Cummins Reports Earnings for the Third Quarter
12 October 2000
Cummins Reports Earnings for the Third Quarter
COLUMBUS, Ind--Oct. 12, 2000--As anticipated on September 26, 2000, Cummins Inc. today reported third-quarter earnings of 66 cents per share, or net earnings of $25 million, on sales of $1.57 billion. This compares to the third quarter of 1999 when the company reported net earnings of $53 million, on sales of $1.63 billion, or $1.35 per share."Our earnings are consistent with our announcement two weeks ago that the third quarter would be significantly impacted by the downturn in the North American heavy-duty truck market," said Tim Solso, Chairman and CEO of Cummins. "As expected, the decline in the truck market also reduced demand for certain truck-related parts in our filtration business. We continue to take action to reduce our costs to address the downturn. Our international markets remain strong, particularly for our industrial engine products, and Power Generation continues to make a solid contribution to profitability. Demand for engines for the Dodge Ram pickup also continues unabated, and we are pleased that we have received a commitment from DaimlerChrysler that it will offer Cummins as the diesel option for its next generation of Dodge Ram pickup trucks." Cummins shipped over 100,000 engines to DaimlerChrysler for the pickup truck market in 1999.
Engine Business
Revenues for the engine business were $962 million, down 7 percent from the third quarter of 1999. Worldwide heavy-duty truck sales of $315 million were down 31 percent compared to the third quarter of 1999, with a 49 percent decrease in unit shipments in North America. In the medium-duty truck market, sales of $129 million were up 7 percent compared to a year ago, primarily due to increased sales in Latin America. Sales of $249 million to the bus and light commercial vehicle market were 17% higher than third-quarter 1999, reflecting strong sales in the bus market, and shipments of over 31,000 engines this quarter to DaimlerChrysler for the Dodge Ram pickup truck. Sales of $269 million to agriculture, construction, mining, marine, and other industrial markets were up 12 percent compared to the third quarter of 1999, reflecting growing penetration in mining markets and stronger international construction markets. The engine business reported earnings before interest and taxes of $6 million, or 0.6 percent of sales, compared to the third quarter of last year, when it reported earnings before interest and taxes of $45 million, or 4.4 percent of sales.
Power Generation Business
Power generation sales of $334 million were down 5 percent from the year-ago quarter. This reflects a demand reduction for the small gensets used primarily in recreational vehicles and mobile markets. In the third quarter of 1999, Cummins launched its Power Rent Business, resulting in a sales spike to stock the rental channel. In the third quarter of 2000, earnings before interest and taxes were $25 million, or 7.5 percent of sales, up significantly from the $15 million, or 4.3 percent of sales, reported in the third quarter a year ago.
Filtration Business and Other
Sales of filtration and other products of $276 million were up 12 percent from the third quarter of 1999, primarily due to increased sales by company owned international distributors. For the group, earnings before interest and taxes for the quarter were $30 million, or 10.9 percent of sales, compared to the third quarter of 1999, when it reported earnings before interest and taxes of $31 million, or 12.6 percent of sales.
For the first nine months of 2000, Cummins reported net earnings of $128 million or $3.36 per share, compared to net earnings of $135 million, or $3.48 per share, for the same period in 1999. Revenues increased from $4.8 billion to $5 billion.
CUMMINS INC.
(Millions, except per share amounts)
FOR THE THIRD QUARTER ENDED September September
--------------------------- 24, 2000 26, 1999
-------- ---------
Net sales $1,572 $1,631
Earnings before interest and taxes 61 91
Net earnings 25 53
Basic earnings per share $ .66 $ 1.37
Diluted earnings per share .66 1.35
Weighted-average number of shares for EPS:
Basic 38.2 38.3
Diluted 38.2 38.9
FOR THE NINE MONTHS ENDED September September
------------------------- 24, 2000 26, 1999
-------- ---------
Net sales $4,989 $4,803
Earnings before interest and taxes 249 249
Net earnings 128 135
Basic earnings per share $ 3.36 $ 3.50
Diluted earnings per share 3.36 3.48
Weighted-average number of shares for EPS:
Basic 38.2 38.4
Diluted 38.2 38.8
CUMMINS INC.
CONSOLIDATED STATEMENT OF EARNINGS
Unaudited
Third Nine Months Second
Quarter Quarter
------- ----------- -------
Millions, except per 2000 1999 2000 1999 2000
share amounts --------------- ------------ ----
---------------------
Net sales $1,572 $1,631 $4,989 $4,803 $1,769
Cost of goods sold 1,262 1,270 3,993 3,770 1,418
------ ------ ------ ------ ------
Gross profit 310 361 996 1,033 351
Selling and administrative
expenses 195 192 579 570 190
Research and engineering
expenses 62 67 180 181 59
Net (income) expense from
joint ventures and alliances (3) 8 (7) 20 (3)
Interest expense 22 18 62 56 21
Other (income) expense, net (5) 3 (5) 13 (2)
------ ------ ------ ------ ------
Earnings before income taxes 39 73 187 193 86
Provision for income taxes 9 19 48 54 22
Minority interest 5 1 11 4 3
------ ------ ------ ------ ------
Net earnings $ 25 $ 53 $ 128 $ 135 $ 61
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Basic earnings per share $.66 $1.37 $3.36 $3.50 $1.62
Diluted earnings per share .66 1.35 3.36 3.48 1.62
Average number of shares:
Basic EPS 38.2 38.3 38.2 38.4 38.1
Diluted EPS 38.2 38.9 38.2 38.8 38.1
Cash dividends declared per
share $.30 $.275 $.90 $.825 $.30
CUMMINS INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited
Millions, except per share amounts Sept. 24, Dec. 31,
---------------------------------- 2000 1999
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 94 $ 74
Receivables, net of allowance of
$10 and $9 1,097 1,026
Inventories 797 787
Other current assets 292 293
------ ------
2,280 2,180
Investments and other assets 375 274
Property, plant and equipment less
accumulated depreciation of $1,555
and $1,490 1,595 1,630
Goodwill, net of amortization of $36
and $28 360 364
Other intangibles, deferred taxes
and deferred charges 264 249
------ ------
Total assets $4,874 $4,697
------ ------
------ ------
Liabilities and shareholders' investment
Current liabilities:
Loans payable $ 125 $ 113
Current maturities of long-term debt 9 10
Accounts payable 417 411
Other current liabilities 681 780
------ ------
1,232 1,314
------ ------
------ ------
Long-term debt 1,313 1,092
------ ------
Other liabilities 802 788
------ ------
Minority interest 68 74
------ ------
Shareholders' investment:
Common stock, $2.50 par value,
48.7 and 48.3 shares issued 122 121
Additional contributed capital 1,139 1,129
Retained earnings 851 760
Accumulated other comprehensive income (176) (109)
Common stock in treasury, at cost,
7.2 and 6.8 shares (290) (274)
Common stock held in trust for
employee benefit plans, 3.2 and 3.4 shares (154) (163)
Unearned compensation (ESOP) (33) (35)
------ ------
1,459 1,429
------ ------
Total liabilities and shareholders'
investment $4,874 $4,697
------ ------
------ ------
CUMMINS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
Nine Months Ended
-----------------
Millions Sept. 24, Sept. 26,
-------- 2000 1999
---- ----
Cash flows from operating activities:
Net earnings $ 128 $ 135
------ ------
Adjustments to reconcile net earnings
to net cash from operating activities:
Depreciation and amortization 180 172
Restructuring and other non-recurring
actions (16) (23)
Accounts receivable (115) (277)
Inventories (28) (70)
Accounts payable and accrued expenses (47) 216
Income taxes payable (24) 12
Equity in losses of joint ventures and
alliances 7 24
Other (11) (19)
------ ------
Total adjustments (54) 35
------ ------
Net cash provided by operating
activities 74 170
------ ------
Cash flows from investing activities:
Property, plant and equipment:
Additions (130) (121)
Disposals 10 27
Investments in joint ventures and
alliances (76) (40)
Acquisition and disposition of
businesses (42) 3
Other - 6
------ ------
Net cash used in investing activities (238) (125)
------ ------
Net cash flows (used in) provided by
operating and investing activities (164) 45
------ ------
Cash flows from financing activities:
Proceeds from borrowings 226 53
Payments on borrowings (8) (26)
Net borrowings under credit agreements 22 26
Repurchase of common stock (16) (30)
Dividend payments (37) (35)
Other (1) (11)
------ ------
Net cash provided by (used in)
financing activities 186 (23)
------ ------
Effect of exchange rate changes on cash (2) -
------ ------
Net change in cash and cash equivalents 20 22
Cash and cash equivalents at the
beginning of the year 74 38
------ ------
Cash and cash equivalents at the end
of the quarter $ 94 $ 60
------ ------
------ ------
CUMMINS INC.
SEGMENT INFORMATION
Unaudited
Operating segment information is as follows:
Power Filtration
Millions Engine Generation And Other Total
-------- ------ ---------- ---------- -----
Third Quarter Ended
September 24, 2000
--------------------
Net sales $ 962 $ 334 $ 276 $1,572
Earnings before interest
and income taxes 6 25 30 61
Net assets 1,213 576 866 2,655
Third Quarter Ended
September 26, 1999
--------------------
Net sales $1,032 $ 352 $ 247 $1,631
Earnings before interest
and income taxes 45 15 31 91
Net assets 996 557 830 2,383
Nine Months Ended
September 24, 2000
-------------------
Net sales $3,114 $1,031 $ 844 $4,989
Earnings before interest
and income taxes 76 78 95 249
Nine Months Ended
September 26, 1999
------------------
Net sales $3,127 $ 908 $ 768 $4,803
Earnings before interest
and income taxes 131 28 90 249