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Cummins Announces Results for the First Quarter of 2014; Improving Demand in North America Drives Revenue Growth

First Quarter Revenues of $4.4 Billion, EBIT of 12.0 Percent of Sales; Full Year Revenue Expected to Grow Between 6 and 10 Percent and EBIT to Be in the Range of 12.75 to 13.25 Percent of Sales

COLUMBUS, IN--(Marketwired - April 29, 2014) - Cummins Inc. (NYSE: CMI) today reported results for the first quarter of 2014.

First quarter revenue of $4.4 billion increased 12 percent from the same quarter in 2013. The increase year-over-year was driven by stronger demand in on-highway markets and distributor acquisitions in North America.

Revenues in North America increased 25 percent while international sales were flat compared to the first quarter a year ago. Within international markets, weakness in India, Australia, Mexico and Brazil offset higher revenues in China and Europe.

Earnings before interest and taxes (EBIT) were $528 million for the first quarter or 12.0 percent of sales. This compares to $437 million or 11.1 percent of sales a year ago.

Net income attributable to Cummins in the first quarter was $338 million ($1.83 per diluted share), compared to $282 million ($1.49 per diluted share) in the first quarter of 2013.

"We delivered good incremental margins in the first quarter as demand in on-highway markets in North America improved. We are also well on track to deliver the expected benefits from our North American distributor acquisitions as we execute our plans and end market demand improves. Conditions in a number of international markets remain very weak, particularly in India and Australia, leading to lower demand for power generation and mining equipment," said Chairman and CEO Tom Linebarger. "We continue to release exciting new products that will drive future profitable growth and we repurchased 3 million shares in the first quarter, consistent with our commitment to return 50 percent of full year operating cash flow to shareholders through a combination of dividends and share repurchase."

Based on the current forecast, Cummins expects full year 2014 revenues to grow between 6% and 10%, up from its previous forecast of growth of between 4% and 8%, due largely to improving demand in North America. EBIT is expected to be in the range of 12.75 to 13.25 percent of sales.

Other recent highlights:

  • For the seventh consecutive year, Cummins has been named one of the world's most ethical companies by The Ethisphere Institute;
  • FORTUNE magazine named Cummins one of America's Most Admired Companies; and
  • Cummins became the first company to receive EPA Tier4 Final certification for high-horsepower generator sets.

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

Engine Segment

  • Sales - $2.6 billion, up 11 percent
  • Segment EBIT - $269 million, or 10.5 percent of sales, compared to $195 million or 8.5 percent of sales
  • Increased demand in on-highway markets in North America offset weakness in global mining and power generation markets

Components Segment

  • Sales - $1.2 billion, up 21 percent
  • Segment EBIT - $167 million, or 13.6 percent of sales, compared to $119 million or 11.7 percent of sales
  • Higher demand in on-highway markets in North America, Europe and China more than offset weaker demand in Brazil

Power Generation Segment

  • Sales - $639 million, down 14 percent
  • Segment EBIT - $25 million, or 3.9 percent of sales, compared to $51 million or 6.8 percent of sales
  • Lower revenues in most markets particularly India, North America and Asia Pacific

Distribution Segment

  • Sales - $950 million, up 22 percent overall and up 1 percent excluding acquisitions
  • Segment EBIT - $76 million, or 8.0 percent of sales, compared to $95 million or 12.2 percent of sales, with currency being the largest driver of the reduction in earnings
  • Higher revenues were primarily driven by acquisitions and stronger demand for parts and service in the North American and Asia Pacific regions.

About Cummins

Cummins Inc., a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service diesel and natural gas engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Headquartered in Columbus, Indiana, (USA) Cummins currently employs approximately 48,000 people worldwide and serves customers in approximately 190 countries and territories through a network of approximately 600 company-owned and independent distributor locations and approximately 6,800 dealer locations. Cummins earned $1.48 billion on sales of $17.3 billion in 2013. Press releases can be found on the Web at www.cummins.com. Follow Cummins on Twitter at @Cummins and on YouTube at CumminsInc.

Forward-looking disclosure statement

Information provided in this release that is not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our forecasts, guidance, preliminary results, expectations, hopes, beliefs and intentions on strategies regarding the future. These forward looking statements include, without limitation, statements relating to our plans and expectations for our revenues for the full year of 2014. Our actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including, but not limited to: the adoption and implementation of global emission standards; the price and availability of energy; the pace of infrastructure development; increasing global competition among our customers; general economic, business and financing conditions; governmental action; changes in our customers' business strategies; competitor pricing activity; expense volatility; labor relations; and other risks detailed from time to time in our Securities and Exchange Commission filings, including particularly in the Risk Factors section of our 2013 Annual Report on Form 10-K. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this press release and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the Securities and Exchange Commission, which are available at http://www.sec.gov or at http://www.cummins.com in the Investor Relations section of our website.

Presentation of Non-GAAP Financial Information
EBIT is a non-GAAP measure used in this release, and is defined and reconciled to what management believes to be the most comparable GAAP measure in a schedule attached to this release. Cummins presents this information as it believes it is useful to understanding the Company's operating performance, and because EBIT is a measure used internally to assess the performance of the operating units.

Webcast information
Cummins management will host a teleconference to discuss these results today at 10 a.m. EST. 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.

The following files are available for download:

                                                                            
                       CUMMINS INC. AND SUBSIDIARIES                        
                CONDENSED CONSOLIDATED STATEMENTS OF INCOME                 
                              (Unaudited) (a)                               
                                                                            
                                                  Three months ended        
                                          ----------------------------------
                                           March 30,    December   March 31,
In millions, except per share amounts         2014      31, 2013     2013   
----------------------------------------- ----------- ----------- ----------
NET SALES                                 $    4,406  $    4,588  $    3,922
  Cost of sales                                3,290       3,424       2,965
                                          ----------- ----------- ----------
GROSS MARGIN                                   1,116       1,164         957
                                                                            
OPERATING EXPENSES AND INCOME                                               
  Selling, general and administrative                                       
   expenses                                      502         500         444
  Research, development and engineering                                     
   expenses                                      190         181         182
  Equity, royalty and interest income                                       
   from investees (Note 1)                        90          80          82
  Other operating income (expense), net           (1)        (10)          1
                                          ----------- ----------- ----------
OPERATING INCOME                                 513         553         414
                                                                            
  Interest income                                  5           6           5
  Interest expense                                17          19           6
  Other income, net                               10           7          18
                                          ----------- ----------- ----------
INCOME BEFORE INCOME TAXES                       511         547         431
                                                                            
  Income tax expense (Note 2)                    153          86         119
                                          ----------- ----------- ----------
CONSOLIDATED NET INCOME                          358         461         312
                                                                            
  Less: Net income attributable to                                          
   noncontrolling interests                       20          29          30
                                          ----------- ----------- ----------
NET INCOME ATTRIBUTABLE TO CUMMINS INC.   $      338  $      432  $      282
                                          =========== =========== ==========
                                                                            
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO                                   
 CUMMINS INC.                                                               
  Basic                                   $     1.83  $     2.33  $     1.50
  Diluted                                 $     1.83  $     2.32  $     1.49
                                                                            
WEIGHTED AVERAGE SHARES OUTSTANDING                                         
  Basic                                        184.3       185.7       188.4
  Diluted                                      184.7       186.3       188.8
                                                                            
CASH DIVIDENDS DECLARED PER COMMON SHARE  $    0.625  $    0.625  $     0.50
                                                                            
(a) Prepared on an unaudited basis in accordance with accounting principles 
 generally accepted in the United States of America.                        
                                                                            
                                                                            
                       CUMMINS INC. AND SUBSIDIARIES                        
                   CONDENSED CONSOLIDATED BALANCE SHEETS                    
                              (Unaudited) (a)                               
                                                                            
                                                               December 31, 
In millions, except par value                  March 30, 2014      2013     
---------------------------------------------- -------------- --------------
ASSETS                                                                      
Current assets                                                              
  Cash and cash equivalents                    $       2,178  $       2,699 
  Marketable securities                                  129            150 
                                               -------------- --------------
    Total cash, cash equivalents and                                        
     marketable securities                             2,307          2,849 
  Accounts and notes receivable, net                   2,949          2,649 
  Inventories                                          2,580          2,381 
  Prepaid expenses and other current assets              663            760 
                                               -------------- --------------
    Total current assets                               8,499          8,639 
                                               -------------- --------------
Long-term assets                                                            
  Property, plant and equipment                        6,563          6,410 
  Accumulated depreciation                            (3,331)        (3,254)
                                               -------------- --------------
    Property, plant and equipment, net                 3,232          3,156 
  Investments and advances related to equity                                
   method investees                                      966            931 
  Goodwill                                               464            461 
  Other intangible assets, net                           357            357 
  Other assets                                         1,233          1,184 
                                               -------------- --------------
      Total assets                             $      14,751  $      14,728 
                                               ============== ==============
                                                                            
LIABILITIES                                                                 
Current liabilities                                                         
  Loans payable                                $          24  $          17 
  Accounts payable (principally trade)                 1,887          1,557 
  Current maturities of long-term debt                    37             51 
  Current portion of accrued product warranty            345            360 
  Accrued compensation, benefits and                                        
   retirement costs                                      323            433 
  Deferred revenue                                       295            285 
  Taxes payable (including taxes on income)               69             99 
  Other accrued expenses                                 575            566 
                                               -------------- --------------
    Total current liabilities                          3,555          3,368 
                                               -------------- --------------
Long-term liabilities                                                       
  Long-term debt                                       1,632          1,672 
  Pensions                                               232            232 
  Postretirement benefits other than pensions            347            356 
  Other liabilities and deferred revenue               1,251          1,230 
                                               -------------- --------------
    Total liabilities                                  7,017          6,858 
                                               -------------- --------------
                                                                            
EQUITY                                                                      
Cummins Inc. shareholders' equity                                           
  Common stock, $2.50 par value, 500 shares                                 
   authorized, 222.3 and 222.3 shares issued           2,101          2,099 
  Retained earnings                                    8,629          8,406 
  Treasury stock, at cost, 38.4 and 35.6                                    
   shares                                             (2,600)        (2,195)
  Common stock held by employee benefits                                    
   trust, at cost, 1.2 and 1.3 shares                    (15)           (16)
  Accumulated other comprehensive loss                                      
    Defined benefit postretirement plans                (607)          (611)
    Other                                               (148)          (173)
                                               -------------- --------------
    Total accumulated other comprehensive loss          (755)          (784)
                                               -------------- --------------
      Total Cummins Inc. shareholders' equity          7,360          7,510 
  Noncontrolling interests                               374            360 
                                               -------------- --------------
        Total equity                                   7,734          7,870 
                                               -------------- --------------
          Total liabilities and equity         $      14,751  $      14,728 
                                               ============== ==============
                                                                            
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America. 
                                                                                                                                

 

                                                                            
                       CUMMINS INC. AND SUBSIDIARIES                        
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               
                              (Unaudited) (a)                               
                                                                            
                                                        Three months ended  
                                                     -----------------------
                                                      March 30,   March 31, 
In millions                                              2014        2013   
---------------------------------------------------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES                                        
  Consolidated net income                            $      358  $      312 
  Adjustments to reconcile consolidated net income                          
   to net cash provided by operating activities                             
    Depreciation and amortization                           105          98 
    Gain on fair value adjustment for consolidated                          
     investees                                               (6)         (7)
    Deferred income taxes                                    22           5 
    Equity in income of investees, net of dividends         (52)        (36)
    Pension contributions in excess of expense             (100)        (54)
    Other post-retirement benefits payments in                              
     excess of expense                                       (8)         (8)
    Stock-based compensation expense                         10           7 
    Excess tax benefits on stock-based awards                (5)         (7)
    Translation and hedging activities                       (3)         (5)
  Changes in current assets and liabilities, net of                         
   acquisitions                                                             
    Accounts and notes receivable                          (232)        (29)
    Inventories                                            (135)       (177)
    Other current assets                                      2         158 
    Accounts payable                                        302         204 
    Accrued expenses                                        (95)       (142)
  Changes in other liabilities and deferred revenue          50          47 
  Other, net                                                 50          62 
                                                     ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES                   263         428 
                                                     ----------- -----------
                                                                            
CASH FLOWS FROM INVESTING ACTIVITIES                                        
  Capital expenditures                                     (107)       (114)
  Investments in internal use software                      (14)        (12)
  Investments in and advances to equity investees            (6)        (24)
  Acquisitions of businesses, net of cash acquired          (90)        (17)
  Investments in marketable securities --                                   
   acquisitions                                             (84)       (133)
  Investments in marketable securities --                                   
   liquidations                                             108         187 
  Cash flows from derivatives not designated as                             
   hedges                                                     5         (30)
  Other, net                                                  1           - 
                                                     ----------- -----------
Net cash used in investing activities                      (187)       (143)
                                                     ----------- -----------
                                                                            
CASH FLOWS FROM FINANCING ACTIVITIES                                        
  Proceeds from borrowings                                    7           - 
  Payments on borrowings and capital lease                                  
   obligations                                              (25)        (27)
  Net borrowings (payments) under short-term credit                         
   agreements                                               (39)         15 
  Distributions to noncontrolling interests                 (13)        (19)
  Dividend payments on common stock                        (115)        (95)
  Repurchases of common stock                              (419)          - 
  Excess tax benefits on stock-based awards                   5           7 
  Other, net                                                 (3)         16 
                                                     ----------- -----------
Net cash used in financing activities                      (602)       (103)
                                                     ----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH                            
 EQUIVALENTS                                                  5         (68)
                                                     ----------- -----------
Net increase (decrease) in cash and cash equivalents       (521)        114 
Cash and cash equivalents at beginning of year            2,699       1,369 
                                                     ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD           $    2,178  $    1,483 
                                                     =========== ===========
(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)                                 
                                                                            
                                                              Non-          
                                     Power                  segment         
In millions     Engine Components Generation Distribution   Items(1)  Total 
               ------- ---------- ---------- ------------   -------- -------
Three months                                                                
 ended March                                                                
 30, 2014                                                                   
External sales $2,090  $     922  $     452  $       942    $     -  $4,406 
Intersegment                                                                
 sales            473        308        187            8       (976)      - 
               ------- ---------- ---------- ------------   -------- -------
 Total sales    2,563      1,230        639          950       (976)  4,406 
Depreciation                                                                
 and                                                                        
 amortization                                                               
 (2)               51         26         12           16          -     105 
Research,                                                                   
 development                                                                
 and                                                                        
 engineering                                                                
 expenses         116         53         19            2          -     190 
Equity,                                                                     
 royalty and                                                                
 interest                                                                   
 income from                                                                
 investees         32          9          8           41          -      90 
Interest                                                                    
 income             2          1          1            1          -       5 
Segment EBIT      269        167         25           76 (3)     (9)    528 
                                                                            
Segment EBIT                                                                
 as a                                                                       
 percentage of                                                              
 total sales     10.5%      13.6%       3.9%         8.0%              12.0%
                                                                            
Three months                                                                
 ended                                                                      
 December 31,                                                               
 2013                                                                       
External sales $2,131  $     859  $     533  $     1,065    $     -  $4,588 
Intersegment                                                                
 sales            431        276        226            8       (941)      - 
               ------- ---------- ---------- ------------   -------- -------
 Total sales    2,562      1,135        759        1,073       (941)  4,588 
Depreciation                                                                
 and                                                                        
 amortization                                                               
 (2)               49         25         13           14          -     101 
Research,                                                                   
 development                                                                
 and                                                                        
 engineering                                                                
 expenses         106         53         20            2          -     181 
Equity,                                                                     
 royalty and                                                                
 interest                                                                   
 income from                                                                
 investees         30          7          2           41          -      80 
Interest                                                                    
 income             3          1          1            1          -       6 
Segment EBIT      235        140         46          107         38     566 
                                                                            
Segment EBIT                                                                
 as a                                                                       
 percentage of                                                              
 total sales      9.2%      12.3%       6.1%        10.0%              12.3%
                                                                            
Three months                                                                
 ended March                                                                
 31, 2013                                                                   
External sales $1,885  $     722  $     539  $       776    $     -  $3,922 
Intersegment                                                                
 sales            418        296        207            2       (923)      - 
               ------- ---------- ---------- ------------   -------- -------
 Total sales    2,303      1,018        746          778       (923)  3,922 
Depreciation                                                                
 and                                                                        
 amortization                                                               
 (2)               52         24         12           10          -      98 
Research,                                                                   
 development                                                                
 and                                                                        
 engineering                                                                
 expenses         105         57         18            2          -     182 
Equity,                                                                     
 royalty and                                                                
 interest                                                                   
 income from                                                                
 investees         23          7          7           45          -      82 
Interest                                                                    
 income             2          1          2            -          -       5 
Segment EBIT      195        119         51           95 (3)    (23)    437 
                                                                            
Segment EBIT                                                                
 as a                                                                       
 percentage of                                                              
 total sales      8.5%      11.7%       6.8%        12.2%              11.1%
                                                                            
(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 March 30, 2014, December 
     31, 2013 and March 31, 2013.                                           
(2)  Depreciation and amortization as shown on a segment basis excludes the 
     amortization of debt discount and deferred costs included in the       
     Condensed Consolidated Statements of Income as "Interest expense."     
(3)  Distribution segment EBIT for the three months ended March 30, 2014,   
     included a $6 million gain on the fair value adjustment resulting from 
     the acquisition of a controlling interest in Cummins Mid-South LLC.    
     Distribution segment EBIT for the three months ended March 31, 2013,   
     included a $7 million gain on the fair value adjustment resulting from 
     the acquisition of a controlling interest in Cummins Northwest LLC.    
                                                                            

                                                                            
                                                                            
                       CUMMINS INC. AND SUBSIDIARIES                        
                            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          
                                     ---------------------------------------
                                       March 30,   December 31,   March 31, 
In millions                              2014          2013         2013    
                                     ------------ ------------- ------------
Total EBIT                           $        528 $         566 $        437
Less: Interest expense                         17            19            6
                                     ------------ ------------- ------------
  Income before income taxes         $        511 $         547 $        431
                                     ============ ============= ============
                                                                            
                                                                            
                                                                            
                                                                            
                       CUMMINS INC. AND SUBSIDIARIES                        
                           SELECTED FOOTNOTE DATA                           
                                (Unaudited)                                 
                                                                            
NOTE 1. EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES                  
                                                                            
                                                                            
Equity, royalty and interest income from investees included in our Condensed
 Consolidated Statements of Income for the reporting periods was as follows:
                                                                            
                                                                            
                                                   Three months ended       
                                            --------------------------------
                                             March 30,  December   March 31,
In millions                                    2014     31, 2013     2013   
------------------------------------------- ---------- ---------- ----------
Distribution Entities                                                       
North American distributors                 $      32  $      31  $      35 
Komatsu Cummins Chile, Ltda.                        6          8          5 
All other distributors                              1          -          - 
Manufacturing Entities                                                      
Dongfeng Cummins Engine Company, Ltd.              14         18         12 
Chongqing Cummins Engine Company, Ltd.             11         14         12 
Beijing Foton Cummins Engine Co., Ltd.                                      
 (Light-duty)                                       6          3          1 
Shanghai Fleetguard Filter Co., Ltd.                3          2          3 
Tata Cummins, Ltd.                                  2          1          1 
Cummins Westport, Inc.                              1         (1)         - 
Beijing Foton Cummins Engine Co., Ltd.                                      
 (Heavy-duty)                                      (6)        (7)        (3)
All other manufacturers                             9          2          7 
                                            ---------- ---------- ----------
  Cummins share of net income                      79         71         73 
Royalty and interest income                        11          9          9 
                                            ---------- ---------- ----------
    Equity, royalty and interest income                                     
     from investees                         $      90  $      80  $      82 
                                            ========== ========== ==========

NOTE 2. INCOME TAXES

Our effective tax rate for the year is expected to approximate 28.5 percent, excluding any one-time items that may arise. The research tax credit expired December 31, 2013 and has not yet been renewed by Congress. Our tax rate is generally less than the 35 percent U.S. statutory income tax rate primarily due to lower tax rates on foreign income. The effective tax rate for the three months ended March 30, 2014, was 29.9 percent. This tax rate includes a $12 million discrete tax expense primarily attributable to state deferred tax adjustments, as well as a $5 million discrete net tax benefit resulting from a $70 million dividend paid from China earnings generated prior to 2012.

Our tax rate for the three month period ended December 31, 2013 was 15.7 percent. We recorded $70 million or $0.38 per share of tax benefits in the fourth quarter of 2013. The income tax provision for the fourth quarter of 2013 was net of the following items:

                                                                            
One-time impacts of foreign legal entity restructuring actions      $     16
One-time impacts of reconciliation of state income tax provision to         
 tax return                                                               17
Lower operating rate primarily resulting from recognition of state          
 and federal research and development credits and the recurring             
 impacts of foreign legal entity restructuring actions                    37
                                                                    --------
  Total                                                             $     70
                                                                    ========
                                                                            

Our effective tax rate for the three months ended March 31, 2013, was 27.6 percent. This tax rate included a discrete tax benefit of $28 million attributable to the 2012 research credit reinstated in January 2013 as well as a discrete tax expense of $17 million, which primarily related to the write-off of a deferred tax asset deemed unrecoverable. The increase in the three month effective tax rate from 2013 to 2014 is attributable primarily to one-time discrete tax benefits in 2013 that did not repeat in 2014 and changes in U.S. state tax legislation that unfavorably impacted our 2014 effective tax rate.

NOTE 3. ACQUISITION  

Cummins Mid-South LLC

On February 14, 2014, we acquired the remaining 62.2 percent interest in Cummins Mid-South LLC (Mid-South) from the former distributor principal. The preliminary purchase consideration was $116 million, which included $32 million in cash and an additional $61 million paid to eliminate outstanding debt. The remaining $23 million will be paid in future periods, subject to customary purchase price adjustments. The acquisition was accounted for as a business combination and the results of the acquired entity were included in the Distribution operating segment subsequent to the acquisition date. As a result of this transaction, first quarter 2014 Distribution segment results included a $6 million gain, as we were required to re-measure our pre-existing 37.8 percent ownership interest in Mid-South to fair value. The transaction generated $3 million of goodwill based on the preliminary purchase price allocation. Net sales for Mid-South were $368 million for the year ended December 31, 2013. This amount is not fully incremental to our consolidated sales as the amount would be reduced by the elimination of sales to the previously unconsolidated entity.

                       CUMMINS INC. AND SUBSIDIARIES                        
                  FINANICAL MEASURES THAT SUPPLEMENT GAAP                   
                                                                            
                                (Unaudited)                                 

Earnings before interest, taxes and noncontrolling interests

We define EBIT as earnings before interest expense, income tax expense and noncontrolling interests in income of consolidated subsidiaries (EBIT). We use EBIT to assess and measure the performance of our operating segments and also as a component in measuring our variable compensation programs. This measure is not in accordance with, or an alternative for, accounting principles generally accepted in the United States of America and may not be consistent with measures used by other companies. It should be considered supplemental data. Below is a reconciliation of EBIT to "Net income attributable to Cummins Inc.," for each of the applicable periods:

                                                                            
                                                                            
                                                   Three months ended       
                                            --------------------------------
                                             March 30,  December   March 31,
In millions                                    2014     31, 2013     2013   
                                            ---------- ---------- ----------
Earnings before interest expense and income                                 
 taxes                                      $     528  $     566  $     437 
                                            ---------- ---------- ----------
                                                                            
EBIT as a percentage of net sales                12.0%      12.3%      11.1%
                                                                            
Less                                                                        
  Interest expense                                 17         19          6 
  Income tax expense                              153         86        119 
                                            ---------- ---------- ----------
Consolidated net income                           358        461        312 
                                            ---------- ---------- ----------
                                                                            
Less                                                                        
  Net income attributable to noncontrolling                                 
   interests                                       20         29         30 
                                            ---------- ---------- ----------
    Net income attributable to Cummins Inc. $     338  $     432  $     282 
                                            ========== ========== ==========
                                                                            
Net income attributable to Cummins Inc. as                                  
 a percentage of net sales                        7.7%       9.4%       7.2%
                                                                            
                                                                            
                       CUMMINS INC. AND SUBSIDIARIES                        
                          BUSINESS UNIT SALES DATA                          
                                (Unaudited)                                 

Engine segment net sales by market

                                                                            
2014                                                                        
In millions                        Q1       Q2       Q3       Q4       YTD  
                                -------- -------- -------- -------- --------
Heavy-duty truck                $    722 $      - $      - $      - $    722
Medium-duty truck and bus            601        -        -        -      601
Light-duty automotive and RV         361        -        -        -      361
Industrial                           700        -        -        -      700
Stationary power                     179        -        -        -      179
                                -------- -------- -------- -------- --------
  Total sales                   $  2,563 $      - $      - $      - $  2,563
                                ======== ======== ======== ======== ========
                                                                            
2013                                                                        
In millions                         Q1       Q2       Q3       Q4      YTD  
                                -------- -------- -------- -------- --------
Heavy-duty truck                $    654 $    723 $    690 $    638 $  2,705
Medium-duty truck and bus            448      595      570      572    2,185
Light-duty automotive and RV         260      345      330      365    1,300
Industrial                           714      762      709      811    2,996
Stationary power                     227      231      193      176      827
                                -------- -------- -------- -------- --------
  Total sales                   $  2,303 $  2,656 $  2,492 $  2,562 $ 10,013
                                ======== ======== ======== ======== ========
                                                                            
                                                                            

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

                                                                            
                                                                            
2014                                                                        
Units                              Q1       Q2       Q3       Q4       YTD  
                                -------- -------- -------- -------- --------
Midrange                         118,900        -        -        -  118,900
Heavy-duty                        28,800        -        -        -   28,800
High-horsepower                    3,400        -        -        -    3,400
                                -------- -------- -------- -------- --------
  Total units                    151,100        -        -        -  151,100
                                ======== ======== ======== ======== ========
                                                                            
2013                                                                        
Units                              Q1       Q2       Q3       Q4       YTD  
                                -------- -------- -------- -------- --------
Midrange                          94,600  121,900  113,800  115,700  446,000
Heavy-duty                        24,900   28,300   26,500   25,700  105,400
High-horsepower                    4,200    3,600    3,500    3,500   14,800
                                -------- -------- -------- -------- --------
  Total units                    123,700  153,800  143,800  144,900  566,200
                                ======== ======== ======== ======== ========
                                                                            
                                                                            

Component segment sales by business

2014                                                                        
In millions                        Q1       Q2       Q3       Q4       YTD  
                                -------- -------- -------- -------- --------
Emission Solutions              $    543 $      - $      - $      - $    543
Turbo Technologies                   313        -        -        -      313
Filtration                           265        -        -        -      265
Fuel systems                         109        -        -        -      109
                                -------- -------- -------- -------- --------
  Total sales                   $  1,230 $      - $      - $      - $  1,230
                                ======== ======== ======== ======== ========
                                                                            
2013                                                                        
In millions                         Q1       Q2       Q3       Q4      YTD  
                                -------- -------- -------- -------- --------
Emission Solutions              $    400 $    444 $    458 $    489 $  1,791
Turbo Technologies                   266      294      263      292    1,115
Filtration                           255      271      248      254    1,028
Fuel systems                          97      108      103      100      408
                                -------- -------- -------- -------- --------
  Total sales                   $  1,018 $  1,117 $  1,072 $  1,135 $  4,342
                                ======== ======== ======== ======== ========
                                                                            
                                                                            

Power Generation segment sales by business

                                                                            
                                                                            
2014                                                                        
In millions                        Q1       Q2       Q3       Q4       YTD  
                                -------- -------- -------- -------- --------
Power products                  $    373 $      - $      - $      - $    373
Power systems                        137        -        -        -      137
Alternators                          105        -        -        -      105
Power solutions                       24        -        -        -       24
                                -------- -------- -------- -------- --------
  Total sales                   $    639 $      - $      - $      - $    639
                                ======== ======== ======== ======== ========
                                                                            
2013                                                                        
In millions                         Q1       Q2       Q3       Q4      YTD  
                                -------- -------- -------- -------- --------
Power products                  $    409 $    474 $    421 $    421 $  1,725
Power systems                        179      187      122      168      656
Alternators                          126      125      126      119      496
Power solutions                       32       28       43       51      154
                                -------- -------- -------- -------- --------
  Total sales                   $    746 $    814 $    712 $    759 $  3,031
                                ======== ======== ======== ======== ========
                                                                            
                                                                            

Distribution segment sales by business

                                                                            
                                                                            
2014                                                                        
In millions                        Q1       Q2          Q3    Q4       YTD  
                                -------- -------- -------- -------- --------
Parts and filtration            $    382 $      - $      - $      - $    382
Power generation                     193        -        -        -      193
Engines                              174        -        -        -      174
Service                              201        -        -        -      201
                                -------- -------- -------- -------- --------
  Total sales                   $    950 $      - $      - $      - $    950
                                ======== ======== ======== ======== ========
                                                                            
2013                                                                        
In millions                         Q1       Q2       Q3       Q4      YTD  
                                -------- -------- -------- -------- --------
Parts and filtration            $    322 $    369 $    377 $    397 $  1,465
Power generation                     163      241      234      293      931
Engines                              152      183      170      208      713
Service                              141      161      163      175      640
                                -------- -------- -------- -------- --------
  Total sales                   $    778 $    954 $    944 $  1,073 $  3,749
                                ======== ======== ======== ======== ========
                                                                            
                                                                            

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