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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, IN -- (Marketwired) -- 02/05/15 -- 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 year-over-year increase 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 Company's 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 & Poor's and Moody's
  • 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 World's Best in Newsweek's 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 $5.1 billion, 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.

The following files are available for download:

   
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.

   
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 securities-acquisitions     (275)     (418)
  Investments in marketable securities-liquidations     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.
   

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   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
                         

 
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   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.

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  
                                           

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  
                                           

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  
                                           

Carole Casto
Executive Director - Corporate Communications
(317) 610-2480
carole.casto@cummins.com

Source: Cummins Inc.

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