Cummins Reports Record Sales and Earnings for the Fourth Quarter
28 January 2000
Cummins Reports Record Sales and Earnings for the Fourth Quarter
COLUMBUS, Ind.--Jan. 28, 2000--Cummins Engine Co. Inc. today announced results for the fourth quarter of 1999, reporting record sales of $1.84 billion and record earnings of $70 million, or $1.82 per share, excluding a pre-tax charge of $60 million for costs associated with the dissolution of its joint venture with Wartsila NSD, announced in December. Including the charge, net earnings were $25 million, or 65 cents per share. This compares to the fourth quarter of 1998, when the company reported net earnings of $29 million, or 75 cents per share, on sales of $1.61 billion.As a result of effective tax management, Cummins was able to lower its full-year tax rate for 1999 to 25 percent. For the fourth quarter, this resulted in an earnings increase of 22 cents per share.
"Our results this quarter reflect very strong demand in our power generation markets, primarily in North America, with sales up 36% from the fourth quarter of 1998," said Chairman and Chief Executive Officer Tim Solso. "We also shipped a record number of engines this quarter to DaimlerChrysler for the Dodge Ram pickup truck - bringing the total number of engines shipped to DaimlerChrysler this year to over 100,000."
"We are beginning to see the benefits of increased volumes as we ramp up production on our new products, building margin improvements this quarter which we expect to continue," said Solso. "We have sustained our hold on our selling, administrative, and research and engineering costs, keeping them to under 16% of sales for the quarter and the year. Late in the quarter, we announced the dissolution of our joint venture with Wartsila NSD, which has now been completed."
"As anticipated in our third quarter announcement, we have experienced lower demand in the North American heavy-duty truck market," said Solso. "This trend is likely to continue in 2000 until new orders and build rates reach equilibrium. We expect our other automotive markets, power generation, and our filtration business to grow moderately this year. Regardless of market conditions, we will continue to focus on reducing costs."
Engine Business
Revenues for the engine business were $1.10 billion, up 10 percent from the fourth quarter of 1998. The worldwide heavy-duty truck market was strong compared to the fourth quarter of 1998, with sales of $450 million up 15 percent, but down slightly compared to the third quarter of 1999. In the medium-duty truck market, sales of $128 million were down 5 percent, primarily due to lower demand in North America. Sales to the bus and light commercial vehicle market were strong, with sales of $253 million up 10 percent compared to the year-ago quarter. Sales of $267 million to agriculture, construction, mining, and other industrial markets were up 9 percent compared to the fourth quarter of 1998 as a result of continued recovery in Asia. The engine business reported earnings before interest and taxes of $51 million, or 4.6 percent of sales, compared to the fourth quarter of last year, when it reported earnings before interest and taxes of $19 million, or 1.9 percent of sales.
Power Generation Business
Power generation sales of $448 million continued their strong surge - 36 percent higher than the year-ago quarter. The increase was primarily due to demand for standby power in North America, as well as strong demand in the rental market. Exclusive of the charge for the dissolution of the Wartsila joint venture, earnings before interest and taxes for the quarter were $24 million, or 5.4 percent of sales, up significantly from the $8 million, or 2.4 percent of sales, reported in the year-ago quarter.
Filtration Business and Other
Sales of filtration and other products of $290 million were up 6 percent compared to the fourth quarter of 1998. For the group, earnings before interest and taxes were $32 million, or 11 percent of sales, slightly lower than the fourth quarter of 1998, when it reported earnings before interest and taxes of $34 million.
For the full year, exclusive of the charge, Cummins reported net earnings of $205 million or $5.29 per share, on revenues of $6.6 billion. Including the charge, Cummins reported net earnings of $160 million or $4.13 per share. In 1998, Cummins reported a net loss of $21 million or a loss of 55 cents per share, including charges of $217 million, on revenues of $6.3 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 1999, Cummins reported sales of $6.6 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.
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(Millions, except per share amounts)
------------------------------------
For the fourth quarter ended Dec. 31, Dec. 31,
---------------------------- 1999 1998
-------- --------
NET SALES $1,836 $1,606
Before special charges
----------------------
Earnings before interest and taxes $ 107 $ -
Net earnings $ 70 -
Basic earnings per share $ 1.83 $ -
Diluted earnings per share $ 1.82 -
As reported
-----------
Earnings before interest and taxes $ 47 $ 61
Net earnings 25 29
Basic earnings per share $ .65 $ .75
Diluted earnings per share .65 .75
Weighted-average number of shares
for EPS:
Basic 38.1 38.4
Diluted 38.4 38.4
Dec. 31, Dec. 31,
FOR THE YEAR ENDED 1999 1998
------------------ -------- -------
NET SALES $6,639 $ 6,266
Before special charges
----------------------
Earnings before interest and taxes $ 356 $ 282
Net earnings 205 140
Basic earnings per share $ 5.33 $ 3.64
Diluted earnings per share 5.29 3.62
Weighted-average number of
shares for EPS:
Basic 38.3 38.5
Diluted 38.6 38.7
As reported
-----------
Earnings before interest and taxes $ 296 $ 65
Net earnings (loss) 160 (21)
Basic earnings (loss) per share $ 4.16 $ (.55)
Diluted earnings (loss) per share $ 4.13 (.55)
Weighted-average number of
shares for EPS:
Basic 38.3 38.5
Diluted 38.6 38.5
Cummins Engine Company, Inc.
----------------------------
Consolidated Statement of Earnings
----------------------------------
Unaudited
---------
Fourth Year Ended Third
Millions, Quarter Quarter
except per share amounts ------- ---------- -------
1999 1998 1999 1998 1999
---- ---- ---- ---- ----
Net sales $1,836 $1,606 $6,639 $6,266 $1,631
Cost of goods sold 1,451 1,281 5,221 4,925 1,270
------ ------ ------ ------ ------
Special charges - - - 92 -
Gross profit 385 325 1,418 1,249 361
Selling and administrative
expenses 211 195 781 787 192
Research and engineering
expenses 64 62 245 255 67
Net expense from joint
ventures and alliances 8 12 28 30 8
Interest expense 19 19 75 71 18
Other (income) expense, net (5) (5) 8 (13) 3
Restructuring and other
non-recurring charges 60 - 60 125 -
------ ------ ------ ------ ------
Earnings (loss) before
income taxes 28 42 221 (6) 73
Provision for income taxes 1 11 55 4 19
Minority interest 2 2 6 11 1
------ ------ ------ ------ ------
Net earnings (loss) $ 25 $ 29 $ 160 $ (21) $ 53
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Basic earnings (loss)
per share $ .65 $ .75 $ 4.16 $ (.55) $ 1.37
Diluted earnings (loss)
per share $ .65 $ .75 $ 4.13 $ (.55) $ 1.35
Average number of shares:
Basic EPS 38.1 38.4 38.3 38.5 38.3
Diluted EPS 38.4 38.4 38.6 38.5 38.9
Cash dividends declared
per share $ .30 $ .275 $1.125 $ 1.10 $ .275
Cummins Engine Co., Inc.
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Consolidated Statement of Financial Position
--------------------------------------------
December 31,
------------
Millions, except per share amounts 1999 1998
---------------------------------- ---- ----
Assets
Current assets:
Cash and cash equivalents $ 74 $ 38
Receivables, net of allowance of $9 and $13 1,026 833
Inventories 787 731
Other current assets 293 274
------ ------
2,180 1,876
------ ------
Investments and other assets:
Investments in joint ventures and alliances 131 136
Other assets 143 144
------ ------
274 280
------ ------
Property, plant and equipment:
Land and buildings 577 590
Machinery, equipment and fixtures 2,375 2,320
Construction in process 168 185
------ ------
3,120 3,095
Less accumulated depreciation 1,490 1,424
------ ------
1,630 1,671
------ ------
Goodwill, net of amortization of $28 and $17 364 384
------ ------
Other intangibles, deferred taxes and
deferred charges 249 331
------ ------
Total assets $4,697 $4,542
------ ------
------ ------
Liabilities and shareholders' investment
Current liabilities:
Loans payable $ 113 $ 64
Current maturities of long-term debt 10 26
Accounts payable 411 340
Accrued salaries and wages 88 99
Accrued product coverage and
marketing expenses 246 209
Income taxes payable 40 13
Other accrued expenses 406 320
------ ------
1,314 1,071
------ ------
Long-term debt 1,092 1,137
------ ------
Other liabilities 788 1,000
------ ------
Minority interest 74 62
------ ------
Shareholders' investment:
Common stock, $2.50 par value,
48.3 and 48.1 shares issued 121 120
Additional contributed capital 1,129 1,121
Retained earnings 760 648
Accumulated other comprehensive income (109) (167)
Common stock in treasury, at cost,
6.8 and 6.1 shares (274) (240)
Common stock held in trust for employee
benefit plans, 3.4 and 3.6 shares (163) (172)
Unearned compensation (35) (38)
------ ------
1,429 1,272
------ ------
Total liabilities and shareholders'
investment $4,697 $4,542
------ ------
------ ------
Cummins Engine Co., Inc.
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Consolidated Statement of Cash Flow
-----------------------------------
Millions 1999 1998 1997
-------- ---- ---- ----
Cash flows from operating
activities:
Net earnings (loss) $160 $ (21) $ 212
---- ------ -----
Adjustments to reconcile net
earnings (loss) to net
cash from operating activities:
Depreciation and amortization 233 199 158
Restructuring and other non-
recurring actions 38 110 (24)
Equity in (earnings) losses of
joint ventures and alliances 35 38 (1)
Receivables (200) (10) (80)
Inventories (60) (26) (65)
Accounts payable and accrued
expenses 162 56 (18)
Deferred income taxes (31) (65) 22
Other (30) (10) (4)
---- ------ -----
Total adjustments 147 292 (12)
---- ------ -----
307 271 200
---- ------ -----
Cash flows from investing
activities:
Property, plant and equipment:
Additions (215) (271) (405)
Disposals 22 7 21
Investments in joint ventures
and alliances (36) (22) (47)
Acquisitions and dispositions
of business activities 57 (468) 76
Other 6 2 1
---- ------ -----
(166) (752) (354)
---- ------ -----
Net cash provided by (used in)
operating and investing activities 141 (481) (154)
---- ------ -----
Cash flows from financing
activities:
Proceeds from borrowings 28 711 281
Payments on borrowings (90) (161) (50)
Net borrowings (payments)
under credit agreements 49 (30) (12)
Repurchases of common stock (34) (14) (75)
Dividend payments (47) (46) (45)
Other (11) 11 (3)
---- ------ -----
(105) 471 96
---- ------ -----
Effect of exchange rate
changes on cash - (1) (1)
---- ------ -----
Net change in cash and
cash equivalents 36 (11) (59)
Cash and cash equivalents at
beginning of year 38 49 108
---- ------ -----
Cash and cash equivalents at
end of year $ 74 $ 38 $ 49
---- ------ -----
---- ------ -----
Cash payments during the year for:
Interest $ 82 $ 56 $ 21
Income taxes 56 73 42
Cummins Engine Co., Inc.
------------------------
Segment Information
-------------------
Unaudited
---------
Operating segment information is as follows:
Power Filtration
Millions Engine Generation And Other Total
-------- ------ ---------- --------- -----
Fourth Quarter Ended
December 31, 1999
--------------------
Net sales $1,098 $ 448 $ 290 $1,836
Earnings before
interest, income taxes
and special charges 51 24 32 107
Special charges 18 42 - 60
Earnings (loss) before
interest and income
taxes 33 (18) 32 47
Net assets 1,015 553 868 2,436
Fourth Quarter Ended
December 31, 1998
--------------------
Net sales $ 1,002 $ 330 $ 274 $1,606
Earnings before interest
and income taxes 19 8 34 61
Net assets 946 511 803 2,260
Year Ended
December 31, 1999
--------------------
Net sales $4,225 $1,356 $1,058 $6,639
Earnings before interest
and income taxes 182 52 122 356
Special charges 18 42 - 60
Earnings before interest
and income taxes 164 10 122 296
Year Ended
December 31, 1998
---------------------
Net sales $3,982 $1,230 $1,054 $6,266
Earnings before
interest, income taxes
and special charges 136 25 121 282
Special charges 165 50 2 217
Earnings (loss) before
interest and income
taxes (29) (25) 119 65