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Press release from Business Wire

Cummins Reports Third Quarter Results, Confirms Full Year Guidance

<ul> <li class='bwlistitemmargb'> <b>Expects full-year revenues of $17 billion, EBIT of 13.5 percent</b> </li> </ul>

Wednesday, October 31, 2012

Cummins Reports Third Quarter Results, Confirms Full Year Guidance07:30 EDT Wednesday, October 31, 2012 COLUMBUS, Ind. (Business Wire) -- Cummins Inc. (NYSE: CMI) today reported results for the third quarter of 2012. 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 InformationEBIT 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 informationCummins 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 SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME(Unaudited) (a)         Three months endedSeptember 30,July 1,September 25,In millions, except per share amounts201220122011NET SALES$4,118 $ 4,452 $ 4,626 Cost of sales   3,076   3,242   3,438 GROSS MARGIN1,042 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 INCOME493 648 639   Interest income 5 7 9 Interest expense 9 8 11 Other income (expense), net   (2)   14   (8) INCOME BEFORE INCOME TAXES487 661 629   Income tax expense (Note 2)   117   166   157 CONSOLIDATED NET INCOME370 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 SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME(Unaudited) (a)       Nine months endedIn millions, except per share amountsSeptember 30,2012September 25,2011NET SALES$13,042 $ 13,127 Cost of sales   9,592   9,779 GROSS MARGIN3,450 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 INCOME1,789 1,936   Interest income 20 25 Interest expense 25 34 Other income (expense), net   14   (14) INCOME BEFORE INCOME TAXES1,798 1,913   Income tax expense (Note 2)   458   539 CONSOLIDATED NET INCOME1,340 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 SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited) (a)   September 30,   December 31,In millions, except par value20122011ASSETS 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 SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited) (a)       Nine months endedSeptember 30,   September 25,In millions20122011CASH 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 SUBSIDIARIESSEGMENT INFORMATION(Unaudited)               EngineComponentsPowerGenerationDistributionNon-segmentItems(1)TotalIn millionsThree months ended September 30, 2012 External sales $2,131$663$526$798$-$4,118 Intersegment sales 3962752883(962)   -   Total sales 2,527938814801(962)4,118 Depreciation and amortization(2)4821128-89 Research, development and engineering expenses 11551191-186 Equity, royalty and interest income from investees 2571250-94 Interest income 212--5 Segment EBIT 239897399(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 1,30392688913(3,131)   - Total sales 8,2273,0732,5032,370(3,131)13,042 Depreciation and amortization(2)142593423-258 Research, development and engineering expenses 341153564-554 Equity, royalty and interest income from investees 1002332147-302 Interest income 9371-20 Segment EBIT 996348243285(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 SUBSIDIARIESRECONCILIATION 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 endedNine months endedSeptember 30,   July 1,   September 25,September 30,   September 25,In millions20122012201120122011 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 SUBSIDIARIESSELECTED 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 endedSeptember 30,   July 1,   September 25,September 30,   September 25,In millions20122012201120122011Distribution 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 SUBSIDIARIESSELECTED 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 priceallocation       Weighted averageamortization lifein 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 SUBSIDIARIESFINANCIAL 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 endedSeptember 30, 2012   July 1, 2012   September 25, 2011In millionsNet Income   Diluted EPSNet Income   Diluted EPSNet 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)160.08 - - 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 SUBSIDIARIESFINANCIAL 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 endedSeptember 30,   July 1,   September 25,September 30,   September 25,In millions20122012201120122011 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 sales12.0%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 sales12.0%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 sales8.5%10.5%9.8%9.8%9.9%   CUMMINS INC. AND SUBSIDIARIESBUSINESS UNIT SALES DATA(Unaudited)           Engine segment net sales by market   2012In millionsQ1Q2Q3Q4YTD 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   2011In millionsQ1Q2Q3Q4YTD 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                     UnitsQ1Q2Q3Q4YTD 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   2011UnitsQ1Q2Q3Q4YTD 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 SUBSIDIARIESBUSINESS UNIT SALES DATA(Unaudited)           Component segment sales by business   2012In millionsQ1Q2Q3Q4YTD 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   2011In millionsQ1Q2Q3Q4YTD 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 millionsQ1Q2Q3Q4YTD 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   2011In millionsQ1Q2Q3Q4YTD 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   2010In millionsYTD Power products $ 1,465 Power systems 616 Generator technologies 550 Power solutions   288 Total sales $ 2,919   CUMMINS INC. AND SUBSIDIARIESBUSINESS UNIT SALES DATA(Unaudited)         Distribution segment sales by product   2012In millionsQ1Q2Q3Q4YTD 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   2011In millionsQ1Q2Q3Q4YTD 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 Cummins Inc.Carole Casto, Executive Director - Corporate Communications, 317-610-2480carole.casto@cummins.com