8-KFinancial EventsCorporate ChangesExhibits & Filings

CUMMINS INC 8-K Report, Triggering Event (May 12, 2006)

Filed May 12, 2006For Securities:CMI

Summary

Cummins Inc. (CMI) filed an 8-K on May 12, 2006, primarily announcing two significant events. First, the company's Board of Directors elected to redeem all $300 million of its 7% Convertible Cumulative Quarterly Income Preferred Securities (QUIPS) on June 15, 2006. This redemption, initiated due to the company's improved financial performance, is expected to reduce interest expenses and strengthen the balance sheet. Holders of the QUIPS have the option to convert their securities into Cummins common stock or receive cash. Second, the company amended its By-Laws to provide greater flexibility in scheduling its annual shareholder meeting. Previously mandated for the first Tuesday of April, the By-Laws were changed to allow the Board of Directors to designate the date, time, and place, with a default of the first Tuesday of May if no specific designation is made. This change reflects the practicalities of holding the meeting later in the year.

Key Highlights

  • 1Cummins Inc. will redeem $300 million in 7% Convertible Cumulative Quarterly Income Preferred Securities (QUIPS) on June 15, 2006.
  • 2The redemption is a strategic move to reduce debt and interest expenses, driven by improved financial performance.
  • 3The company projects interest expense savings of approximately $10.5 million in 2006 and $21 million annually thereafter.
  • 4Holders of QUIPS have the option to convert their securities into Cummins common stock or receive cash.
  • 5The Board of Directors amended the company's By-Laws regarding the annual shareholder meeting date.
  • 6The annual meeting can now be scheduled by the Board of Directors, with a default date of the first Tuesday of May.
  • 7A quarterly common stock cash dividend of $0.30 per share was declared, payable June 1, 2006.

Frequently Asked Questions

Cummins is redeeming the QUIPS as part of a strategy to strengthen its balance sheet, driven by significant improvements in its financial performance over the past two years. The early redemption is expected to reduce the company's debt levels and result in substantial long-term savings on interest expenses.

The company expects to reduce its interest expense by approximately $10.5 million in 2006 and by $21 million annually starting in 2007. The redemption is anticipated to have a minimal impact on the company's diluted earnings per share.

Holders of the QUIPS have the choice to either convert their securities into shares of Cummins common stock at a pre-determined price, or to redeem their securities for cash.

The By-Laws were amended to give the Board of Directors more flexibility in scheduling the annual shareholder meeting. Instead of being fixed on the first Tuesday of April, the Board can now designate the date, time, and place. If no designation is made, the meeting will default to the first Tuesday of May.