Cummins 2Q Earnings Down $1.56 Per Share...But
COLUMBUS, Ind.--July 12, 2001--Cummins Inc. today reported second quarter earnings of $0.06 per share, or $2 million profit after taxes, on sales of $1.46 billion, exclusive of a pre-tax charge of $125 million for costs associated with certain restructuring actions. Including the charge, Cummins posted a loss of $82 million dollars, or a loss of $2.14 per share. This compares to the second quarter of 2000, when Cummins reported earnings of $1.62 per share, or $61 million profit, on sales of $1.77 billion."Our earnings are consistent with our outlook in April that we will show progressively improved profitability in a time of very difficult market conditions in most of our North American end markets," said Chairman and Chief Executive Officer Tim Solso. "Despite the continued economic downturn, the vast majority of the company's business is profitable."
Cost Reductions and Restructuring Continues
"We continue to take cost out of all our businesses," said Solso. "The cost reduction actions we took in the fourth quarter last year are on schedule and will produce savings of $55 million per year by the end of 2001."
The $125 million pre-tax charge is related to the termination of the development of a new heavy-duty engine platform and further cost reduction actions. "By building on our existing platforms to meet the changing emissions regulations, we can avoid $200 million in additional expenditures and investments over the next two years," said Solso. The restructuring charge also includes provisions for a workforce reduction of approximately 600 people throughout the company. Cummins will achieve the reductions through terminations, layoffs, retirements and attrition.
"I am very confident that all of our efforts are positioning Cummins to remain profitable at the bottom of the economic cycle, and generate significant profitability and cash as we emerge from this economic downturn," continued Solso. "We expect to have all of our business segments operating with a healthy, growing business model that provides solid returns to our shareholders."
The company said operating free cash flow for the quarter was an inflow of $36 million dollars, compared to an outflow of $12 million dollars a year ago, and an outflow of $14 million dollars in the first quarter. The improvement in free cash flow this quarter reflects continued progress in reducing working capital, especially inventories.
Outlook
Given the market conditions, the company's operating earnings estimate for the year remains unchanged at a range of $0.20 to $0.35 per share. Solso noted that demand from most end markets in North America appears to have bottomed in the second and third quarter based on all available data. "We are cautiously optimistic that late this year or early next year demand in our end markets will slowly improve," concluded Solso.
Power Generation Business
The Power Generation Business continued to grow, with sales of $384 million, up $16 million dollars or 4 percent from a year ago, and 24 percent higher than the first quarter of 2001, reflecting strong demand in North America, Europe and Brazil. Earnings before interest and taxes were up for the quarter at $32 million, compared to the second quarter of last year, when it reported earnings before interest and taxes of $30 million.
Filtration Business and Other
Sales of Filtration Business and other products were $291 million, down slightly compared to the second quarter of 2000. Sales at company-owned distributors in a number of international markets continued to grow during the second quarter. Filtration business revenues were down year-over-year, impacted by the weakness in North American on- and off-highway OEM markets. For the group, earnings before interest and taxes for the quarter were $23 million, compared to the second quarter of last year, when it reported earnings before interest and taxes of $35 million.
Engine Business
Revenues for the engine business were $786 million, down 29 percent from the second quarter of 2000. Worldwide heavy-duty truck sales of $235 million were down 41 percent compared to the second quarter of 2000, with a 57 percent decrease in unit shipments to the North American heavy-duty truck market. Unit shipments to other markets were down 36 percent with the reductions primarily in Mexico and Europe. In the medium- duty truck and bus market, sales of $147 million were 19 percent lower than a year ago, due to a 31 percent drop in North American medium-duty truck engine volumes.
Sales to light-duty automotive and recreational vehicle markets were $151 million, down 34 percent from the year-ago quarter, due to reduced engine shipments for recreational vehicles and to DaimlerChrysler for the Dodge Ram pickup truck. Sales of $253 million to agriculture, construction, mining, marine, and other industrial markets were 15 percent lower than the year-ago quarter.
The Engine Business reported a loss before interest and taxes of $24 million, compared to the second quarter of last year, when it reported earnings before interest and taxes of $42 million.
The company's conference call to discuss the earnings report will be webcast at 11 a.m. Eastern Daylight Time today. The webcast can be accessed through Cummins' website at www.cummins.com. Access the investor home page and connect to the link to the conference call.
Cummins, headquartered in Columbus, Ind., is the world's largest producer of commercial diesel engines above 50 horsepower. The company provides products and services for customers in markets worldwide for engines, power generation, and filtration. In 2000, Cummins reported sales of $6.6 billion. Press releases by fax may be requested by calling News on Demand at 888-329-2305.
Information provided and statements made on the webcast and in this release that are 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.
CUMMINS INC.
(Millions, except per share amounts)
FOR THE SECOND QUARTER ENDED June 24, 2001 June 25, 2000
---------------------------- ------------- -------------
Net Sales $ 1,461 $ 1,769
Before special charges
Earnings before interest and taxes $ 31 --
Net earnings 2 --
Basic earnings per share $ .06 --
Diluted earnings per share .06 --
Weighted-average number of
shares for EPS:
Basic 38.2 --
Diluted 38.4 --
As reported
Earnings (loss) before
interest and taxes $ (94) $ 107
Net earnings (loss) (82) 61
Basic earnings (loss) per share $ (2.14) $ 1.62
Diluted earnings (loss) per share (2.14) 1.62
Weighted-average number of
shares for EPS:
Basic 38.2 38.1
Diluted 38.2 38.1
FOR THE FIRST HALF ENDED June 24, 2001 June 25, 2000
------------------------ ------------- -------------
Net Sales $ 2,810 $ 3,417
Before special charges
Earnings before interest and taxes $ 25 --
Net earnings (loss) (24) --
Basic earnings (loss) per share $ (.62) --
Diluted earnings (loss) per share (.62) --
As reported
Earnings (loss) before interest
and taxes $ (100) $ 188
Net earnings (loss) (108) 103
Basic earnings (loss) per share $ (2.82) $ 2.71
Diluted earnings (loss) per share (2.82) 2.70
Weighted-average number of
shares for EPS:
Basic 38.2 38.2
Diluted 38.2 38.2
CUMMINS INC.
CONSOLIDATED STATEMENT OF EARNINGS
FOR THE SECOND QUARTER AND FIRST HALF
ENDED JUNE 24, 2001 AND JUNE 25, 2000
Unaudited
Millions, except per share amounts
----------------------------------
Second First First
Quarter Half Quarter
2001 2000 2001 2000 2001
---- ---- ---- ---- ----
Net sales $ 1,461 $ 1,769 $ 2,810 $ 3,417 $ 1,349
Cost of goods sold 1,192 1,418 2,309 2,731 1,117
------- ------- ------- ------- -------
Gross profit 269 351 501 686 232
Selling and
administrative
expenses 183 190 366 384 183
Research and
engineering
expenses 58 59 111 118 53
Net income from
joint ventures
and alliances (3) (3) (5) (4) (2)
Interest expense 23 21 46 40 23
Other (income)
expense, net -- (2) 4 -- 4
Restructuring,
asset impairment
and other
special charges 125 -- 125 -- --
------- ------- ------- ------- -------
Earnings (loss)
before income
taxes (117) 86 (146) 148 (29)
(Benefit) provision
for income taxes (39) 22 (46) 39 (7)
Minority interest 4 3 8 6 4
------- ------- ------- ------- -------
Net earnings (loss) $ (82) $ 61 $ (108) $ 103 $ (26)
======= ======= ======= ======= =======
Basic earnings
(loss) per share $ (2.14) $ 1.62 $ (2.82) $ 2.71 $ (.68)
Diluted earnings
(loss) per share (2.14) 1.62 (2.82) 2.70 (.68)
Average number of
shares:
Basic EPS 38.2 38.1 38.2 38.2 38.2
Diluted EPS 38.2 38.1 38.2 38.2 38.2
Cash dividends
declared per share $ .30 $ .30 $ .60 $ .60 $ .30
CUMMINS INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited
Millions, except per share amounts
----------------------------------
Jun. 24, 2001 Dec. 31, 2000
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 104 $ 62
Receivables, net of allowance of $8 849 724
Inventories 711 770
Other current assets 278 274
------ ------
1,942 1,830
Investments and other assets 350 338
Property, plant and equipment less
accumulated depreciation of $1,622
and $1,598 1,434 1,598
Goodwill, net of amortization
of $46 and $42 348 354
Other intangibles, deferred taxes and
deferred charges 378 380
------ ------
Total assets $4,452 $4,500
====== ======
Liabilities and shareholders' investment
Current liabilities:
Loans payable $ 22 $ 156
Current maturities of long-term debt 8 8
Accounts payable 430 388
Other current liabilities 690 671
------ ------
1,150 1,223
------ ------
Long-term debt 915 1,032
------ ------
Other liabilities 842 837
------ ------
Minority interest 82 72
------ ------
Company-obligated manditorily
redeemable convertible
preferred securities of
subsidiary trust holding solely
convertible subordinated debentures
of the parent 292 --
------ ------
Shareholders' investment:
Common stock, $2.50 par value,
48.5 and 48.6 shares issued 121 122
Additional contributed capital 1,130 1,137
Retained earnings 586 718
Accumulated other comprehensive income (201) (167)
Common stock in treasury, at
cost, 7.2 shares (290) (290)
Common stock held in trust for
employee benefit plans, 3.0
and 3.1 shares (145) (151)
Unearned compensation (ESOP) (30) (33)
------ ------
1,171 1,336
------ ------
Total liabilities and
shareholders' investment $4,452 $4,500
====== ======
CUMMINS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
First Half Ended
Millions June 24, 2001 June 25, 2000
-------- ------------- -------------
Cash flows from operating activities:
Net earnings (loss) $ (108) $ 103
------ -----
Adjustments to reconcile net earnings
(loss) to net cash from operating
activities:
Depreciation and amortization 118 117
Restructuring actions 111 (5)
Accounts receivable (145) (144)
Inventories 37 (38)
Accounts payable and accrued expenses 80 55
Income taxes payable (50) (5)
Equity in losses of joint
ventures and alliances 3 4
Other 11 (28)
------ -----
Total adjustments 165 (44)
------ -----
Net cash provided by operating
activities 57 59
------ -----
Cash flows from investing activities:
Property, plant and equipment:
Additions (122) (84)
Disposals 121 16
Investments in joint ventures and
alliances (19) (36)
Acquisition and disposition of businesses 1 (35)
Other 1 --
------ -----
Net cash used in investing activities (18) (139)
------ -----
Net cash flows provided by (used in)
operating and investing activities 39 (80)
------ -----
Cash flows from financing activities:
Proceeds from borrowings -- 168
Payments on borrowings (6) (7)
Net payments under short-term
credit agreements (247) (40)
Repurchases of common stock -- (16)
Dividend payments (25) (25)
Issuance of manditorily redeemable
preferred securities 292 --
Other (10) 1
------ -----
Net cash provided by financing activities 4 81
------ -----
Effect of exchange rate changes on cash (1) (1)
------ -----
Net change in cash and cash equivalents 42 --
Cash and cash equivalents at the
beginning of the year 62 74
------ -----
Cash and cash equivalents at the end
of the first half $ 104 $ 74
====== =====
CUMMINS INC.
SEGMENT INFORMATION
Unaudited
Operating segment information is as follows:
Filtration
Power And
Millions Engine Generation Other Total
-------- ------ ---------- ----- -----
Second Quarter Ended June 24, 2001
----------------------------------
Net sales $ 786 $ 384 $ 291 $ 1,461
Earnings (loss) before
interest, income taxes
and special charges (24) 32 23 31
Special charges 118 5 2 125
Earnings (loss) before
interest and income taxes (142) 27 21 (94)
Net assets 1,050 421 854 2,325
Second Quarter Ended June 25, 2000
----------------------------------
Net sales $1,107 $ 368 $ 294 $ 1,769
Earnings before interest
and income taxes 42 30 35 107
Net assets 1,160 578 845 2,583
First Half Ended June 24, 2001
------------------------------
Net sales $1,554 $ 693 $ 563 $ 2,810
Earnings (loss) before
interest, income taxes
and special charges (58) 40 43 25
Special charges 118 5 2 125
Earnings (loss) before
interest and income taxes (176) 35 41 (100)
First Half Ended June 25, 2000
------------------------------
Net sales $2,152 $ 697 $ 568 $ 3,417
Earnings before interest
and income taxes 70 53 65 188