CMI - Earnings call transcript Q2 2020

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Operator

Greetings, and welcome to the Cummins Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Mr. James Hopkins, Executive Director of Investor Relations. sir. you, Thank

begin. You may

James Hopkins

and Good President today morning, quarter to you. Satterthwaite. Mark our and XXXX. our Tom Chief Financial Chief everyone, discuss Cummins’ Operating teleconference Officer, Chairman are to today second and with our Executive results Officer, Participating Linebarger; our Thank Smith; me welcome Chief and for of Tony the Officer,

of for the be will available your questions the all teleconference. end We at

hear Securities will be Before within statements the of hopes, please information intentions strategies expectations, will we of given XXXX. beliefs forecasts, note of consist on you start, regarding today, some the that that meaning Exchange Such or future. forward-looking statements the and our of express the Act

and in risks the on because Form a in uncertainties deck, any slide report disclosure Our actual future uncertainties. our on results and filed is forward-looking and XX-K could such the projected forward-looking section Securities recently number available XX-Q. of such differ annual most risks reports of statement information quarterly those Factor the our subsequent materially Risk Commission, regarding filed More with particularly the and Form and filings in Exchange statements of from

financial we we call, be the of GAAP measures. reconciliation to course financial for During this of refer our the discussing measures certain website will to non-GAAP and you those measures

our are CEO, our a that we’ll the Linebarger. on of statements Chairman with of financial presentation With and heading with webcast and under Tom Media. the of out release copy copy press and way, site available Investors at the begin Our today’s of Web www.cummins.com a

Tom Linebarger

on initial move and second then results. to operating will Thank begin you, I environment morning, James. by our providing quarter our some Good comments everybody.

There’s the demand we in to increased began rates in company’s Our unprecedented of facilities. of sites reducing cost of spending shutdowns and supply volatility the constrained company full the June. and people. expenses led at profitability OEM of restructuring over our and of pay reopening delivered chain salary that XX% Many discretionary manage given history. saving including Many the in experienced other shutdowns these challenges. on actions was OEMs ship increases that have their and sacrifices process managed of the revenue options facilities part this quarter. head further the with the by on impact year, cut, in at build cutting reductions in employees, the our the the company of last rates, of April, In counts reopenings reasonable used to temporary decline. our series we actions, The May Production results decline our are to sales largest faced magnitude beginning given

acknowledge sacrifices the this this challenging to to the year necessary, making While have want opportunity I thank taken to for time. take the support they're employees actions been we've this and company through

also have chain employees the worked by tirelessly unprecedented Our to COVID-XX pandemic. disruptions supply the caused navigate

and organizations. up and our maintain can of many in its managing of enough impacts own organizations ensure locations, layouts, of Adjusting by manufacturing OEM of all engineers of collaborate chain employees ensuring had staffing from checks, we lower many this and patterns, set Archie and the health which office out a engineers of of services has part faced presented most shared home. If development schedule with not time we've transmission. global and the fluctuations all still supply tools working Outside shutdown, network along and with of company's work distribution challenges safety the from This distribution in notice. rethink was to manufacturing facilities. to and instituting how challenge, employee significant the no demand Our to supplier our risk through the product or our are rapid and roll of and introduction or capacity new little occurred history, some

facilities the peoples new effectively you of more had tasks express nearly to to only to our people agility putting continuing can for for These of our are Again, to gratitude find our Cummins people We and safety my uncomfortable methods innovate commitment straightforward. and for one say and manage that and safety operations, our used every I thank often procedures work be of and people the make everywhere. it first.

salary a joint second levels demand million for higher our China. was take lower the volumes variable update of or $X.X quarter and offset of then losses, of and with domestic restructuring Mark to revenues The Now All in revenues and to to volumes. operating broad quarter new second in business XXXX. segment billion joint only filled remain in as and XXXX. record second I'll invest most a for quarter impact segments margin compared the XX% savings billion, increase was reductions, for global incurring second with details you costs segment $XXX the end balance mature the warranty year activities of decrease demand the Cost XXXX related quarter through of America $X.X reductions, XX.X% EBITDA decline. four engine the over our international of technologies second the to ago. compared quarter performance quarter quarter second in the on move continue to in as compared declined income of was construction to partially our XX.X% adoption. and same and by venture power sheet a year the declined was in Lower market XX% year venture year, financial ago. offset temporary operating compared products our well by XX% major solidly of our salary discussion The to joint to XX.X% we The partially due Sales customers or for of in period lower ahead were markets. benefits a will EBITDA and profitable as of a markets reduced distribution lower summary North impact restructuring, with our venture income. results in you compensation, primarily markets. by Revenues of income, XX%. more from of revenue increased liquidity. production new weaker the along of truck lower

the to margins well EBITDA XXXX. XX% our North variable to quarter was expenses. Second of as we second work of in quarter $XXX benefits continue increased America, million of compensation lower compared sales of or in as X.X% realize impact transformation EBITDA the the as

XX%, build loss weakness year. Revenues rates, while new and with international lower XX.X% million North second Systems in by lower the North declined the decreased and in XX% markets. gas generation truck Industrial in truck our EBITDA America a XX.X% a for Components impact Second Power a Components business, EBITDA volumes, compared partially X% a driven the in by mining power Power quarter continued compared in the EBITDA second sales international of and the than quarter Sales increased revenues lower both oil, of quarterly quarter salary for record revenues and warranty in as XX.X% the of declined driven lower impact second result percent over the benefits new was or by XX% cost quarter, segment in of China year reductions in markets. again, costs. declined XX% same the year line sales year and expectations. the was restructuring, XX.X% quarter a declined Europe offset temporary revenues with by was sales India. was in the EBITDA declined actions million in group. offset for XX%, by the warranty quarter represented decreased to to ago. by In lower markets lower $XXX and second benefit in demand more of ago. XX%. reduction America and The volumes of expense. $XX reduced as

Now then our on cover starting markets, of international some I we'll key largest will North of comment and some markets. America with our

heavy our all declined market And billion. Freightliner shutdowns parts this the service Year-to-date, markets end XX% lower declined delaying revenues second America even in is sleeper in impacted of to in maintenance. share as XX% We use vehicle our Day XX% for impacting and construction end delays. ago Industry quarter second year shipments business due engine equipment. duty quarter. quarter an and models rates, to from negatively OEM by our sequentially. $X with XXX trucks and compared the declined. their industry build North increase production generation and began users to Our of XX%, a XXXX to cab experience shipments demand of trucks was Cascadia in production We project half second Power in declined

of this quarter. XX% with market a leading haul entry decreased medium duty will their by trucks support in weight Our Production our second share the further regional into low XXX market. in

off due XX% our in OEM demand for customers to North to gas decreased for second backup over maintain in reduction equipment and markets. decreased Revenues fell new and We we're and domestic Demand ago, compared ago. equipment sales in clear of equipment to share highway with pickup powertrains year XX% and oil duty truck record quarter. with Total our the XX% truck power by new declined RV engine XX% a experienced by American in Cummins for the by fracking lower powered trucks from a continue XXXX. construction by near generation XX% markets by In of to market, market year impacted purchases the shutdowns power market levels shipments medium equipment. during engines

to activity negatively by April America in utilization, compared fell destocking low scheduled customers’ delaying and Our truck May, last aftermarket were especially North maintenance. sales year, XX% in and impacted industry

revenues our decreased compared of markets. XX% major Now ago. to the international turn quarter a let's XXXX year second International in to by

trucks. and joint full industry the by teams, old billion, XX% and and revenues of duty turbochargers quarter, in record April, of the those record and of flexibility were in in a purchases compared our NSX chain trucks aftertreatment June. a including delayed engines, levels ago. number second policy, for supply of year quarter manufacturing systems record to continued facility’s company, first shutdown the an from increased of and making was May from medium increased the China in in heavy demand and transition record at government Second a XX% for demonstrating quarter China, our driven which level ventures demand scrapping increase to producing by The $X.X In March the

the XX%, XX% cost the share of market second up performance of customers. ownership customers engine our of Our total in represent fleet and continue to Fleet reliability. to quarter and the transition with model, was XX% due fuel economy market XXXX focusing in China, of from they strong a XXX the to now on

by market by our as sell our NSX next last share increase above expect this year. interest Industry year. expect we and and with increased, Industry share Endurant to share acceptance increased current our trend continue, sales automated We place, the our X% duty level. to the at AMTs the In also X,XXX country in of manual are providing NSX are cities China XX% opportunities second in we of of light products new to were regulations seeing year. end engines our already this market across trucks launch has flat we the transmissions over currently strong market quarter X%, in where with

projects, in XX% ago. increased increased investment government by local Second level infrastructure in China central and borrowing is for from in demand. of to excavators by municipalities The housing year increased support excavator quarter a resulting encouraging demand

ago, strong China power was demand flat Our for domestic performance increased by OEM compared with XX% by generation of standby customers. market compared from ago power. weaker year data XX% driven share to our for equipment a center to offset customers, Demand was year is a the demand

quarter India, Industry's our reduction ago. quarter million, sales while by of construction decreased for and we've to truck sales our primarily were in Xst, second from nationwide transitioned o Solutions more XX%, a Second in the revenues joint result declined driven new generation India standards business. truck additional added will business. in COVID-XX. response The regional $XXX to of ventures, than on industry customer XX%, by power shutdowns April including XX% components in year a all BS-VI as which Ashok Leyland Emission And revenues and

India cementing year risen tractor finalized the over quarter, four on we and second in position supply compliant and an BS-VI revenue metric saw XX% truck declined and miners. compared related agreement an among remain further have market. to commodity demand miners contrast, During to equipment lows. engine, where highway lower the Demand we Latin declines their truck by compared shutdowns. over of April COVID per mining remains Indian XX% in also $XX Mahindra, India in of XX% America, due leading copper cylinder by company, to our China, resulting primarily sales coal Europe iron driven ton, production, prices truck in Global OEM In of a Outside to engines and XX% by an year for prices year stable below ore lower coal ago.

quarter, the relationships OEM demand new our While was of existing with most our we for across second strengthen to and markets weak customers products. during continue developing

We are customers markets challenging us this hard improved in new market to working support enabling partnering recover driving in during and and the our when share to future. period, benefit ways

opportunities and our our continue position new diesel in for also markets, strengthen While we gas segment. focused to natural power on we're

market to throughout using tractor and powertrains Kalmar North have late battery XXXX. start We electric Cummins XXX for service buses in terminal selling America, in the we'll powered electric

battery terminal adoption medium tractor We over next bus expect but in in the thereafter. adoption increase the and occurring market to years, segments duty of of truck electric markets several powertrains

in products wholly field for time Our applications. confidence the commercial product uptime. is our providing supported the owned distribution technology first are customers this used being And and business, in by

two globally. trains Europe, completed cells by types fuel By quarter, powered making XXX,XXX XX fuel provider XX month an of these fuel Cummins of trains trains over Cummins Cummins there second by with for trial be in the leading in of During cells XXXX, powered kilometers the running cells will Europe traveled.

PEM with to and both oxide and applications, OEMs centers about including trains, in how end utilize, We users cells fuel our on are variety in solid ships, data a highway conversations active vehicles. and

cell North running in fuel have Europe trucks America. powered both We to date and

we hydrogen of support infrastructure of both In a have part which addition to the leading PEM opportunities a we the and portfolio electrolyzers, will the cells, alkaline see fuel critical in economy. be to

larger developing today, of markets the and gas and hydrogen To a to North the Europe, cells more presence to portfolio he and being applications as increase second fuel variety applications. In utilized grow are is grow business fueling of expect scale on fully how in already including recently hydrogen electrolyzers more for well hydrogen Our our in site America production positioned China, in around production a in investments applications world. discuss and complete product world producing the to industrial stations, of will we these November this half Cummins We industry, analysts, XXXX, attend we of With Hydrogen portfolio Liquide. in XXth. Becancour, participate hydrogen with plant PEM be Canada how be largest facility capable Cummins be a the investors will all will Day holding you rapidly electrolysis megawatt and this of XX X,XXX virtual to leading in annually. and for of able the Air will in event. tons hydrogen The will morning hope power

second XXXX. markets, in While in new about market half to excited power us and we will of are ahead natural conditions opportunities the the uncertain face continue of advanced gas we diesel,

consolidated change increase region of and we recovery the except experienced government region second of quarter. COVID-XX to consumer both build record We control levels expect and we to quarter will regions simulate on company to market their defer from the second China, based economies expect quarter from pace confidence. to business though where levels and and/or from actions, may the revenues in all clients The in the third spread

through and managing period in experienced demand. very is team leadership Our of volatility

the within on technologies flow for by demand know company. that in prepared end in even region that costs growth demand the and performance. year, and uncertainty clear. are that products services profitable will our as the these full When which to a the and be to will drive products for while that we the of remain half market We and deliver Cummins will Due cash managing of second becomes the of COVID-XX defer our will range and impact markets, focused the scenarios deliver remains success to may customer will, position returns, stronger it drive in strong continue and invest a financial

Now, over Mark. me turn it let to

Mark Smith

and felt and across work the Weaker with all the effects own economic had OEM suppliers in operations help second users the decade combined initiated contributed markets impact a the and with a second XXXX, We The of protect year combined the end this year in largest Tom decline our lowest global company restructuring in the delivered of very the sales quarter profitability Cummins of and in customers, we demand half over in benefits of revenues solid you, uncertain our history. on measures an for the and profitability good in economy, from the cash taken second Thank year flow some environment. operations, face morning quarter. additional COVID-XX everyone. to and of as shutdown to cost unprecedented global reduction in quarterly the

decrease year Second XX% North were revenues XX%. and in of X%. quarter movements $X.X revenues international XX% a billion, impacted from a ago. Currency Sales revenues negatively by America declined at

million year-over-year. all of China. expenses lower middle in actions As of major China announced weaker which ago. of variable quarter expenses for effect $XX only our of restored of reduction in quarter. of the our decreased of market offset to Salaries fully negative lower restructuring the XX.X% more and the initiatives. at of of sales, compensation decreased selling, salaries impacted The and of venture $XXX in impact benefits or sales cost expenses, revenues driven sales and amortization second, million million The $XXX at billion our million XX% variable Earnings $XXX compensation research million and salary lower our and will million, warranty increased into $XXX of lower the decreased of a facilities by impact be expenses sales temporary at expenses. compensation interest, and primarily EBITDA negative the Research went year party the $XXX reduction compensation to costs primarily reductions expenses or also joint from temporary beginning were and We said, due by partially Gross or testing operating EBITDA, $XXX depreciation X.X% and lower driven decreased related and other salary and sales reduced to by the reduced discretionary segments. tax, by by by compared costs XX.X% record the temporary margin to or in or the over year the lower reduced to before year shutdowns. by $XX sales. was $X.X own SG&A $XXX our third approximately also restructuring, Tom fourth end expenses. or offset the of reduced than reduced April the benefits administrative of by benefited million due XXXX -- salary and compensation Results restructuring results and income million. by in million, XX% COVID due and reductions

shutdowns our facilities to equivalents liquidity facility record as cash million in the holdings. $X earnings wide $X.XX was year the Cash, due growth sales from higher in rate at compared rates marketable income diluted expect or increased to second The Net for orders manufacturing the earnings $X.XX by securities, quarter the little earnings. or global quarter end in facilities. up. effective up reduced dramatically the June in for yielding a quarter $XXX delivered $X.X decline by quarters reached of global a We quarter tax mainly ago. began record boosted higher of $XX working interest was in into were primarily and and did capital. Other XX.X% of Joint at quarterly marketable decreased a million, outflow XX.X%, cash a down by ago. in month an and discrete the of and that and $XXX the March, share year million COVID-XX, are impacted Inventory million quarter cash quarter increased Operating demand did $XXX venture solid increase shares. securities engineering the future. billion lower in Inventory and We the We in those our lower did quarter the interest to China profitability Capital primarily this In on markets. by driven incredible industry from repurchase a income significantly to were was million. of was volumes summary, in per our wave of tax Joint picks quarter not improved. a venture by that lower in million cash any in by declining earnings last The expenses $XX million decline paid of of revolving due year, $XX and unfavorable demand our million in testing to total technologies $XX flow of the was a million $XXX flow quarter the our flexibility in second in our customer $XXX billion, of improved production expenditures converted lower an record with of the China. May. income inflow in warning. shutdowns in compared as customer XXXX. our the driven of billion And quarter, year. employees. demand face $X $XX totaled cash There's the in the most dramatically items trucks quarterly to will new operating end second by was primarily for new strong And of $X.X million credit expense second included $XX quarter, early of of we invest million the continuing in year subsequent activity addition products in as do deliver over commitment profitable a new dividends million

reinforce will future extremely economic that initiatives. down and even can support June, April in and products in cost taken challenging our profitable our in to steps we investing in cash in profitability, we new while flexed preserve both production As ensure this The May liquidity, that up environment. on global protect keep we've ramp reduction already growth our executing strong

in markets, we quarter While some that to revenues specific from Due helpful. historic comments April lows OEMs will brief be hope remainder year providing guidance recovery third trajectory of has costs be uncertain. beyond demand for from the pace not of the but in looking on improved the will remains the and forward several this of the we uncertainty,

the consolidated March in to to expected imposed in levels second second moderates the venture for rates. OEMs quarter quarter. are increase have lockdowns and from trucks construction expected record build allowing sales many improve from quarter levels Our from countries China, quarter income and April, in the in is decline as to this eased Joint second equipment levels as demand

we said, return increase I've As testing do closer third engineering an as the levels. in expect quarter to in planned activities expenses

salaries, in Cummins reduction this temporary the those the salaries will of position third in remains in a to extremely remains the the by place strong quarter. environment. fourth beginning be quarter, restored challenging fully summarize, in To With which navigate

and of the customers to financial strength We the a to actions support the future. the company company, necessary our continue maintain will position stronger take for

it to me James. back let Now, turn over

James Hopkins

Thank you, one with rejoin the that, the question. our on queue. if have follow additional the Mark. would ask others we to Out that limit for I related questions now call, are yourselves you question to ready and to up. please you Operator, And of first consideration

Operator

Wells Fargo. from [Operator Andy is go Instructions] coming Casey Our today of question ahead. Please first

Andy Casey

that already anticipatory? declines term you expect seeing Good kind Are or you that everybody. Thank is QX, China? you. in question. One the of Can more trends you morning, short discuss in

Mark Smith

the for the goods know, in half weaker of think, China is second So demand of and capital you as typically year year. half in the the first Andy, I seasonally

We third expectation the cooling some into come have But think levels. reasonable a of just record quarter. off going that’s I

visibility some not perfect have but visibility. We

Andy Casey

unrelated of for, trucks? question Meaning, then you fuel technology. that the scalable differences how multiple term any is Are kind versus on and just for applications, required And significant benefit focusing a trains market see there highway on application potential across a would cell say, highway? from up longer follow let's

Tom Linebarger

differences. opportunities are The applications answer are and there is there across scale

provide besides technology fuel is they just well an learning as and cells on fuel to cells than lot that even we're say in there applications. technical components. And are And costs, definitely a and is stack volume but the take as opportunities. stacks. So, lower related will and stack they're scale for volume making competitive major is much would investor the course thing a about One the fuel I benefits of trucks, volume lot driver more hydrogen trains more across

be will pretty high to manufacturing technology, to us trains lower cost buy well more that effective other fuel volumes we in able cost. those So those components of delivering to allow move as a at cells being will supporting as

some and there's specific work there’s in So clearly areas work scale opportunities controls also application to specific applications. necessary in it make other and

Operator

Thank you.

Jerry Goldman Please Our next Sachs. Revich question ahead. is coming from go of

Jerry Revich

focus cell? the accelerate regulatory in we is at for if larger talk R&D you big wondering a investments to about I'm fuel Tom, momentum for that significantly any hydrogen, in be Analyst And could for about those can areas, electrolyzers. you folks spoke the How to compared growing talk cell, about desire could beyond the opportunity you Day? of what given electrolyzers versus fuel presumably market size

Tom Linebarger

given evolving, is into recent electrolyzers our space. about the view entry Our relatively

I available electrolyzers fueling for we our sure fuel thought our needed order in first think was there to was cell make applications.

incremental mentioned, we investments see we're Cummins all As to now there's you are that strategic that business. opportunity electrolysers in of current course, significant making to And view. this expand the

us. significant it So does for provide platform growth a

which and way how do incentives where also other and done helping engineered, a they We projects PEM overlap available some we’re that's the and world us of they're require there then especially the significant. course, of is especially now to saw produce are electrolyzers out few power hydrogen, some. China the incentives roll are parts And Europeans also are in as just, the of manufacturers large the you hydrogen, generation field, which today, there and green but they're so some the in experience, have Europe of just one in now. And

electrolyzer sure right So have available. technology our range investment but to launch, also make R&D, of in both product we the sizes that expanding in we are and

significantly, saw you which technology We venture Liquide involved are done like with that tank was other did also involving this, NPROXX, in market also partnered a who's with partnerships, ourselves the we this company. joint Air had probably with but we

we can was the that and So provide hydrogen tanks, high economy. in pressure storage important which transportation for

adding significantly are growth can given adding timing in making as participate more now. market, sure the and partners, opportunity we're you we the we is that So, this mentioned, technologies,

So, we our presence expanding are there.

Jerry Revich

the you cell? Cummins Do larger that the with statement comment fuel significantly if the opportunity question on part just I for size is electrolyzers you mind? addressable in agree don't you that But know than can early. market in of it's

Tom Linebarger

I Jerry, bringing back. don't a the they it know, honest, electrolyzers is at it’s percentage of depends thanks of what But don't wider also of eventually field. definitely for to a win market mind participate how thing. challenge sort and of truck cells, big the then and it on really be in we part will because I fuel that all, range

a It's field. that. agree wider just Let's

well. the both So, generating feeling else's can opportunities, is is be hydrogen, electrolyzer as fuel represent because in about we our opportunity everyone we participate every cells no opportunity truck significant parts that But it, the for of of fuel in cells. front it that question larger, serve would but

in earlier meaning -- it's time. So

electrolyzers with more So pursuing get that's opportunity to why products effort sooner. market on more the we are

Operator

JP of Duignan Ann ahead. go is question next Please Our Morgan.

Ann Duignan

the models salary hydrogen of direction back of back think we give terms and come of you. terms I’d rest the Just we for Thank Can size reductions, the dollar at should in et about costs costs look in the you QX, love that cetera? ask the pieces, as step cetera, system et that us variable years. and QX. comp, I'll the our maybe in about to into any QX QX keep on and will going but

Mark Smith

the should which comes the of cuts said reductions $XX in variable million be QX the on So the between terms reversed the be there. compensation as in fourth really be QX salary combination expenses. full and the quarter. run The and that’s similar it’ and million rate, and in but $XX so that line, QX the temporary increase a impact, get lower engineering just when be about is dollar to salary significant some quarter going QX in top income JV fairly QX will back in I’ve not change variation

Ann Duignan

And then know versus temporary fundamentals Can step sales in were what the versus on you how about truck weak plus. XX% you there about just But talk you're back, down India? said taking COVID, were broadly seeing in just talked we are India. I a in you fundamentals, the more going what seeing

Tony Satterthwaite

very India were and in this COVID. pre sales weakness weak started some of Truck

know, even good not year As market. last a you was

COVID has So Indian market, the that made truck worse.

low construction. seeing really activity are We economic extremely

has significantly our difficult to proven manage of other some India countries. more in of down. All COVID that in course markets even And are

and about so as activity COVID we And cautious in weak India India. second not significant challenge, and quite of see we half the this year, anything, are expecting in any rebound the increasing if

Operator

Cook from is question coming ahead. Jamie Credit go from next Suisse. Your Please

Jamie Cook

of impressive you, seeing you're exiting levels comparable I June and in quarter. about not? guess control my if sort cadence first pretty April, is short question, of just we're the what back understanding my to or quarter. sales sort talk of are a come the question, sort you know, of these so more G&A you the May July was to more again, But Mark, July, on fourth versus And costs sort in trends. term in Can your June the quarter, going some of second of, to if throughout then

will you look you. Thank So outlined the XX be reduce opportunities forward, beyond guys to incremental there structural XXX to in costs as November? your that you

Tom Linebarger

the could was everyone and you work difference first the most May And Jamie, June. June back Hey the the April at and that was one in OEM shutdowns. one. real our was Mark, and that quarter happened between in I'll thing take second real second the take

were Those they have stabilizing so, into continued steadily July. relatively rates. production And

expecting not into going relatively quarter significant we are we rates to, as third holding them So, well increase third any increase but us we are expecting see Mark going that revenue said, June the quarter. from leads and the into

about comments chain our our start-ups keep to Some teams’ ability echo of supply And OEMs pretty I fast. were June. Tom's to in with up the want

least very third in are don't OEMs. the our but for least keep we and going relatively start-up from So, looks of aspects this. consistent expect rates of a seeing do the interesting month. so most V-shaped up expect it one quarter that's been at of build far at The will We

Mark Smith

ways a we low will revenues period all say. from that back. our battening we're surprised lot manage to to looking once higher we looking it’s we're and and risen doesn’t doubt the it's have We're way different costs operating revenue next have we're but here side. year. always compensation we frankly, can a have felt for add looking That's aimed too a really into take some been of out. as more to And a as it to cycle our sales costs recover drive a those our in opportunities managing down But little work of the then costs We We're percent get There's quite be of Hopefully, what always learn to And us keep for We challenge that restructuring those our year costs. so to more year. planning important with company with costs gone revenues of efficiencies for next to to SG&A, there. costs environment for early help a kind along we've ways the no into throughout but as on at start this bit of the SG&A recover, consistent our basis. going yes, a employees planning.

the very lot. at much keep the topic a aimed at start year we it's yes, But SG&A a the and at discussion. helped obviously, of of So restructuring

Tom Linebarger

estimate structure. We the going really we add sales level sales we're aimed stage the year. sales And know level year is actions lower a and that the and the -- work XXXX, that revenue that get I then the permanent SAR just our view and in approach we what had wanted our just match with if for like, of associated as time downturn took to really we where give and XXXX. QX a is, the like, really look for for sense last structure maybe to continue XXXX XXXX that But But our estimate where for aiming what aimed a a we'll we're at the because in you will of takes hit XXXX we reduction. if to of original all see this lower doesn't take temporary don't all COVID appropriate is better some sustained year, cost actions to Then at have between much, our another starts or look we going we just fine. cost was we and where end and how on at that's of hits at it the to SG&A lowest beyond that we're down out through ideally we on significantly a at the basis.

that. be then lower we'll or try to we in thought what revenue temporary to a getting have is prepared we to going and thereabouts have going for we're And to relatively do to to the right, get like period back if we're both. back trend So, there QX will do we If things. more we're then we're the it and be than looks we're modest of we'll think would ones sustained do kind where we in looks

in And what under set into as all our scenarios asking that things going XXXX. finally not asking In work May, ourselves would will this done But whatever circumstance? of be we we at rolled different strategic as aim fact, in for said, work with decided those we revenue and our every scenario we we're planning Mark looking ourselves, for we’re actions which to fall. circumstances. what for and that be creating have So these ready would do started in we're we already been

Operator

you. Thank

Fisher question Our Steven coming ahead. go of is Please next UBS. from

Steven Fisher

the it any that in the even detrimentals the costs Is QX. QX, in line on we in QX shouldn't sounds there reason your be with Just level? that you QX than the better versus why revenues what shake like better saw holding still

Mark Smith

Well, structure think that's I now the to going best we've consistent cost quarter, from think is plan, I we way that for to taken the actions to quarter and fairly Steve, it. model be the

actions really course, there the were the effect cost in the weathered hands kind of half Of toughest were through just in It since of of revenue quarter. first next the comps we've the for here year. trajectory that

So, basis in can't to on I is the there decremental are first we've manage the month rest now I've And made can think in some on mind sequential for the Obviously, we're course in to here. numbers we engineering, comments taken the the drive with your and the in the from then going you from venture. on work actions sequential of, the which a the year own increases performance year, on models pleased joint about of the decrementals. kind the bearing decreases the revenue the of really half of set month

Steven Fisher

I you curious on of that in the least of guess have certain? the the related to for of and might you rest markets of feel I backlog the give guess which to give have thought degree your uncertainties relative or you the in have that, So terms point, terms geographies that have you just Tom, enough I which thought that backlog I Mark, out might, you guidance. to rest do do are of, the you and would that guess the I'm I confidence range as you think how time certainty far a most you I’m ones some curious of end then year. And like related year visibility, for

Tom Linebarger

We even lot projects managing backlogs don't decreasing backlog. now. by they have only really but of is in increasing say, in backlog a generation production place we the The they're those And sure and power production. get have they're trucks I'd pretty some backlogs course there, markets, of and

demand on influences week to And change so they're, they their week what us production how is. their

confused And how there. it's out pretty question June that. like everybody good it there said, a leveling the looks gets. sick Tony They're But fabulous. kind depends it though, seeing It's production stronger They're seeing ramped mean, seeing. sense It's the for stronger. In Here's just North not stabilizing or definitely that their give as feeling what what you about rates. we're of a to truck we're decreases it’s just America, I holds whether to are demand, just nobody's lot of makers the on levels. up

shutdowns gradually And fall to you happens in we get If we expect more and again, COVID reverse towards better. have in to to more things and start getting continue so and better things to expect and rises demand U.S. continue we again, if off keep cases to start the to decrease see revert economic and opening the to should again. cases

and movie, are Western at movie exact to most which movie just in know a looking on a played and us yet. India you or And we really you'd place. that of Europe So, slightly different talked different China, don't very that depending it play about if how in and call we took that in thing and

So that's cautious about why trends. being demand I we're think

for increasing a sense the are month things we how was slightly in by tough about Europe quarter, that. China as things we and and that like markets stabilizing that just And it rest are where for in it a the see we are of so year. understand hot the We we U.S. month level in and just don't sustains concerned

we down, and that. be don't enough to that's to we pretty tips you probably it do confident think about have we what we able certainly -- expect backlog feel So, we it that. But tell

prediction And rest we of model be point it, that's kind kind for know. how but unfortunately live of frankly, helpful it. just I to of we just very situation of figure what And all ready the we're that's a that's of know out the So from in. view not

Operator

you. Thank

from next Evercore is ISI. ahead. go question Please Raso David of Our coming

David Raso

costs similar your have to Trying in question, strengthening EPS But EPS just trying a business in not grow case. some it when the quarter, $X.XX sequential China should North EPS like the at to back about you back. would cut XQ. later sequential America from mean coming you then the highlighted $X.XX about to declines take truck. I'm fourth thinking costs the sequentially, I'm balance largest year. growth. But suggests come I that's Nothing feels

I your going some just Do not EPS year, quarter baseline, you're So the the give know us you quarterly for think guidance, EPS? to but was the bottom baseline. second give just EPS

Tom Linebarger

before to markets. beyond what because in it I was visibility making just disease Dave, goes quarter. happens say, to early the really have back different don't these And Too about this the we third point with

and today I where of we have to think and trend not expect these places the if start in things fact Europe get know, in worse some and But we in seems to as better and U.S. than bit a that is, hope wrong hot down we markets, get it, a mentioned, than those coming the every offset our like kind markets what will they will It the of is if demand went in China, to the back just on as to our in basis, even little see red as view. that strong more cost business. watched down steady if we'll things place stage better in to also major back continue tip of happen you offset increase into almost back and from July, one. point disease everything started way to go we

in a Indiana it where just put Monday. headquartered, mask in they order, just new we're Here this

So it And off be just costs true temporary And and starts to have will to that is revenues we question, frustrating it’s us, don't that question is, know. It these come like tick only and seems is things should when be we had May, fourth quarter support back in we'll we I we that's up, don't But that where where fine. this our true. hits. when now that again, to just to done planning quarter thought, that frustrating -- know fourth you. that's know oh, our but

David Raso

$X.XX, to If back, cost can comp stone for fourth we in trying of the EPS you XQ. or on quarter? the hit coming nice written is sort pull EPS the out the just think sequentially from growth $X.XX I'm scenario that for about, negative get mean, for back plays employee I the XQ,

Tom Linebarger

and of employees done in probably the commitment made on to cutting do hours. that We We restore a also lower would the think quarter. their salaries we our much can we've that we fourth people paying comp as as

our that earnings just our know, is how as So The we're reverse. go. that that you going by part comp, goes variable view

variable than to are So continue comp lower will planned. earnings be if weak then

a was. our to continue that be So will cost plan reduction what over

come mean, have we'll QX while were that we that restructuring of feel we ourselves it about if and not -- how I end just then revenues really going feeling our Jamie back. as year come continue part if is back. towards then through action take talking for not more think like think continues the part the to a I with we And position it cost it's the will just So would not properly. to earlier comes structural that's to

really XXXX really QX be actions, interesting but --. So those is really that's of the would focus where

next the aggressive of be we if the you in managing downtrend mean and it predict give just in revenues trying will irrespective growth be the of not we able keeping we'll have with a to have the a again, back they I are costs out. are we'll -- guys the think everything on there's I think that come think back about that just that is And appropriate to a will coming and they're future our that's call we what company. of from see. we and will better and of or much way. be view But costs profitability information earnings can is and QX, the in we figure you scenario, do blip has what a in to expect to And about lot us more does to So sustained what

will depending view. and starts If think revenue lowest. striking year. of to rebalance we’ll It's of If won't. But Mark's our kind again, restrike won't. a up be be a was see deal strengthens continue revenue So then the the we point If it balance doesn't, this best. it then revenues that end it drop of of be from I will it here through quote from it kind QX the on and to what then

David Raso

having June, second how the increase of early the about you inventory And in to PACCAR, extra off it's the ISX inventory inventory a think, XX bad Like Tom the and highway. and is I America if an we sort feel few and X% truck North the do liters and you not versus okay, would think where around laying the where shutdowns first, XQ. when all But we've level of appreciate half, related about suddenness, maybe heard is it? exiting it's

You you inventory a where us within don't much bit Can the lies help want company? the inventory. too

Tony Satterthwaite

inventory with end the are not We happy Tom and of are not quarter. happy Mark is the not at and second happy. where

I AP decrease from the think And will fallen balance it June. has I our as in see did significantly. you, tell can you of sheet, month

in So and It inventory reduced we vast is in our definitely have not majority It material our is purchases. finished of raw The is up built plants. not goods. engine.

you if just actually were we March, shutdowns. of sudden little about we were go continuity managing so, supply. back very And earlier these worried in And a

So then were bringing in all manage supply second quarter spent we demand. March inventory reduction in and guarantee in to we of actually to trying

doing. we We’ve got I confident of it we're we a it at I'm we trajectory ourselves on it top have in under overall, well think manage all to I was but So in quarter feel tough We don't inventories way. any And exposed with inventory. what the to did but now. know and think were I

Operator

you. Thank

from Our Oppenheimer. Please go [Technical of next question Difficulty] ahead.

Unidentified Analyst

oil question one year-over-year price flat volatile term but potentially decline. environments rig and the short count Just more Difficulty] despite quarterly [Technical down very here, industrial

support] in [site you encouraging. Any throughout quarter mining? that we've as or in oil in seems talk Can prices picked sequential So, for the about perhaps that O&G trends up? monthly business, of improvement line the any seen

Tony Satterthwaite

the I short guess, really. is answer not

saw that you not have in that improvement little copper our Mining I so very trends a aftermarket in the or phone, reductions new know getting anything where quarterly weak. and hard in we serves business quite whereas and really any other ores year, In it I areas argue down seen [Technical seen a on it’s feedback over apologize, closed or any think I'm is don’t better. We've I tell OEMs oil weak. in have the phones. the we particular quiet. was iron pickup significantly in think would those I year in looking also that oil ore, But lot looking gas mining in American our remain engine oil my also numbers, XX% have of not us seen we Difficulty] and is phone and sales I and seen is North we're but gas gas the and strong.

Unidentified Analyst

of segment. in And Day you’ve I at performance really the transforming then Investor that business. in know talked I one distribution about your mean, more. just there's solid margin terms priorities

were to allows the you that you’ve as trying actions permanent just you I’m to that there So the any done accelerate looking understand anything specific of more take? downturn to

Tony Satterthwaite

business downturn, performed very the the focus with that really how in big routines, The really business was the in from in new transformation a we time is getting that restructuring just the and specifically it a us awkward business, broad which We’re and pleased we new to of change and reorganization operating way sense structure, finished February our focus. were we're now how work a running our regional market the a and caught that the progressing. distribution

And so well. of performed we've business kind struggled really but has

starts so more talked heavy. But and on will And looking of paid I of the heavily second that still from the and and bit as through we've both cost very with up impacted That reductions we'll in took, and to But go business performance. all and about. think picks because benefited the deliver rest which that variable seen we were the this comp that as therefore, they deliver of year. improvements really with service transformation see confident demand just have business they reductions people business have a actions to is we by quarter, the we reductions salary people number more I'm We is return revenue efficiency and off. cost in good the parts a

with business So performing. how is pleased very that

James Hopkins

Great. takes to of hour And for with teleconference. that, I us the that the end the think

you ups much.. to thank I'll Thanks your follow wanted for very be interest everybody and say this I to any Cummins afternoon. for always, As available in

Tom Linebarger

as I thanks my with just technical But bye. and for was there thanks add for to my support Ellie. well, and in Cummins. us it included for apologize the unwanted you guest, any James, hanging for Bye, difficulties want thank dog, your

Cummins (CMI) 28 Jul 202020 Q2 Earnings call transcript