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.
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(Millions, except per share amounts)
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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.
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CONSOLIDATED STATEMENT OF EARNINGS
----------------------------------
FOR THE SECOND QUARTER AND FIRST HALF
-------------------------------------
ENDED JUNE 25, 2000 AND JUNE 27, 1999
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Unaudited
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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.
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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.
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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.
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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