8-KEarnings & ResultsRegulation FDExhibits & Filings

CUMMINS INC 8-K Report, Financial Results (Feb 25, 2009)

Filed February 25, 2009For Securities:CMI

Summary

This 8-K filing from Cummins Inc. (CMI) on February 25, 2009, primarily serves to amend previously reported fourth quarter and full-year 2008 financial results. The company announced a revision to its warranty liability estimate, leading to an $82 million increase in that liability. This adjustment negatively impacted earnings per diluted share by $0.23 for the fourth quarter and $0.24 for the full year. While the increased warranty liability was a significant factor, it was partially offset by a $9 million reduction in variable and incentive compensation and a $27 million decrease in income tax expense. These changes are reflected in cost of sales, SG&A expenses, and accrued expenses on the financial statements, and will be incorporated into the upcoming Form 10-K filing.

Key Highlights

  • 1Cummins Inc. is revising its previously issued fourth quarter and full year 2008 financial results.
  • 2The revision is primarily due to an $82 million increase in the company's warranty liability estimate.
  • 3This adjustment will decrease reported earnings per diluted share by $0.23 for Q4 2008 and $0.24 for the full year 2008.
  • 4The increased warranty liability is partially offset by a $9 million reduction in variable and incentive compensation expenses.
  • 5Income tax expense for the period decreased by $27 million due to these adjustments.
  • 6The revised financial figures will be incorporated into the company's 2008 Form 10-K filing, expected by March 2, 2009.
  • 7The filing includes updated Condensed Consolidated Statements of Income, Balance Sheets, and Cash Flows for 2008 and 2007, along with segment information.

Frequently Asked Questions

This 8-K filing is primarily to report revised financial results for the fourth quarter and full year of 2008. The revision stems from an updated analysis of warranty payments that indicated a need to increase the company's estimated warranty liability.

The $82 million increase in warranty liability will negatively impact earnings. Specifically, it reduces diluted earnings per share by $0.23 for the fourth quarter of 2008 and by $0.24 for the full year of 2008. However, this impact is partially mitigated by a $9 million reduction in variable compensation and a $27 million decrease in income tax expense.

These adjustments have been incorporated into Cummins' fourth-quarter and full-year 2008 results. They will be fully reflected in the company's upcoming Form 10-K filing, which was expected to be filed no later than March 2, 2009.

Besides the warranty liability adjustment, the filing also notes a restructuring charge of $37 million recorded in the fourth quarter of 2008, primarily related to workforce reductions. Additionally, there was a $36 million decrease in the cash surrender value of corporate-owned life insurance impacting other income in the fourth quarter of 2008.