956 | ||||||||
| 2010 | ||||||||||||||||||
| In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||
| Turbo technologies | $ | 200 | $ | 226 | $ | 239 | $ | 283 | $ | 948 | ||||||||
| Emission solutions | 137 | 170 | 192 | 251 | 750 | |||||||||||||
| Filtration | 228 | 250 | 248 | 285 | 1,011 | |||||||||||||
| Fuel systems | 65 | 83 | 90 | 99 | 337 | |||||||||||||
| Total sales | $ | 630 | $ | 729 | $ | 769 | $ | 918 | $ | 3,046 | ||||||||
Distribution segment sales by product
| 2011 | ||||||||||||||||||
| In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||
| Parts and filtration | $ | 235 | $ | 271 | $ | - | $ | - | $ | 506 | ||||||||
| Power generation | 145 | 195 | - | - | 340 | |||||||||||||
| Engines | 140 | 186 | - | - | 326 | |||||||||||||
| Service | 122 | 133 | - | - | 255 | |||||||||||||
| Total sales | $ | 642 | $ | 785 | $ | - | $ | - | $ | 1,427 | ||||||||
| 2010 | ||||||||||||||||||
| In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||
| Parts and filtration | $ | 193 | $ | 221 | $ | 220 | $ | 248 | $ | 882 | ||||||||
| Power generation | 99 | 135 | 125 | 157 | 516 | |||||||||||||
| Engines | 83 | 109 | 112 | 162 | 466 | |||||||||||||
| Service | 101 | 111 | 116 | 132 | 460 | |||||||||||||
| Total sales | $ | 476 | $ | 576 | $ | 573 | $ | 699 | $ | 2,324 | ||||||||