Cummins Reports Third Quarter Results, Confirms Full Year Guidance

• Expects full-year revenues of $17 billion, EBIT of 13.5 percent

COLUMBUS, Ind.--(BUSINESS WIRE)--Cummins Inc. (NYSE: CMI) today reported results for the third quarter of 2012.

“Demand has dropped sharply over the last three months, reflecting a high degree of uncertainty among customers in most geographic markets”

Third quarter revenue of $4.1 billion decreased 11 percent from the same quarter in 2011. Revenues in North America grew 2 percent while revenues from international markets declined 21 percent.

Earnings before interest and taxes (EBIT) were $496 million or 12.0 percent of sales compared to $640 million or 13.8 percent of sales in the third quarter of 2011.

Net income attributable to Cummins in the third quarter of 2012 was $352 million ($1.86 per diluted share) compared to $452 million in the same period a year ago ($2.35 per diluted share).

“Demand has dropped sharply over the last three months, reflecting a high degree of uncertainty among customers in most geographic markets,” said Tom Linebarger, Chairman and Chief Executive Officer. “We have been responding to the conditions by delaying or cancelling projects, flexing production at some of our manufacturing plants, reducing discretionary expenses, and reducing our workforce by 1000 to 1500 people by the end of this year. We are continuing to fund projects that are important for future growth and meeting commitments to customers. We are working to respond to the conditions now to ensure the long term strength of the company and to best serve the many stakeholders who rely on Cummins long term success.”

Based on the current forecast, Cummins expects full year revenues to be $17 billion, with EBIT in the range of 13.5 percent of sales.

Other recent highlights:

• Fitch Rating Services raised its Long-term Issuer Default Rating and long-term debt ratings for Cummins to “A”;
• Cummins became the first engine manufacturer to receive certification for the EPA 2013 regulations and the new Greenhouse Gas rules that come into effect in the U.S. in 2014 with our ISX15 engine;
• Cummins Power Generation’s stationary diesel generator set received EPA Tier 4 interim certification for the North American market 3 years ahead of deadline; and
• Newsweek’s 2012 Green Rankings of businesses ranked Cummins #64 among the 500 largest public companies in the United States, which is #1 among industrial companies;

Third quarter 2012 detail (all comparisons to same period in 2011)

Engine Segment

• Sales – $2.5 billion, down 14 percent
• Segment EBIT – $239 million, or 9.5 percent of sales, compared to $349 million or 11.8 percent of sales
• Lower demand in North American heavy duty truck, medium duty truck, oil and gas and mining markets, lower demand for trucks in Brazil and in the construction market in China offset stronger demand for light duty truck and construction engines in North America.

Components Segment

• Sales - $938 million, down 8 percent
• Segment EBIT - $89 million, or 9.5 percent of sales, compared to $113 million or 11.1 percent of sales
• Lower demand in on-highway markets in North America, Europe and China offset higher product content in Brazil. The net impact of acquisitions and divestitures slightly increased revenues

Power Generation Segment

• Sales – $814 million, down 7 percent
• Segment EBIT – $73 million, or 9.0 percent of sales, compared to $92 million or 10.5 percent of sales
• Higher revenues in North America offset by lower demand in Europe, China, the Middle East and Latin America

Distribution Segment

• Sales – $801 million, up 2 percent, down 7 percent excluding acquisitions
• Segment EBIT – $99 million, or 12.4 percent of sales, compared to $104 million or 13.3 percent of sales
• Lower sales in Africa, Europe and Asia Pacific offsetting growth in North America, China and the Middle East

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 employed approximately 44,000 people worldwide at the end of 2011 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, 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 second quarter of 2012, as well as the full year. 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 11 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
		September 30,		July 1,		September 25,
In millions, except per share amounts		2012		2012		2011
NET SALES		$	4,118	$	4,452	$	4,626
	Cost of sales		3,076		3,242		3,438
GROSS MARGIN			1,042		1,210		1,188
OPERATING EXPENSES AND INCOME
	Selling, general and administrative expenses		456		487		489
	Research, development and engineering expenses		186		187		164
	Equity, royalty and interest income from investees (Note 1)		94		104		102
	Gain on sale of businesses		-		6		-
	Other operating income (expense), net		(1)		2		2
OPERATING INCOME			493		648		639
	Interest income		5		7		9
	Interest expense		9		8		11
	Other income (expense), net		(2)		14		(8)
INCOME BEFORE INCOME TAXES			487		661		629
	Income tax expense (Note 2)		117		166		157
CONSOLIDATED NET INCOME			370		495		472
	Less: Net income attributable to noncontrolling interests		18		26		20
NET INCOME ATTRIBUTABLE TO CUMMINS INC.		$	352	$	469	$	452
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
	Basic	$	1.87	$	2.47	$	2.35
	Diluted	$	1.86	$	2.47	$	2.35
WEIGHTED AVERAGE SHARES OUTSTANDING
	Basic		188.6		189.8		192.1
	Diluted		189.0		190.1		192.7
CASH DIVIDENDS DECLARED PER COMMON SHARE		$	0.50	$	0.40	$	0.40

(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)
		Nine months ended
In millions, except per share amounts		September 30, 2012		September 25, 2011
NET SALES		$	13,042	$	13,127
	Cost of sales		9,592		9,779
GROSS MARGIN			3,450		3,348
OPERATING EXPENSES AND INCOME
	Selling, general and administrative expenses		1,418		1,341
	Research, development and engineering expenses		554		450
	Equity, royalty and interest income from investees (Note 1)		302		315
	Gain on sale of businesses		6		68
	Other operating income (expense), net		3		(4)
OPERATING INCOME			1,789		1,936
	Interest income		20		25
	Interest expense		25		34
	Other income (expense), net		14		(14)
INCOME BEFORE INCOME TAXES			1,798		1,913
	Income tax expense (Note 2)		458		539
CONSOLIDATED NET INCOME			1,340		1,374
	Less: Net income attributable to noncontrolling interests		64		74
NET INCOME ATTRIBUTABLE TO CUMMINS INC.		$	1,276	$	1,300
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
	Basic	$	6.73	$	6.71
	Diluted	$	6.72	$	6.69
WEIGHTED AVERAGE SHARES OUTSTANDING
	Basic		189.6		193.8
	Diluted		190.0		194.4
CASH DIVIDENDS DECLARED PER COMMON SHARE		$	1.30	$	0.925

(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 30,		December 31,
In millions, except par value						2012		2011
ASSETS
Current assets
	Cash and cash equivalents					$	1,033	$	1,484
	Marketable securities						239		277
		Total cash, cash equivalents and marketable securities					1,272		1,761
	Accounts and notes receivable, net						2,503		2,526
	Inventories						2,570		2,141
	Prepaid expenses and other current assets						770		663
			Total current assets				7,115		7,091
Long-term assets
	Property, plant and equipment						5,691		5,245
		Accumulated depreciation					(3,134)		(2,957)
		Property, plant and equipment, net					2,557		2,288
	Investments and advances related to equity method investees						962		838
	Goodwill						443		339
	Other intangible assets, net						365		227
	Other assets						972		885
				Total assets		$	12,414	$	11,668
LIABILITIES
Current liabilities
	Loans payable					$	54	$	28
	Accounts payable (principally trade)						1,460		1,546
	Current portion of accrued product warranty						406		422
	Accrued compensation, benefits and retirement costs						388		511
	Deferred revenue						208		208
	Taxes payable (including taxes on income)						172		282
	Other accrued expenses						621		660
			Total current liabilities				3,309		3,657
Long-term liabilities
	Long-term debt						670		658
	Postretirement benefits other than pensions						417		432
	Other liabilities and deferred revenue						1,184		1,090
				Total liabilities			5,580		5,837
EQUITY
Cummins Inc. shareholders’ equity
	Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.2 shares issued						2,046		2,001
	Retained earnings						7,068		6,038
	Treasury stock, at cost, 32.3 and 30.2 shares						(1,809)		(1,587)
	Common stock held by employee benefits trust, at cost, 1.6 and 1.8 shares						(19)		(22)
	Accumulated other comprehensive loss
		Defined benefit postretirement plans					(694)		(724)
		Other					(114)		(214)
		Total accumulated other comprehensive loss					(808)		(938)
			Total Cummins Inc. shareholders’ equity				6,478		5,492
	Noncontrolling interests						356		339
				Total equity			6,834		5,831
					Total liabilities and equity	$	12,414	$	11,668

(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 30,		September 25,
In millions			2012		2011
CASH FLOWS FROM OPERATING ACTIVITIES
	Consolidated net income		$	1,340	$	1,374
	Adjustments to reconcile consolidated net income to net cash provided by operating activities
		Depreciation and amortization		262		243
		Gain on sale of businesses		(6)		(68)
		Gain on fair value adjustment for consolidated investee		(7)		-
		Deferred income taxes		91		148
		Equity in income of investees, net of dividends		(51)		7
		Pension contributions in excess of expense		(74)		(71)
		Other post-retirement benefits payments in excess of expense		(16)		(10)
		Stock-based compensation expense		29		28
		Excess tax benefits on stock-based awards		(12)		(4)
		Translation and hedging activities		16		(14)
	Changes in current assets and liabilities, net of acquisitions and divestitures:
		Accounts and notes receivable		66		(469)
		Inventories		(367)		(367)
		Other current assets		(54)		(5)
		Accounts payable		(145)		317
		Accrued expenses		(398)		173
	Changes in other liabilities and deferred revenue			154		93
	Other, net			(41)		(7)
Net cash provided by operating activities				787		1,368
CASH FLOWS FROM INVESTING ACTIVITIES
	Capital expenditures			(424)		(377)
	Investments in internal use software			(62)		(31)
	Investments in and advances to equity investees			(92)		(104)
	Proceeds from sale of business, net of cash sold			10		111
	Acquisition of businesses, net of cash acquired			(215)		-
	Investments in marketable securities—acquisitions			(433)		(538)
	Investments in marketable securities—liquidations			475		572
	Cash flows from derivatives not designated as hedges			13		4
	Other, net			9		7
Net cash used in investing activities				(719)		(356)
CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from borrowings			64		96
	Payments on borrowings and capital lease obligations			(120)		(174)
	Net borrowings under short-term credit agreements			5		(5)
	Distributions to noncontrolling interests			(50)		(50)
	Dividend payments on common stock			(246)		(178)
	Repurchases of common stock			(231)		(546)
	Excess tax benefits on stock-based awards			12		4
	Other, net			16		13
Net cash used in financing activities				(550)		(840)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS				31		(30)
Net increase (decrease) in cash and cash equivalents				(451)		142
Cash and cash equivalents at beginning of year				1,484		1,023
CASH AND CASH EQUIVALENTS AT END OF PERIOD			$	1,033	$	1,165

(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)
			Engine		Components		Power Generation		Distribution		Non-segment Items^(1)		Total
	In millions
	Three months ended September 30, 2012
	External sales		$	2,131	$	663	$	526	$	798	$	-	$	4,118
	Intersegment sales		396		275		288		3		(962)			-
		Total sales		2,527		938		814		801		(962)		4,118
	Depreciation and amortization^(2)			48		21		12		8		-		89
	Research, development and engineering expenses			115		51		19		1		-		186
	Equity, royalty and interest income from investees			25		7		12		50		-		94
	Interest income			2		1		2		-		-		5
	Segment EBIT			239		89		73		99		(4)		496
	Three months ended July 1, 2012
	External sales		$	2,381	$	710	$	572	$	789	$	-	$	4,452
	Intersegment sales		460			326		337		5		(1,128)		-
		Total sales		2,841		1,036		909		794		(1,128)		4,452
	Depreciation and amortization^(2)			47		19		11		8		-		85
	Research, development and engineering expenses			115		51		19		2		-		187
	Equity, royalty and interest income from investees			37		8		10		49		-		104
	Interest income			3		1		3		-		-		7
	Segment EBIT			376		116		94		92		(9)		669
	Three months ended September 25, 2011
	External sales		$	2,539	$	704	$	604	$	779	$	-	$	4,626
	Intersegment sales		416		311		270		4		(1,001)			-
		Total sales		2,955		1,015		874		783		(1,001)		4,626
	Depreciation and amortization^(2)			46		19		11		6		-		82
	Research, development and engineering expenses			103		46		14		1		-		164
	Equity, royalty and interest income from investees			35		7		16		44		-		102
	Interest income			5		1		2		1		-		9
	Segment EBIT			349		113		92		104		(18)		640
	Nine months ended September 30, 2012
	External sales		$	6,924	$	2,147	$	1,614	$	2,357	$	-	$	13,042
	Intersegment sales		1,303		926		889		13		(3,131)			-
		Total sales		8,227		3,073		2,503		2,370		(3,131)		13,042
	Depreciation and amortization^(2)			142		59		34		23		-		258
	Research, development and engineering expenses			341		153		56		4		-		554
	Equity, royalty and interest income from investees			100		23		32		147		-		302
	Interest income			9		3		7		1		-		20
	Segment EBIT			996		348		243		285		(49)		1,823
	Nine months ended September 25, 2011
	External sales		$	7,021	$	2,105	$	1,810	$	2,191	$	-	$	13,127
	Intersegment sales		1,225		866		768		19		(2,878)			-
		Total sales		8,246		2,971		2,578		2,210		(2,878)		13,127
	Depreciation and amortization^(2)			135		55		32		17		-		239
	Research, development and engineering expenses			285		126		37		2		-		450
	Equity, royalty and interest income from investees			126		24		37		128		-		315
	Interest income			14		3		6		2		-		25
	Segment EBIT			1,016		338		286		299		8		1,947

(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 September 30, 2012 and September 25, 2011. The three months ended July 1, 2012, and nine months ended September 30, 2012, include a $6 million gain ($4 million after-tax) related to adjustments from our 2011 divestitures. The nine months ended September 25, 2011, include a $68 million gain ($37 million after-tax) related to the sale of certain assets and liabilities of our exhaust business from the Components segment. The gains have been excluded from segment results as they were not considered in our evaluation of operating results for the corresponding periods. There were no other significant unallocated corporate expenses.

(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 30,		July 1,		September 25,		September 30,		September 25,
In millions	2012		2012		2011		2012		2011
Segment EBIT	$	496	$	669	$	640	$	1,823	$	1,947
Less: Interest expense		9		8		11		25		34
Income before income taxes	$	487	$	661	$	629	$	1,798	$	1,913

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						Nine months ended
			September 30,		July 1,		September 25,		September 30,		September 25,
In millions			2012		2012		2011		2012		2011
Distribution Entities
North American distributors			$	37	$	38	$	35	$	115	$	100
Komatsu Cummins Chile, Ltda.				9		6		6		20		16
All other distributors				-		2		1		3		3
Manufacturing Entities
Chongqing Cummins Engine Company, Ltd.				14		17		20		49		51
Dongfeng Cummins Engine Company, Ltd.				9		17		15		42		64
Shanghai Fleetguard Filter Co., Ltd.				3		4		4		10		12
Beijing Foton Cummins Engine Co., Ltd.				3		2		(2)		3		(5)
Cummins Westport, Inc.				2		4		4		11		8
Valvoline Cummins, Ltd.				2		2		2		6		6
Tata Cummins, Ltd.				-		3		2		7		9
Komatsu manufacturing alliances				(1)		1		-		(1)		1
All other manufacturers				7		(1)		7		7		19
	Cummins share of net income			85		95		94		272		284
Royalty and interest income				9		9		8		30		31
		Equity, royalty and interest income from investees	$	94	$	104	$	102	$	302	$	315

NOTE 2. INCOME TAXES

Our effective tax rate for the year is expected to approximate 26.5 percent, absent any discrete period activity. Our tax rate is generally less than the 35 percent U.S. income tax rate primarily due to lower tax rates on foreign income. The tax rates for the three and nine month periods ended September 30, 2012, were 24.1 percent and 25.5 percent, respectively. These tax rates include a $16 million tax benefit for third quarter discrete tax adjustments, $6 million of which related to a dividend distribution of accumulated foreign income earned in prior years. These discrete tax adjustments also included a discrete tax benefit of $13 million for prior year tax return true-up adjustments and a discrete tax charge of $3 million related to the third quarter enactment of U.K. tax law changes.

The effective tax rate for the three month period ended July 1, 2012, was 25.1 percent and was less than the 35 percent U.S. income tax rate primarily due to lower tax rates on foreign income.

The tax rates for the three and nine month periods ended September 25, 2011, were 25.0 percent and 28.2 percent, respectively, and included a net discrete income tax benefit of $29 million (net of additional reserves for uncertain tax positions of $39 million) related to prior year refund claims filed for additional research tax credits, additional foreign income and foreign tax credits, as well as other adjustments. This benefit also included discrete income tax charges of $2 million for prior year tax return true-up adjustments and $3 million related to the third quarter enactment of U.K. tax law changes in the three and nine month periods ended September 25, 2011. Additionally, the tax rate for the nine month period included a second quarter discrete income tax charge of $4 million related to the enactment of state tax law changes in Indiana. The decrease in the 2012 effective tax rates versus the comparable periods in 2011 is due primarily to our assertion that income earned after 2011 by our China operations is permanently reinvested, as well as certain tax planning strategies implemented in our U.K. subsidiaries.

CUMMINS INC. AND SUBSIDIARIES
SELECTED FOOTNOTE DATA
(Unaudited)

NOTE 3. ACQUISITIONS

In April 2012, we reached an agreement to acquire the doser technology and business assets from Hilite Germany GmbH (Hilite) in a cash transaction. Dosers are products that enable compliance with emission standards in certain aftertreatment systems and complement our current product offerings. The transaction was approved by German regulators in June and closed on July 18, 2012. The purchase price was $176 million and is summarized below. There was no contingent consideration associated with this transaction. During the first nine months of 2012 we expensed approximately $4 million of acquisition related costs.

The acquisition of Hilite was accounted for as a business combination, with the results of the acquired entity and the goodwill included in the Components operating segment in the third quarter of 2012. The majority of the purchase price was allocated to technology and customer related intangible assets and goodwill, most of which is expected to be fully deductible for tax purposes. We expect the Hilite acquisition to strengthen our aftertreatment product offerings. This acquisition enhances our technical capabilities and keeps us in a strong position to meet the needs of current customers and grow into new markets, especially as an increasing number of regions around the world adopt tougher emission standards.

Intangible assets by asset class, including weighted average amortization life, are as follows:

Dollars in millions		Purchase price allocation		Weighted average amortization life in years
Technology		$	52	10.6
Customer			23	4.5
License arrangements			8	6.0
	Total intangible assets	$	83	8.5

The purchase price was allocated as follows:

In millions
Inventory		$	5
Fixed assets			5
Intangible assets			83
Goodwill			91
Liabilities			(8)
	Total purchase price	$	176

Net sales for Hilite were $77 million for the 12 months ended December 31, 2011.

In July 2012, we acquired an additional 45 percent interest in Cummins Central Power from the former principal for consideration of approximately $20 million. The acquisition was accounted for as a business combination, with the results of the acquired entity included in the Distribution operating segment in the third quarter of 2012. Distribution segment results also included a $7 million gain, as we were required to re-measure our pre-existing 35 percent ownership interest in Cummins Central Power to fair value in accordance with GAAP. Net sales for Cummins Central Power were $209 million for the 12 months ended December 31, 2011.

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 the gain related to the sale of certain assets and liabilities and discrete income tax items. 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. The following table reconciles net income attributable to Cummins Inc. to net income attributable to Cummins Inc. excluding special items for the three month periods ended September 30, 2012, July 1, 2012 and September 25, 2011.

		Three months ended
		September 30, 2012				July 1, 2012				September 25, 2011
In millions		Net Income		Diluted EPS		Net Income		Diluted EPS		Net Income		Diluted EPS
Net income attributable to Cummins Inc.		$	352	$	1.86	$	469	$	2.47	$	452	$	2.35
Subtract
	Gain on sale of businesses^(1)		-		-		4		0.02		-		-
	Discrete income tax items^(2)		16		0.08		-		-		29		0.15
Net income attributable to Cummins Inc.
	excluding special items	$	336	$	1.78	$	465	$	2.45	$	423	$	2.20

(1)	The gain has been excluded from operating results as it was not considered in our evaluation of performance for the three months ended July 1, 2012.
(2)	The three month period ended September 30, 2012, includes a $16 million tax benefit for third quarter 2012 discrete tax adjustments, $6 million of which related to a dividend distribution of accumulated foreign income earned in prior years. These discrete tax adjustments also included a discrete tax benefit of $13 million for prior year tax return true-up adjustments and a discrete tax charge of $3 million related to the third quarter enactment of U.K. tax law changes.
	The three month period ended September 25, 2011, includes a net discrete income tax benefit of $29 million (net of additional reserves for uncertain tax positions of $39 million) related to prior year refund claims filed for additional research tax credits, additional foreign income and foreign tax credits, as well as other adjustments. This benefit also included discrete income tax charges of $2 million for prior year tax return true-up adjustments and $3 million related to the third quarter enactment of U.K. tax law changes in the three month period ended September 25, 2011.

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. Below is a reconciliation of EBIT, a non-GAAP financial measure, to “Net income attributable to Cummins Inc.,” for each of the applicable periods:

			Three months ended						Nine months ended
			September 30,		July 1,		September 25,		September 30,		September 25,
In millions			2012		2012		2011		2012		2011
Earnings before interest expense, income taxes and special items			$	496	$	663	$	640	$	1,817	$	1,879
Earnings before interest expense, income taxes and special items as a percentage of net sales				12.0%		14.9%		13.8%		13.9%		14.3%
Add
	Gain on sale of businesses			-		6		-		6		68
Earnings before interest expense and income taxes			$	496	$	669	$	640	$	1,823	$	1,947
EBIT as a percentage of net sales				12.0%		15.0%		13.8%		14.0%		14.8%
Less
	Interest expense			9		8		11		25		34
	Income tax expense			117		166		157		458		539
Consolidated net income				370		495		472		1,340		1,374
Less
	Net income attributable to noncontrolling interests			18		26		20		64		74
		Net income attributable to Cummins Inc.	$	352	$	469	$	452	$	1,276	$	1,300
Net income attributable to Cummins Inc. as a percentage of net sales				8.5%		10.5%		9.8%		9.8%		9.9%

CUMMINS INC. AND SUBSIDIARIES BUSINESS UNIT SALES DATA (Unaudited)
Engine segment net sales by market
2012
In millions		Q1		Q2		Q3		Q4		YTD
Heavy-duty truck		$	892	$	807	$	656	$	-	$	2,355
Medium-duty truck and bus			526		512		478		-		1,516
Light-duty automotive and RV			286		297		353		-		936
Industrial			861		859		766		-		2,486
Stationary power			294		366		274		-		934
	Total sales	$	2,859	$	2,841	$	2,527	$	-	$	8,227
2011
In millions		Q1		Q2		Q3		Q4		YTD
Heavy-duty truck		$	485	$	693	$	748	$	865	$	2,791
Medium-duty truck and bus			474		608		640		598		2,320
Light-duty automotive and RV			296		310		271		299		1,176
Industrial			855		988		977		1,030		3,850
Stationary power			281		301		319		269		1,170
	Total sales	$	2,391	$	2,900	$	2,955	$	3,061	$	11,307

Unit shipments by engine classification (including unit shipments to Power Generation)

2012
Units		Q1		Q2		Q3		Q4		YTD
Midrange			109,000		110,000		113,000		-		332,000
Heavy-duty			36,000		33,000		26,000		-		95,000
High horsepower			5,500		5,800		4,600		-		15,900
	Total units		150,500		148,800		143,600		-		442,900
2011
Units		Q1		Q2		Q3		Q4		YTD
Midrange			109,400		131,300		130,600		138,100		509,400
Heavy-duty			20,000		29,900		31,100		35,300		116,300
High horsepower			4,900		5,700		5,600		5,400		21,600
	Total units		134,300		166,900		167,300		178,800		647,300

CUMMINS INC. AND SUBSIDIARIES BUSINESS UNIT SALES DATA (Unaudited)
Component segment sales by business
2012
In millions		Q1		Q2		Q3		Q4		YTD
Emission solutions		$	404	$	349	$	325	$	-	$	1,078
Filtration			270		266		260		-		796
Turbo technologies			298		297		257		-		852
Fuel systems			127		124		96		-		347
	Total sales	$	1,099	$	1,036	$	938	$	-	$	3,073
2011
In millions		Q1		Q2		Q3		Q4		YTD
Emission solutions		$	273	$	311	$	306	$	372	$	1,262
Filtration			255		287		288		283		1,113
Turbo technologies			297		314		298		314		1,223
Fuel systems			99		120		123		123		465
	Total sales	$	924	$	1,032	$	1,015	$	1,092	$	4,063

In the first quarter of 2012, our Power Generation segment reorganized its reporting structure to include the following businesses: power products, power systems, generator technologies and power solutions. Sales for our Power Generation segment by business (including 2011 and 2010 reorganized balances) were as follows:

2012
In millions		Q1		Q2		Q3		Q4		YTD
Power products		$	375	$	459	$	425	$	-	$	1,259
Power systems			188		217		174		-		579
Generator technologies			141		160		138		-		439
Power solutions			76		73		77		-		226
	Total sales	$	780	$	909	$	814	$	-	$	2,503
2011
In millions		Q1		Q2		Q3		Q4		YTD
Power products		$	377	$	415	$	433	$	411	$	1,636
Power systems			189		210		188		228		815
Generator technologies			154		189		166		164		673
Power solutions			75		95		87		117		374
	Total sales	$	795	$	909	$	874	$	920	$	3,498
2010
In millions		YTD
Power products		$	1,465
Power systems			616
Generator technologies			550
Power solutions			288
	Total sales	$	2,919

CUMMINS INC. AND SUBSIDIARIES BUSINESS UNIT SALES DATA (Unaudited)
Distribution segment sales by product
2012
In millions		Q1		Q2		Q3		Q4		YTD
Parts and filtration		$	288	$	302	$	326	$	-	$	916
Power generation			186		201		178		-		565
Engines			166		147		157		-		470
Service			135		144		140		-		419
	Total sales	$	775	$	794	$	801	$	-	$	2,370
2011
In millions		Q1		Q2		Q3		Q4		YTD
Parts and filtration		$	235	$	271	$	283	$	296	$	1,085
Power generation			145		195		191		191		722
Engines			140		186		171		206		703
Service			122		133		138		141		534
	Total sales	$	642	$	785	$	783	$	834	$	3,044