Cummins Completes Third Consecutive Year of Record Sales and Profits.Company Eclipses $3 Billion in Quarterly Sales; Power Generation and Distribution Segments Report Record Operating Profits Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. in Fourth Quarter COLUMBUS, Ind. -- Cummins Inc. (NYSE NYSE See: New York Stock Exchange :CMI (Computer-Managed Instruction) Using computers to organize and manage an instructional program for students. It helps create test materials, tracks the results and monitors student progress. ) today reported record sales and earnings for the fourth quarter and all of 2006, marking the third consecutive year of record financial performance for the Company. Cummins eclipsed $3 billion in quarterly sales for the first time during the fourth quarter. All four of the Company's operating segments posted record revenues, and Cummins' Power Generation and Distribution businesses reported record Segment EBIT EBIT See: Earnings Before Interest and Taxes EBIT See earnings before interest and taxes (EBIT). in the fourth quarter, as well as for the entire year. For the full year, Cummins reported sales of $11.36 billion, up 15 percent from $9.92 billion in 2005. Earnings Before Interest and Taxes In financial and business accounting, earnings before interest and taxes (EBIT) is a measure of a firm's profitability that excludes interest and income tax expenses.[1] EBIT = Operating Revenue – Operating Expenses + Non-operating Income (EBIT) of $1.18 billion (10.4 percent of sales) increased 30 percent over $907 million (9.1 percent of sales) in 2005. Net earnings rose 30 percent to $715 million, or $14.21 per diluted share, from $550 million, or $11.01 per diluted share, the previous year. In the fourth quarter, Cummins reported sales of $3.03 billion, a 10 percent increase from $2.75 billion in the same period in 2005. EBIT rose 13 percent to $303 million (10.0 percent of sales), from $269 million (9.8 percent of sales). Net earnings in the fourth quarter increased 13 percent to $189 million, or $3.75 per diluted share, from $167 million, or $3.31 per diluted share, in the fourth quarter of 2005. Gross margin for the quarter was 22.1 percent, down slightly from 22.5 percent for the fourth quarter of 2005. The Company's Power Generation and Distribution businesses performed at record levels in the fourth quarter - and for the entire year - while the Engine segment reported near-record EBIT on its best-ever quarterly sales performance in the fourth quarter. Segment EBIT at the Company's Components segment was essentially flat in the fourth quarter, compared to 2005. The Distribution business continued its trend of growing earnings faster than sales, with the greatest growth coming in sales of power generation products in the Middle East and Europe. Joint venture income from the Company's North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. distributors also rose significantly in the quarter. Engine sales were a record in the fourth quarter, led by strong gains in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. for heavy- and medium-duty truck markets and in the international construction markets. Additionally, sales to the oil and gas engine markets more than doubled from the fourth quarter of 2005. During the fourth quarter Cummins announced plans to enter the light-duty diesel market in both the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and China. The Company announced that its Columbus (Indiana) Engine Plant will be the home of its U.S.-based light-duty program that will add at least 600 jobs by the end of the decade. Cummins also announced a joint venture to make 2.8 and 3.8-liter engines in China with Beiqi Foton Motor Company in Beijing. The engines, scheduled to go into production in 2008, will be used in light-duty commercial trucks, pickups and sport utility vehicles This page lists sports utility vehicles currently in production (as of April 2007), as well as past models. The list includes crossover SUVs, Mini SUVs, Compact SUVs and other similar vehicles. and certain industrial applications. Last week, Cummins announced that its new 6.7-liter turbo diesel engine for the 2007.5 model year Dodge Ram
The Ram is a full-size pickup truck from Chrysler LLC's Dodge brand. The name was first used in 1981 on the redesigned Ram and Power Ram, though it came from the hood ornament used on Heavy Duty pickup meets the 2010 standards for oxides of nitrogen emissions, a full three years ahead of schedule. The engine went into production at the Company's Midrange midrange Epidemiology The halfway point or midpoint in a set of observations; for most data, MR is calculated as the sum of the smallest observation and the largest observation, divided by 2; for age data, one is added to the numerator; a midrange is usually Engine Plant in Walesboro, Indiana, in January and the new Ram pickup truck is expected to be on the market in March. "By almost every measure, 2006 was an outstanding year," said Cummins Chairman and Chief Executive Officer Tim Solso. "We continued to build on the success of the past two years even as we devoted significant time and resources to meeting the 2007 emissions changes in the United States. "All of our business segments showed strong sales growth in 2006 and we gained share in key businesses and geographic markets around the world. At the same time, we invested in critical growth opportunities and developed cost-control strategies that will help us weather the temporary slowdown in the North American heavy-duty truck engine market in 2007 as a result of the U.S. emissions changes." 2007 outlook The Company expects to earn between $11 and $11.50 a share in 2007, despite the forecasted emissions-related downturn in the North American heavy-duty truck engine market. As a result of a regular review of its disclosure and corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. practices, Cummins has decided to offer only annual earnings guidance starting in 2007. The guidance reflects the Company's confidence in its ability to deliver strong earnings as a result of its continued product and geographic diversification, investment in key growth opportunities and ongoing efforts to control costs. For example, Cummins expects strength in medium-duty and high-horsepower engine sales, power generation and distribution to help offset lower North American heavy-duty sales. The Company also anticipates an increase in its turbocharger tur·bo·charg·er n. See turbosupercharger. tur  bo·charged adj. sales
to other engine manufacturers and sees significant growth opportunities
in the sale of advanced exhaust aftertreatment and filtration products
to meet changing emissions standards around the world.
Additionally, Cummins is forecasting continued profitable growth in key emerging markets such as China and India, and international sales are expected to exceed U.S. sales in 2007. "I am extremely excited about our prospects for 2007 and beyond," Solso said. "The Company is well-positioned to face the challenges of the changing emissions regulations in the near-term, and we're also working hard to identify and invest in the next generation of profitable growth opportunities." Fourth quarter 2006 details Engine segment Sales of $1.95 billion were a quarterly record and 6 percent higher than $1.84 billion during the same period in 2005. Segment EBIT increased 16 percent to $181 million, or 9.3 percent of sales, from $156 million, or 8.5 percent of sales, a year ago. North American heavy-duty truck engine shipments rose 14 percent and North American medium-duty engine shipments increased 57 percent in advance of the 2007 emissions changes, offsetting a 15 percent drop in shipments to Chrysler during the quarter. Shipments to the international construction markets rose 18 percent from the same period in 2005. Power Generation segment Segment sales of $658 million rose 14 percent from $575 million, while Segment EBIT increased 27 percent to $62 million, or 9.4 percent of sales, from $49 million or 8.5 percent of sales. Commercial sales rose 18 percent and alternator alternator: see generator. alternator Source of direct electric current in modern vehicles for ignition, lights, fans, and other uses. The electric power is generated by an alternator mechanically coupled to the engine, with a rotor field coil sales jumped 30 percent, more than offsetting a drop in consumer sales. Distribution segment Segment sales of $386 million rose 12 percent from $346 million in the same period in 2005. Segment EBIT increased 18 percent to $39 million, or 10.1 percent of sales, from $33 million, or 9.5 percent of sales in 2005. Sales of power generation products were strong, most notably in the Middle East and Europe. Joint venture income rose 45 percent in the quarter, led by improved performance at North American distributors. Components segment Sales in the segment - which consists of the Company's filtration, turbocharger, exhaust aftertreatment and fuel systems businesses - rose 12 percent to $599 million, from $535 million for the same period in 2005. Segment EBIT fell slightly to $23 million, or 3.8 percent of sales, from $24 million, or 4.5 percent of sales, in the fourth quarter of 2005. The Segment's performance was led by the Filtration and Fuel System businesses, which reported improved sales and gross margin. The Company's turbocharger and Emission Solutions businesses were adversely affected by costs associated with introducing new products, and manufacturing and logistics challenges caused by rapidly increasing demand. Cash flow, pension funding and debt reduction The Company's strong cash flow in the fourth quarter allowed it to continue to fund its pension above required levels and to reduce debt. Cummins reduced its long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. by half during 2006, lowering its debt-to-capital ratio to 22.4 percent at year's end. For the year, Cummins paid $266 million into its pension funds, well in excess of the required payments. The Company's full-year cash flow was a record $840 million. Excluding the pension payments, cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses was $1.1 billion - a 21 percent improvement from 2005. Taxes During the fourth quarter, tax legislation was signed that retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin extended the incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. research tax credit to tax years 2006 and 2007. This favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. affected the Company's quarterly and full-year tax provision by $10.3 million, or $0.20 per share, in the quarter and $0.21 per share for the full year. Presentation of Non-GAAP Financial Information EBIT and cash flow from operations excluding pension contributions are non-GAAP measures used in this release. Each is defined and reconciled to what management believes to be the most comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measure in a schedule attached to this release. Cummins presents this information as it believes it is useful to understanding the Company's operating performance, and because EBIT is a measure used internally to assess the performance of the operating units operating unit A type of operating company that engages in transactions with outsiders and that is owned by another business. For example, in 1995 the stockholders of Capital Cities/ABC approved a $19 billion merger with the Walt Disney Company, whereupon . Webcast information Cummins management will host a teleconference to discuss these results today at 10 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . This teleconference will be webcast and available on the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of the Cummins website at www.cummins.com. Participants wishing to view the visuals available with the audio are encouraged to sign-in a few minutes prior to the start of the teleconference. About Cummins Cummins Inc., a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Headquartered in Columbus, Indiana Columbus (IPA: [kəˈlʌm.bəs]) is the county seat of Bartholomew County, Indiana. The population was 39,059 at the 2000 census. The current mayor is Fred Armstrong. , (USA) Cummins serves customers in more than 160 countries through its network of 550 Company-owned and independent distributor facilities and more than 5,000 dealer locations. Cummins reported net income of $715 million on sales of $11.4 billion in 2006. Press releases can be found on the Web at www.cummins.com. Forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. disclosure Information provided in this release and on the webcast that is not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, including statements regarding the company's expectations, hopes, beliefs and intentions on strategies regarding the future. It is important to note that the company's actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including, but not limited to, general economic, business and financing conditions, labor relations, governmental action, competitor pricing activity, expense volatility and other risks detailed from time to time in Cummins Securities and Exchange Commission filings. [TABLE OMITTED] (a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America UNITED STATES OF AMERICA. The name of this country. The United States, now thirty-one in number, are Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Hampshire, . [TABLE OMITTED] (a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America. [TABLE OMITTED] (a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America. [TABLE OMITTED] (1) Includes intercompany eliminations and unallocated corporate expenses. A reconciliation of our segment information to the corresponding amounts in the Consolidated Financial Statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge is shown in the table below: [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] NOTE 3. PROVISION FOR INCOME TAXES Our tax rates are generally less than the 35 percent U.S. income tax rate primarily because of lower taxes on foreign earnings, export tax benefits and research tax credits. Our effective tax rate for the three and twelve months ended December 31, 2006, was 28.3 percent and 29.9 percent, respectively. Our provision for the three months ended December 31, 2006, was favorably impacted by $10 million, or $0.20 per share, due to the retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a reinstatement Reinstatement The restoration of an insurance policy after it has lapsed for nonpayment of premiums. of the U.S. research tax credit. Our provision for the twelve months ended December 31, 2006, was impacted by a $12 million, or $0.23 per share, increase in the first quarter for the effect of new Indiana tax legislation, a $28 million, or $0.55 per share, reduction in the second quarter due to the favorable resolution of tax uncertainties related to prior years and $10 million, or $0.21 per share, due to the U.S. research tax credit. Our effective tax rate for the three and twelve months ended December 31, 2005, was 25.9 percent and 27.1 percent, respectively. Our 2005 provision was reduced by $16 million ($6 million in the first quarter, $4 million in the second quarter, $1 million in the third quarter and $5 million in the fourth quarter) for the tax benefits of foreign dividend distributions which qualified for a special 85-percent deduction under The American Jobs Creation Act of 2004. NOTE 4. DEPRECIATION AND AMORTIZATION Depreciation and amortization expense included in operating activities of the Condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. Consolidated Statements of Cash Flows for the years ended December 31, 2006 and 2005 was $296 million and $295 million, respectively. NOTE 5. SHORT-TERM BORROWINGS & LONG-TERM DEBT Holders of our $120 million 6.75% debentures due 2027, could elect to be repaid on February 15, 2007, at par value together with accrued interest Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) 360-day year method, used for corporate and municipal bonds. . The election was irrevocable Unable to cancel or recall; that which is unalterable or irreversible. IRREVOCABLE. That which cannot be revoked. 2. A will may at all times be revoked by the same person who made it, he having a disposing mind; but the moment the testator is and required to be made between December 15, 2006 and January 16, 2007. As a result, $62 million of the debt was presented for repayment during this period. Therefore, our balance sheet at December 31, 2006, reflects $62 million in short-term borrowings and $58 million in long-term debt. [TABLE OMITTED] |
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