Edgar Filing: CUMMINS INC

UNITED STATES

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report: October 30, 2009

CUMMINS INC.

(Exact name of registrant as specified in its charter)

Indiana

(State or other Jurisdiction of

Incorporation)

1-4949

(Commission File Number)

35-0257090

(I.R.S. Employer Identification

No.)

500 Jackson Street

P. O. Box 3005

Columbus, IN 47202-3005

(Principal Executive Office) (Zip Code)

Registrant's telephone number, including area code: (812) 377-5000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

[ ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On October 30, 2009, Cummins Inc. issued a press release regarding its release of third quarter results.

Item 7.01. Regulation FD Disclosure

The following information is furnished pursuant to Item 2.02, "Results of Operations

and Financial Condition" and Item 7.01, "Regulation FD Disclosure."

On October 30, 2009, Cummins Inc. ("Cummins," "the Company," "the registrant," "we," "our," or "us") issued the attached press release reporting its financial results for the third quarter of 2009. A copy of Cummins' press release is attached hereto as Exhibit 99 and hereby incorporated by reference.

Item 9.01. Financial Statements and Exhibits.

(d)

The following exhibit is furnished herewith:

99-Press Release dated October 30, 2009

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: October 30, 2009

CUMMINS INC.

/s/ Marsha L. Hunt

______________________________

Marsha L. Hunt

Vice President - Corporate Controller

(Principal Accounting Officer)

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited) (a)

	Three months ended
	September 27,		June 28,			September 28,
In millions (except per share amounts)	2009		2009			2008
NET SALES	$	2,530	$	2,431		$	3,693
Cost of sales	2,027		1,983			2,873
GROSS MARGIN	503		448			820

OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses	304		287			388
Research, development and engineering expenses	90		79			113
Equity, royalty and interest income from investees	57		57			66
Restructuring and other charges	22		7			―
Other operating income (expense), net	3		(11		)	(2		)

OPERATING INCOME	147		121			383

Interest income	2		1			4
Interest expense	9		10			10
Other income (expense), net	6		(13		)	(7		)
INCOME BEFORE INCOME TAXES	146		99			370

Income tax expense	36		29			123
NET INCOME	110		70			247

Less: net income attributable to noncontrolling interests	15		14			18
NET INCOME ATTRIBUTABLE TO CUMMINS INC.	$	95	$	56		$	229

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic	$	0.48	$	0.28		$	1.18
Diluted	$	0.48	$	0.28		$	1.17

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		197.4		197.1			194.9
Diluted		197.8		197.4			196.5

CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.175	$	0.175		$	0.175

(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 INCOME

(Unaudited) (a)

	Nine months ended
	September 27,			September 28,
In millions (except per share amounts)	2009			2008
NET SALES	$	7,400		$	11,054
Cost of sales	6,004			8,648
GROSS MARGIN	1,396			2,406

OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses	891			1,109
Research, development and engineering expenses	254			320
Equity, royalty and interest income from investees	147			202
Restructuring and other charges	95			―
Other operating (expense) income, net	(6		)	(9		)

OPERATING INCOME	297			1,170

Interest income	5			14
Interest expense	26			33
Other (expense) income, net	(10		)	(20		)
INCOME BEFORE INCOME TAXES	266			1,131

Income tax expense	72			372
NET INCOME	194			759

Less: net income attributable to noncontrolling interests	36			47
NET INCOME ATTRIBUTABLE TO CUMMINS INC.	$	158		$	712

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic	$	0.80		$	3.65
Diluted	$	0.80		$	3.62

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		197.1			195.1
Diluted		197.4			196.5

CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.525		$	0.425

(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)

	September 27,			December 31,
In millions (except par value)	2009			2008
ASSETS
Current assets
Cash and cash equivalents	$	686		$	426
Marketable securities		148			77
Accounts and notes receivable, net		1,731			1,782
Inventories		1,461			1,783
Deferred income taxes		363			347
Prepaid expenses and other current assets		254			298
Total current assets		4,643			4,713
Long-term assets
Property, plant and equipment		4,736			4,539
Accumulated depreciation		(2,877	)		(2,698	)
Property, plant and equipment, net		1,859			1,841
Investments and advances related to equity method investees		538			588
Goodwill		363			362
Other intangible assets, net		229			223
Deferred income taxes		400			491
Other assets		323			301
Total assets	$	8,355		$	8,519
LIABILITIES
Current liabilities
Current portion of long-term debt and loans payable	$	60		$	69
Accounts payable (principally trade)		875			1,009
Current portion of accrued product warranty		422			434
Accrued compensation, benefits and retirement costs		335			364
Other accrued expenses		619			763
Total current liabilities		2,311			2,639
Long-term liabilities
Long-term debt		621			629
Pensions		425			574
Postretirement benefits other than pensions		455			452
Other liabilities and deferred revenue		740			745
Total liabilities		4,552			5,039
EQUITY
Cummins Inc. shareholders’ equity
Common stock, $2.50 par value, 500 shares authorized, 222.1 and 221.7 shares issued		1,842			1,793
Retained earnings		3,340			3,288
Treasury stock, at cost, 20.3 and 20.4 shares		(713	)		(715	)
Common stock held by employee benefits trust, at cost, 3.5 and 5.1 shares		(43	)		(61	)
Unearned compensation		(1	)		(5	)
Accumulated other comprehensive loss
Defined benefit postretirement plans		(741	)		(798	)
Other		(121	)		(268	)
Total accumulated other comprehensive loss		(862	)		(1,066	)
Total Cummins Inc. shareholders’ equity		3,563			3,234
Noncontrolling interests		240			246
Total equity		3,803			3,480
Total liabilities and equity	$	8,355		$	8,519

(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)

	Nine months ended
	September 27,				September 28,
In millions	2009				2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	194			$	759
Adjustments to reconcile net income to net cash provided by operating activities:
Restructuring and other charges, net of cash payments	21				―
Depreciation and amortization	238				233
Deferred income taxes	(11			)	38
Equity in income of investees, net of dividends	56				(80			)
Pension expense, net of pension contributions	(49			)	(40			)
Other post-retirement benefits expense, net of cash payments	(18			)	(11			)
Stock-based compensation expense	16				27
Excess tax deficiencies (benefits) on stock-based awards	2				(12			)
Translation and hedging activities	33				15
Changes in current assets and liabilities, net of acquisitions and dispositions:
Accounts and notes receivable	89				(310			)
Inventories	360				(334			)
Other current assets	32				(35			)
Accounts payable	(155			)	198
Accrued expenses	(185			)	206
Changes in long-term liabilities	103				78
Other, net	4				(7			)
Net cash provided by operating activities	730				725
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(204			)	(330			)
Investments in internal use software	(24			)	(53			)
Proceeds from disposals of property, plant and equipment	8				20
Investments in and advances to equity investees	(5			)	(51			)
Acquisition of businesses, net of cash acquired	(2			)	(142			)
Proceeds from the sale of an equity investee	―				64
Investments in marketable securities—acquisitions	(234			)	(264			)
Investments in marketable securities—liquidations	171				281
Purchases of other investments	(54			)	(54			)
Cash flows from derivatives not designated as hedges	(21			)	(24			)
Other, net	1				1
Net cash used in investing activities	(364			)	(552			)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings	11				91
Payments on borrowings and capital lease obligations	(60			)	(111			)
Net borrowings under short-term credit agreements	(4			)	5
Distributions to noncontrolling interests	(16			)	(14			)
Dividend payments on common stock	(106			)	(86			)
Proceeds from sale of common stock held by employee benefit trust	54				52
Repurchases of common stock	―				(123			)
Excess tax (deficiencies) benefits on stock-based awards	(2			)	12
Other, net	3				3
Net cash used in financing activities	(120			)	(171			)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	14				(7			)
Net increase (decrease) in cash and cash equivalents	260				(5			)
Cash and cash equivalents at beginning of year	426				577
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$		686		$		572

(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				Power Generation			Components				Distribution			Non-segment items(1)				Total
Three months ended September 27, 2009
External sales	$		1,270		$	444		$		395		$	421		$		—		$	2,530
Intersegment sales	169				105			196				1			(471			)	―
Total sales	1,439				549			591				422			(471			)	2,530
Depreciation and amortization(2)	49				13			18				5			―				85
Research, development and engineering expense	59				9			22				―			―				90
Equity, royalty and interest income from investees	16				5			4				32			―				57
Restructuring and other charges	―				―			―				―			22				22
Interest income	1				―			1				―			―				2
Segment EBIT	61				23			31				55			(15			)	155

Three months ended June 28, 2009
External sales	$		1,133		$	481		$		355		$	462		$		—		$	2,431
Intersegment sales	173				129			147				1			(450			)	―
Total sales	1,306				610			502				463			(450			)	2,431
Depreciation and amortization(2)	45				11			17				4			―				77
Research, development and engineering expense	51				8			20				―			―				79
Equity, royalty and interest income from investees	17				6			4				30			―				57
Restructuring and other charges	―				―			―				―			7				7
Interest income	―				―			―				1			―				1
Segment EBIT	(4			)	41			(10			)	55			27				109

Three months ended September 28, 2008
External sales	$		1,927		$	653		$		535		$	578		$		—		$	3,693
Intersegment sales	352				235			266				3			(856			)	―
Total sales	2,279				888			801				581			(856			)	3,693
Depreciation and amortization(2)	43				9			16				6			―				74
Research, development and engineering expense	75				11			27				―			―				113
Equity, royalty and interest income from investees	26				6			3				31			―				66
Interest income	2				1			1				―			―				4
Segment EBIT	160				108			61				61			(10			)	380

Nine months ended September 27, 2009
External sales	$	3,608			$		1,402	$	1,096			$		1,294	$		―		$	7,400
Intersegment sales	629				414			527				4			(1,574			)	―
Total sales	4,237				1,816			1,623				1,298			(1,574			)	7,400
Depreciation and amortization(2)	135				35			53				14			―				237
Research, development and engineering expense	168				25			61				―			―				254
Equity, royalty and interest income from investees	30				16			9				92			―				147
Restructuring and other charges	―				―			―				―			95				95
Interest income	2				1			1				1			―				5
Segment EBIT	41				133			22				168			(72			)	292

Nine months ended September 28, 2008
External sales	$		5,842		$	1,926		$		1,686		$	1,600		$	—			$	11,054
Intersegment sales	1,032				687			790				7			(2,516			)	―
Total sales	6,874				2,613			2,476				1,607			(2,516			)	11,054
Depreciation and amortization(2)	133				31			49				17			―				230
Research, development and engineering expense	215				31			74				―			―				320
Equity, royalty and interest income from investees	91				17			10				84			―				202
Interest income	7				3			3				1			―				14
Segment EBIT	575				301			175				178			(65			)	1,164
(1) Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. For the three and nine months ended September 27, 2009, unallocated corporate expenses included restructuring and other charges of $22 million and $95 million and gains of $8 million and $5 million related to flood damages. For the three months ended June 28, 2009, unallocated corporate expenses included restructuring and other charges of $7 million and a $9 million loss related to flood damage insurance recoveries. There were no unallocated corporate expenses for the three months ended September 28, 2008. For the nine months ended September 28, 2008, unallocated corporate expenses included losses of $6 million related to flood damages.
(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.

CUMMINS INC. AND SUBSIDIARIES

RECONCILIATION OF SEGMENT INFORMATION

(Unaudited)

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						Nine months ended
	September 27,		June 28,		September 28,		September 27,		September 28,
In millions	2009		2009		2008		2009		2008
Segment EBIT	$	155	$	109	$	380	$	292	$	1,164
Less:
Interest expense	9		10		10		26		33
Income before income taxes	$	146	$	99	$	370	$	266	$	1,131

FINANCIAL MEASURES THAT SUPPLEMENT GAAP

(Unaudited)

Earnings before interest, taxes, noncontrolling interests and restructuring and other charges

We define EBIT as earnings or loss 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. Below is a reconciliation of EBIT, a non-GAAP financial measure, to consolidated net income attributable to Cummins Inc., for each of the applicable periods:

	Three months ended									Nine months ended
	September 27,			June 28,			September 28,			September 27,			September 28,
In millions	2009			2009			2008			2009			2008
Earnings before interest expense, income taxes and restructuring and other charges	$	177		$	116		$	380		$	387		$	1,164

Earnings before interest expense, income taxes and restructuring and other charges as a percentage of sales	*7.0*		%	4.8		%	10.3		%	*5.2*		%	10.5		%
Less:
Restructuring and other charges	22			7			―			95			―

Earnings before interest and income taxes	$	155		$	109		$	380		$	292		$	1,164

EBIT as a percentage of net sales	*6.1*		%	4.5		%	10.3		%	*3.9*		%	10.5		%

Less:
Interest expense	9			10			10			26			33
Income tax expense	36			29			123			72			372
Net income	110			70			247			194			759

Less:
Net income attributable to noncontrolling interests	15			14			18			36			47
Net income attributable to Cummins Inc.	$	95		$	56		$	229		$	158		$	712

Net income attributable to Cummins Inc. as a percentage of net sales	*3.8*		%	2.3		%	6.2		%	*2.1*		%	6.4		%

CUMMINS INC. AND SUBSIDIARIES

FINANCIAL MEASURES THAT SUPPLEMENT GAAP

(Unaudited)

Net income and diluted earnings per share (EPS) attributable to Cummins Inc. excluding restructuring and other charges

We believe this is a useful measure of our operating performance for the period presented as it illustrates our operating performance without regard to restructuring. 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. The following table reconciles net income attributable to Cummins Inc. excluding restructuring and other charges to Net income attributable to Cummins Inc. for the three and nine months ended September 27, 2009, and the three months ended June 28, 2009. There were no restructuring actions taken in the three or nine months ended September 28, 2008.

	Three months ended								Nine months ended
	September 27, 2009				June 28, 2009				September 27, 2009
In millions	Net Income		Diluted EPS		Net Income		Diluted EPS		Net Income		Diluted EPS
Net income attributable to Cummins Inc. excluding restructuring and other charges	$	110	$	0.56	$	60	$	0.30	$	221	$	1.12
Less:
Restructuring and other charges, net(1)	15		0.08		4		0.02		63		0.32
Net income attributable to Cummins Inc.	$	95	$	0.48	$	56	$	0.28	$	158	$	0.80
(1) During the three and nine months ended September 27, 2009, management approved and committed to undertake actions, which resulted in a pretax charge of $22 million and $95 million, respectively. These charges included employee-related liabilities for severance and benefits of approximately $10 million and $76 million, net of changes in estimate, exit costs of approximately zero and $7 million, and pension and other postretirement benefit curtailment charges of $12 million and $12 million, for the three and nine months ended, respectively. During the three months ended June 28, 2009, management approved actions, which resulted in a pretax charge of $7 million, including employee-related liabilities for severance and benefits of approximately $8 million. In the three months ended June 28, 2009, there was also a favorable change in estimate for previously recorded restructuring actions of $1 million.

SUPPLEMENTAL INFORMATION

In 2009, the Power Generation segment reorganized its reporting structure to include the following businesses: Commercial Products, Alternators, Commercial Projects, Power Electronics and Consumer. Sales by quarter for our Power Generation segment by business for the years 2008 and 2007 were as follows:

2008	Three months ended								Year ended
In millions	March 30, 2008		June 29, 2008		September 28, 2008		December 31, 2008		December 31, 2008
Commercial Products	$	444	$	555	$	559	$	558	$	2,116
Alternator	156		178		174		178		686
Commercial Projects	86		111		63		68		328
Power Electronics	27		31		35		39		132
Consumer	74		63		57		44		238
Total sales	$	787	$	938	$	888	$	887	$	3,500

2007	Three months ended								Year ended
In millions	April 1, 2007		July 1, 2007		September 30, 2007		December 31, 2007		December 31, 2007
Commercial Products	$	383	$	448	$	449	$	481	$	1,761
Alternator	132		156		163		172		623
Commercial Projects	45		44		49		81		219
Power Electronics	26		26		28		28		108
Consumer	89		95		87		78		349
Total sales	$	675	$	769	$	776	$	840	$	3,060