( BW)(IN-CUMMINS)(CUM) Cummins Inc. Reports Solid 2003 Second Quarter
Earnings; Filtration and International Distributor Businesses Post
Record Quarters; Engine Business Shows Significant Improvement
Business Editors
COLUMBUS, Ind.--(BUSINESS WIRE)--July 25, 2003--Cummins Inc.
(NYSE:CUM) today reported second quarter earnings of $.34 per share,
or $14 million profit after taxes, on sales of $1.54 billion.
The stronger than expected earnings reflect record performance by
the International Distributor and Filtration and Other Businesses. The
quarter also represents significant improvement in the Engine
Business, particularly due to increased sales in the Dodge Ram truck
and a rebound in sales in the North American heavy-duty truck market.
The performance in these three businesses bolstered profits
significantly and the Power Generation Business moved closer to
breakeven while absorbing $5 million of restructuring costs.
"We believe this quarter's results demonstrate that we are well
positioned for the market upturn. Three of our four businesses are
performing well, and the fourth business has taken necessary actions
to return to profitability," said Tim Solso, Chairman and Chief
Executive Officer. "We are delivering the right products to the market
for our customers. We are generating positive cash flow, while funding
important product development programs. We remain committed to paying
an attractive dividend to our shareholders and providing a good return
to all our stakeholders. We will continue to tightly manage spending
and believe we will benefit strongly as our markets continue to
recover."
Engine Business
Total sales for the Engine Business in the second quarter were
$889 million, a 5 percent increase from sales of $850 million a year
ago. Revenues in automotive markets were 6 percent higher than the
second quarter of 2002, with increases in our light-duty automotive
business more than offsetting sales declines in medium-duty truck and
bus engines. Overall revenue from Industrial markets was up 2 percent
year-over-year, with increases in mining and government markets and
decreases in revenues from rail and marine engines.
The Engine Business continues to benefit from the successful
launch of our complete line of emission-compliant engines. There are
now more than 16,000 of the new ISX and ISM heavy-duty engines in the
field, with almost 450 million miles of service accumulated. By
October, the Company expects to have more than 25,000 engines in
service, with close to one billion miles of reliable performance.
The award-winning Cummins Turbo Diesel engine made for the Dodge
Ram truck continues to perform very well and has strong market
acceptance. Engine sales volume for the Dodge Ram over the last three
quarters creates a new shipment record for Cummins. For the second
consecutive year, our engine was named the best among all Chrysler
engines and first among diesel engines for heavy-duty pickup trucks,
as recently reflected in a report released by J.D. Powers and
Associates.
Power Generation
Sales in the Power Generation Business for the second quarter were
$307 million, essentially flat with the second quarter of 2002.
In North America, revenues were down 2 percent compared to a year
ago, with continued weak demand in our commercial genset business.
Demand in our consumer business remained strong, with sales 2 percent
higher than the second quarter of 2002. Outside North America,
revenues increased 3 percent in total, with decreases in Latin America
and parts of Asia more than offset by increases in Europe and
Australia.
Filtration and Other
Revenues for the Filtration and Other Business were $265 million
for the quarter, a 9 percent increase compared to the second quarter
of 2002. This marks a record sales quarter for the segment, despite
continued weakness across most markets it serves.
Fleetguard secured another long-term supply agreement in the
quarter with CNH Global N.V. and continues to pursue similar
agreements with other major original equipment manufacturers. The
segment also continues to benefit from the profitable growth of the
Emission Solutions business. Emission Solutions continues to achieve
growth targets, while funding technologies necessary to meet future
emissions requirements.
International Distributor
Sales for the International Distributor Business were $169 million
in the second quarter, an increase of 17 percent compared to sales of
$145 million last year, with improvement across most regions.
The International Distributor Business continues to demonstrate
its stable earnings capabilities. Earnings performance reached a
record level in the second quarter. This business is increasing parts
and service revenues and is benefiting from best-practice sharing
across distributors.
Guidance
Cummins expects third quarter earnings in the range of $.60 to
$.70 per share. Our earnings guidance for the year remains in the
previous range of $1.20 to $1.40 per share. The Company's free cash
flow for the year is still expected to be in the range of $70 to $80
million - sufficient to fund our dividend and provide for some modest
debt reduction in 2003. Cummins expects capital expenditures for the
year to be below $110 million.
Restatement Update
On April 14th, the Company announced that it would restate prior
period financial statements. This restatement required 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. The Company is pleased to announce that the re-audit and
restatement work is substantially complete.
Cummins is completing financial statements and disclosures and
expects to file the Company's 2002 Form 10-K as well as first and
second quarter Form 10-Qs for 2003 in the near future. Until the Form
10-K is filed, the Company will not release comparisons with prior
periods. Once Cummins files the 2002 Form 10-K, the Company will
announce the date of its Annual Shareholders Meeting.
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.
Information in this press release includes certain non-GAAP
financial measures. Such information is reconciled to what management
believes is the most directly comparable GAAP financial measures,
contained in this release, which will be furnished on a Form 8-K and
may be accessed from the Cummins website at www.cummins.com.
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Cummins Inc.
(Millions, except per share amounts)
Unaudited
FOR THE QUARTER ENDED
June 29, March 30, Year-to-Date
2003 2003 2003
Net sales $1,539 $1,387 $2,926
As reported
Earnings (loss) before interest
and income taxes 46 (14) 32
Net earnings (loss) 14 (34) (20)
Basic earnings (loss) per share $.34 $(.86) $(.52)
Diluted earnings (loss) per share .34 (.86) (.52)
Weighted-average number of shares
for EPS
Basic 39.0 38.9 39.0
Diluted 39.0 38.9 39.0
Cummins Inc.
Consolidated Statement of Earnings
Unaudited
Second First
Quarter Quarter Year-to-Date
Millions, except per share amounts 2003 2003 2003
Net sales $1,539 $1,387 $2,926
Cost of goods sold 1,263 1,173 2,436
Gross margin 276 214 490
Selling and administrative expenses 200 195 395
Research and engineering expenses 50 46 96
Joint ventures and alliances (income)
expense (17) (7) (24)
Interest expense 20 20 40
Other (income) expense, net (3) (6) (9)
Earnings (loss) before income taxes,
minority interest, dividends on
preferred securities of subsidiary
trust and cumulative effect of change
in accounting principle. 26 (34) (8)
Provision (benefit) for income taxes 5 (10) (5)
Minority interest 2 4 6
Dividends on preferred securities of
subsidiary trust 5 6 11
Net earnings (loss) $14 $(34) $(20)
Earnings Per Share
Basic $.34 $(.86) $(.52)
Diluted $.34 $(.86) $(.52)
Average number of shares:
Basic EPS 39.0 38.9 39.0
Diluted EPS 39.0 38.9 39.0
Cash dividends declared per share $.30 $.30 $.60
Cummins Inc.
Consolidated Statement of Cash Flows
Unaudited
Second Quarter
Ended
Millions June 29, 2003
Cash flows provided by (used in) operating activities
Net earnings $14
Adjustments to reconcile net earnings to net cash
from operating activities:
Depreciation and amortization 54
Equity in (income) losses of joint ventures and
alliances (13)
Minority interest 2
Translation and hedging activities 2
Changes in assets and liabilities:
Receivables (30)
Proceeds (repayments) from sale of receivables 5
Inventories (18)
Accounts payable and accrued expenses 25
Other (7)
Total adjustments 20
Net cash provided by operating activities 34
Cash flows provided by (used in) investing activities
Property, plant and equipment:
Capital expenditures (27)
Proceeds from disposals 2
Investments in and advances to joint ventures and
alliances 21
Purchases of marketable securities (26)
Proceeds from sale of marketable securities 37
Net cash provided by investing activities 7
Net cash provided by operating and investing activities 41
Cash flows provided by (used in) financing activities
Proceeds from borrowings 9
Payments on borrowings (8)
Net borrowings under short term credit agreements (29)
Dividend payments on common stock (13)
Other (9)
Net cash used in financing activities (50)
Effect of exchange rate changes on cash and cash
equivalents 2
Net change in cash and cash equivalents (7)
Cash and cash equivalents at the beginning of the
quarter 66
Cash and cash equivalents at the end of the quarter $59
Cummins Inc.
Segment Information
Unaudited
Power Filtration International Elimina-
Millions Engine Generation And Other Distributor tions Total
Second
Quarter
Ended
June 29,
2003
Net sales $889 $307 $265 $169 $(91) $1,539
Earnings
(loss)
before
interest
and
income
taxes 24 (15) 25 12 - 46
First
Quarter
Ended
March
30, 2003
Net sales $816 $267 $254 $136 $(86) $1,387
Earnings
(loss)
before
interest
and
income
taxes (23) (17) 20 6 - (14)
Year-to-
Date
Ended
June 29,
2003
Net sales $1,705 $574 $519 $305 $(177) $2,926
Earnings
(loss)
before
interest
and
income
taxes 1 (32) 45 18 - 32
Product Revenues as Percent of Total Sales
- ------------------------------------------
% of Consolidated Sales Q1 Q2 Q3 Q4 YTD
- ----------------------------------------------------------------------
2003:
- ----------------------------------------------------------------------
Engines 45 44 44
- ----------------------------------------------------------------------
Non-Engine Products 55 56 56
- ----------------------------------------------------------------------
2002:
- ----------------------------------------------------------------------
Engines 44 46 51 41 46
- ----------------------------------------------------------------------
Non-Engine Products 56 54 49 59 54
- ----------------------------------------------------------------------
Sales
- -----
$Millions Q1 Q2 Q3 Q4 YTD
- ----------------------------------------------------------------------
2003:
- ----------------------------------------------------------------------
Engine Business
- ----------------------------------------------------------------------
Heavy-Duty Truck 236 266 502
- ----------------------------------------------------------------------
Medium Duty Truck+Bus 122 141 263
- ----------------------------------------------------------------------
Light Duty Auto+RV 222 228 450
- ----------------------------------------------------------------------
Industrial 236 254 490
- ----------------------------------------------------------------------
TOTAL ENGINE BUSINESS 816 889 1,705
- ----------------------------------------------------------------------
Power Generation 267 307 574
- ----------------------------------------------------------------------
Int'l. Distributors 136 169 305
- ----------------------------------------------------------------------
Filtration / Other 254 265 519
- ----------------------------------------------------------------------
Eliminations (86) (91) (177)
- ----------------------------------------------------------------------
TOTAL 1,387 1,539 2,926
- ----------------------------------------------------------------------
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
- ----------------------------------------------------------------------
Engine Shipments
- ----------------
Units Q1 Q2 Q3 Q4 YTD
- ----------------------------------------------------------------------
2003:
- ----------------------------------------------------------------------
Midrange 66,200 69,900 136,100
- ----------------------------------------------------------------------
Heavy-duty 10,700 12,800 23,500
- ----------------------------------------------------------------------
High Horsepower 1,900 2,000 3,900
- ----------------------------------------------------------------------
TOTAL 78,800 84,700 163,500
- ----------------------------------------------------------------------
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--BM/cg*
CONTACT: Cummins Inc.
Jason Rawlings, 812-377-7719