Cummins Announces Strong First Quarter Results With Revenue Growth Of 16 Percent And EBIT Increasing 24 Percent

Cummins Inc. (NYSE: CMI) today reported strong sales and profits for the first quarter of 2012.

First quarter revenue of $4.5 billion increased 16 percent from the same quarter in 2011. The increase year-over-year was driven by higher demand in truck, power generation and construction markets in North America and strong growth in global mining markets. Growth in these markets offset weaker demand in the truck market in Brazil, the construction market in China and construction and power generation markets in Europe.

Earnings before interest and taxes (EBIT) was $658 million or 14.7 percent of sales compared to $532 million or 13.8 percent of sales in the first quarter of 2011. EBIT increased by 24 percent, continuing the company’s trend of growing earnings faster than sales.

Net income attributable to Cummins in the first quarter of 2012 was $455 million ($2.38 per diluted share) compared to $343 million in the same period a year ago ($1.75 per diluted share).

“Cummins continues to benefit from its geographic diversification and its leadership position in a number of end markets as evidenced by our very strong first quarter results,” said Tom Linebarger, Chairman and Chief Executive Officer. “Revenues in North America grew 40 percent in the first quarter, offsetting near-term softness in some emerging markets. I am delighted that through close coordination with our key OEM partners and strong execution from our manufacturing and supply chain teams, we have been able to quickly increase our production in North America to meet strong demand for our products.”

Based on the current forecast, Cummins reaffirms that total Company revenues are expected to increase 10 percent in 2012, with EBIT in the range of 14.5 to 15 percent of sales.

Other recent highlights:

• Cummins announced at the Mid-America Truck Show in March that it has commenced development of a new 15-liter spark-ignited natural gas engine for the U.S. heavy-duty truck market.
• Also at the Mid-America Truck Show, Cummins unveiled its product solutions that will allow the Company’s engines for U.S. truck customers to meet 2014 fuel efficiency and green house gas standards in 2013.
• Cummins announced plans to develop a new master site for its operations in Brazil.
• For the fifth consecutive year, Cummins has been named one of the world's most ethical companies by The Ethisphere Institute.

First quarter detail (all comparisons to same period in 2011)

Engine Segment

• Sales – $2.9 billion, up 20 percent
• Segment EBIT – $381 million, or 13.3 percent of sales, compared to $290 million or 12.1 percent of sales
• Improved demand in North American heavy duty truck, medium duty truck and light duty truck and construction markets offsetting lower sales to the China construction and Brazilian truck markets
• Strong demand for mining engines globally

Components

• Sales - $1.1 billion, an increase of 19 percent
• Segment EBIT - $143 million, or 13.0 percent of sales, compared to $105 million or 11.4 percent of sales
• Record quarter driven by increased demand in North America and Brazil more than offsetting lower demand in Europe and China

Power Generation

• Sales – $780 million, down 2 percent
• Segment EBIT – $76 million, or 9.7 percent of sales, compared to $89 million or 11.2 percent of sales
• Improved demand in North America and Brazil offsetting lower revenues in the Middle East and Europe

Distribution

• Sales – $775 million, up 21 percent
• Segment EBIT – $94 million, or 12.1 percent of sales, compared to $89 million or 13.9 percent of sales
• Revenue increase driven by strong growth in Asia Pacific region, North and Central America, Europe 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 employs approximately 44,000 people worldwide and serves customers in approximately 190 countries and territories through a network of more than 600 company-owned and independent distributor locations and approximately 6,500 dealer locations. Cummins earned $1.85 billion on sales of $18.0 billion in 2011. Press releases can be found on the Web at www.cummins.com.

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, expectations, hopes, beliefs and intentions on strategies regarding the future. 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 2011 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
			April 1,			December 31,			March 27,
In millions, except per share amounts			2012			2011			2011
NET SALES			$	4,472		$	4,921		$	3,860
	Cost of sales			3,274			3,680			2,903
GROSS MARGIN				1,198			1,241			957
OPERATING EXPENSES AND INCOME
	Selling, general and administrative expenses			475			496			389
	Research, development and engineering expenses			181			179			129
	Equity, royalty and interest income from investees (Note 1)			104			101			96
	Gain on sale of business			-			53			-
	Other operating income (expense), net			2			25			(6)
OPERATING INCOME				648			745			529
	Interest income			8			9			6
	Interest expense			8			10			10
	Other income (expense), net			2			14			(3)
INCOME BEFORE INCOME TAXES				650			758			522
	Income tax expense (Note 2)			175			186			157
CONSOLIDATED NET INCOME				475			572			365
	Less: Net income attributable to noncontrolling interests			20			24			22
NET INCOME ATTRIBUTABLE TO CUMMINS INC.			$	455		$	548		$	343
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
	Basic		$	2.39		$	2.87		$	1.75
	Diluted		$	2.38		$	2.86		$	1.75
WEIGHTED AVERAGE SHARES OUTSTANDING
	Basic			190.4			190.9			195.5
	Diluted			190.8			191.5			196.1
CASH DIVIDENDS DECLARED PER COMMON SHARE			$	0.40		$	0.40		$	0.2625

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

CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (a)
In millions, except par value							April 1, 2012			December 31, 2011
ASSETS
Current assets
	Cash and cash equivalents						$	1,317		$	1,484
	Marketable securities							252			277
		Total cash, cash equivalents and marketable securities						1,569			1,761
	Accounts and notes receivable, net							2,684			2,526
	Inventories							2,382			2,141
	Prepaid expenses and other current assets							682			663
			Total current assets					7,317			7,091
Long-term assets
	Property, plant and equipment							5,416			5,245
		Accumulated depreciation						(3,025)			(2,957)
		Property, plant and equipment, net						2,391			2,288
	Investments and advances related to equity method investees							903			838
	Goodwill							342			339
	Other intangible assets, net							250			227
	Other assets							916			885
				Total assets			$	12,119		$	11,668
LIABILITIES
Current liabilities
	Loans payable						$	33		$	28
	Accounts payable (principally trade)							1,731			1,546
	Current portion of accrued product warranty							418			422
	Accrued compensation, benefits and retirement costs							289			511
	Deferred revenue							211			208
	Taxes payable (including taxes on income)							297			282
	Other accrued expenses							651			660
			Total current liabilities					3,630			3,657
Long-term liabilities
	Long-term debt							650			658
	Pensions							157			205
	Postretirement benefits other than pensions							428			432
	Other liabilities and deferred revenue							896			885
				Total liabilities				5,761			5,837
EQUITY
Cummins Inc. shareholders’ equity
	Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.2 shares issued							2,017			2,001
	Retained earnings							6,416			6,038
	Treasury stock, at cost, 30.2 and 30.2 shares							(1,590)			(1,587)
	Common stock held by employee benefits trust, at cost, 1.7 and 1.8 shares							(20)			(22)
	Accumulated other comprehensive loss
		Defined benefit postretirement plans						(713)			(724)
		Other						(100)			(214)
		Total accumulated other comprehensive loss						(813)			(938)
			Total Cummins Inc. shareholders’ equity					6,010			5,492
	Noncontrolling interests							348			339
				Total equity				6,358			5,831
					Total liabilities and equity		$	12,119		$	11,668

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

CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (a)
				Three months ended
In millions				April 1, 2012			March 27, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
	Consolidated net income			$	475		$	365
	Adjustments to reconcile consolidated net income to net cash provided by operating activities
		Depreciation and amortization			85			79
		Deferred income taxes			(27)			21
		Equity in income of investees, net of dividends			(59)			(62)
		Pension contributions in excess of expense			(27)			(24)
		Other post-retirement benefits payments in excess of expense			(4)			(5)
		Stock-based compensation expense			7			5
		Excess tax benefits on stock-based awards			(11)			(2)
		Translation and hedging activities			10			4
	Changes in current assets and liabilities, net of acquisitions
		Accounts and notes receivable			(135)			(306)
		Inventories			(209)			(210)
		Other current assets			(28)			(2)
		Accounts payable			148			251
		Accrued expenses			(196)			(28)
	Changes in other liabilities and deferred revenue				29			24
	Other, net				(37)			(22)
Net cash provided by operating activities					21			88
CASH FLOWS FROM INVESTING ACTIVITIES
	Capital expenditures				(126)			(91)
	Investments in internal use software				(16)			(10)
	Investments in and advances to equity investees				(5)			(21)
	Acquisition of businesses, net of cash acquired				(5)			-
	Investments in marketable securities—acquisitions				(146)			(101)
	Investments in marketable securities—liquidations				184			134
	Cash flows from derivatives not designated as hedges				11			4
	Other, net				1			7
Net cash used in investing activities					(102)			(78)
CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from borrowings				12			38
	Payments on borrowings and capital lease obligations				(38)			(45)
	Net borrowings (payments) under short-term credit agreements				-			1
	Distributions to noncontrolling interests				(22)			(21)
	Dividend payments on common stock				(77)			(51)
	Repurchases of common stock				(8)			(190)
	Excess tax benefits on stock-based awards				11			2
	Other, net				9			4
Net cash used in financing activities					(113)			(262)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS					27			8
Net increase (decrease) in cash and cash equivalents					(167)			(244)
Cash and cash equivalents at beginning of year					1,484			1,023
CASH AND CASH EQUIVALENTS AT END OF PERIOD				$	1,317		$	779

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

	CUMMINS INC. AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited)
	In millions			Engine			Components			Power Generation			Distribution			Non-segment Items (1)			Total
	Three months ended April 1, 2012
	External sales			$	2,412		$	774		$	516		$	770		$	-		$	4,472
	Intersegment sales			447			325			264			5			(1,041)				-
		Total sales			2,859			1,099			780			775			(1,041)			4,472
	Depreciation and amortization (2)				47			19			11			7			-			84
	Research, development and engineering expenses				111			51			18			1			-			181
	Equity, royalty and interest income from investees				38			8			10			48			-			104
	Interest income				4			1			2			1			-			8
	Segment EBIT				381			143			76			94			(36)			658
	Three months ended December 31, 2011
	External sales			$	2,628		$	781		$	682		$	830		$	-		$	4,921
	Intersegment sales			433				311			238			4			(986)			-
		Total sales			3,061			1,092			920			834			(986)			4,921
	Depreciation and amortization (2)				46			18			10			8			-			82
	Research, development and engineering expenses				112			49			17			1			-			179
	Equity, royalty and interest income from investees				40			7			10			44			-			101
	Interest income				4			2			2			1			-			9
	Segment EBIT				368			132			87			87			94			768
	Three months ended March 27, 2011
	External sales			$	2,006		$	660		$	557		$	637		$	-		$	3,860
	Intersegment sales			385			264			238			5			(892)				-
		Total sales			2,391			924			795			642			(892)			3,860
	Depreciation and amortization (2)				45			18			10			6			-			79
	Research, development and engineering expenses				80			37			11			1			-			129
	Equity, royalty and interest income from investees				42			8			8			38			-			96
	Interest income				3			1			1			1			-			6
	Segment EBIT				290			105			89			89			(41)			532

(1)		Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three month periods ended April 1, 2012 and March 27, 2011. For the three months ended December 31, 2011, unallocated corporate expenses include a $53 million gain ($33 million after-tax) recorded for the sale of certain assets and liabilities of our light-duty filtration business from our Components segment and a $38 million gain ($24 million after-tax) related to flood damage recoveries from the insurance settlement regarding a June 2008 flood in Southern Indiana.
(2)		Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount that is included in the Condensed Consolidated Statements of Income as “Interest expense.”

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
			April 1,			December 31,			March 27,
In millions			2012			2011			2011
Segment EBIT			$	658		$	768		$	532
Less
	Interest expense			8			10			10
Income before income taxes			$	650		$	758		$	522

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 interim reporting periods was as follows:

			Three months ended
			April 1,			December 31,			March 27,
In millions			2012			2011			2011
Distribution Entities
North American distributors			$	40		$	34		$	30
Komatsu Cummins Chile, Ltda.				5			6			4
All other distributors				1			1			1
Manufacturing Entities
Chongqing Cummins Engine Company, Ltd.				18			17			12
Dongfeng Cummins Engine Company, Ltd.				16			16			23
Cummins Westport, Inc.				5			6			1
Tata Cummins, Ltd.				4			5			4
Shanghai Fleetguard Filter Co., Ltd.				3			3			4
Valvoline Cummins, Ltd.				2			1			2
Komatsu manufacturing alliances				(1)			2			2
Beijing Foton Cummins Engine Co., Ltd.				(2)			(2)			(2)
All other manufacturers				1			2			6
	Cummins share of net income			92			91			87
Royalty and interest income				12			10			9
	Equity, royalty and interest income from investees		$	104		$	101		$	96

NOTE 2. INCOME TAXES

Our effective tax rate for the year is expected to approximate 27 percent, absent any discrete period activity. 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 tax rate for the three month period ended April 1, 2012, was 27 percent.

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