Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
The following information is furnished pursuant to Item 2.02, "Results of Operations and Financial Condition" and Item 7.01, "Regulation FD Disclosure."
On July 30, 2008, Cummins Inc. ("Cummins," "the Company," "our," or "we") issued the attached press release reporting its financial results for the second quarter of 2008 and revised financial guidance for full-year 2008. The press release, including attachments, is furnished as Exhibit 99 and incorporated herein by reference.
Pursuant to the requirements of the Securities Exchange act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Contact:
Mark Land - Director of Public Relations
(317) 610-2456
mark.d.land@cummins.com
For Immediate Release
July 30, 2008
Cummins reports best quarterly financial results in Company history as international demand surges
-- Company increases full-year sales growth guidance to 15 percent --
COLUMBUS, IN - Cummins Inc. (NYSE: CMI) today reported record sales and profits in the second quarter, as strong global growth offset softness in some North American markets. All four of the Company's business segments reported record financial performance in the quarter, as non-U.S. sales grew to 61 percent of Cummins' business - up from 54 percent for all of 2007 and 57 percent in the first quarter of 2008.
Second quarter sales grew 16 percent to $3.89 billion, from $3.34 billion during the same period in 2007. Net income increased 37 percent to $293 million, or $1.49 a share, compared to $214 million, or $1.06 a share, in 2007.
Earnings Before Interest and Taxes (EBIT) of $469 million (12.1 percent of sales), was a 32 percent improvement over $354 million (10.6 percent of sales) during the same period a year ago.
The Company experienced broad gains in product and geographic markets around the world, including:
Strong sales growth and market share in the North American heavy-duty engine market. Despite high fuel prices and weakness in the U.S. economy, Cummins posted gains in this market, compared to 2007 when changes in emissions regulations led to sharply lower demand - especially in the first half of the year.
Strong medium-duty truck engine sales, especially in Brazil and Mexico.
Increased demand in the Company's commercial generator business, most notably in the Middle East, Latin America, China and the United Kingdom.
Strong sales growth in North America, Europe and China for turbochargers.
Significant sales gains for the Company's Emission Solutions products in North America and Europe, driven by new emissions regulations.
Significantly higher income from the Company's joint ventures worldwide, led by Dongfeng Cummins Engine Company in China, which saw large gains as result of a pre-buy in the on-highway truck market in advance of new emissions standards.
A 58 percent increase in the Company's Distribution Business sales, led by strong organic growth in Europe, the South Pacific and Middle East and the acquisition of a majority interest in a previously independent distributor in the United States.
The Company's strong second quarter performance came in the face of continued economic weakness in the United States, which has affected the Company's consumer-related markers. For the quarter, engine sales to Chrysler for the Dodge Ram heavy-duty pickup fell more than 60 percent from the same period in 2007; RV engine sales fell nearly 40 percent and the Company's consumer power generation sales were off more than 30 percent from a year ago.
"We had an outstanding second quarter in the face of some very real economic challenges, especially in the U.S.," said Cummins Chairman and Chief Executive Officer Tim Solso. "We are managing all of our businesses very carefully and the results speak to the effectiveness of our global growth strategy."
In light of the Company's performance in the first half of the year and its forecast for the remainder of 2008, Cummins today also announced that is now forecasting a 15 percent sales increase for all of 2008, up from its previous guidance of 12 percent. The Company expects to earn an EBIT margin of 10 percent of sales for the year.
"As we look forward, despite the continuing economic uncertainty in the U.S. and Western Europe, and expected increases in materials costs, we are confident that we will continue to see growth in the second half of the year," Solso said, adding that "2008 will be the fifth consecutive year of record sales and profits for Cummins."
Other recent Company-related news or events included:
Early this month, the Company announced a 40 percent increase in the quarterly dividend to 17.5 cents a share, payable Sept. 2 to shareholders of record on Aug. 22.
In June, severe flooding in southern Indiana affected a number of Cummins facilities. A large manufacturing plant was partially flooded and the Cummins Technical Center in Columbus experienced severe flooding, resulting in its engine test cells being out of operation for approximately five weeks. The second quarter results include a charge of approximately $6 million related to the flooding, but the Company is confident that it has insurance coverage to limit the impact of this event.
Fitch Rating Services upgraded the Company's senior unsecured long-term debt to BBB+, from BBB, citing recent market share gains and improvement in Cummins' geographic and business diversification.
Cummins entered in a new revolving credit facility that expands its capacity from $650 million to $1.1 billion.
Second quarter details
Engine Segment
Sales of $2.39 billion increased 13 percent from $2.11 billion in the same period in 2007, while Segment EBIT of $221 million, or 9.3 percent of sales, rose 19 percent from $186 million, or 8.8 percent of sales.
Heavy-duty truck engine sales increased 42 percent, while medium-duty truck and bus engine sales rose 32 percent - offsetting the large drop in sales to the light-duty automotive and RV markets. Sales to industrial markets grew 21 percent, fueled by stronger international demand particularly in the construction, mining and marine segments.
Power Generation
Sales of $938 million rose 22 percent from $769 million in the second quarter of 2007. Segment EBIT increased 31 percent to $115 million, or 12.3 percent of sales, compared to $88 million, or 11.4 percent of sales, in 2007.
The commercial generator business, the segment's largest, saw its sales increase 35 percent in the quarter, with very strong demand in the Middle East, Latin America, the U.K. and China. Alternator sales increased 14 percent and were strongest in the same international regions. In addition to the higher volumes, improved pricing led to the significantly higher Segment EBIT.
Components
Segment sales of $855 million were 13 percent higher than $757 million for the same period in 2007. Segment EBIT was sharply higher, improving by 60 percent to $77 million, or 9.0 percent of sales, from $48 million, or 6.3 percent of sales. The Segment EBIT gains were the result of higher sales volumes, improved pricing and increased manufacturing efficiencies across many of the businesses.
Sales gains were led by a 24 percent increase in turbocharger revenue, a 21 percent gain in fuel systems sales and a 17 percent rise in emission aftertreatment sales. Sales in the filtration business - the segment's largest business - were essentially flat as comparisons were negatively affected by the discontinuation of a product line last year and the sale of its Universal Silencer division at the end of 2007.
Distribution
Sales rose 58 percent to $581 million, from $368 million during the same period in 2007. Segment EBIT of $68 million, or 11.7 percent of sales, rose 48 percent from $46 million, or 12.5 percent of sales. The recently consolidated Power Systems distributor contributed $63 million to the sales increase.
Excluding Power Systems, the segment's power generation sales increased 58 percent led by Europe, the South Pacific and Middle East. Likewise, engine sales, powered by strength in Europe, rose 62 percent; while parts sales increased by 26 percent.
Earnings webcast information Cummins management will host a teleconference to discuss these results today at 10 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.
About Cummins
Cummins Inc., a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Headquartered in Columbus, Indiana, (USA) Cummins serves customers in approximately 190 countries and territories through a network of more than 500 Company-owned and independent distributor locations and approximately 5,200 dealer locations. Cummins reported net income of $739 million on sales of $13.05 billion in 2007. Press releases can be found on the Web at www.cummins.com.
Presentation of Non-GAAP Financial Information
EBIT is a non-GAAP measure used in this release. EBIT 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.
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 the company's expectations, hopes, beliefs and intentions on strategies regarding the future. It is important to note that the company's 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, general economic, business and financing conditions, labor relations, governmental action, competitor pricing activity, expense volatility and other risks detailed from time to time in Cummins Securities and Exchange Commission filings.
