Cummins Reports Strong Third Quarter Sales and Operating Profit
14 October 1999
Cummins Reports Strong Third Quarter Sales and Operating Profit; $1.35 Per Share Net Earnings
COLUMBUS, Ind.--Oct. 14, 1999--
CUMMINS ENGINE COMPANY, INC.
(Millions, except per share amounts)
FOR THE THIRD QUARTER ENDED September 26, 1999 September 27, 1998
--------------------------- ------------------ ------------------
Net sales $1,631 $1,525
Earnings (loss) before
interest and taxes 91 (126)(a)
Net earnings (loss) 53 (110)(a)
Basic earnings (loss) per share $ 1.37 $ (2.86)(a)
Diluted earnings (loss) per share 1.35 (2.86)(a)
Weighted-average number of
shares for EPS:
Basic 38.3 38.5
Diluted 38.9 38.5
FOR THE NINE MONTHS ENDED September 26, 1999 September 27, 1998
------------------------- ------------------ ------------------
Net sales $4,803 $4,660
Earnings before interest and taxes 249 4 (b)
Net earnings (loss) 135 (50)(b)
Basic earnings (loss) per share $ 3.50 $ (1.30)(b)
Diluted earnings (loss) per share 3.48 (1.30)(b)
Weighted-average number of
shares for EPS:
Basic 38.4 38.5
Diluted 38.8 38.5
(a) Before pre-tax special charges of $174 recorded in the third quarter of 1998, earnings before interest and taxes were $48, net earnings were $20, basic earnings per share were $.52 and diluted earnings per share were $.52.
(b) Before pre-tax special charges of $217 recorded in the first and third quarters of 1998, earnings before interest and taxes for the first nine months of 1998 were $221, net earnings were $111, basic earnings per share were $2.88 and diluted earnings per share were $2.86.
COLUMBUS, Ind.--Oct. 14, 1999--Cummins Engine Co. Inc. today announced it set two new records for a third quarter, reporting earnings before interest and taxes of $91 million on sales of $1.63 billion. Net earnings for the quarter rose to $53 million, or $1.35 per share, representing a 160 percent increase from the 52 cents per share reported in the third quarter of 1998, exclusive of special charges. Including special charges of $174 million, in the third quarter of 1998, Cummins reported a loss of $110 million, or a loss of $2.86 cents per share, on sales of $1.53 billion.
"We are very pleased that our third quarter results reflect the continued cost improvements we showed in the second quarter of this year," said Jim Henderson, Chairman and Chief Executive Officer of Cummins. "As planned, we are holding selling, administrative and research and engineering expenses under our target of 16 percent, and we are also seeing cost improvements as we continue to ramp up production of our new products. All of our major product launches are now complete, and these new products are being enthusiastically received by our customers."
Continued Henderson, "Compared to the third quarter of last year, our results benefited from the continued strength of the North American heavy-duty truck market. Demand for power generation in North America and Europe also increased. Agricultural markets worldwide continued to be very weak, affecting both our engine and filtration businesses."
"As we look to the fourth quarter and the year 2000, we believe the build rate for new heavy-duty trucks in North America will be reduced somewhat in line with lower incoming order rates," said Henderson. "This is an adjustment we have anticipated for some time. We do not believe it will be precipitous because the fundamentals of the market are sound - the economy is strong and the freight hauled on trucks continues to be robust. In addition, truck manufacturers have been diligent about the quality of their backlogs and the total backlog is still quite large. Finally, demand for buses, pickup trucks, RV's, and power generation equipment is expected to remain very strong. We foresee modest improvement in Asian markets; however, worldwide agricultural markets are not expected to improve in the near term."
Engine Business
Revenues for the engine business were $1.03 billion, up 5.5 percent from the third quarter of 1998. The worldwide heavy-duty truck market was strong, with sales of $459 million up 20 percent compared to the third quarter of 1998. In the medium-duty truck market, sales of $121 million were down 14 percent, primarily due to lower demand in North America. Sales to the bus and light commercial vehicle market of $212 million were level with the year-ago quarter. Sales of $240 million to agriculture, construction, mining, and other industrial markets were down 2 percent compared to the third quarter of 1998 as a result of a 43 percent decline in sales to agricultural markets worldwide, offset by an increase of 28 percent in sales to marine markets. The engine business reported earnings before interest and taxes of $45 million, or 4.4 percent of sales, compared to the third quarter of last year, when it reported earnings before interest and taxes of $13 million, or 1.3 percent of sales.
Power Generation Business
Power generation sales of $352 million were very strong -- 19 percent higher than the year-ago quarter due to demand for power generation equipment in North America, Mexico and Europe. The increase in demand was also due in part to strong sales of small generator sets for the recreational RV market, where Cummins holds an 80 percent market share. Earnings before interest and taxes for the quarter were $15 million, or 4.3 percent of sales, up significantly from the $5 million, or 1.7 percent of sales, reported in the year-ago quarter.
Filtration Business and Other
Sales of filtration and other products of $247 million were down 2 percent compared to the third quarter of 1998, primarily due to lower retail sales from company-owned international distributors. The filtration business continues to be affected by the slowdown in agriculture markets, as well as decreased demand in the quarter for small engines for consumer markets, including lawn and garden equipment. The group continued its strong earnings performance: earnings before interest and taxes were $31 million, or 12.6 percent of sales, compared to $30 million, or 12 percent of sales, reported in the third quarter of 1998.
For the first nine months of 1999, Cummins reported net earnings of $135 million or $3.48 per share on revenues of $4.8 billion. This compares to the first nine months of 1998, when Cummins reported a net loss of $50 million or a loss of $1.30 per share, including special charges of $217 million, on revenues of $4.7 billion.
Cummins, headquartered in Columbus, Ind., is the world's largest producer of diesel engines above 200 horsepower. The company provides products and services for customers in markets worldwide for engines, power generation, and filtration. In 1998, Cummins reported sales of $6.3 billion. 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.
CUMMINS ENGINE COMPANY, INC.
CONSOLIDATED STATEMENT OF EARNINGS
Unaudited
Third Quarter Nine Months Second
Millions, except Quarter
per share amounts 1999 1998 1999 1998 1999
--------------------- ---- ---- ---- ---- ----
Net sales $1,631 $1,525 $4,803 $4,660 $1,667
Cost of goods sold 1,270 1,218 3,770 3,644 1,296
Special charges -- 49 -- 92 --
------- ------- ------ ------- ------
Gross profit 361 258 1,033 924 371
Selling and
administrative
expenses 192 191 570 592 200
Research and
engineering expenses 67 61 181 193 60
Net expense from
joint ventures
and alliances 8 8 20 18 5
Interest expense 18 17 56 52 19
Other expense (income), net 3 (1) 13 (8) 3
Restructuring and other
non-recurring charges - 125 - 125 -
------- ------- ------ ------- ------
Earnings (loss) before
income taxes 73 (143) 193 (48) 84
Provision (benefit) for
income taxes 19 (35) 54 (7) 25
Minority interest 1 2 4 9 1
------- ------- ------ ------- ------
Net earnings (loss) $ 53 $ (110) $ 135 $ (50) $ 58
------- ------- ------ ------- ------
------- ------- ------ ------- ------
Basic earnings (loss)
per share $ 1.37 $ (2.86) $ 3.50 $ (1.30) $ 1.51
Diluted earnings (loss)
per share 1.35 (2.86) 3.48 (1.30) 1.50
Average number of shares:
Basic EPS 38.3 38.5 38.4 38.5 38.5
Diluted EPS 38.9 38.5 38.8 38.5 38.7
Cash dividends declared
per share $ .275 $ .275 $ .825 $ .825 $ .275