News Release


Cummins Reports Results for the Second Quarter of 2014

COLUMBUS, IN -- (Marketwired) -- 07/28/14 -- Cummins Inc. (NYSE: CMI)

  • Second quarter revenues of $4.8 billion, EBIT of 13.6 percent of sales on stronger North American truck markets
  • Full year revenue expected to grow between 8 and 11 percent and EBIT to be in the range of 12.75 to 13.25 percent of sales

Cummins Inc. (NYSE: CMI) today reported results for the second quarter of 2014.

Second quarter revenue of $4.8 billion increased 7 percent from the same quarter in 2013. The increase year-over-year was driven by stronger demand in on-highway markets and distributor acquisitions in North America.

Revenues in North America increased 14 percent while international sales decreased 1 percent compared to the second quarter a year ago. Within international markets, lower revenues in Mexico, Brazil and India offset stronger demand in China.

Earnings before interest and taxes (EBIT) were $657 million for the second quarter or 13.6 percent of sales. This compares to $621 million or 13.7 percent of sales a year ago.

Net income attributable to Cummins in the second quarter was $446 million ($2.43 per diluted share), compared to $414 million ($2.20 per diluted share) in the second quarter of 2013.

"Demand is growing in on-highway markets in North America this year as the economy improves and we have gained market share in medium duty truck and bus markets. Our Components business delivered very strong results in the second quarter generating record sales and profits," said Chairman and CEO Tom Linebarger. "Earlier this month we raised the quarterly dividend by 25 percent and the Board of Directors also approved a new $1 billion share repurchase program, consistent with our commitment to return 50 percent of operating cash flow to shareholders and reflecting our confidence in the Company's future."

Based on the current forecast, Cummins expects full year 2014 revenues to grow between 8% and 11%, up from its previous forecast of growth of between 6% and 10%, due largely to improving demand in North America. EBIT is expected to be in the range of 12.75 to 13.25 percent of sales.

Other recent highlights:

  • The Company named Rich Freeland as President and Chief Operating Officer
  • Cummins was named 2013 Powertrain Supplier of the Year by Chrysler Group
  • The Company was ranked among the World's Best in Newsweek's 2014 Green Rankings for our continuous efforts to reduce our environmental footprint and make a positive impact on the environment
  • For the ninth straight year Cummins was awarded a perfect score by the Human Rights Campaign Foundation (HRC) in the 2014 Corporate Quality Index as part of HRC's Best Place to Work Initiative

Second quarter 2014 detail (all comparisons to same period in 2013)

Engine Segment

  • Sales - $2.7 billion, up 3 percent
  • Segment EBIT - $311 million, or 11.3 percent of sales, compared to $339 million or 12.8 percent of sales
  • Increased demand in on-highway markets in North America offset weakness in global power generation and the Brazilian truck market

Components Segment

  • Sales - $1.3 billion, up 15 percent
  • Segment EBIT - $185 million, or 14.5 percent of sales, compared to $136 million or 12.2 percent of sales
  • Higher demand in on-highway markets in North America, Europe and China more than offset weaker demand in Brazil

Power Generation Segment

  • Sales - $743 million, down 9 percent
  • Segment EBIT - $61 million, or 8.2 percent of sales, compared to $76 million or 9.3 percent of sales
  • Lower revenues in most markets particularly North America, Asia Pacific and Middle East offset stronger demand in China and Africa

Distribution Segment

  • Sales - $1.2 billion, up 30 percent overall and up 2 percent excluding acquisitions
  • Segment EBIT - $126 million, or 10.2 percent of sales, compared to $100 million or 10.5 percent of sales
  • Higher revenues were primarily driven by acquisitions and stronger demand in North America and Africa.

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 48,000 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 6,800 dealer locations. Cummins earned $1.48 billion on sales of $17.3 billion in 2013. 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 2014. 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. EDT. This teleconference will be webcast and available on the Investor Relations section of the Cummins website at www.cummins.com . Participants wishing to view the visuals available with the audio are encouraged to sign-in a few minutes prior to the start of the teleconference.

 
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (a)
     
     
    Three months ended
In millions, except per share amounts   June 29, 2014   March 30, 2014   June 30, 2013
NET SALES   $ 4,835     $ 4,406     $ 4,525  
  Cost of sales     3,608       3,290       3,372  
GROSS MARGIN     1,227       1,116       1,153  
                         
OPERATING EXPENSES AND INCOME                        
  Selling, general and administrative expenses     535       502       484  
  Research, development and engineering expenses     179       190       177  
  Equity, royalty and interest income from investees (Note 1)     105       90       108  
  Other operating income (expense), net     (6 )     (1 )     10  
OPERATING INCOME     612       513       610  
                         
  Interest income     6       5       10  
  Interest expense     15       17       8  
  Other income, net     39       10       1  
INCOME BEFORE INCOME TAXES     642       511       613  
                         
  Income tax expense (Note 2)     170       153       172  
CONSOLIDATED NET INCOME     472       358       441  
                         
  Less: Net income attributable to noncontrolling interests     26       20       27  
NET INCOME ATTRIBUTABLE TO CUMMINS INC.   $ 446     $ 338     $ 414  
                         
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.                        
  Basic   $ 2.44     $ 1.83     $ 2.20  
  Diluted   $ 2.43     $ 1.83     $ 2.20  
                         
WEIGHTED AVERAGE SHARES OUTSTANDING                        
  Basic     182.8       184.3       187.8  
  Diluted     183.2       184.7       188.2  
                         
CASH DIVIDENDS DECLARED PER COMMON SHARE   $ 0.625     $ 0.625     $ 0.50  

(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)
     
     
    Six months ended
In millions, except per share amounts   June 29, 2014   June 30, 2013
NET SALES   $ 9,241     $ 8,447  
  Cost of sales     6,898       6,337  
GROSS MARGIN     2,343       2,110  
                 
OPERATING EXPENSES AND INCOME                
  Selling, general and administrative expenses     1,037       928  
  Research, development and engineering expenses     369       359  
  Equity, royalty and interest income from investees (Note 1)     195       190  
  Other operating income (expense), net     (7 )     11  
OPERATING INCOME     1,125       1,024  
                 
  Interest income     11       15  
  Interest expense     32       14  
  Other income, net     49       19  
INCOME BEFORE INCOME TAXES     1,153       1,044  
                 
  Income tax expense (Note 2)     323       291  
CONSOLIDATED NET INCOME     830       753  
                 
  Less: Net income attributable to noncontrolling interests     46       57  
NET INCOME ATTRIBUTABLE TO CUMMINS INC.   $ 784     $ 696  
                 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.                
  Basic   $ 4.27     $ 3.70  
  Diluted   $ 4.26     $ 3.69  
                 
WEIGHTED AVERAGE SHARES OUTSTANDING                
  Basic     183.5       188.1  
  Diluted     183.9       188.5  
                 
CASH DIVIDENDS DECLARED PER COMMON SHARE   $ 1.25     $ 1.00  

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

 
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (a)
         
         
In millions, except par value   June 29, 2014   December 31, 2013
ASSETS                
Current assets                
  Cash and cash equivalents   $ 2,219     $ 2,699  
  Marketable securities     158       150  
    Total cash, cash equivalents and marketable securities     2,377       2,849  
  Accounts and notes receivable, net     3,188       2,649  
  Inventories     2,745       2,381  
  Prepaid expenses and other current assets     770       760  
      Total current assets     9,080       8,639  
Long-term assets                
  Property, plant and equipment     6,739       6,410  
  Accumulated depreciation     (3,410 )     (3,254 )
    Property, plant and equipment, net     3,329       3,156  
  Investments and advances related to equity method investees     934       931  
  Goodwill     465       461  
  Other intangible assets, net     353       357  
  Other assets     1,339       1,184  
        Total assets   $ 15,500     $ 14,728  
                 
LIABILITIES                
Current liabilities                
  Loans payable   $ 30     $ 17  
  Accounts payable (principally trade)     1,905       1,557  
  Current maturities of long-term debt     33       51  
  Current portion of accrued product warranty     353       360  
  Accrued compensation, benefits and retirement costs     401       433  
  Deferred revenue     316       285  
  Taxes payable (including taxes on income)     125       99  
  Other accrued expenses     646       566  
    Total current liabilities     3,809       3,368  
Long-term liabilities                
  Long-term debt     1,627       1,672  
  Pensions     233       232  
  Postretirement benefits other than pensions     341       356  
  Other liabilities and deferred revenue     1,332       1,230  
        Total liabilities     7,342       6,858  
                 
EQUITY                
Cummins Inc. shareholders' equity                
  Common stock, $2.50 par value, 500 shares authorized, 222.3 and 222.3 shares issued     2,113       2,099  
  Retained earnings     8,961       8,406  
  Treasury stock, at cost, 38.4 and 35.6 shares     (2,604 )     (2,195 )
  Common stock held by employee benefits trust, at cost, 1.2 and 1.3 shares     (14 )     (16 )
  Accumulated other comprehensive loss                
    Defined benefit postretirement plans     (597 )     (611 )
    Other     (72 )     (173 )
    Total accumulated other comprehensive loss     (669 )     (784 )
      Total Cummins Inc. shareholders' equity     7,787       7,510  
Noncontrolling interests     371       360  
        Total equity     8,158       7,870  
          Total liabilities and equity   $ 15,500     $ 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)
     
     
    Six months ended
In millions   June 29, 2014   June 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES                
  Consolidated net income   $ 830     $ 753  
  Adjustments to reconcile consolidated net income to net cash provided by operating activities                
    Depreciation and amortization     217       200  
    Gain on fair value adjustment for consolidated investees     (20 )     (12 )
    Deferred income taxes     (88 )     20  
    Equity in income of investees, net of dividends     (108 )     (57 )
    Pension contributions in excess of expense     (127 )     (78 )
    Other post-retirement benefits payments in excess of expense     (14 )     (15 )
    Stock-based compensation expense     21       19  
    Excess tax benefits on stock-based awards     (5 )     (8 )
    Translation and hedging activities     (9 )     3  
  Changes in current assets and liabilities, net of acquisitions                
    Accounts and notes receivable     (321 )     (265 )
    Inventories     (223 )     (184 )
    Other current assets     4       214  
    Accounts payable     289       310  
    Accrued expenses     120       (87 )
  Changes in other liabilities and deferred revenue     116       100  
  Other, net     19       47  
NET CASH PROVIDED BY OPERATING ACTIVITIES     701       960  
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
  Capital expenditures     (245 )     (275 )
  Investments in internal use software     (26 )     (24 )
  Investments in and advances to equity investees     (11 )     (4 )
  Acquisitions of businesses, net of cash acquired     (193 )     (134 )
  Investments in marketable securities-acquisitions     (179 )     (243 )
  Investments in marketable securities-liquidations     179       280  
  Cash flows from derivatives not designated as hedges     4       (23 )
  Other, net     8       12  
Net cash used in investing activities     (463 )     (411 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
  Proceeds from borrowings     17       2  
  Payments on borrowings and capital lease obligations     (39 )     (51 )
  Net borrowings (payments) under short-term credit agreements     (48 )     56  
  Distributions to noncontrolling interests     (32 )     (28 )
  Dividend payments on common stock     (229 )     (189 )
  Repurchases of common stock     (430 )     (289 )
  Excess tax benefits on stock-based awards     5       8  
  Other, net     -       18  
Net cash used in financing activities     (756 )     (473 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS     38       (63 )
Net increase (decrease) in cash and cash equivalents     (480 )     13  
Cash and cash equivalents at beginning of year     2,699       1,369  
CASH AND CASH EQUIVALENTS AT END OF PERIOD   $ 2,219     $ 1,382  

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

 
CUMMINS INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
                         
                         
In millions   Engine   Components   Power Generation   Distribution   Non-segment
Items
(1)
  Total
Three months ended June 29, 2014                                                
External sales   $ 2,178     $ 953     $ 475     $ 1,229     $ -     $ 4,835  
Intersegment sales     566       327       268       9       (1,170 )     -  
  Total sales     2,744       1,280       743       1,238       (1,170 )     4,835  
Depreciation and amortization(2)     52       26       13       20       -       111  
Research, development and engineering expenses     105       53       18       3       -       179  
Equity, royalty and interest income from investees     45       9       9       42       -       105  
Interest income     4       1       1       -       -       6  
Segment EBIT     311       185       61       126   (3)   (26 )     657  
                                                 
Segment EBIT as a percentage of total sales     11.3 %     14.5 %     8.2 %     10.2 %             13.6 %
                                                 
Three months ended March 30, 2014                                                
External sales   $ 2,090     $ 922     $ 452     $ 942     $ -     $ 4,406  
Intersegment sales     473       308       187       8       (976 )     -  
  Total sales     2,563       1,230       639       950       (976 )     4,406  
Depreciation and amortization(2)     51       26       12       16       -       105  
Research, development and engineering expenses     116       53       19       2       -       190  
Equity, royalty and interest income from investees     32       9       8       41       -       90  
Interest income     2       1       1       1       -       5  
Segment EBIT     269       167       25       76   (3)   (9 )     528  
                                                 
Segment EBIT as a percentage of total sales     10.5 %     13.6 %     3.9 %     8.0 %             12.0 %
                                                 
Three months ended June 30, 2013                                                
External sales   $ 2,209     $ 786     $ 583     $ 947     $ -     $ 4,525  
Intersegment sales     447       331       231       7       (1,016 )     -  
  Total sales     2,656       1,117       814       954       (1,016 )     4,525  
Depreciation and amortization(2)     51       23       12       15       -       101  
Research, development and engineering expenses     102       57       17       1       -       177  
Equity, royalty and interest income from investees     52       9       10       37       -       108  
Interest income     7       -       2       1       -       10  
Segment EBIT     339       136       76       100   (3)   (30 )     621  
                                                 
Segment EBIT as a percentage of total sales     12.8 %     12.2 %     9.3 %     10.5 %             13.7 %
                                                 
(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 June 29, 2014, March 30, 2014 and June 30, 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 June 29, 2014, March 30, 2014 and June 30, 2013 included gains of $14 million, $6 million and $5 million on the fair value adjustments resulting from the acquisitions of controlling interests in North American distributors in each period, respectively.
 
CUMMINS INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
                         
                         
In millions   Engine   Components   Power Generation   Distribution   Non-segment Items (1)   Total
Six months ended June 29, 2014                                                
External sales   $ 4,268     $ 1,875     $ 927     $ 2,171     $ -     $ 9,241  
Intersegment sales     1,039       635       455       17       (2,146 )     -  
  Total sales     5,307       2,510       1,382       2,188       (2,146 )     9,241  
Depreciation and amortization
(2)
    103       52       25       36       -       216  
Research, development and engineering expenses     221       106       37       5       -       369  
Equity, royalty and interest income from investees     77       18       17       83       -       195  
Interest income     6       2       2       1       -       11  
Segment EBIT     580       352       86       202   (3)   (35 )     1,185  
                                                 
Segment EBIT as a percentage of total sales     10.9 %     14.0 %     6.2 %     9.2 %             12.8 %
                                                 
Six months ended June 30, 2013                                                
External sales   $ 4,094     $ 1,508     $ 1,122     $ 1,723     $ -     $ 8,447  
Intersegment sales     865       627       438       9       (1,939 )     -  
  Total sales     4,959       2,135       1,560       1,732       (1,939 )     8,447  
Depreciation and amortization
(2)
    103       47       24       25       -       199  
Research, development and engineering expenses     207       114       35       3       -       359  
Equity, royalty and interest income from investees     75       16       17       82       -       190  
Interest income     9       1       4       1       -       15  
Segment EBIT     534       255       127       195   (3)   (53 )     1,058  
                                                 
Segment EBIT as a percentage of total sales     10.8 %     11.9 %     8.1 %     11.3 %             12.5 %
                                                 
(1) Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the six months ended June 29, 2014 and June 30, 2013.
(2) Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount and deferred costs included in theCondensed Consolidated Statements of Income as "Interest expense." The amortization of debt discount and deferred costs were $1 million and $5 million for the six months ended June 29, 2014 and June 30, 2013, respectively.
(3) Distribution segment EBIT for the six months ended June 29, 2014 and June 30, 2013 included gains of $20 million and $12 million on the fair value adjustments resulting from the acquisitions of controlling interests in North American distributors in each period, respectively.
   

A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Income is shown in the table below:

         
         
    Three months ended   Six months ended
In millions   June 29, 2014   March 30, 2014   June 30, 2013   June 29, 2014   June 30, 2013
Total EBIT   $ 657     $ 528     $ 621     $ 1,185     $ 1,058  
Less: Interest expense     15       17       8       32       14  
  Income before income taxes   $ 642     $ 511     $ 613     $ 1,153     $ 1,044  
 
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   Six months ended
In millions   June 29, 2014   March 30, 2014   June 30, 2013   June 29, 2014   June 30, 2013
Distribution Entities                                        
North American distributors   $ 30     $ 32     $ 29     $ 62     $ 64  
Komatsu Cummins Chile, Ltda.     8       6       6       14       11  
All other distributors     1       1       -       2       -  
Manufacturing Entities                                        
Dongfeng Cummins Engine Company, Ltd.     22       14       20       36       32  
Chongqing Cummins Engine Company, Ltd.     15       11       17       26       29  
Beijing Foton Cummins Engine Co., Ltd. (Light-duty)     8       6       9       14       10  
Shanghai Fleetguard Filter Co., Ltd.     3       3       4       6       7  
Tata Cummins, Ltd.     2       2       2       4       3  
Cummins Westport, Inc.     -       1       3       1       3  
Beijing Foton Cummins Engine Co., Ltd. (Heavy-duty)     (7 )     (6 )     (7 )     (13 )     (10 )
All other manufacturers     14       9       15       23       22  
  Cummins share of net income     96       79       98       175       171  
Royalty and interest income     9       11       10       20       19  
    Equity, royalty and interest income from investees   $ 105     $ 90     $ 108     $ 195     $ 190  

NOTE 2. INCOME TAXES

Our effective tax rate for the year is expected to approximate 28 percent, excluding any one-time items that may arise and the research tax credit which expired December 31, 2013 and has not yet been renewed by Congress. Our tax rate is generally less than the 35 percent U.S. statutory income tax rate primarily due to lower tax rates on foreign income. The effective tax rates for the three and six month periods ended June 29, 2014, were 26.5 percent and 28 percent, respectively. The tax rate for the three months ended June 29, 2014, included a $2 million discrete tax benefit for the release of reserves for uncertain tax positions related to multiple state audit settlements. Additionally, the tax rate for the six month period included a $12 million discrete tax expense attributable primarily to state deferred tax adjustments, as well as a $6 million discrete net tax benefit resulting from a $70 million dividend paid from China earnings generated prior to 2012.

Our effective tax rate for the three month period ended March 30, 2014, was 29.9 percent, and included a $12 million discrete tax expense attributable primarily to state deferred tax adjustments, as well as a $6 million discrete net tax benefit resulting from a $70 million dividend paid from China earnings generated prior to 2012.

Our effective tax rates for the three and six month periods ended June 30, 2013, were 28.1 percent and 27.9 percent, respectively. These tax rates included a discrete tax benefit of $28 million attributable to the 2012 research credit reinstated in January 2013, as well as a discrete tax expense of $17 million, which primarily related to the write-off of a deferred tax asset deemed unrecoverable. The decrease in the three month effective tax rate from 2013 to 2014 is primarily due to favorable changes in the jurisdictional mix of pre-tax income and the 2014 favorable discrete tax item related to state audit settlements. 

NOTE 3. ACQUISITION  

Cummins Southern Plains LLC

On March 31, 2014, we acquired the remaining 50 percent interest in Cummins Southern Plains LLC (Southern Plains) from the former distributor principal. The purchase consideration was $92 million as presented below, which included $41 million in cash and an additional $48 million paid to eliminate outstanding debt. The remaining $3 million will be paid in future periods. The intangible assets are primarily customer related and are being amortized over periods ranging from one to five years. The acquisition was accounted for as a business combination and the results of the acquired entity were included in the Distribution operating segment subsequent to the acquisition date. As a result of this transaction, second quarter 2014 Distribution segment results included a $13 million gain, as we were required to re-measure our pre-existing 50 percent ownership interest in Southern Plains to fair value in accordance with GAAP. The transaction generated less than $1 million of goodwill based on the purchase price allocation. Net sales for Southern Plains were $433 million for the year ended December 31, 2013. This amount is not fully incremental to our consolidated sales as the amount would be reduced by the elimination of sales to the previously unconsolidated entity.

The final purchase price allocation as of June 29, 2014, was as follows:

     
     
In millions    
Accounts receivable $ 63  
Inventory   59  
Fixed assets   47  
Intangible assets   11  
Other current assets   9  
Current liabilities   (53 )
Total business valuation   136  
Fair value of pre-existing 50 percent interest   (44 )
Purchase price $ 92  
 
CUMMINS INC. AND SUBSIDIARIES
FINANCIAL MEASURES THAT SUPPLEMENT GAAP
(Unaudited)

Earnings before interest, 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, accounting principles generally accepted in the United States of America and may not be consistent with measures used by other companies. It should be considered supplemental data. Below is a reconciliation of EBIT to "Net income attributable to Cummins Inc.," for each of the applicable periods:

         
         
    Three months ended   Six months ended
In millions   June 29, 2014   March 30, 2014   June 30, 2013   June 29, 2014   June 30, 2013
Earnings before interest expense and income taxes   $ 657     $ 528     $ 621     $ 1,185     $ 1,058  
                                         
EBIT as a percentage of net sales     13.6 %     12.0 %     13.7 %     12.8 %     12.5 %
                                         
Less                                        
  Interest expense     15       17       8       32       14  
  Income tax expense     170       153       172       323       291  
Consolidated net income     472       358       441       830       753  
                                         
Less                                        
  Net income attributable to noncontrolling interests     26       20       27       46       57  
    Net income attributable to Cummins Inc.   $ 446     $ 338     $ 414     $ 784     $ 696  
                                         
Net income attributable to Cummins Inc. as a percentage of net sales     9.2 %     7.7 %     9.1 %     8.5 %     8.2 %
 
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     $ -     $ -     $ 1,518  
Medium-duty truck and bus     601       646       -       -       1,247  
Light-duty automotive and RV     361       336       -       -       697  
Industrial     700       757       -       -       1,457  
Stationary power     179       209       -       -       388  
  Total sales   $ 2,563     $ 2,744     $ -     $ -     $ 5,307  
                                         
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     -     -     237,600  
Heavy-duty   28,800     30,300     -     -     59,100  
High-horsepower   3,400     3,900     -     -     7,300  
  Total units   151,100     152,900     -     -     304,000  
                               
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  
 
Component segment sales by business
                               
                               
2014                              
In millions   Q1   Q2   Q3   Q4   YTD
Emission Solutions   $ 543     $ 582     $ -     $ -     $ 1,125  
Turbo Technologies     313       307       -       -       620  
Filtration     265       275       -       -       540  
Fuel systems     109       116       -       -       225  
  Total sales   $ 1,230     $ 1,280     $ -     $ -     $ 2,510  
                                         
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     $ -     $ -     $ 818  
Power systems     137       141       -       -       278  
Alternators     105       126       -       -       231  
Power solutions     24       31       -       -       55  
  Total sales   $ 639     $ 743     $ -     $ -     $ 1,382  
                                         
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  
 
Distribution segment sales by business
                               
                               
2014                              
In millions   Q1   Q2   Q3   Q4   YTD
Parts and filtration   $ 382     $ 461     $ -     $ -     $ 843  
Power generation     193       278       -       -       471  
Engines     174       249       -       -       423  
Service     201       250       -       -       451  
  Total sales   $ 950     $ 1,238     $ -     $ -     $ 2,188  
                                         
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  

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

Source: Cummins Inc.