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: April 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 April 30, 2013, Cummins Inc. (“Cummins,” “the Company,” “the registrant,” “we,” “our,” or, “us”) issued a press release announcing its first quarter 2013 results.

Item 9.01. Financial Statements and Exhibits.

(d)

The following exhibit is furnished pursuant to Item 2.02 herewith:

99-Press Release dated April 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: April 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
		March 31,		December 31,		April 1,
In millions, except per share amounts		2013		2012		2012
NET SALES		$	3,922	$	4,292	$	4,472
	Cost of sales		2,965		3,234		3,274
GROSS MARGIN			957		1,058		1,198

OPERATING EXPENSES AND INCOME
	Selling, general and administrative expenses		444		482		475
	Research, development and engineering expenses		182		174		181
	Equity, royalty and interest income from investees (Note 1)		82		82		104
	Other operating income (expense), net		1		(19)		2
OPERATING INCOME			414		465		648

	Interest income		5		5		8
	Interest expense		6		7		8
	Other income (expense), net		18		10		2
INCOME BEFORE INCOME TAXES			431		473		650

	Income tax expense (Note 2)		119		75		175
CONSOLIDATED NET INCOME			312		398		475

	Less: Net income attributable to noncontrolling interests		30		29		20
NET INCOME ATTRIBUTABLE TO CUMMINS INC.		$	282	$	369	$	455

EARNINGS PER COMMON SHARE ATTRIBUTABLE
	TO CUMMINS INC.
	Basic	$	1.50	$	1.96	$	2.39
	Diluted	$	1.49	$	1.95	$	2.38

WEIGHTED AVERAGE SHARES OUTSTANDING
	Basic		188.4		188.4		190.4
	Diluted		188.8		188.8		190.8

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 BALANCE SHEETS
(Unaudited) (a)

In millions, except par value						March 31, 2013		December 31, 2012
ASSETS
Current assets
	Cash and cash equivalents					$	1,483	$	1,369
	Marketable securities						196		247
		Total cash, cash equivalents and marketable securities					1,679		1,616
	Accounts and notes receivable, net						2,496		2,475
	Inventories						2,387		2,221
	Prepaid expenses and other current assets						658		855
			Total current assets				7,220		7,167
Long-term assets
	Property, plant and equipment						5,942		5,876
		Accumulated depreciation					(3,173)		(3,152)
		Property, plant and equipment, net					2,769		2,724
	Investments and advances related to equity method investees						944		897
	Goodwill						444		445
	Other intangible assets, net						366		369
	Other assets						1,013		946
				Total assets		$	12,756	$	12,548

LIABILITIES
Current liabilities
	Loans payable					$	13	$	16
	Accounts payable (principally trade)						1,554		1,339
	Current maturities of long-term debt						54		61
	Current portion of accrued product warranty						396		386
	Accrued compensation, benefits and retirement costs						280		400
	Deferred revenue						230		215
	Taxes payable (including taxes on income)						203		173
	Other accrued expenses						527		546
			Total current liabilities				3,257		3,136
Long-term liabilities
	Long-term debt						736		698
	Postretirement benefits other than pensions						422		432
	Other liabilities and deferred revenue						1,296		1,308
				Total liabilities			5,711		5,574

EQUITY
Cummins Inc. shareholders’ equity
	Common stock, $2.50 par value, 500 shares authorized, 222.2 and 222.4 shares issued						2,064		2,058
	Retained earnings						7,530		7,343
	Treasury stock, at cost, 32.5 and 32.6 shares						(1,827)		(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					(775)		(794)
		Other					(320)		(156)
		Total accumulated other comprehensive loss					(1,095)		(950)
			Total Cummins Inc. shareholders’ equity				6,655		6,603
	Noncontrolling interests						390		371
				Total equity			7,045		6,974
					Total liabilities and equity	$	12,756	$	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)

			Three months ended
In millions			March 31, 2013		April 1, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
	Consolidated net income		$	312	$	475
	Adjustments to reconcile consolidated net income to net cash provided by operating activities
		Depreciation and amortization		98		85
		Gain on fair value adjustment for consolidated investee		(7)		-
		Deferred income taxes		5		(27)
		Equity in income of investees, net of dividends		(36)		(59)
		Pension contributions in excess of expense		(54)		(27)
		Other post-retirement benefits payments in excess of expense		(8)		(4)
		Stock-based compensation expense		7		7
		Excess tax benefits on stock-based awards		(7)		(11)
		Translation and hedging activities		(5)		10
	Changes in current assets and liabilities, net of acquisitions
		Accounts and notes receivable		(29)		(135)
		Inventories		(177)		(209)
		Other current assets		158		(28)
		Accounts payable		204		148
		Accrued expenses		(142)		(196)
	Changes in other liabilities and deferred revenue			47		29
	Other, net			62		(37)
Net cash provided by operating activities				428		21

CASH FLOWS FROM INVESTING ACTIVITIES
	Capital expenditures			(114)		(126)
	Investments in internal use software			(12)		(16)
	Investments in and advances to equity investees			(24)		(5)
	Acquisition of businesses, net of cash acquired			(17)		(5)
	Investments in marketable securities—acquisitions			(133)		(146)
	Investments in marketable securities—liquidations			187		184
	Cash flows from derivatives not designated as hedges			(30)		11
	Other, net			-		1
Net cash used in investing activities				(143)		(102)

CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from borrowings			-		12
	Payments on borrowings and capital lease obligations			(27)		(38)
	Net borrowings (payments) under short-term credit agreements			15		-
	Distributions to noncontrolling interests			(19)		(22)
	Dividend payments on common stock			(95)		(77)
	Repurchases of common stock			-		(8)
	Excess tax benefits on stock-based awards			7		11
	Other, net			16		9
Net cash used in financing activities				(103)		(113)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS				(68)		27
Net increase (decrease) in cash and cash equivalents				114		(167)
Cash and cash equivalents at beginning of year				1,369		1,484
CASH AND CASH EQUIVALENTS AT END OF PERIOD			$	1,483	$	1,317

(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)

	In millions		Engine		Components		Power Generation		Distribution		Non-segment Items⁽¹⁾		Total
	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 December 31, 2012
	External sales		$	2,177	$	662	$	549	$	904	$	-	$	4,292
	Intersegment sales			329		277		216		3		(825)		-
		Total sales		2,506		939		765		907		(825)		4,292
	Depreciation and amortization⁽²⁾			50		23		13		11		-		97
	Research, development and engineering expenses			92		60		20		2		-		174
	Equity, royalty and interest income from investees			27		6		8		41		-		82
	Interest income			2		-		2		1		-		5
	Segment EBIT			252		78		42		84		24		480
	Add back restructuring and other charges			20		6		12		14		-		52
		Segment EBIT excluding restructuring and other charges		272		84		54		98		24		532

	Segment EBIT as a percentage of total sales			10.1%		8.3%		5.5%		9.3%				11.2%
	Segment EBIT excluding restructuring and other
		charges as a percentage of total sales		10.9%		8.9%		7.1%		10.8%				12.4%

	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

	Segment EBIT as a percentage of total sales			13.3%		13.0%		9.7%		12.1%				14.7%

(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 March 31, 2013 and April 1, 2012. For the three months ended December 31, 2012, unallocated corporate expenses included a $20 million reserve ($12 million after-tax) related to legal matters. 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.

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
			March 31,		December 31,		April 1,
In millions			2013		2012		2012
Segment EBIT excluding restructuring and other charges			$	437	$	532	$	658
Add: Restructuring and other charges				-		(52)		-
	Segment EBIT			437		480		658
Less: Interest expense				6		7		8
		Income before income taxes	$	431	$	473	$	650

CUMMINS INC. AND SUBSIDIARIES

SEGMENT 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
			March 31,		December 31,		April 1,
In millions			2013		2012		2012
Distribution Entities
North American distributors			$	35	$	32	$	40
Komatsu Cummins Chile, Ltda.				5		6		5
All other distributors				-		1		1
Manufacturing Entities
Chongqing Cummins Engine Company, Ltd.				12		12		18
Dongfeng Cummins Engine Company, Ltd.				12		10		16
Shanghai Fleetguard Filter Co., Ltd.				3		3		3
Valvoline Cummins, Ltd.				3		2		2
Tata Cummins, Ltd.				1		4		4
Beijing Foton Cummins Engine Co., Ltd.				1		2		(2)
Cummins Westport, Inc.				-		3		5
Komatsu manufacturing alliances				(1)		(2)		(1)
All other manufacturers				2		2		1
	Cummins share of net income			73		75		92
Royalty and interest income				9		7		12
		Equity, royalty and interest income from investees	$	82	$	82	$	104

NOTE 2. INCOME TAXES

Our effective tax rate for the year is expected to approximate 29.5 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 rate for the three month period ended March 31, 2013, was 27.6 percent. This tax rate includes a discrete tax benefit of $28 million attributable to the 2012 research credit as well as a discrete tax expense 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. The expiration of this credit resulted in a higher income tax provision of $28 million in 2012. 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 effective tax rate for the three months ended April 1, 2012, was 26.9 percent. The increase in the 2013 effective tax rate 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.

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 one-time income tax items and restructuring charges. 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 March 31, 2013, December 31, 2012 and April 1, 2012.

		Three months ended
		March 31, 2013				December 31, 2012				April 1, 2012
In millions		Net Income		Diluted EPS		Net Income		Diluted EPS		Net Income		Diluted EPS
Net income attributable to Cummins Inc.		$	282	$	1.49	$	369	$	1.95	$	455	$	2.38
Add
	Restructuring and other charges		-		-		35		0.19		-		-
Less
	One-time tax benefits⁽¹⁾		11		0.05		39		0.21		-		-
Net income attributable to Cummins Inc.
	excluding special items	$	271	$	1.44	$	365	$	1.93	$	455	$	2.38

(1)	The one-time tax items for the three months ended March 31, 2013, included a discrete tax benefit of $28 million attributable to the 2012 research credit as well as a discrete tax expense of $17 million, which relates to the write-off of a deferred tax asset deemed unrecoverable. The one-time tax benefits for the three months ended December 31, 2012, related primarily to benefits resulting from transactions entered into and elections made with respect to our U.K. operations.

CUMMINS INC. AND SUBSIDIARIES

FINANCIAL MEASURES THAT SUPPLEMENT GAAP

(Unaudited)

Earnings before interest expense, income taxes, noncontrolling interests and restructuring and other charges

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 and EBIT excluding restructuring and other charges, non-GAAP financial measures, to “Net income attributable to Cummins Inc.,” for each of the applicable periods:

				Three months ended
				March 31,		December 31,		April 1,
In millions				2013		2012		2012
Earnings before interest expense, income taxes and
	special items			$	437	$	532	$	658

Earnings before interest expense, income taxes and
	special items as a percentage of net sales				*11.1%*		12.4%		14.7%

Less
	Restructuring and other charges				-		52		-

Earnings before interest expense and income taxes				$	437	$	480	$	658

EBIT as a percentage of net sales					*11.1%*		11.2%		14.7%

Less
	Interest expense				6		7		8
	Income tax expense				119		75		175
		Consolidated net income			312		398		475

Less
	Net income attributable to noncontrolling interests				30		29		20
			Net income attributable to Cummins Inc.	$	282	$	369	$	455

Net income attributable to Cummins Inc. as a
	percentage of net sales				*7.2%*		8.6%		10.2%

CUMMINS INC. AND SUBSIDIARIES

BUSINESS UNIT SALES DATA

(Unaudited)

Engine segment net sales by market

2013
In millions		Q1		Q2		Q3		Q4		YTD
Heavy-duty truck		$	654	$	-	$	-	$	-	$	654
Medium-duty truck and bus			448		-		-		-		448
Light-duty automotive and RV			260		-		-		-		260
Industrial			714		-		-		-		714
Stationary power			227		-		-		-		227
	Total sales	$	2,303	$	-	$	-	$	-	$	2,303

2012
In millions		Q1		Q2		Q3		Q4		YTD
Heavy-duty truck		$	892	$	807	$	656	$	609	$	2,964
Medium-duty truck and bus			526		512		478		575		2,091
Light-duty automotive and RV			286		297		353		343		1,279
Industrial			861		859		766		747		3,233
Stationary power			294		366		274		232		1,166
	Total sales	$	2,859	$	2,841	$	2,527	$	2,506	$	10,733

Unit shipments by engine classification (including unit shipments to Power Generation)

2013
Units		Q1	Q2	Q3	Q4	YTD
Midrange		94,600	-	-	-	94,600
Heavy-duty		24,900	-	-	-	24,900
High-horsepower		4,200	-	-	-	4,200
	Total units	123,700	-	-	-	123,700

2012
Units		Q1	Q2	Q3	Q4	YTD
Midrange		109,000	110,000	113,000	108,500	440,500
Heavy-duty		36,000	33,000	26,000	24,100	119,100
High-horsepower		5,500	5,800	4,600	3,900	19,800
	Total units	150,500	148,800	143,600	136,500	579,400

CUMMINS INC. AND SUBSIDIARIES

BUSINESS UNIT SALES DATA

(Unaudited)

Component segment sales by business

2013
In millions		Q1		Q2		Q3		Q4		YTD
Emission solutions		$	400	$	-	$	-	$	-	$	400
Turbo technologies			266		-		-		-		266
Filtration			255		-		-		-		255
Fuel systems			97		-		-		-		97
	Total sales	$	1,018	$	-	$	-	$	-	$	1,018

2012
In millions		Q1		Q2		Q3		Q4		YTD
Emission solutions		$	404	$	349	$	325	$	337	$	1,415
Turbo technologies			298		297		257		254		1,106
Filtration			270		266		260		252		1,048
Fuel systems			127		124		96		96		443
	Total sales	$	1,099	$	1,036	$	938	$	939	$	4,012

Power generation segment sales by business

2013
In millions		Q1		Q2		Q3		Q4		YTD
Power products		$	409	$	-	$	-	$	-	$	409
Power systems			179		-		-		-		179
Generator technologies			126		-		-		-		126
Power solutions			32		-		-		-		32
	Total sales	$	746	$	-	$	-	$	-	$	746

2012
In millions		Q1		Q2		Q3		Q4		YTD
Power products		$	375	$	459	$	425	$	395	$	1,654
Power systems			188		217		174		178		757
Generator technologies			141		160		138		127		566
Power solutions			76		73		77		65		291
	Total sales	$	780	$	909	$	814	$	765	$	3,268

Distribution segment sales by business

2013
In millions		Q1		Q2		Q3		Q4		YTD
Parts and filtration		$	322	$	-	$	-	$	-	$	322
Power generation			163		-		-		-		163
Engines			152		-		-		-		152
Service			141		-		-		-		141
	Total sales	$	778	$	-	$	-	$	-	$	778

2012
In millions		Q1		Q2		Q3		Q4		YTD
Parts and filtration		$	288	$	302	$	326	$	319	$	1,235
Power generation			186		201		178		242		807
Engines			166		147		157		195		665
Service			135		144		140		151		570
	Total sales	$	775	$	794	$	801	$	907	$	3,277