Form 8-K CUMMINS INC For: Feb 05
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:� February�5, 2015
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��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):
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[�] | 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)) |
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Item 2.02. Results of Operations and Financial Condition.
�
On February�5, 2015, Cummins Inc. ( Cummins, the Company, the registrant, we, our, or us ) issued the attached press release reporting its financial results for the fourth quarter and full year of 2014, 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.
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(d) | The following exhibit is furnished pursuant to Item 2.02 herewith:� |
99-Press Release dated February�5, 2015
SIGNATURE
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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.
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Date:�February�5, 2015
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CUMMINS INC. |
�/s/ Marsha L. Hunt |
Marsha L. Hunt Vice President - Corporate Controller (Principal Accounting Officer) |
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CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (a)
� | Three months ended | |||||||
In millions, except per share amounts | December�31, 2014 | December�31, 2013 | ||||||
NET SALES | $ | 5,090 | $ | 4,588 | ||||
Cost of sales | 3,817 | 3,451 | ||||||
GROSS MARGIN | 1,273 | 1,137 | ||||||
OPERATING EXPENSES AND INCOME | � | � | ||||||
Selling, general and administrative expenses | 568 | 473 | ||||||
Research, development and engineering expenses | 187 | 181 | ||||||
Equity, royalty and interest income from investees | 76 | 80 | ||||||
Other operating income (expense), net | (13 | ) | (10 | ) | ||||
OPERATING INCOME | 581 | 553 | ||||||
Interest income | 6 | 6 | ||||||
Interest expense | 17 | 19 | ||||||
Other income, net | 42 | 7 | ||||||
INCOME BEFORE INCOME TAXES | 612 | 547 | ||||||
Income tax expense | 145 | 86 | ||||||
CONSOLIDATED NET INCOME | 467 | 461 | ||||||
Less: Net income attributable to noncontrolling interests | 23 | 29 | ||||||
NET INCOME ATTRIBUTABLE TO CUMMINS INC. | $ | 444 | $ | 432 | ||||
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. | � | � | ||||||
Basic | $ | 2.45 | $ | 2.33 | ||||
Diluted | $ | 2.44 | $ | 2.32 | ||||
WEIGHTED AVERAGE SHARES OUTSTANDING | � | � | ||||||
Basic | 181.4 | 185.7 | ||||||
Diluted | 181.9 | 186.3 | ||||||
CASH DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.78 | $ | 0.625 | ||||
(a)���� Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America. | ||||||||
�
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CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (a)
� | Years ended December 31, | |||||||
In millions, except per share amounts | 2014 | 2013 | ||||||
NET SALES | $ | 19,221 | $ | 17,301 | ||||
Cost of sales | 14,360 | 13,021 | ||||||
GROSS MARGIN | 4,861 | 4,280 | ||||||
� | ||||||||
OPERATING EXPENSES AND INCOME | � | � | ||||||
Selling, general and administrative expenses | 2,095 | 1,817 | ||||||
Research, development and engineering expenses | 754 | 713 | ||||||
Equity, royalty and interest income from investees | 370 | 361 | ||||||
Other operating expense, net | (17 | ) | (10 | ) | ||||
OPERATING INCOME | 2,365 | 2,101 | ||||||
� | ||||||||
Interest income | 23 | 27 | ||||||
Interest expense | 64 | 41 | ||||||
Other income, net | 110 | 32 | ||||||
INCOME BEFORE INCOME TAXES | 2,434 | 2,119 | ||||||
Income tax expense | 698 | 531 | ||||||
CONSOLIDATED NET INCOME | 1,736 | 1,588 | ||||||
� | ||||||||
Less: Net income attributable to noncontrolling interests | 85 | 105 | ||||||
NET INCOME ATTRIBUTABLE TO CUMMINS INC. | $ | 1,651 | $ | 1,483 | ||||
� | ||||||||
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. | � | � | ||||||
Basic | $ | 9.04 | $ | 7.93 | ||||
Diluted | $ | 9.02 | $ | 7.91 | ||||
� | ||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING | ||||||||
Basic | 182.7 | 187.0 | ||||||
Diluted | 183.1 | 187.4 | ||||||
CASH DIVIDENDS DECLARED PER COMMON SHARE | $ | 2.81 | $ | 2.25 | ||||
(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)
December 31, | ||||||||
In millions, except par value | 2014 | 2013 | ||||||
ASSETS | � | � | ||||||
Current assets | � | � | ||||||
Cash and cash equivalents | $ | 2,301 | $ | 2,699 | ||||
Marketable securities | 93 | 150 | ||||||
Total cash, cash equivalents and marketable securities | 2,394 | 2,849 | ||||||
Accounts and notes receivable, net | 2,946 | 2,649 | ||||||
Inventories | 2,866 | 2,381 | ||||||
Prepaid expenses and other current assets | 849 | 760 | ||||||
Total current assets | 9,055 | 8,639 | ||||||
Long-term assets | � | � | ||||||
Property, plant and equipment, net | 3,686 | 3,156 | ||||||
Investments and advances related to equity method investees | 981 | 931 | ||||||
Goodwill and other intangible assets, net | 822 | 818 | ||||||
Other assets | 1,232 | 1,184 | ||||||
Total assets | $ | 15,776 | $ | 14,728 | ||||
LIABILITIES | � | � | ||||||
Current liabilities | � | � | ||||||
Loans payable | $ | 86 | $ | 17 | ||||
Accounts payable (principally trade) | 1,881 | 1,557 | ||||||
Accrued expenses | 2,054 | 1,794 | ||||||
Total current liabilities | 4,021 | 3,368 | ||||||
Long-term liabilities | � | � | ||||||
Long-term debt | 1,589 | 1,672 | ||||||
Other liabilities | 2,073 | 1,818 | ||||||
Total liabilities | 7,683 | 6,858 | ||||||
EQUITY | ||||||||
Cummins Inc. shareholders equity | � | � | ||||||
Common stock, $2.50 par value, 500 shares authorized, 222.3 and 222.3 shares�issued | 2,139 | 2,099 | ||||||
Retained earnings | 9,545 | 8,406 | ||||||
Treasury stock, at cost, 40.1 and 35.6 shares | (2,844 | ) | (2,195 | ) | ||||
Common stock held by employee benefits trust, at cost, 1.1 and 1.3 shares | (13 | ) | (16 | ) | ||||
Accumulated other comprehensive loss | (1,078 | ) | (784 | ) | ||||
Total Cummins Inc. shareholders equity | 7,749 | 7,510 | ||||||
Noncontrolling interests | 344 | 360 | ||||||
Total equity | 8,093 | 7,870 | ||||||
Total liabilities and equity | $ | 15,776 | $ | 14,728 | ||||
(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)
� | Years ended December 31, | |||||||
In�millions | 2014 | 2013 | ||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | $ | 2,266 | $ | 2,089 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | � | � | ||||||
Capital expenditures | (743 | ) | (676 | ) | ||||
Investments in internal use software | (55 | ) | (64 | ) | ||||
Investments in and advances to equity investees | (60 | ) | (42 | ) | ||||
Acquisitions of businesses, net of cash acquired | (436 | ) | (147 | ) | ||||
Investments in marketable securitiesacquisitions | (275 | ) | (418 | ) | ||||
Investments in marketable securitiesliquidations | 336 | 525 | ||||||
Purchases of other investments | (40 | ) | ||||||
Cash flows from derivatives not designated as hedges | (14 | ) | 1 | |||||
Other, net | 13 | 15 | ||||||
Net cash used in investing activities | (1,234 | ) | (846 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | � | � | ||||||
Proceeds from borrowings | 55 | 1,004 | ||||||
Payments on borrowings and capital lease obligations | (94 | ) | (90 | ) | ||||
Distributions to noncontrolling interests | (83 | ) | (75 | ) | ||||
Dividend payments on common stock | (512 | ) | (420 | ) | ||||
Repurchases of common stock | (670 | ) | (381 | ) | ||||
Other, net | (39 | ) | 14 | |||||
Net cash (used in) provided by financing activities | (1,343 | ) | 52 | |||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (87 | ) | 35 | |||||
Net (decrease) increase in cash and cash equivalents | (398 | ) | 1,330 | |||||
Cash and cash equivalents at beginning of year | 2,699 | 1,369 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 2,301 | $ | 2,699 | ||||
(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 | Distribution | Components | Power Generation | Non-segment Items(1) | Total | |||||||||||||||||||
� | Three months ended December 31, 2014 | � | � | � | � | � | � | |||||||||||||||||||
External sales | $ | 1,988 | $ | 1,682 | $ | 970 | $ | 450 | $ | $ | 5,090 | |||||||||||||||
Intersegment sales | 851 | 12 | 351 | 310 | (1,524 | ) | ||||||||||||||||||||
Total sales | 2,839 | 1,694 | 1,321 | 760 | (1,524 | ) | 5,090 | |||||||||||||||||||
Depreciation and amortization(2) | 54 | 28 | 27 | 15 | 124 | |||||||||||||||||||||
Research, development and engineering expenses | 103 | 2 | 60 | 22 | 187 | |||||||||||||||||||||
Equity, royalty and interest income from investees | 30 | 28 | 9 | 9 | 76 | |||||||||||||||||||||
Interest income | 3 | 2 | 1 | 6 | ||||||||||||||||||||||
Segment EBIT | 315 | 158 | (3)� | 160 | 22 | (4)� | (26 | ) | 629 | |||||||||||||||||
Segment EBIT as a percentage of total sales | 11.1 | % | 9.3 | % | 12.1 | % | 2.9 | % | 12.4 | % | ||||||||||||||||
Three months ended December 31, 2013 | ||||||||||||||||||||||||||
External sales | $ | 2,131 | $ | 1,065 | $ | 859 | $ | 533 | $ | $ | 4,588 | |||||||||||||||
Intersegment sales | 431 | 8 | 276 | 226 | (941 | ) | ||||||||||||||||||||
Total sales | 2,562 | 1,073 | 1,135 | 759 | (941 | ) | 4,588 | |||||||||||||||||||
Depreciation and amortization(2) | 49 | 14 | 25 | 13 | 101 | |||||||||||||||||||||
Research, development and engineering expenses | 106 | 2 | 53 | 20 | 181 | |||||||||||||||||||||
� | Equity, royalty and interest income from investees | 30 | 41 | 7 | 2 | 80 | ||||||||||||||||||||
Interest income | 3 | 1 | 1 | 1 | 6 | |||||||||||||||||||||
Segment EBIT | 235 | 107 | 140 | 46 | 38 | 566 | ||||||||||||||||||||
� | ||||||||||||||||||||||||||
Segment EBIT as a percentage of total sales | 9.2 | % | 10.0 | % | 12.3 | % | 6.1 | % | 12.3 | % | ||||||||||||||||
(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, 2014 and December 31, 2013. | ||||||||||||||||||||||||
(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." | ||||||||||||||||||||||||
(3 | ) | Distribution segment EBIT for the three months ended December 31, 2014 included gains of $35 million on the fair value adjustments resulting from the acquisitions of controlling interests in North American distributors. | ||||||||||||||||||||||||
(4 | ) | Power Generation segment EBIT for the three months ended December 31, 2014, included actions taken to reduce its future cost structure. Costs associated with these actions were $32 million and are primarily related to the closure of a plant in Germany. The charge also included $3 million of targeted actions throughout the business including various headcount reductions to better align capacity with current levels of demand. | ||||||||||||||||||||||||
CUMMINS INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
In�millions | Engine | Distribution | Components | Power Generation | Non-segment Items(1) | Total | ||||||||||||||||||||
Year ended December 31, 2014 | ||||||||||||||||||||||||||
External sales | $ | 8,437 | $ | 5,135 | � | $ | 3,791 | $ | 1,858 | $ | $ | 19,221 | ||||||||||||||
Intersegment sales | 2,525 | 39 | � | 1,327 | 1,038 | (4,929 | ) | |||||||||||||||||||
Total sales | 10,962 | 5,174 | � | 5,118 | 2,896 | (4,929 | ) | 19,221 | ||||||||||||||||||
Depreciation and amortization(2) | 207 | 86 | � | 106 | 53 | 452 | ||||||||||||||||||||
Research, development and engineering expenses | 438 | 9 | � | 230 | 77 | 754 | ||||||||||||||||||||
Equity, royalty and interest income from investees | 147 | 148 | � | 36 | 39 | 370 | ||||||||||||||||||||
Interest income | 12 | 4 | � | 4 | 3 | 23 | ||||||||||||||||||||
Segment EBIT | 1,225 | 491 | (3)� | 684 | 168 | (4)� | (70 | ) | 2,498 | |||||||||||||||||
Segment EBIT as a percentage of total sales | 11.2 | % | 9.5 | % | 13.4 | % | 5.8 | % | 13.0 | % | ||||||||||||||||
Year ended December 31, 2013 | ||||||||||||||||||||||||||
External sales | $ | 8,270 | $ | 3,726 | � | $ | 3,151 | $ | 2,154 | $ | $ | 17,301 | ||||||||||||||
Intersegment sales | 1,743 | 23 | � | 1,191 | 877 | (3,834 | ) | |||||||||||||||||||
Total sales | 10,013 | 3,749 | � | 4,342 | 3,031 | (3,834 | ) | 17,301 | ||||||||||||||||||
Depreciation and amortization(2) | 205 | 54 | � | 96 | 50 | 405 | ||||||||||||||||||||
Research, development and engineering expenses | 416 | 6 | � | 218 | 73 | 713 | ||||||||||||||||||||
Equity, royalty and interest income from investees | 136 | 165 | � | 28 | 32 | 361 | ||||||||||||||||||||
Interest income | 16 | 2 | � | 3 | 6 | 27 | ||||||||||||||||||||
Segment EBIT | 1,041 | 388 | (3)� | 527 | 218 | (14 | ) | 2,160 | ||||||||||||||||||
Segment EBIT as a percentage of total sales | 10.4 | % | 10.3 | % | 12.1 | % | 7.2 | % | 12.5 | % | ||||||||||||||||
(1 | ) | Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the years ended December 31, 2014 and December�31, 2013. | ||||||||||||||||||||||||
(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." The amortization of debt discount and deferred costs were $3 million and $2 million for the years ended December 31, 2014 and 2013, respectively. | ||||||||||||||||||||||||
(3 | ) | Distribution segment EBIT for the years ended December 31, 2014 and December 31, 2013 included gains of $73 million and $12 million on the fair value adjustments resulting from the acquisitions of controlling interests in North American distributors in each period, respectively. | ||||||||||||||||||||||||
(4 | ) | Power Generation segment EBIT for the year ended December 31, 2014, included actions taken to reduce its future cost structure. Costs associated with these actions were $32 million and are primarily related to the closure of a plant in Germany. The charge also included $3 million of targeted actions throughout the business including various headcount reductions to better align capacity with current levels of demand. | ||||||||||||||||||||||||
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A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Income is shown in the table below:
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� | Three�months�ended | Twelve months ended | ||||||||||||||
In�millions | December�31, 2014 | December�31, 2013 | December 31, 2014 | December 31, 2013 | ||||||||||||
Total EBIT | $ | 629 | $ | 566 | $ | 2,498 | $ | 2,160 | ||||||||
Less: Interest expense | 17 | 19 | 64 | 41 | ||||||||||||
Income before income taxes | $ | 612 | $ | 547 | $ | 2,434 | $ | 2,119 | ||||||||
NOTE 1.� EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES
CUMMINS INC. AND SUBSIDIARIES
SELECTED FOOTNOTE DATA
(Unaudited)
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 | Years ended | ||||||||||||||
In�millions | December�31, 2014 | December�31, 2013 | December�31, 2014 | December�31, 2013 | ||||||||||||
Distribution Entities | � | � | � | � | ||||||||||||
North American distributors | $ | 18 | $ | 31 | $ | 107 | $ | 129 | ||||||||
Komatsu Cummins Chile, Ltda. | 7 | 8 | 29 | 25 | ||||||||||||
All other distributors | 2 | 4 | 1 | |||||||||||||
Manufacturing Entities | � | � | ||||||||||||||
Dongfeng Cummins Engine Company,�Ltd. | 16 | 18 | 67 | 63 | ||||||||||||
Chongqing Cummins Engine Company,�Ltd. | 12 | 14 | 51 | 58 | ||||||||||||
Beijing Foton Cummins Engine Co.,�Ltd. (Light-duty) | 4 | 3 | 28 | 17 | ||||||||||||
Beijing Foton Cummins Engine Co., Ltd. (Heavy-duty) | (12 | ) | (7 | ) | (30 | ) | (21 | ) | ||||||||
All other manufacturers | 20 | 4 | 74 | 53 | ||||||||||||
Cummins share of net income | 67 | 71 | 330 | 325 | ||||||||||||
Royalty and interest income | 9 | 9 | 40 | 36 | ||||||||||||
Equity, royalty and interest income from investees | $ | 76 | $ | 80 | $ | 370 | $ | 361 | ||||||||
�
NOTE 2.� INCOME TAXES
U.S. tax legislation was passed in the fourth quarter extending the federal research tax credit to 2014. We recorded a $24 million benefit in the fourth quarter related to this legislation.
CUMMINS INC. AND SUBSIDIARIES
SELECTED FOOTNOTE DATA
(Unaudited)
NOTE 3. ACQUISITIONS
The Distribution segment joint venture acquisitions for the fourth quarter 2014 were as follows:
Entity Acquired | Date of Acquisition | Additional Percent Interest Acquired | Payments to Former Owners | Acquisition Related Debt Retirements | Total Purchase Consideration | Type of Acquisition(1) | Gain Recognized(1) | Goodwill Acquired | Intangibles Recognized | Net Sales Previous Fiscal Year Ended | |||||||||||||||||||||||||
Cummins Bridgeway LLC | 11/03/14 | 54 | % | $ | 22 | $ | 45 | $ | 77 | (3)� | COMB | $ | 13 | $ | 4 | $ | 15 | $ | 331 | ||||||||||||||||
Cummins Npower LLC | 09/29/14 | 50 | % | 33 | 34 | 73 | (3)� | COMB | 15 | 7 | 8 | 374 | |||||||||||||||||||||||
Cummins Power South LLC | 09/29/14 | 50 | % | 17 | 16 | 35 | (3)� | COMB | 7 | 8 | 1 | 239 | |||||||||||||||||||||||
____________________________________________________
(1)� | All results from acquired entities were included in Distribution segment results subsequent to the acquisition date. Newly consolidated entities were accounted for as business combinations (COMB) with gains recognized based on the requirement to remeasure our pre-existing ownership to fair value in accordance with GAAP. |
(2) Purchase accounting for this acquisition is preliminary awaiting customary adjustment to purchase price in accordance with the purchase agreements.
(3)� | The "Total Purchase Consideration" represents the total amount that will or is estimated to be paid to complete the acquisition. In some instances a portion of the acquisition payment has not yet been made and will be paid in future periods in accordance with the purchase contract. The total outstanding consideration as of December 31, 2014 for these entities was $18 million. |
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 periods presented as it illustrates our operating performance without regard to special items including tax adjustments and plant closing and other actions. This measure is 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 | |||||||||||||||||
� | December�31, 2014 | December�31, 2013 | ||||||||||||||||
In millions | Net Income | Diluted EPS | Net Income | Diluted EPS | ||||||||||||||
Net income attributable to Cummins Inc. | $ | 444 | $ | 2.44 | $ | 432 | $ | 2.32 | ||||||||||
Add | ||||||||||||||||||
Power Generation segment actions (1) | 21 | 0.12 | ||||||||||||||||
Less | � | � | � | � | ||||||||||||||
Tax items | 70 | 0.38 | ||||||||||||||||
Net income attributable to Cummins Inc. excluding special items | $ | 465 | $ | 2.56 | $ | 362 | $ | 1.94 | ||||||||||
� | Years ended | |||||||||||||||||
� | December�31, 2014 | December�31, 2013 | ||||||||||||||||
In millions | Net Income | Diluted EPS | Net Income | Diluted EPS | ||||||||||||||
Net income attributable to Cummins Inc. | $ | 1,651 | $ | 9.02 | $ | 1,483 | $ | 7.91 | ||||||||||
Add | ||||||||||||||||||
Power Generation segment actions (1) | 21 | 0.11 | ||||||||||||||||
Less | � | � | � | � | ||||||||||||||
Tax items | 74 | 0.39 | ||||||||||||||||
Net income attributable to Cummins Inc. excluding special items | $ | 1,672 | $ | 9.13 | $ | 1,409 | $ | 7.52 | ||||||||||
(1 | ) | In the fourth quarter of 2014, we recorded a plant closing and initiated other actions totaling $32 million ($21 million after tax). | ||||||||||||||||
CUMMINS INC. AND SUBSIDIARIES
FINANCIAL MEASURES THAT SUPPLEMENT GAAP
(Unaudited)
Earnings before interest, taxes, noncontrolling interests and special items
�
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 | Years ended | ||||||||||||||
In millions | December�31, 2014 | December�31, 2013 | December�31, 2014 | December�31, 2013 | ||||||||||||
Earnings before interest expense, income taxes and special items | $ | 661 | $ | 566 | $ | 2,530 | $ | 2,160 | ||||||||
Earnings before interest expense, income taxes and special items as a percentage of net sales | 13.0 | % | 12.3 | % | 13.2 | % | 12.5 | % | ||||||||
Less | ||||||||||||||||
Plant closing and other actions | 32 | 32 | ||||||||||||||
Earnings before interest expense and income taxes | $ | 629 | $ | 566 | $ | 2,498 | $ | 2,160 | ||||||||
EBIT as a percentage of net sales | 12.4 | % | 12.3 | % | 13.0 | % | 12.5 | % | ||||||||
Less | ||||||||||||||||
Interest expense | 17 | 19 | 64 | 41 | ||||||||||||
Income tax expense | 145 | 86 | 698 | 531 | ||||||||||||
Consolidated net income | 467 | 461 | 1,736 | 1,588 | ||||||||||||
Less | ||||||||||||||||
Net income attributable to noncontrolling interests | 23 | 29 | 85 | 105 | ||||||||||||
Net income attributable to Cummins Inc. | $ | 444 | $ | 432 | $ | 1,651 | $ | 1,483 | ||||||||
Net income attributable to Cummins Inc. as a percentage of net sales | 8.7 | % | 9.4 | % | 8.6 | % | 8.6 | % | ||||||||
CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)
Engine segment net sales by market:
2014 | � | � | � | � | � | |||||||||||||||
In�millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||
Heavy-duty truck | $ | 722 | $ | 796 | $ | 823 | $ | 798 | $ | 3,139 | ||||||||||
Medium-duty truck and bus | 601 | 646 | 631 | 652 | 2,530 | |||||||||||||||
Light-duty automotive and RV | 361 | 336 | 354 | 385 | 1,436 | |||||||||||||||
Industrial | 700 | 757 | 788 | 795 | 3,040 | |||||||||||||||
Stationary power | 179 | 209 | 220 | 209 | 817 | |||||||||||||||
Total sales | $ | 2,563 | $ | 2,744 | $ | 2,816 | $ | 2,839 | $ | 10,962 | ||||||||||
2013 | � | � | � | � | � | |||||||||||||||
In�millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||
Heavy-duty truck | $ | 654 | $ | 723 | $ | 690 | $ | 638 | $ | 2,705 | ||||||||||
Medium-duty truck and bus | 448 | 595 | 570 | 572 | 2,185 | |||||||||||||||
Light-duty automotive and RV | 260 | 345 | 330 | 365 | 1,300 | |||||||||||||||
Industrial | 714 | 762 | 709 | 811 | 2,996 | |||||||||||||||
Stationary power | 227 | 231 | 193 | 176 | 827 | |||||||||||||||
Total sales | $ | 2,303 | $ | 2,656 | $ | 2,492 | $ | 2,562 | $ | 10,013 | ||||||||||
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Unit shipments by engine classification (including unit shipments to Power Generation):
2014 | � | � | � | � | � | ||||||||||
Units | Q1 | Q2 | Q3 | Q4 | YTD | ||||||||||
Midrange | 118,900 | 118,700 | 117,700 | 115,900 | 471,200 | ||||||||||
Heavy-duty | 28,800 | 30,300 | 32,300 | 30,700 | 122,100 | ||||||||||
High-horsepower | 3,400 | 3,900 | 3,900 | 3,600 | 14,800 | ||||||||||
Total units | 151,100 | 152,900 | 153,900 | 150,200 | 608,100 | ||||||||||
2013 | � | � | � | � | � | ||||||||||
Units | Q1 | Q2 | Q3 | Q4 | YTD | ||||||||||
Midrange | 94,600 | 121,900 | 113,800 | 115,700 | 446,000 | ||||||||||
Heavy-duty | 24,900 | 28,300 | 26,500 | 25,700 | 105,400 | ||||||||||
High-horsepower | 4,200 | 3,600 | 3,500 | 3,500 | 14,800 | ||||||||||
Total units | 123,700 | 153,800 | 143,800 | 144,900 | 566,200 | ||||||||||
Distribution segment sales by business:
2014 | � | � | � | � | � | |||||||||||||||
In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||
Parts and filtration | $ | 382 | $ | 461 | $ | 491 | $ | 590 | $ | 1,924 | ||||||||||
Power generation | 193 | 278 | 279 | 413 | 1,163 | |||||||||||||||
Engines | 174 | 249 | 270 | 368 | 1,061 | |||||||||||||||
Service | 201 | 250 | 252 | 323 | 1,026 | |||||||||||||||
Total sales | $ | 950 | $ | 1,238 | $ | 1,292 | $ | 1,694 | $ | 5,174 | ||||||||||
2013 | � | � | � | � | � | |||||||||||||||
In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||
Parts and filtration | $ | 322 | $ | 369 | $ | 377 | $ | 397 | $ | 1,465 | ||||||||||
Power generation | 163 | 241 | 234 | 293 | 931 | |||||||||||||||
Engines | 152 | 183 | 170 | 208 | 713 | |||||||||||||||
Service | 141 | 161 | 163 | 175 | 640 | |||||||||||||||
Total sales | $ | 778 | $ | 954 | $ | 944 | $ | 1,073 | $ | 3,749 | ||||||||||
CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)
Component segment sales by business:
2014 | � | � | � | � | � | |||||||||||||||
In�millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||
Emission Solutions | $ | 543 | $ | 582 | $ | 598 | $ | 620 | $ | 2,343 | ||||||||||
Turbo Technologies | 313 | 307 | 297 | 305 | 1,222 | |||||||||||||||
Filtration | 265 | 275 | 268 | 267 | 1,075 | |||||||||||||||
Fuel systems | 109 | 116 | 124 | 129 | 478 | |||||||||||||||
Total sales | $ | 1,230 | $ | 1,280 | $ | 1,287 | $ | 1,321 | $ | 5,118 | ||||||||||
2013 | � | � | � | � | � | |||||||||||||||
In�millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||
Emission Solutions | $ | 400 | $ | 444 | $ | 458 | $ | 489 | $ | 1,791 | ||||||||||
Turbo Technologies | 266 | 294 | 263 | 292 | 1,115 | |||||||||||||||
Filtration | 255 | 271 | 248 | 254 | 1,028 | |||||||||||||||
Fuel systems | 97 | 108 | 103 | 100 | 408 | |||||||||||||||
Total sales | $ | 1,018 | $ | 1,117 | $ | 1,072 | $ | 1,135 | $ | 4,342 | ||||||||||
Power Generation segment sales by business:
2014 | � | � | � | � | � | |||||||||||||||
In�millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||
Power products | $ | 373 | $ | 445 | $ | 439 | $ | 412 | $ | 1,669 | ||||||||||
Power systems | 137 | 141 | 159 | 194 | 631 | |||||||||||||||
Alternators | 105 | 126 | 115 | 103 | 449 | |||||||||||||||
Power solutions | 24 | 31 | 41 | 51 | 147 | |||||||||||||||
Total sales | $ | 639 | $ | 743 | $ | 754 | $ | 760 | $ | 2,896 | ||||||||||
2013 | � | � | � | � | � | |||||||||||||||
In�millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||
Power products | $ | 409 | $ | 474 | $ | 421 | $ | 421 | $ | 1,725 | ||||||||||
Power systems | 179 | 187 | 122 | 168 | 656 | |||||||||||||||
Alternators | 126 | 125 | 126 | 119 | 496 | |||||||||||||||
Power solutions | 32 | 28 | 43 | 51 | 154 | |||||||||||||||
Total sales | $ | 746 | $ | 814 | $ | 712 | $ | 759 | $ | 3,031 | ||||||||||
�
Contact:
Carole Casto
Executive Director - Corporate Communications
(317) 610-2480
For Immediate Release
February 5, 2015
Cummins Announces Results for 2014; Reports Record Revenues; Shares Expectations for Revenue and EBIT Growth in 2015
" | Fourth quarter revenues of $5.1 billion and EBIT of 13 percent of sales excluding one-time items |
" | Full year 2014 revenues increased 11 percent and EBIT increased 16 percent |
" | The Company expects revenue growth of between 2 and 4 percent and EBIT to be in the range of 13.5 to 14 percent of sales in 2015, up from 13 percent in 2014 |
" | Cummins plans to return 50 percent of Operating Cash Flow to shareholders in 2015 |
COLUMBUS, IND. - Cummins Inc. (NYSE: CMI) today reported results for the fourth quarter and full year of 2014.
Fourth quarter revenue of $5.1 billion, increased 11 percent from the same quarter in 2013. The increase year-over-year was driven by higher revenues in North America which more than offset lower demand in Brazil and Europe.
Earnings before interest and taxes (EBIT) were $629 million for the fourth quarter or 12.4 percent of sales. These results include $32 million of expense associated with cost reduction activities in the Power Generation business. Excluding this expense, EBIT was $661 million or 13.0 percent of sales. This compares to $566 million or 12.3 percent of sales a year ago.
Net income attributable to Cummins in the fourth quarter was $444 million ($2.44 per diluted share), or $465 million ($2.56 per diluted share) excluding one-time items, compared to $432 million ($2.32 per diluted share) in the fourth quarter of 2013.
Revenues for the full year were a record $19.2 billion, 11 percent higher than 2013. Acquisitions contributed 3 percent to revenue growth. Revenues in North America increased 20 percent and international sales grew 2 percent. Within international markets, growth in China more than offset weaker demand in Brazil and India.
EBIT for the year, was $2.5 billion or 13.0 percent of sales. Excluding one-time items, EBIT was $2.53 billion or 13.2 percent compared to $2.16 billion or 12.5 percent of sales in 2013.
Net income attributable to Cummins for the full year was $1.65 billion ($9.02 per diluted share), or $1.67 billion ($9.13 per diluted share) excluding one-time items, up from $1.48 billion ($7.91 per diluted share) in 2013. The full year tax rate was 28.7 percent.
We reported record revenues in 2014 despite weak economic conditions in several of our most important international markets, said Chairman and CEO Tom Linebarger. Revenues grew 11 percent as demand in on-highway markets in North America improved, we continued executing our distributor acquisition strategy, and we delivered strong growth in China driven by new products. We continued to invest in future growth, reflecting our commitment to technology and product leadership, while growing EBIT faster than sales.
Cummins improvement in profitability was driven by record performance in the Components and Distribution businesses and higher earnings in the Engine business. Results in the Companys Power Generation business fell short of expectations, but the actions the Company has taken to lower costs will improve earnings going forward. Demand in North American on-highway markets is expected to improve again in 2015, but will be partially offset by continued weakness in international markets and the negative impact of the strong U.S. dollar.
Linebarger continued, We are committed to improving the quality of our products and service for our customers, closely managing costs and further improving our financial performance in 2015. The Company delivered on its commitment to return 50 percent of cash from operations to shareholders in 2014 and will do so again this year.
Based on the current forecast, Cummins expects full year revenues to grow between 2 and 4 percent, and EBIT to be in the range of 13.5 to 14.0 percent.
2014 highlights:
" | The Company increased its dividend by 25 percent and repurchased 4.8 million shares |
" | The Company received credit rating upgrades from Standard & Poors and Moodys |
" | For the seventh consecutive year, Cummins was named one of the world's most ethical companies by The Ethisphere Institute |
" | Cummins received a perfect score in the Corporate Equality Index by the Human Rights Campaign for the 10th consecutive year |
" | The Company was ranked among the Worlds Best in Newsweeks 2014 Green Rankings |
" | Cummins was named one of the Top 50 companies for diversity by Diversity Inc for the seventh consecutive year |
Fourth quarter 2014 detail (all comparisons to same period in 2013)
Engine Segment
" | Q4 Sales - $2.8 billion, up 11 percent |
" | Q4 Segment EBIT - $315 million, or 11.1 percent of sales, compared to $235 million or 9.2 percent of sales |
" | Strong demand in on-highway markets in North America more than offset weakness in Brazil, China and Europe |
" | Full year sales $11 billion, up 9 percent, EBIT of $1.23 billion compared to $1.04 billion in 2013 |
Components Segment
" | Q4 Sales - $1.3 billion, up 16 percent |
" | Q4 Segment EBIT - $160 million, or 12.1 percent of sales, compared to $140 million or 12.3 percent of sales |
" | Higher demand in on-highway markets in North America, Europe and China |
" | Full year sales $5.1billion, up 18 percent, EBIT of $684 million compared to $527 million in 2013 |
Power Generation Segment
" | Q4 Sales - $760 million, flat compared to 2013 |
" | Q4 Segment EBIT - $22 million, or 2.9 percent of sales, compared to $46 million or 6.1 percent of sales. EBIT in the fourth quarter of 2014 includes expense of $32 million associated with cost reduction activities |
" | Higher revenues in Latin America and Africa offset weaker demand in Eastern Europe and India |
" | Full year sales $2.9 billion, down 4 percent, EBIT of $168 million compared to $218 million in 2013 |
Distribution Segment
" | Q4 Sales - $1.7 billion, up 58 percent, up 7 percent excluding acquisitions |
" | Q4 Segment EBIT - $158 million, or 9.3 percent of sales, compared to $107 million or 10.0 percent of sales |
" | Current quarter included gains of $35 million, and amortization costs of $17 million related to acquisitions |
" | Higher revenues were primarily driven by acquisitions and stronger demand for parts and service in North America |
" | Full year sales $5.2 billion, up 38 percent, EBIT of $491 million compared to $388 million in 2013 |
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 54,600 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 $1.65 billion on sales of $19.2 billion in 2014. Press releases can be found on the Web at www.cummins.com. Follow Cummins on Twitter at @Cummins and on YouTube at CumminsInc.
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 2015. 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 2013 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.