Cummins Reports Best Quarterly Financial Results in Company History as International Demand Surges.Company Increases Full-Year Sales Growth Guidance to 15 Percent 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 profits in the second quarter, as strong global growth offset softness in some North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. markets. All four of the Company's business segments reported record financial performance in the quarter, as non-U.S. sales grew to 61 percent of Cummins' business - up from 54 percent for all of 2007 and 57 percent in the first quarter of 2008. Second quarter sales grew 16 percent to $3.89 billion, from $3.34 billion during the same period in 2007. Net income increased 37 percent to $293 million, or $1.49 a share, compared to $214 million, or $1.06 a share, in 2007. 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 EBIT See: Earnings Before Interest and Taxes EBIT See earnings before interest and taxes (EBIT). ) of $469 million (12.1 percent of sales), was a 32 percent improvement over $354 million (10.6 percent of sales) during the same period a year ago. The Company experienced broad gains in product and geographic markets around the world, including: * Strong sales growth and market share in the North American heavy-duty engine market. Despite high fuel prices and weakness in the U.S. economy, Cummins posted gains in this market, compared to 2007 when changes in emissions regulations led to sharply lower demand - especially in the first half of the year. * Strong medium-duty truck engine sales, especially in Brazil and Mexico. * Increased demand in the Company's commercial generator business, most notably in the Middle East, Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , China and the United Kingdom. * Strong sales growth 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. , Europe and China for turbochargers. * Significant sales gains for the Company's Emission Solutions products in North America and Europe, driven by new emissions regulations. * Significantly higher income from the Company's joint ventures worldwide, led by Dongfeng Cummins Engine Company in China, which saw large gains as result of a pre-buy in the on-highway truck market in advance of new emissions standards. * A 58 percent increase in the Company's Distribution Business sales, led by strong organic growth in Europe, the South Pacific and Middle East and the acquisition of a majority interest in a previously independent distributor in 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. . The Company's strong second quarter performance came in the face of continued economic weakness in the United States, which has affected the Company's consumer-related markers. For the quarter, engine sales to Chrysler for the 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 fell more than 60 percent from the same period in 2007; RV engine sales fell nearly 40 percent and the Company's consumer power generation sales were off more than 30 percent from a year ago. "We had an outstanding second quarter in the face of some very real economic challenges, especially in the U.S.," said Cummins Chairman and Chief Executive Officer Tim Solso. "We are managing all of our businesses very carefully and the results speak to the effectiveness of our global growth strategy." In light of the Company's performance in the first half of the year and its forecast for the remainder of 2008, Cummins today also announced that is now forecasting a 15 percent sales increase for all of 2008, up from its previous guidance of 12 percent. The Company expects to earn an EBIT margin of 10 percent of sales for the year. "As we look forward, despite the continuing economic uncertainty in the U.S. and Western Europe Western Europe The countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). , and expected increases in materials costs, we are confident that we will continue to see growth in the second half of the year," Solso said, adding that "2008 will be the fifth consecutive year of record sales and profits for Cummins." Other recent Company-related news or events included: * Early this month, the Company announced a 40 percent increase in the quarterly dividend to 17.5 cents a share, payable Sept. 2 to shareholders of record on Aug. 22. * In June, severe flooding in southern Indiana Southern Indiana, in the United States, is notable because it is culturally distinct from the rest of the state. The area's geography has led to a blend of Northern and Southern culture that is not found in the rest of Indiana. affected a number of Cummins facilities. A large manufacturing plant was partially flooded and the Cummins Technical Center in Columbus experienced severe flooding, resulting in its engine test cells being out of operation for approximately five weeks. The second quarter results include a charge of approximately $6 million related to the flooding, but the Company is confident that it has insurance coverage to limit the impact of this event. * Fitch Rating Services upgraded the Company's senior unsecured 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. to BBB BBB A medium grade assigned to a debt obligation by a rating agency to indicate an adequate ability to pay interest and repay principal. However, adverse developments are more likely to impair this ability than would be the case for bonds rated A and above. +, from BBB, citing recent market share gains and improvement in Cummins' geographic and business diversification. * Cummins entered in a new revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility that expands its capacity from $650 million to $1.1 billion. Second Quarter Details Engine Segment Sales of $2.39 billion increased 13 percent from $2.11 billion in the same period in 2007, while Segment EBIT of $221 million, or 9.3 percent of sales, rose 19 percent from $186 million, or 8.8 percent of sales. Heavy-duty truck engine sales increased 42 percent, while medium-duty truck and bus engine sales rose 32 percent - offsetting the large drop in sales to the light-duty automotive and RV markets. Sales to industrial markets grew 21 percent, fueled by stronger international demand particularly in the construction, mining and marine segments. Power Generation Sales of $938 million rose 22 percent from $769 million in the second quarter of 2007. Segment EBIT increased 31 percent to $115 million, or 12.3 percent of sales, compared to $88 million, or 11.4 percent of sales, in 2007. The commercial generator business, the segment's largest, saw its sales increase 35 percent in the quarter, with very strong demand in the Middle East, Latin America, the U.K. and China. 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 increased 14 percent and were strongest in the same international regions. In addition to the higher volumes, improved pricing led to the significantly higher Segment EBIT. Components Segment sales of $855 million were 13 percent higher than $757 million for the same period in 2007. Segment EBIT was sharply higher, improving by 60 percent to $77 million, or 9.0 percent of sales, from $48 million, or 6.3 percent of sales. The Segment EBIT gains were the result of higher sales volumes, improved pricing and increased manufacturing efficiencies across many of the businesses. Sales gains were led by a 24 percent increase in turbocharger tur·bo·charg·er n. See turbosupercharger. tur  bo·charged adj. revenue, a 21 percent gain in fuel systems sales and a 17 percent rise
in emission aftertreatment sales. Sales in the filtration business - the
segment's largest business - were essentially flat as comparisons
were negatively affected by the discontinuation dis·con·tin·u·a·tion n. A cessation; a discontinuance. Noun 1. discontinuation - the act of discontinuing or breaking off; an interruption (temporary or permanent) discontinuance of a product line last year and the sale of its Universal Silencer division at the end of 2007. Distribution Sales rose 58 percent to $581 million, from $368 million during the same period in 2007. Segment EBIT of $68 million, or 11.7 percent of sales, rose 48 percent from $46 million, or 12.5 percent of sales. The recently consolidated Power Systems distributor contributed $63 million to the sales increase. Excluding Power Systems, the segment's power generation sales increased 58 percent led by Europe, the South Pacific and Middle East. Likewise, engine sales, powered by strength in Europe, rose 62 percent; while parts sales increased by 26 percent. Earnings Webcast Information Cummins management will host a teleconference to discuss these results today at 10 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . 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 approximately 190 countries and territories through a network of more than 500 Company-owned and independent distributor locations and approximately 5,200 dealer locations. Cummins reported net income of $739 million on sales of $13.05 billion in 2007. Press releases can be found on the Web at www.cummins.com. Presentation of Non-GAAP Financial Information EBIT is a non-GAAP measure used in this release. EBIT 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 . Forward-Looking Disclosure Statement Information provided in this release that is not purely historical are 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. 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] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] A reconciliation of our segment information to the corresponding amounts in 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 Income is shown in the table below: [TABLE OMITTED] NOTE 1. FLOOD DAMAGE In June 2008, Columbus, Indiana experienced significant flooding which damaged some of our facilities. We lost approximately five weeks of testing at our technical center, however, critical testing was transferred to other Cummins facilities and external suppliers to minimize the interruption. The physical damage to the facilities, as well as the related removal, salvage and recovery costs, was covered by insurance, subject to a deductible of $6 million, which was recorded in the second quarter of 2008. We anticipate that all other costs will be reimbursed through our insurance coverage. We are confident our insurance coverage will limit the impact of this event. [TABLE OMITTED] [TABLE OMITTED] |
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