Cummins Engine Reports Q2 Earnings
16 July 1998
Cummins Engine Reports Second-Quarter Earnings Per Share of $1.38; Earnings Before Interest and Taxes Up 22 Percent on a 17 Percent Increase in Sales
COLUMBUS, Ind.--July 16, 1998--
CUMMINS ENGINE COMPANY, INC.
(Millions, except per share amounts)
FOR THE SECOND QUARTER ENDED June 28, 1998 June 29, 1997
____________________________ _____________ _____________
Net sales $1,635 $1,396
Earnings before interest and taxes 99 81
Net earnings 53 53
Basic earnings per share $ 1.39 $ 1.40
Diluted earnings per share 1.38 1.38
Weighted-average number of shares for EPS:
Basic 38.5 38.3
Diluted 38.8 38.7
FOR THE FIRST HALF ENDED June 28, 1998 June 29, 1997
________________________ _____________ _____________
Net sales $3,135 $2,700
Earnings before interest and taxes 173 (a) 142
Net earnings 91 (a) 94
Basic earnings per share $ 2.36 (a) $ 2.46
Diluted earnings per share 2.34 (a) 2.44
Weighted-average number of shares for EPS:
Basic 38.5 38.3
Diluted 38.8 38.6
(a) After a one-time pre-tax charge of $43 ($0.78 per share after
taxes) recorded in the first quarter of 1998, first half 1998 earnings
before interest and taxes were $130, net earnings were $60, basic
earnings per share were $1.57 and diluted earnings per share were
$1.55.
Cummins Engine Co. Inc. today reported second-quarter net earnings of $53 million, or $1.38 per share, both unchanged from year-ago levels. Earnings before interest and taxes for the quarter were a record $99 million, up 22 percent from the $81 million reported a year ago, and sales were a record $1.64 billion, an increase of 17 percent over second-quarter 1997 sales of $1.40 billion. Cummins said net earnings remained unchanged from the year-ago quarter primarily as a result of the interest expense associated with the acquisition of Nelson Industries.
"Strong volumes in the Americas, coupled with our intensive efforts to control expenses, have contributed to our healthy performance this quarter," said Cummins Chairman and Chief Executive Officer Jim Henderson. "We are encouraged by the improvement over first-quarter earnings of 96 cents per share. While we continue to be affected by the Asian recession, particularly in our Power Generation and Industrial Groups, we expect third-quarter operating earnings to be in line with the second quarter."
Continued Henderson: "We are exploring ways to further reduce costs over the long term. We expect to reduce our work force by 1,000 positions over the next 12 months through attrition, voluntary separations, and further manufacturing restructuring. These and other potential cost-reduction measures will likely result in a significant charge in the third quarter."
For the first half of 1998, excluding a charge of $43 million taken in the first quarter, Cummins reported net earnings of $91 million, or $2.34 per share, on sales of $3.1 billion. For the same period of 1997, the company's net earnings were $94 million, or $2.44 per share, on sales of $2.7 billion.
Sales of $400 million to the heavy-duty truck market were 21 percent higher than the second quarter of 1997 due to continued strong demand for trucks. "In the second quarter, we began limited production of the Signature 600, a completely new engine with the first fully integrated electronic controls and dual overhead cam design in automotive history, featuring 600 hp. with improved torque," said Henderson. "This product is expected to help Cummins capture a larger share of the heavy-duty truck market."
Sales to the medium-duty truck market of $139 million declined 3 percent from the year-ago quarter as a result of lower shipments to the North American market. Sales of $216 million to the bus and light commercial vehicle market were 42 percent higher than second-quarter 1997 levels due to continued robust demand for the Cummins-powered Dodge Ram pickup truck and strong sales for bus engines.
Power generation sales of $313 million were 4 percent higher than the year-ago quarter primarily as a result of the consolidation of Cummins India Limited, completed in the fourth quarter of 1997.
Industrial sales of $294 million were 12 percent higher than the second quarter of 1997. This reflects strong sales of construction equipment in North America and agricultural equipment in international markets.
Sales of filtration and other products of $273 million, 33 percent higher than the second quarter of 1997, continue to be favorably affected by the acquisition of Nelson Industries early this year.
Cummins said that discussions with the U.S. Environmental Protection Agency (EPA) are continuing with the company and other diesel engine manufacturers regarding the level of nitrogen oxide emissions under certain driving conditions. The company reiterated its earlier statements that it believes it is in full compliance with all EPA standards regarding emissions and is working closely with the EPA to improve emissions standards. Cummins said that it hopes that an amicable solution to the matter can be reached, but indicated that resolution of this matter could have a material effect on Cummins' financial results.
Cummins, headquartered in Columbus, Ind., is the world's largest producer of diesel engines above 200 horsepower. The company provides products for customers in its key markets: automotive, power generation, industrial and filtration. Cummins reported record sales of $5.6 billion in 1997. Press releases by fax may be requested by calling News on Demand (toll free) at 888-329-2305. Cummins' home page on the Internet can be found at http://www.cummins.com.
Certain information included in this press release is forward-looking and involves risks and uncertainties, including general economic and competitive conditions that could significantly affect expected results.