( BW)(IN-CUMMINS-INC)(CUM) Cummins First Quarter Loss Due to Global
Uncertainty and Soft Markets
Business Editors/Automotive Writers
COLUMBUS, Ind.--(BUSINESS WIRE)--April 17, 2003--Cummins Inc.
(NYSE:CUM) today reported a loss for the first quarter 2003 of $34
million, or $0.86 per share, on sales of $1.39 billion. This compares
to a loss of $26 million, or $0.68 per share, on sales of $1.33
billion for the first quarter of 2002. Excluding the cumulative effect
of a change in accounting principle in the first quarter of 2002, the
loss was $29 million, or $0.75 per share.
"These financial results reflect the continued downturn in many of
our markets that began in the second half of 2000. However, I remain
confident that we are providing the products that are right for our
customers and that position us well in the marketplace," said Tim
Solso, Chairman and Chief Executive Officer. "As we gain production
efficiencies with our new products and as the markets recover, we will
see our financial returns improve."
The Company normally experiences seasonal weakness in the first
quarter, with March being the strongest month. As a result of global
uncertainty, normal gains in March were not realized. However, the
Company expects to see increased earnings throughout the remainder of
the year.
A breakdown of results by business units, as well as a number of
operational successes in the quarter, are detailed below.
Engine Business
Total Sales for the Engine Business in the first quarter were $816
million, a 5 percent increase from sales of $776 million a year ago.
Revenues in automotive markets were 13 percent higher than the first
quarter last year, primarily due to increases in light-duty automotive
sales. Overall revenue from industrial markets was down 10 percent
year-over-year, with softness across most segments.
The Engine Business is experiencing a very successful launch of
the Company's new emissions-compliant products. This complete line of
new heavy-duty engines is performing well for our customers and end
users. More than 8,000 engines have been shipped and order rates
continue to improve. The Cummins turbo diesel engine for the
award-winning Dodge Ram pickup is also performing well and continues
to have strong acceptance in the marketplace. Engine shipments to
DaimlerChrysler for the Dodge Ram were up 12,000 units, an increase of
60 percent from the first quarter of last year, resulting from the
launch of Chrysler's new model pickup.
Power Generation
Sales in the Power Generation Business for the first quarter were
$267 million, down 6 percent from the first quarter of 2002.
In North America, revenues were down 9 percent compared to a year
ago, with continued weak demand in the commercial generator set
business. This decrease was partially offset by a 4 percent increase
in recreational vehicle and marine business revenue compared to the
first quarter of 2002. Outside North America, revenues decreased 4
percent in total, with decreases in Latin America and parts of Asia
partially offset by increases in India and Australia.
Filtration and Other
Revenues for the Filtration and Other segment were $254 million
for the quarter, an 11 percent increase compared to the first quarter
of 2002. This reflects higher Filtration Business sales, with some
improvement in demand as well as increased market penetration.
The Filtration Business has continued to make progress in securing
long-term supply agreements with major Original Equipment
Manufacturers to achieve future growth. The Fleetguard Emission
Solutions division is also providing profitable growth as it positions
itself as the leader in the growing segment of aftertreatment
technology.
International Distributor
Sales for the International Distributor Business were $136 million
in the quarter, an increase of 10 percent compared to sales of $124
million dollars last year, with modest improvement across most
regions. The International Distributor Business delivered strong
results, despite a seasonally weak quarter.
The Filtration and International Distributor Business Units
continue to generate increasing profits and solid growth in revenue.
These businesses are more stable, less cyclical and less capital
intensive than our other businesses.
Guidance
In light of the current market conditions and first-quarter
performance, guidance is being lowered for the year to $1.20 to $1.40
per share. Cummins expects second quarter results to be a profit in
the range of $.10 to $.20 cents per share. Cash flow guidance for 2003
remains at around $70 million dollars aided by lower capital spending
and working capital. The Company expects to generate sufficient cash
to fund the dividend and provide modest debt reduction in 2003.
"We remain confident that we have taken the right actions to
position us for success going forward. We will continue to tightly
manage spending and take additional actions where needed," said Solso.
"From the depressed market conditions we are operating in today, the
long term outlook remains very promising. We believe the worst is
behind us, and we continue to be positioned for the upturn as a result
of the two and a half years of relentless cost reduction."
Accounts Payable Adjustment
On April 14th, the Company also announced that it will restate
prior period financial statements. The restatement relates to the
previously announced need for an accounts payable adjustment primarily
associated with the implementation of a new enterprise resource
planning system in one of its plants. This restatement will require a
re-audit of the 2000 and 2001 financial statements by the Company's
new auditors, PricewaterhouseCoopers, LLP (PwC) since Arthur Andersen,
LLP was Cummins auditors for those periods and is no longer providing
auditing services.
Cummins will file its 2002 Form 10-K as soon as practicable
following the finalization of the re-audit. The Company also intends
to release unaudited financial statements for 2002. The 2000 and 2001
financial statements, as previously reported, are subject to change as
a result of the re-audit.
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 its customers through more than 500 company-owned and
independent distributor locations in 131 countries and territories.
With 23,700 employees worldwide, Cummins reported sales of $5.9
billion in 2002. Press releases by fax can be requested by calling
News On Demand (toll free) at 888-329-2305. The Cummins home page can
be found at www.cummins.com.
Information provided in this release that is not purely historical
is considered to be 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.
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CUMMINS INC.
(Millions, except per share amounts)
Unaudited
For The First Quarter Ended Mar. 30, 2003 Mar. 31, 2002
Net sales $1,387 $1,333
Before cumulative effect of change
in accounting principle
Earnings (loss) before interest
and income taxes - (15)
Net earnings (loss) - (29)
Basic earnings (loss) per share - $(.75)
Diluted earnings (loss)
per share - (.75)
As reported
Earnings (loss) before interest
and income taxes (14) (15)
Net earnings (loss) (34) (26)
Basic earnings (loss) per share $(.86) $(.68)
Diluted earnings (loss)
per share (.86) (.68)
Weighted-average number of
shares for EPS
Basic 38.9 38.5
Diluted 38.9 38.5
Cummins Inc.
Consolidated Statement of Earnings
Unaudited
Fourth
First Quarter Quarter
Millions, except per share amounts 2003 2002 2002
Net sales $1,387 $1,333 $1,414
Cost of goods sold 1,173 1,107 1,191
Gross margin 214 226 223
Selling and administrative expenses 195 186 173
Research and engineering expenses 46 56 39
Joint ventures and alliances (income)
expense (7) - (6)
Restructuring, asset impairment and
other charges - - (13)
Interest expense 20 14 17
Loss on early retirement of debt - - 8
Other (income) expense, net (6) (1) 3
Earnings (loss) before income
taxes, minority interest, dividends
on preferred securities of subsidiary
trust and cumulative effect of change
in accounting principle (34) (29) 2
Provision (benefit) for income taxes
(10) (9) (54)
Minority interest 4 3 5
Dividends on preferred securities of
subsidiary trust 6 6 5
Net earnings (loss) before cumulative
effect of change in accounting
principle. (34) (29) 46
Cumulative effect of change in
accounting principle, net of
$1 tax - 3 -
Net earnings (loss) $(34) $(26) $46
Earnings Per Share
Basic
Net earnings (loss) before
cumulative effect of change
in accounting principle $ (.86) $ (.75) $ 1.19
Cumulative effect of change
in accounting principle, net
of tax - .07 -
Net earnings (loss) (.86) (.68) $1.19
Diluted
Net earnings (loss) before
cumulative effect of change
in accounting principle $ (.86) $ (.75) $ 1.10
Cumulative effect of change
in accounting principle, net
of tax - .07 -
Net earnings (loss) (.86) (.68) 1.10
Average number of shares:
Basic EPS 38.9 38.5 38.9
Diluted EPS 38.9 38.5 45.2
Cash dividends declared per share $.30 $.30 $.30
Cummins Inc.
Consolidated Statement of Financial Position
Unaudited
Millions Mar. 30, 2003 Dec. 31, 2002
Assets
Current assets
Cash and cash equivalents $66 $217
Marketable securities 73 74
Receivables, net of allowance
of $13 and $13 863 813
Inventories 699 642
Other current assets 261 236
1,962 1,982
Property, plant and equipment
Land and buildings 577 579
Machinery, equipment and fixtures 2,257 2,299
Construction in process 58 69
2,892 2,947
Less accumulated depreciation 1,623 1,642
1,269 1,305
Investments in and advances to joint
ventures and alliances 278 265
Goodwill, net of amortization of $51 and
$51 344 344
Other intangible assets 92 95
Deferred income taxes 640 640
Other noncurrent assets 202 202
Total assets $4,787 $4,833
Liabilities and shareholders' investment
Current liabilities
Loans payable $24 $19
Current maturities of
long-term debt 4 119
Accounts payable 520 425
Accrued product coverage and
marketing expenses 226 232
Other current liabilities 463 525
1,237 1,320
Long-term debt 1,067 999
Other liabilities 1,296 1,285
Minority interest 95 91
Cummins obligated mandatorily
redeemable convertible preferred
securities of subsidiary trust
holding solely convertible
subordinated debentures of Cummins 291 291
Shareholders' investment
Common stock, $2.50 par value,
48.5 and 48.6 shares issued 121 121
Additional contributed capital 1,113 1,115
Retained earnings 530 576
Accumulated other comprehensive
income (530) (528)
Common stock in treasury, at
cost, 7.0 and 7.0 million shares (280) (280)
Common stock held in trust for
employee benefit plans 2.6 and
2.6 million shares (124) (128)
Unearned compensation (ESOP) (29) (29)
801 847
Total liabilities and shareholders'
investment $ 4,787 $ 4,833
Cummins Inc.
Consolidated Statement of Cash Flows
Unaudited
First Quarter Ended
Millions Mar. 30, 2003 Mar. 31, 2002
Cash flows from operating activities
Net earnings (loss) $(34) $(26)
Adjustments to reconcile net
earnings (loss) to net cash
from operating activities:
Cumulative effect of change
in accounting principle - (3)
Depreciation and amortization 55 54
Restructuring and other non-
recurring actions - (7)
Equity in (income) losses of joint
ventures and alliances (6) 7
Minority interest 4 2
Translation and hedging
activities (2) 5
Changes in assets and liabilities:
Receivables (50) (105)
Proceeds (repayments) from sale
of receivables - 35
Inventories (58) (31)
Accounts payable and accrued
expenses 15 25
Total adjustments (42) (18)
Net cash used in operating
activities (76) (44)
Cash flows provided by (used in) investing
activities
Property, plant and equipment:
Capital expenditures (16) (18)
Proceeds from disposals 3 2
Investments in and advances to
joint ventures and alliances (6) (7)
Purchases of marketable securities (29) (22)
Proceeds from sale of marketable
securities 28 19
Net cash used in investing
activities (20) (26)
Net cash used in operating and investing
activities (96) (70)
Cash flows provided by (used in) financing
activities
Proceeds from borrowings 1 -
Payments on borrowings (117) (1)
Net borrowings under short term
credit agreements 75 81
Dividend payments on common stock (12) (12)
Other (3) (1)
Net cash provided by financing
activities (56) 67
Effect of exchange rate changes
on cash and cash equivalents 1 (1)
Net change in cash and cash equivalents
(151) (4)
Cash and cash equivalents at the beginning
of the year 217 52
Cash and cash equivalents at the end of
the quarter $ 66 $ 48
Cummins Inc.
Segment Information
Unaudited
Power Filtration
Millions Engine Generation And Other
First Quarter Ended
March 30, 2003
Net sales $816 $267 $254
Earnings (loss) before interest and
income taxes
(23) (17) 20
Net assets 813 476 659
First Quarter Ended
March 31, 2002
Net sales $776 $283 $228
Earnings (loss) before interest and
income taxes
(19) (15) 18
Net assets 882 424 643
International
Millions Distributor Eliminations Total
First Quarter Ended
March 30, 2003
Net sales $136 $(86) $1,387
Earnings (loss) before interest
and income taxes
6 - (14)
Net assets 180 - 2,128
First Quarter Ended
March 31, 2002
Net sales $124 $(78) $1,333
Earnings (loss) before interest
and income taxes
1 - (15)
Net assets 169 - 2,118
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Product Revenues as Percent of Total Sales
- ----------------------------------------------------------------------
% of Consolidated Sales Q1 Q2 Q3 Q4 YTD
- ----------------------------------------------------------------------
2003:
- ----------------------------------------------------------------------
Engines 45 45
- ----------------------------------------------------------------------
Non-Engine Products 55 55
- ----------------------------------------------------------------------
2002:
- ----------------------------------------------------------------------
Engines 44 46 51 41 46
- ----------------------------------------------------------------------
Non-Engine Products 56 54 49 59 54
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Sales
- ----------------------------------------------------------------------
$Millions Q1 Q2 Q3 Q4 YTD
- ------------------------------------------ ------ ------ ------ ------
2003:
- ------------------------------------------ ------ ------ ------ ------
Engine Business
- ------------------------------------------ ------ ------ ------ ------
Heavy-Duty Truck 236 236
- ------------------------------------------ ------ ------ ------ ------
Medium Duty Truck+Bus 122 122
- ------------------------------------------ ------ ------ ------ ------
Light Duty Auto+RV 222 222
- ------------------------------------------ ------ ------ ------ ------
Industrial 236 236
- ------------------------------------------ ------ ------ ------ ------
Total Engine Business 816 816
- ------------------------------------------ ------ ------ ------ ------
Power Generation 267 267
- ------------------------------------------ ------ ------ ------ ------
Int'l. Distributors 136 136
- ------------------------------------------ ------ ------ ------ ------
Filtration / Other 254 254
- ------------------------------------------ ------ ------ ------ ------
Eliminations (86) (86)
- ------------------------------------------ ------ ------ ------ ------
TOTAL 1,387 1,387
- ------------------------------------------ ------ ------ ------ ------
2002:
- ------------------------------------------ ------ ------ ------ ------
Engine Business
- ------------------------------------------ ------ ------ ------ ------
Heavy-Duty Truck 219 265 378 207 1,069
- ------------------------------------------ ------ ------ ------ ------
Medium Duty Truck+Bus 138 157 191 113 599
- ------------------------------------------ ------ ------ ------ ------
Light Duty Auto+RV 157 179 236 209 781
- ------------------------------------------ ------ ------ ------ ------
Industrial 262 249 228 247 986
- ------------------------------------------ ------ ------ ------ ------
Total Engine Business 776 850 1,033 776 3,435
- ------------------------------------------ ------ ------ ------ ------
Power Generation 283 304 315 324 1,226
- ------------------------------------------ ------ ------ ------ ------
Int'l. Distributors 124 145 152 153 574
- ------------------------------------------ ------ ------ ------ ------
Filtration / Other 228 243 236 244 951
- ------------------------------------------ ------ ------ ------ ------
Eliminations (78) (84) (88) (83) (333)
- ------------------------------------------ ------ ------ ------ ------
TOTAL 1,333 1,458 1,648 1,414 5,853
- ------------------------------------------ ------ ------ ------ ------
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Engine Shipments
- ----------------------------------------------------------------------
Units Q1 Q2 Q3 Q4 YTD
- ------------------------------------- ------- ------- ------- --------
2003:
- ------------------------------------- ------- ------- ------- --------
Midrange 66,200 66,200
- ------------------------------------- ------- ------- ------- --------
Heavy-duty 10,700 10,700
- ------------------------------------- ------- ------- ------- --------
High Horsepower 1,900 1,900
- ------------------------------------- ------- ------- ------- --------
TOTAL 78,800 78,800
- ------------------------------------- ------- ------- ------- --------
2002:
- ------------------------------------- ------- ------- ------- --------
Midrange 60,500 67,000 71,800 65,800 265,100
- ------------------------------------- ------- ------- ------- --------
Heavy-duty 11,200 14,700 22,700 9,300 57,900
- ------------------------------------- ------- ------- ------- --------
High Horsepower 2,100 2,100 2,200 2,500 8,900
- ------------------------------------- ------- ------- ------- --------
TOTAL 73,800 83,800 96,700 77,600 331,900
- ------------------------------------- ------- ------- ------- --------
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--30--KR/cl*
CONTACT: Cummins Inc.
Jason Rawlings, 812/377-7719