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Form 8-K CUMMINS INC For: May 03

May 3, 2016 7:49 AM EDT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549


FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report:  May 3, 2016
 
  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))
 
  
 

1


Item 2.02. Results of Operations and Financial Condition.
 
On May 3, 2016, 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 2016, which is furnished herewith as Exhibit 99.

The information furnished pursuant to this Item 2.02, including Exhibit 99, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act.


Item 9.01. Financial Statements and Exhibits.
 
(d)
The following exhibit is furnished pursuant to Item 2.02 herewith: 
99-Press Release dated May 3, 2016


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 3, 2016
 
CUMMINS INC.
 /s/ Marsha L. Hunt
Marsha L. Hunt
Vice President - Corporate Controller
(Principal Accounting Officer)

 

2

CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (a)



 
 
Three months ended
In millions, except per share amounts
 
April 3,
2016
 
March 29,
2015
NET SALES
 
$
4,291

 
$
4,709

Cost of sales
 
3,235

 
3,514

GROSS MARGIN
 
1,056

 
1,195

OPERATING EXPENSES AND INCOME
 
 
 
 
Selling, general and administrative expenses
 
490

 
517

Research, development and engineering expenses
 
166

 
195

Equity, royalty and interest income from investees (Note 1)
 
72

 
68

Other operating expense, net
 
(2
)
 
(3
)
OPERATING INCOME
 
470

 
548

Interest income
 
6

 
5

Interest expense
 
19

 
14

Other income, net
 
8

 
9

INCOME BEFORE INCOME TAXES
 
465

 
548

Income tax expense (Note 2)
 
132

 
144

CONSOLIDATED NET INCOME
 
333

 
404

Less: Net income attributable to noncontrolling interests
 
12

 
17

NET INCOME ATTRIBUTABLE TO CUMMINS INC.
 
$
321

 
$
387

 
 
 
 
 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
 
 
 
 
Basic
 
$
1.87

 
$
2.14

Diluted
 
$
1.87

 
$
2.14

 
 
 
 
 
WEIGHTED AVERAGE SHARES OUTSTANDING
 
 

 
 
Basic
 
171.8

 
180.6

Diluted
 
172.0

 
181.0

 
 
 
 
 
CASH DIVIDENDS DECLARED PER COMMON SHARE
 
$
0.975

 
$
0.78

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






 




3

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


In millions, except par value
 
April 3,
2016
 
December 31,
2015
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
915

 
$
1,711

Marketable securities
 
359

 
100

Total cash, cash equivalents and marketable securities
 
1,274

 
1,811

Accounts and notes receivable, net
 
2,921

 
2,820

Inventories
 
2,759

 
2,707

Prepaid expenses and other current assets
 
514

 
609

Total current assets
 
7,468

 
7,947

Long-term assets
 
 
 
 
Property, plant and equipment
 
7,360

 
7,322

Accumulated depreciation
 
(3,648
)
 
(3,577
)
Property, plant and equipment, net
 
3,712

 
3,745

Investments and advances related to equity method investees
 
1,053

 
975

Goodwill
 
485

 
482

Other intangible assets, net
 
344

 
328

Pension assets
 
763

 
735

Other assets
 
1,002

 
922

Total assets
 
$
14,827

 
$
15,134

 
 
 
 
 
LIABILITIES
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable (principally trade)
 
$
1,809

 
$
1,706

Loans payable
 
117

 
24

Commercial paper
 
50

 

Accrued compensation, benefits and retirement costs
 
302

 
409

Current portion of accrued product warranty
 
350

 
359

Current portion of deferred revenue
 
425

 
403

Other accrued expenses
 
815

 
863

Current maturities of long-term debt
 
49

 
39

Total current liabilities
 
3,917

 
3,803

Long-term liabilities
 
 
 
 
Long-term debt
 
1,614

 
1,576

Postretirement benefits other than pensions
 
339

 
349

Pensions
 
298

 
298

Other liabilities and deferred revenue
 
1,399

 
1,358

Total liabilities
 
$
7,567

 
$
7,384

 
 
 
 
 
EQUITY
 
 
 
 
Cummins Inc. shareholders’ equity
 
 
 
 
Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.4 shares issued
 
$
2,076

 
$
2,178

Retained earnings
 
10,473

 
10,322

Treasury stock, at cost, 52.0 and 47.2 shares
 
(4,203
)
 
(3,735
)
Common stock held by employee benefits trust, at cost, 0.8 and 0.9 shares
 
(9
)
 
(11
)
Accumulated other comprehensive loss
 
(1,417
)
 
(1,348
)
Total Cummins Inc. shareholders’ equity
 
6,920

 
7,406

Noncontrolling interests
 
340

 
344

Total equity
 
$
7,260

 
$
7,750

Total liabilities and equity
 
$
14,827

 
$
15,134

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




4

CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (a)


 
 
Three months ended
In millions
 
April 3,
2016
 
March 29,
2015
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
Consolidated net income
 
$
333

 
$
404

Adjustments to reconcile consolidated net income to net cash provided by operating activities
 
 
 
 
Restructuring actions and other charges, net of cash payments
 
(25
)
 

Depreciation and amortization
 
128

 
128

Deferred income taxes
 
(2
)
 
(1
)
Equity in income of investees, net of dividends
 
(48
)
 
(53
)
Pension contributions in excess of expense
 
(50
)
 
(96
)
Other post-retirement benefits payments in excess of expense
 
(8
)
 
(8
)
Stock-based compensation expense
 
5

 
5

Translation and hedging activities
 
(14
)
 
7

Changes in current assets and liabilities, net of acquisitions
 
 
 
 
Accounts and notes receivable
 
(98
)
 
(276
)
Inventories
 
(54
)
 
(98
)
Other current assets
 
188

 
20

Accounts payable
 
103

 
147

Accrued expenses
 
(283
)
 
(35
)
Changes in other liabilities and deferred revenue
 
78

 
59

Other, net
 
10

 
(30
)
Net cash provided by operating activities
 
263

 
173

 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
Capital expenditures
 
(71
)
 
(100
)
Investments in internal use software
 
(13
)
 
(8
)
Investments in and advances to equity investees
 
(25
)
 
10

Acquisitions of businesses, net of cash acquired
 
(1
)
 
(11
)
Investments in marketable securities—acquisitions
 
(291
)
 
(95
)
Investments in marketable securities—liquidations
 
35

 
71

Cash flows from derivatives not designated as hedges
 
(26
)
 
4

Other, net
 
4

 
4

Net cash used in investing activities
 
(388
)
 
(125
)
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
Proceeds from borrowings
 
105

 
2

Net borrowings of commercial paper
 
50

 

Payments on borrowings and capital lease obligations
 
(15
)
 
(18
)
Distributions to noncontrolling interests
 
(10
)
 
(1
)
Dividend payments on common stock
 
(170
)
 
(140
)
Repurchases of common stock
 
(575
)
 
(137
)
Other, net
 
(17
)
 
(2
)
Net cash used in financing activities
 
(632
)
 
(296
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
 
(39
)
 
(56
)
Net decrease in cash and cash equivalents
 
(796
)
 
(304
)
Cash and cash equivalents at beginning of year
 
1,711

 
2,301

CASH AND CASH EQUIVALENTS AT END OF PERIOD
 
$
915

 
$
1,997

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

5

CUMMINS INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)

                   
 
In millions
 
Engine
 
Distribution
 
Components
 
Power Generation
 
Non-segment
Items
(1)
 
Total
 
Three months ended April 3, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
External sales
 
$
1,624

 
$
1,458

 
$
897

 
$
312

 
$

 
$
4,291

 
Intersegment sales
 
710

 
5

 
340

 
238

 
(1,293
)
 

 
Total sales
 
2,334

 
1,463

 
1,237

 
550

 
(1,293
)
 
4,291

 
Depreciation and amortization(2)
 
58

 
26

 
27

 
16

 

 
127

 
Research, development and engineering expenses
 
97

 
2

 
54

 
13

 

 
166

 
Equity, royalty and interest income from investees
 
41

 
18

 
8

 
5

 

 
72

 
Interest income
 
3

 
1

 
1

 
1

 

 
6

 
Segment EBIT
 
200

 
95

 
173

 
31

 
(15
)
 
484

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment EBIT as a percentage of total sales
 
8.6
%
 
6.5
%
 
14.0
%
 
5.6
%
 
 
 
11.3
%
 
 
 

 
 
 
 
 
 
 
 
 
 
 
Three months ended March 29, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
External sales
 
$
1,889

 
$
1,469

 
$
931

 
$
420

 
$

 
$
4,709

 
Intersegment sales
 
707

 
7

 
368

 
260

 
(1,342
)
 

 
Total sales
 
2,596

 
1,476

 
1,299

 
680

 
(1,342
)
 
4,709

 
Depreciation and amortization(2)
 
58

 
27

 
26

 
16

 

 
127

 
Research, development and engineering expenses
 
114

 
3

 
61

 
17

 

 
195

 
Equity, royalty and interest income from investees
 
30

 
20

 
9

 
9

 

 
68

 
Interest income
 
2

 
1

 
1

 
1

 

 
5

 
Segment EBIT
 
253

 
88

 
195

 
49

 
(23
)
 
562

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment EBIT as a percentage of total sales
 
9.7
%
 
6.0
%
 
15.0
%
 
7.2
%
 
 
 
11.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1
)
Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended April 3, 2016 and March 29, 2015.
(2
)
Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount and deferred costs 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
In millions
 
April 3,
2016
 
March 29,
2015
Total segment EBIT
 
$
484

 
$
562

Less: Interest expense
 
19

 
14

Income before income taxes
 
$
465

 
$
548



6

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 reporting periods was as follows:
 
 
Three months ended
In millions
 
April 3,
2016
 
March 29,
2015
Distribution Entities
 
 
 
 
Komatsu Cummins Chile, Ltda.
 
$
10

 
$
7

North American distributors
 
5

 
10

All other distributors
 

 
1

Manufacturing Entities
 
 

 
 
Beijing Foton Cummins Engine Co., Ltd.
 
18

 
7

Chongqing Cummins Engine Company, Ltd.
 
8

 
12

Dongfeng Cummins Engine Company, Ltd.
 
7

 
14

All other manufacturers
 
16

 
7

Cummins share of net income
 
64

 
58

Royalty and interest income
 
8

 
10

Equity, royalty and interest income from investees
 
$
72

 
$
68

 
NOTE 2.  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 the research tax credit. The effective tax rate for the three months ended April 3, 2016, was 28.4 percent and did not include any discrete items. Our effective tax rate for the three months ended March 29, 2015, was 26.3 percent. This tax rate included an $18 million discrete tax benefit to reflect the release of reserves for uncertain tax positions related to a favorable federal audit settlement.

7

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 these are useful measures of our operating performance for the periods presented as they illustrate our operating performance without regard to special items including tax adjustments. These measures are not in accordance with, or an alternative for, accounting principles generally accepted in the United States of America (GAAP) 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 following periods:
 
 
 
Three months ended
 
 
 
April 3, 2016
 
March 29, 2015
In millions
 
Net Income
 
Diluted EPS
 
Net Income
 
Diluted EPS
Net income attributable to Cummins Inc.
 
$
321

 
$
1.87

 
$
387

 
$
2.14

Less
 
 

 
 

 
 

 
 

Tax benefit
 

 

 
18

 
0.10

Net income attributable to Cummins Inc. excluding special items
 
$
321

 
$
1.87


$
369


$
2.04

Earnings before interest, income taxes and noncontrolling interests
We define EBIT as earnings 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. This measure is not in accordance with, or an alternative for, GAAP and may not be consistent with measures used by other companies. It should be considered supplemental data. Below is a reconciliation of EBIT to “Net income attributable to Cummins Inc.” for each of the applicable periods:
 
 
Three months ended
In millions
 
April 3, 2016
 
March 29, 2015
Earnings before interest expense and income taxes
 
$
484

 
$
562

 
 
 
 
 
EBIT as a percentage of net sales
 
11.3
%
 
11.9
%
 
 
 
 
 
Less
 
 
 
 
Interest expense
 
19

 
14

Income tax expense
 
132

 
144

Consolidated net income
 
333

 
404

 
 
 
 
 
Less
 
 
 
 
Net income attributable to noncontrolling interests
 
12

 
17

Net income attributable to Cummins Inc.
 
$
321

 
$
387

 
 
 
 
 
Net income attributable to Cummins Inc. as a percentage of net sales
 
7.5
%
 
8.2
%


8

CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)


Engine Segment Sales by Market and Unit Shipments by Engine Classification
2016
 
 
 
 
 
 
 
 
 
 
In millions
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Heavy-duty truck
 
$
631

 
$

 
$

 
$

 
$
631

Medium-duty truck and bus
 
549

 

 

 

 
549

Light-duty automotive
 
433

 

 

 

 
433

Industrial
 
539

 

 

 

 
539

Stationary power
 
182

 

 

 

 
182

Total sales
 
$
2,334

 
$

 
$

 
$

 
$
2,334

 
 
 
 
 
 
 
 
 
 
 
2015
 
 
 
 
 
 
 
 
 
 
In millions
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Heavy-duty truck
 
$
757

 
$
875

 
$
784

 
$
700

 
$
3,116

Medium-duty truck and bus
 
608

 
674

 
585

 
640

 
2,507

Light-duty automotive
 
381

 
354

 
339

 
401

 
1,475

Industrial
 
616

 
624

 
617

 
601

 
2,458

Stationary power
 
234

 
270

 
203

 
186

 
893

Total sales
 
$
2,596

 
$
2,797

 
$
2,528

 
$
2,528

 
$
10,449

Unit shipments by engine classification (including unit shipments to Power Generation):
2016
 
 
 
 
 
 
 
 
 
 
Units
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Mid-range
 
117,100

 

 

 

 
117,100

Heavy-duty
 
19,700

 

 

 

 
19,700

High-horsepower
 
2,800

 

 

 

 
2,800

Total units
 
139,600

 

 

 

 
139,600

 
 
 
 
 
 
 
 
 
 
 
2015
 
 
 
 
 
 
 
 
 
 
Units
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Mid-range
 
112,400

 
120,000

 
107,400

 
116,600

 
456,400

Heavy-duty
 
28,700

 
32,800

 
28,600

 
24,300

 
114,400

High-horsepower
 
3,500

 
3,700

 
3,200

 
3,400

 
13,800

Total units
 
144,600

 
156,500

 
139,200

 
144,300

 
584,600

Distribution Segment Sales by Business
2016
 
 
 
 
 
 
 
 
 
 
In millions
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Parts and filtration
 
$
647

 
$

 
$

 
$

 
$
647

Engines
 
242

 

 

 

 
242

Power generation
 
275

 

 

 

 
275

Service
 
299

 

 

 

 
299

Total sales
 
$
1,463

 
$

 
$

 
$

 
$
1,463

 
 
 
 
 
 
 
 
 
 
 
2015
 
 
 
 
 
 
 
 
 
 
In millions
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Parts and filtration
 
$
573

 
$
598

 
$
604

 
$
648

 
$
2,423

Engines
 
321

 
318

 
323

 
332

 
1,294

Power generation
 
298

 
272

 
323

 
397

 
1,290

Service
 
284

 
307

 
301

 
330

 
1,222

Total sales
 
$
1,476

 
$
1,495

 
$
1,551

 
$
1,707

 
$
6,229


9

CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)


Component Segment Sales by Business
2016
 
 
 
 
 
 
 
 
 
 
In millions
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Emission solutions
 
$
607

 
$

 
$

 
$

 
$
607

Turbo technologies
 
265

 

 

 

 
265

Filtration
 
252

 

 

 

 
252

Fuel systems
 
113

 

 

 

 
113

Total sales
 
$
1,237

 
$

 
$

 
$

 
$
1,237

 
 
 
 
 
 
 
 
 
 
 
2015
 
 
 
 
 
 
 
 
 
 
In millions
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Emission solutions
 
$
613

 
$
679

 
$
607

 
$
600

 
$
2,499

Turbo technologies
 
301

 
307

 
266

 
267

 
1,141

Filtration
 
255

 
266

 
240

 
249

 
1,010

Fuel systems
 
130

 
145

 
127

 
120

 
522

Total sales
 
$
1,299

 
$
1,397

 
$
1,240

 
$
1,236

 
$
5,172

Power Generation Segment Sales by Business
In the first quarter of 2016, our Power Generation segment reorganized its reporting structure to include the following product lines:
Power generation - We manufacture generators for commercial and consumer applications ranging from 2 kilowatts to 3.5 megawatts, as well as paralleling systems and transfer switches for applications such as data centers, health care facilities and waste water treatment plants. We also provide turnkey solutions for distributed generation and energy management applications using natural gas or biogas as a fuel. The business also serves global rental accounts for diesel and gas generator sets.
Generator technologies - We design, manufacture, sell and service A/C generator/alternator products internally as well as to other generator set assemblers. Our products are sold under the Stamford, AVK and Markon brands and range in output from 3 kilovolt-amperes (kVA) to 12,000 kVA.
Sales for our Power Generation segment by business (including 2015 and 2014 reorganized balances) were as follows:
2016
 
 
 
 
 
 
 
 
 
 
In millions
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Power generation
 
$
477

 
$

 
$

 
$

 
$
477

Generator technologies
 
73

 

 

 

 
73

Total sales
 
$
550

 
$

 
$

 
$

 
$
550

 
 
 
 
 
 
 
 
 
 
 
2015
 
 
 
 
 
 
 
 
 
 
In millions
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Power generation
 
$
582

 
$
655

 
$
573

 
$
572

 
$
2,382

Generator technologies
 
98

 
92

 
86

 
82

 
358

Total sales
 
$
680

 
$
747

 
$
659

 
$
654

 
$
2,740

 
 
 
 
 
 
 
 
 
 
 
2014
 
 
 
 
 
 
 
 
 
 
In millions
 
YTD
 
 
 
 
 
 
 
 
Power generation
 
$
2,447

 
 
 
 
 
 
 
 
Generator technologies
 
449

 
 
 
 
 
 
 
 
Total sales
 
$
2,896

 
 
 
 
 
 
 
 


10


Contact:
Carole Casto
Executive Director - Corporate Communications
(317) 610-2480
For Immediate Release
May 3, 2016

Cummins Reports First Quarter 2016 Results

First quarter revenues of $4.3 billion, EBIT of 11.3 percent of sales
Cummins reaffirms full year guidance for revenues and EBIT
Company announces a second quarter change to Operating Segments

COLUMBUS, IND. - Cummins Inc. (NYSE: CMI) today reported results for the first quarter of 2016.

First quarter revenues of $4.3 billion decreased 9 percent from the same quarter in 2015. Lower production in the North American heavy-duty truck market and weak global demand for off-highway and power generation equipment contributed to the reduction in sales. Currency negatively impacted revenues by approximately 3 percent compared to last year, primarily due to a stronger US dollar.

Revenues in North America decreased 10 percent while international sales declined by 8 percent. Within international markets revenues in Latin America and Asia declined the most.

Earnings before interest and taxes (EBIT) in the first quarter were $484 million, or 11.3 percent of sales, down from $562 million or 11.9 percent of sales a year ago.
 
Net income attributable to Cummins in the first quarter was $321 million ($1.87 per diluted share), compared to $387 million ($2.14 per diluted share) in the first quarter of 2015. The tax rate in the first quarter of 2016, was 28.4 percent.

“Our results for the first quarter reflect solid execution of our cost reduction plans in the face of very challenging market conditions,” said Rich Freeland Chief Operating Officer. “Benefits from restructuring actions, material cost reduction projects and lower warranty costs all helped to mitigate the impact of lower sales.”

Based on the current forecast, we expect full year 2016 revenues to be down 5 to 9 percent, and EBIT to be in the range of 11.6 to 12.2 percent of sales, unchanged from our forecast three months ago.

Effective April 2016 we re-organized our business to combine our Power Generation Segment and our High Horsepower engine business creating the Power Systems Segment. Going forward we will present





results for four operating segments: Engine, Distribution, Components and Power Systems. We will begin to report results for our new reporting structure in the second quarter of 2016 and will also reflect this change for historical periods. “The formation of the Power Systems Segment combines two businesses that are already strongly interdependent and will allow us to streamline business and technical processes to accelerate innovation, grow market share and more efficiently manage our supply chain and manufacturing operations,” said Chairman and CEO Tom Linebarger.

Other recent highlights:

Our QSK95 diesel engine received Tier 4 Final certification from the EPA for the US locomotive market.

We announced a joint venture with Olayan to expand access to markets and enhance the service and support provided to customers in the Middle East.

Ethisphere Institute named Cummins to its list of the world’s most ethical companies for the 9th straight year.

We returned $745 million to shareholders in the form of dividends and share repurchases in the first quarter, consistent with our plans to return 75 percent of Operating Cash Flow to shareholders in 2016.

First quarter 2016 detail (all comparisons to same period in 2015)

Engine Segment

Sales - $2.3 billion, down 10 percent.
Segment EBIT - $200 million, or 8.6 percent of sales, compared to $253 million or 9.7 percent of sales.
Sales declined due to lower production in the North American heavy-duty truck market and weak demand in power generation, oil and gas, commercial marine and mining markets.

Distribution Segment

Sales - $1.5 billion, down 1 percent.
Segment EBIT - $95 million, or 6.5 percent of sales, compared to $88 million or 6.0 percent of sales.
Increased revenue from acquisitions and growth in international markets were more than offset by lower sales in off-highway markets in North America and the negative impact of currency.

Components Segment

Sales - $1.2 billion, down 5 percent.
Segment EBIT - $173 million, or 14.0 percent of sales, compared to $195 million or 15.0 percent of sales.
Lower sales in North America and the unfavorable impact of currency more than offset growth in China.

Power Generation Segment

Sales - $550 million, down 19 percent.
Segment EBIT - $31 million, or 5.6 percent of sales, compared to $49 million, or 7.2 percent of sales.
Weaker sales in most regions, with Asia and Latin America declining the most.





About Cummins
Cummins Inc., a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service diesel and natural gas engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Headquartered in Columbus, Indiana, (USA) Cummins currently employs approximately 55,200 people worldwide and serves customers in approximately 190 countries and territories through a network of approximately 600 company-owned and independent distributor locations and approximately 7,200 dealer locations. Cummins earned $1.4 billion on sales of $19.1 billion in 2015. Press releases can be found on the Web at www.cummins.com. Follow Cummins on Twitter at www.twittter.com/cummins and on YouTube at www.youtube.com/cummininc.

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 our forecasts, guidance, preliminary results, expectations, hopes, beliefs and intentions on strategies regarding the future. These forward looking statements include, without limitation, statements relating to our plans and expectations for our revenues for the full year of 2016. Our 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: the adoption and implementation of global emission standards; the price and availability of energy; the pace of infrastructure development; increasing global competition among our customers; general economic, business and financing conditions; governmental action; changes in our customers’ business strategies; competitor pricing activity; expense volatility; labor relations; and other risks detailed from time to time in our Securities and Exchange Commission filings, including particularly in the Risk Factors section of our 2015 Annual Report on Form 10-K. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this press release and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the Securities and Exchange Commission, which are available at http://www.sec.gov or at http://www.cummins.com in the Investor Relations section of our website.
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. EST. 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.




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