Cummins Reports Earnings of $1.62 Per Share for the Second Quarter
13 July 2000
Cummins Reports Earnings of $1.62 Per Share for the Second Quarter
COLUMBUS, Ind. - Cummins, Engine Company, Inc. today matched its all-time record when it reported earnings before interest and taxes of $107 million, on sales of $1.77 billion. Net earnings for the quarter rose to $61 million, or $1.62 per share, from $58 million, or $1.50 per share, on sales of $1.67 billion a year ago."Our earnings this quarter demonstrate that we have successfully diversified our business -- earnings per share were up 8 percent from the year ago quarter despite a 28 percent decline in shipments to the North American heavy-duty truck market, as well as a weaker North American construction market," said Chairman and Chief Executive Officer Tim Solso. "Other markets and regions were very strong, including power generation, filtration, marine, bus, pickup truck, and international markets. Our efforts to hold our selling, administrative, and research and engineering costs to 14.1 percent of sales also contributed to our success this quarter."
"Looking ahead to the third quarter, we see continued strength in most of our markets with the notable exception of the North American heavy-duty truck market," said Solso. "While we still estimate a 30 percent decline in that market for the year, we expect the second half of the year to be particularly difficult as truck OEM's make major adjustments in their build rates."
Engine Business
Revenues for the engine business were $1.11 billion, up slightly from the second quarter of 1999. Worldwide heavy-duty truck sales of $400 million were down 14 percent compared to the second quarter of 1999, with a 28 percent decrease in unit shipments to the North American heavy-duty truck market. In the medium-duty truck market, sales of $133 million were essentially flat compared to a year ago. The bus and light commercial vehicle markets were $277 million, up 26 percent from the year-ago quarter, reflecting strong sales in the bus market, and record shipments of 32,100 engines to DaimlerChrysler for the Dodge Ram pickup truck. Sales of $297 million to agriculture, construction, mining, marine, and other industrial markets were up 8 percent compared to the year-ago quarter, reflecting increased demand in all regions except for the North American construction market. The engine business reported earnings before interest and taxes of $42 million, or 3.8 percent of sales, compared to the second quarter of last year, when it reported earnings before interest and taxes of $59 million, or 5.4 percent of sales.
Power Generation Business
The Power Generation business unit continued its strong surge, with sales of $368 million, up $63 million dollars or 21 percent from the year ago quarter, reflecting continued recovery in Asia, and strong demand in North America and Europe. Earnings before interest and taxes for the quarter were $30 million, or 8.2 percent of sales, compared to the second quarter of last year, when it reported earnings before interest and taxes of $11 million, or 3.6 percent of sales.
Filtration Business and Other
Sales of filtration and other products of $294 million were up 10 percent from the second quarter of 1999, primarily due to strong international sales. For the group, earnings before interest and taxes for the quarter were $35 million, or 11.9 percent of sales, compared to the second quarter of last year, when it reported earnings before interest and taxes of $33 million, or 12.4 percent of sales.
For the first six months of 2000, Cummins reported net earnings of $103 million or $2.70 per share, compared to net earnings of $82 million, or $2.13 per share, for the same period in 1999. Revenues increased from $3.2 billion to $3.4 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 record sales of $6.6 billion.
CUMMINS ENGINE COMPANY, INC. ---------------------------- (Millions, except per share amounts) ---------------------------------- FOR THE SECOND QUARTER ENDED June 25, 2000 June 27, 1999 ---------------------------- ------------- ------------- Net sales $1,769 $1,667 Earnings before interest and taxes 107 103 Net earnings 61 58 Basic earnings per share $ 1.62 $ 1.51 Diluted earnings per share 1.62 1.50 Weighted-average number of shares for EPS: Basic 38.1 38.5 Diluted 38.1 38.7 FOR THE FIRST HALF ENDED June 25, 2000 June 27, 1999 ------------------------ ------------- ------------- Net sales $3,417 $3,172 Earnings before interest and taxes 188 158 Net earnings 103 82 Basic earnings per share $ 2.71 $ 2.14 Diluted earnings per share 2.70 2.13 Weighted-average number of shares for EPS: Basic 38.2 38.5 Diluted 38.2 38.7 CUMMINS ENGINE COMPANY, INC. ---------------------------- CONSOLIDATED STATEMENT OF EARNINGS ---------------------------------- FOR THE SECOND QUARTER AND FIRST HALF ------------------------------------- ENDED JUNE 25, 2000 AND JUNE 27, 1999 ------------------------------------- Unaudited --------- Second Quarter First Half First Quarter -------------- ---------- ------------- Millions, except per share 2000 1999 2000 1999 2000 amounts ---- ---- ---- ---- ---- -------------------------- Net sales $1,769 $1,667 $3,417 $3,172 $1,648 Cost of goods sold 1,418 1,296 2,731 2,500 1,313 ------ ------ ------ ------ ------ Gross profit 351 371 686 672 335 Selling and administrative expenses 190 200 384 378 194 Research and engineering expenses 59 60 118 114 59 Net (income) expense from joint ventures and alliances (3) 5 (4) 12 (1) Interest expense 21 19 40 38 19 Other (income) expense, net (2) 3 - 10 2 ------ ------ ------ ------ ------ Earnings before income taxes 86 84 148 120 62 Provision for income taxes 22 25 39 35 17 Minority interest 3 1 6 3 3 ------ ------ ------ ------ ------ Net earnings $61 $58 $103 $82 $42 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Basic earnings per share $1.62 $1.51 $2.71 $2.14 $1.09 Diluted earnings per share 1.62 1.50 2.70 2.13 1.09 Average number of shares: Basic EPS 38.1 38.5 38.2 38.5 38.2 Diluted EPS 38.1 38.7 38.2 38.7 38.3 Cash dividends declared per share $.30 $.275 $.60 $.55 $.30 CUMMINS ENGINE COMPANY, INC. ---------------------------- CONSOLIDATED STATEMENT OF FINANCIAL POSITION -------------------------------------------- Unaudited --------- Millions, except per share amounts Jun. 25, 2000 Dec. 31, 1999 ---------------------------------- ------------- ------------- Assets Current assets: Cash and cash equivalents $ 74 $ 74 Receivables, net of allowance of $9 1,138 1,026 Inventories 822 787 Other current assets 294 293 ------ ------ 2,328 2,180 Investments and other assets 346 274 Property, plant and equipment less accumulated depreciation of $1,542 and $1,490 1,602 1,630 Goodwill, net of amortization of $33 and $28 359 364 Other intangibles, deferred taxes and deferred charges 251 249 ------ ------ Total assets $4,893 $4,697 ------ ------ ------ ------ Liabilities and shareholders' investment Current liabilities: Loans payable $ 68 $ 113 Current maturities of long-term debt 9 10 Accounts payable 463 411 Other current liabilities 770 780 ------ ------ 1,310 1,314 ------ ------ Long-term debt 1,255 1,092 ------ ------ Other liabilities 788 788 ------ ------ Minority interest 79 74 ------ ------ Shareholders' investment: Common stock, $2.50 par value, 48.7 and 48.3 shares issued 121 121 Additional contributed capital 1,140 1,129 Retained earnings 839 760 Accumulated other comprehensive income (158) (109) Common stock in treasury, at cost, 7.2 and 6.8 shares (290) (274) Common stock held in trust for employee benefit plans, 3.4 shares (158) (163) Unearned compensation (ESOP) (33) (35) ------ ------ 1,461 1,429 ------ ------ Total liabilities and shareholders' investment $4,893 $4,697 ------ ------ ------ ------ CUMMINS ENGINE COMPANY, INC. ---------------------------- CONSOLIDATED STATEMENT OF CASH FLOWS ------------------------------------ Unaudited --------- First Half Ended Millions June 25, 2000 June 27, 1999 -------- ------------- ------------- Cash flows from operating activities: Net earnings $ 103 $ 82 ------ ------ Adjustments to reconcile net earnings to net cash from operating activities: Depreciation and amortization 117 114 Restructuring actions (5) (11) Accounts receivable (144) (188) Inventories (38) (28) Accounts payable and accrued expenses 55 200 Income taxes payable (5) 8 Equity in losses of joint ventures and 4 16 alliances Other (28) (10) ------ ------ Total adjustments (44) 101 ------ ------ Net cash provided by operating activities 59 183 ------ ------ Cash flows from investing activities: Property, plant and equipment: Additions (84) (80) Disposals 16 21 Investments in joint ventures and alliances (36) (37) Acquisition and disposition of businesses (35) 3 Other - 2 ------ ------ Net cash used in investing activities (139) (91) ------ ------ Net cash flows (used in) provided by operating and investing activities (80) 92 ------ ------ Cash flows from financing activities: Proceeds from borrowings 168 - Payments on borrowings (7) (17) Net payments under short-term credit agreements (40) (10) Repurchases of common stock (16) (10) Dividend payments (25) (23) Other 1 (3) ------ ------ Net cash provided by (used in) financing activities 81 (63) ------ ------ Effect of exchange rate changes on cash (1) - ------ ------ Net change in cash and cash equivalents - 29 Cash and cash equivalents at the beginning of the year 74 38 ------ ------ Cash and cash equivalents at the end of the first half $ 74 $ 67 ------ ------ ------ ------ CUMMINS ENGINE CO., INC. ------------------------ SEGMENT INFORMATION ------------------- Unaudited --------- Operating segment information is as follows: Power Filtration Millions Engine Generation And Other Total -------- ------ ---------- ---------- ----- 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 Second Quarter Ended June 27, 1999 ------------------------- Net sales $1,095 $ 305 $ 267 $1,667 Earnings before interest and income taxes 59 11 33 103 Net assets 974 509 815 2,298 First Half Ended June 25, 2000 ------------------------ Net sales $2,152 $ 697 $ 568 $3,417 Earnings before interest and income taxes 70 53 65 188 First Half Ended June 27, 1999 ------------------------ Net sales $2,095 $ 556 $ 521 $3,172 Earnings before interest and income taxes 86 13 59 158