Cummins Inc. (NYSE: CMI) today reported its highest third quarter sales and profits ever, and second best quarter in its history, led by strong gains internationally that more than offset continued weakness in the Company’s North American consumer markets.
Third quarter sales of $3.69 billion were 10 percent higher than $3.37 billion during the same period in 2007. Net income rose 24 percent to $229 million, or $1.17 a share, compared to $184 million, or $0.92 a share a year ago. Earnings Before Interest and Taxes (EBIT) increased 24 percent to $380 million, from $306 million in the third quarter of 2007.
All four of the Company’s business segments improved their sales and Segment EBIT compared to the same period in 2007. Power Generation and Distribution had the largest percentage sales gains compared to last year, while the Components and Power Generation segments both saw their Segment EBIT as a percentage of sales increase significantly in the quarter.
Non-U.S. sales accounted for 61 percent of the Company’s revenues in the third quarter, compared to 52 percent a year ago. Cummins’ international business was particularly strong in the Power Generation segment, where sales grew 29 percent outside North America, and the Distribution segment, which saw a 28 percent increase outside North America in the quarter.
“Despite the significant challenges facing the U.S. economy and signs of economic weakness in Europe, the Company performed extremely well in the third quarter,” said Cummins Chairman and Chief Executive Officer Tim Solso. “Even more importantly, we continue to meet or exceed our profitability targets as we grow our sales. These results, which keep us on track for a fifth straight year of record financial performance, are further proof that our strategy of diversifying our product line and expanding our geographic customer base is working.
“While we expect the fourth quarter to bring more economic challenges – especially in the U.S. and Europe – Cummins has never been better positioned to ride out a turbulent economy than it is today,” Solso added. “Our debt is less than 15 percent of our total capital. We have healthy cash balances and our business operations continue to generate cash. We also have a $1.1 billion revolving credit line for additional liquidity.”
Despite the continuing economic softness in some markets, Cummins expects revenue to grow in 2008 by 12 percent from last year, down from earlier guidance of 15 percent, and to earn an EBIT margin of 10 percent on its sales.
Among the third quarter highlights:
- Cummins improved its market share in the North American heavy-duty truck and bus markets.
- The Company continued to see strong international demand for its medium-duty truck engines, especially in Latin America.
- Cummins Power Generation experienced significant growth in China, India, Africa, the Middle East and Latin America, compared to the same period in 2007.
- Sales of exhaust aftertreatment products made by Cummins Emission Solutions showed strong growth, especially in North America.
- Joint venture income of $66 million is the highest ever for the third quarter.
- For the fourth year in a row, Cummins was named to the Dow Jones Sustainability Index, which represents the top 10 percent of the world's largest 2,500 companies in corporate sustainability.
- Cummins repurchased 1.4 million shares of stock during the quarter and increased its dividend by 40 percent.
Despite its strong overall performance, the Company is experiencing significant declines in some of its consumer markets as the U.S. economy continues to deteriorate. Revenue from the light-duty automotive and recreational vehicle markets fell 56 percent, compared to the same period in 2007, as engine shipments to Chrysler for the heavy-duty Dodge Ram pickup fell 75 percent. Within Power Generation, sales in the consumer line of business fell 34 percent in the quarter, driven primarily by sharply lower sales to the recreational vehicle and residential standby generator markets in the U.S.
Economic conditions in the U.S. and Europe are not going to improve in the fourth quarter. Cummins is closely monitoring the economic situation around the world and is taking steps to appropriately adjust spending and investment levels to ensure that the Company meets its financial commitments in the future.
“We have experience in managing through difficult economic times, and we will be proactive in monitoring our costs very closely in the short term, even as we continue to invest in profitable growth opportunities,” said Chief Financial Officer Pat Ward. “With our strong balance sheet, positive cash flow and available credit facilities we are well positioned to manage through the downturn in the economy, while delivering the products our customers expect and the financial returns our investors demand.”
Third quarter details
Engine Segment
Sales of $2.28 billion were 6 percent higher than $2.15 billion in the same period in 2007, while Segment EBIT increased 3 percent to $160 million, or 7.0 percent of sales, from $155 million, or 7.2 percent of sales.
Sales to the heavy duty truck market increased 21 percent, driven by market share gains in North America. Medium-duty truck and bus market sales rose 13 percent, led by strong demand in Brazil and share gains in the North American bus engine market. Sales to the industrial engine markets increased 19 percent. The increases in these and other markets were partially offset by the dramatic drop in sales in the North American light-duty automotive and recreational vehicle markets.
Power Generation
Sales of $888 million increased 14 percent from $776 million a year ago. Segment EBIT rose 30 percent to $108 million, or 12.2 percent of sales, from $83 million, or 10.7 percent of sales.
Sales to the commercial power generation markets, the largest business in the segment, increased 25 percent, led by a 90 percent growth in sales in China, 42 percent growth in Latin America and 36 percent sales growth in India. The alternator and rental businesses also had strong sales gains.
Components
Sales of $801 million were 8 percent higher than $741 million during the third quarter of 2007, as Segment EBIT increased 79 percent to $61 million, or 7.6 percent of sales, from $34 million, or 4.6 percent of sales.
The segment continued to see strong sales gains from the turbocharger and Emission Solutions businesses, and profitability improvements from all four lines of business as pricing and manufacturing efficiency improved. Emission Solutions sales increased 27 percent in the quarter, while turbocharger sales rose 9 percent.
Distribution
Sales rose 47 percent in the quarter to $581 million, from $395 million in the same period in 2007. The increase reflects $80 million from the acquisition of three previously independent Cummins distributors; absent the acquisitions sales increased 27 percent during the quarter.
Strong engine sales in Europe and Africa, power generation in the South Pacific and Singapore, and service revenue gains in the South Pacific - primarily for mining equipment – led the organic growth.
Segment EBIT increased 33 percent to $61 million, or 10.5 percent of sales, from $46 million, or 11.6 percent of sales, a year ago. Segment EBIT gains due to stronger sales and improved margins were partially offset by unfavorable currency translation during the quarter.
Earnings webcast information
Cummins management will host a teleconference to discuss these results today at 10 a.m. EDT. This teleconference will be webcast and available on the Investor Relations 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, (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 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.
Forward-looking disclosure statement
Information provided in this release that is not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act 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.
CUMMINS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (a) | |||||||||||
| Three months ended | |||||||||||
| September 28, | June 29, | September 30, | |||||||||
| 2008 | 2008 | 2007 | |||||||||
| Millions (except per share amounts) | |||||||||||
| NET SALES | $ | 3,693 | $ | 3,887 | $ | 3,372 | |||||
| Cost of sales | 2,873 | 3,008 | 2,720 | ||||||||
| GROSS MARGIN | 820 | 879 | 652 | ||||||||
| OPERATING EXPENSES AND INCOME | |||||||||||
| Selling, general and administrative expenses | 388 | 370 | 340 | ||||||||
| Research, development and engineering expenses | 113 | 104 | 82 | ||||||||
| Equity, royalty and interest income from investees | 66 | 69 | 58 | ||||||||
Flood damage expense | — | 6 | — | ||||||||
| Other operating (expense) income, net | (2 | ) | — | 1 | |||||||
| OPERATING INCOME | 383 | 468 | 289 | ||||||||
| Interest income | 4 | 4 | 9 | ||||||||
| Interest expense | 10 | 12 | 14 | ||||||||
| Other (expense) income, net | (7 | ) | (3 | ) | 8 | ||||||
| INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS | 370 | 457 | 292 | ||||||||
| Income tax expense | 123 | 147 | 97 | ||||||||
| Minority interests in income of consolidated subsidiaries | 18 | 17 | 11 | ||||||||
| NET INCOME | $ | 229 | $ | 293 | $ | 184 | |||||
| EARNINGS PER COMMON SHARE | |||||||||||
| Basic | $ | 1.18 | $ | 1.50 | $ | 0.93 | |||||
| Diluted | $ | 1.17 | $ | 1.49 | $ | 0.92 | |||||
| WEIGHTED AVERAGE SHARES OUTSTANDING | |||||||||||
| Basic | 194.9 | 195.2 | 198.2 | ||||||||
| Diluted | 196.5 | 196.6 | 199.8 | ||||||||
| CASH DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.175 | $ | 0.125 | $ | 0.125 | |||||
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America. | |||||||||||
CUMMINS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (a) | ||||||
| Nine months ended | ||||||
| September 28, | September 30, | |||||
| 2008 | 2007 | |||||
| Millions (except per share amounts) | ||||||
| NET SALES | $ | 11,054 | $ | 9,532 | ||
| Cost of sales | 8,648 | 7,658 | ||||
| GROSS MARGIN | 2,406 | 1,874 | ||||
| OPERATING EXPENSES AND INCOME | ||||||
| Selling, general and administrative expenses | 1,109 | 937 | ||||
| Research, development and engineering expenses | 320 | 236 | ||||
| Equity, royalty and interest income from investees | 202 | 146 | ||||
| Flood damage expense | 6 | — | ||||
| Other operating (expense) income, net | (3 | ) | 6 | |||
| OPERATING INCOME | 1,170 | 853 | ||||
| Interest income | 14 | 27 | ||||
| Interest expense | 33 | 44 | ||||
| Other (expense) income, net | (20 | ) | 23 | |||
| INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS | 1,131 | 859 | ||||
| Income tax expense | 372 | 284 | ||||
| Minority interests in income of consolidated subsidiaries | 47 | 34 | ||||
| NET INCOME | $ | 712 | $ | 541 | ||
| EARNINGS PER COMMON SHARE | ||||||
| Basic | $ | 3.65 | $ | 2.71 | ||
| Diluted | $ | 3.62 | $ | 2.70 | ||
| WEIGHTED AVERAGE SHARES OUTSTANDING | ||||||
| Basic | 195.1 | 199.4 | ||||
| Diluted | 196.5 | 200.7 | ||||
| CASH DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.425 | $ | 0.305 | ||
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America. | ||||||
CUMMINS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (a) | ||||||||||
| September 28, | December 31, | |||||||||
| 2008 | 2007 | |||||||||
| Millions (except par value) | ||||||||||
| ASSETS | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | $ | 572 | $ | 577 | ||||||
| Marketable securities | 83 | 120 | ||||||||
| Accounts and notes receivable, net | 2,303 | 1,998 | ||||||||
| Inventories | 1,991 | 1,692 | ||||||||
| Deferred income taxes | 308 | 276 | ||||||||
| Prepaid expenses and other current assets | 191 | 152 | ||||||||
| Total current assets | 5,448 | 4,815 | ||||||||
| Long-term assets | ||||||||||
| Property, plant and equipment | 4,484 | 4,313 | ||||||||
| Accumulated depreciation | (2,744 | ) | (2,668 | ) | ||||||
| Property, plant and equipment, net | 1,740 | 1,645 | ||||||||
| Investments and advances related to equity method investees | 590 | 514 | ||||||||
| Goodwill and other intangible assets, net | 577 | 538 | ||||||||
| Deferred income taxes and other assets | 630 | 683 | ||||||||
| Total assets | $ | 8,985 | $ | 8,195 | ||||||
| LIABILITIES | ||||||||||
| Current liabilities | ||||||||||
| Current portion of long-term debt and loans payable | $ | 80 | $ | 119 | ||||||
| Accounts payable (principally trade) | 1,446 | 1,263 | ||||||||
| Current portion of accrued product warranty | 376 | 337 | ||||||||
| Accrued compensation, benefits and retirement costs | 404 | 441 | ||||||||
| Other accrued expenses | 672 | 551 | ||||||||
| Total current liabilities | 2,978 | 2,711 | ||||||||
| Long-term liabilities | ||||||||||
| Long-term debt | 587 | 555 | ||||||||
| Pensions and other postretirement benefits | 571 | 633 | ||||||||
| Other liabilities and deferred revenue | 704 | 594 | ||||||||
| Total liabilities | 4,840 | 4,493 | ||||||||
| MINORITY INTERESTS | 253 | 293 | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||||
| Common stock, $2.50 par value, 500 shares authorized, 221.5 and 220.4 shares issued | 1,784 | 1,719 | ||||||||
| Retained earnings | 3,281 | 2,660 | ||||||||
| Treasury stock, at cost, 20.2 and 18.2 shares | (711 | ) | (593 | ) | ||||||
| Common stock held by employee benefits trust, at cost, 5.6 and 6.5 shares | (68 | ) | (79 | ) | ||||||
| Unearned compensation | (6 | ) | (11 | ) | ||||||
| Accumulated other comprehensive loss | ||||||||||
| Defined benefit postretirement plans | (363 | ) | (378 | ) | ||||||
| Other | (25 | ) | 91 | |||||||
| Total accumulated other comprehensive loss | (388 | ) | (287 | ) | ||||||
| Total shareholders’ equity | 3,892 | 3,409 | ||||||||
| Total liabilities, minority interests and shareholders’ equity | $ | 8,985 | $ | 8,195 | ||||||
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America. | ||||||||||
CUMMINS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (a) | ||||||||
| Nine months ended | ||||||||
| September 28, | September 30, | |||||||
| 2008 | 2007 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | Millions | |||||||
| Net income | $ | 712 | $ | 541 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 233 | 215 | ||||||
| Net gain on disposal of property, plant and equipment | (3 | ) | (8 | ) | ||||
| Deferred income taxes | 38 | 69 | ||||||
| Equity in earnings of investees, net of dividends | (80 | ) | (55 | ) | ||||
| Minority interest in income of consolidated subsidiaries | 47 | 34 | ||||||
| Pension expense | 54 | 73 | ||||||
| Pension contributions | (94 | ) | (144 | ) | ||||
| Other post-retirement benefits expense, net of cash payments | (11 | ) | (22 | ) | ||||
| Stock-based compensation expense | 27 | 20 | ||||||
| Excess tax benefits on stock-based awards | (12 | ) | (11 | ) | ||||
| Translation and hedging activities | 15 | (19 | ) | |||||
| Changes in current assets and liabilities, net of acquisitions and dispositions: | ||||||||
| Accounts and notes receivable | (310 | ) | (222 | ) | ||||
| Inventories | (334 | ) | (329 | ) | ||||
| Other current assets | (35 | ) | (22 | ) | ||||
| Accounts payable | 198 | 218 | ||||||
| Accrued expenses | 206 | 121 | ||||||
| Changes in long-term liabilities | 78 | 65 | ||||||
| Other, net | (4 | ) | (1 | ) | ||||
| Net cash provided by operating activities | 725 | 523 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Capital expenditures | (330 | ) | (182 | ) | ||||
| Investments in internal use software | (53 | ) | (46 | ) | ||||
| Proceeds from disposals of property, plant and equipment | 20 | 33 | ||||||
| Investments in and advances to equity investees | (51 | ) | (27 | ) | ||||
| Acquisition of businesses, net of cash acquired | (142 | ) | (20 | ) | ||||
| Proceeds from the sale of an equity investment | 64 | ― | ||||||
| Investments in marketable securities—acquisitions | (264 | ) | (307 | ) | ||||
| Investments in marketable securities—liquidations | 281 | 295 | ||||||
| Purchases of other investments | (54 | ) | (52 | ) | ||||
| Other, net | (23 | ) | (17 | ) | ||||
| Net cash used in investing activities | (552 | ) | (323 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from borrowings | 91 | 3 | ||||||
| Payments on borrowings and capital lease obligations | (111 | ) | (122 | ) | ||||
| Net borrowings under short-term credit agreements | 5 | (14 | ) | |||||
| Distributions to minority shareholders | (14 | ) | (15 | ) | ||||
| Dividend payments on common stock | (86 | ) | (63 | ) | ||||
| Proceeds from sale of common stock held by employee benefit trust | 52 | ― | ||||||
| Repurchases of common stock | (123 | ) | (210 | ) | ||||
| Excess tax benefits on stock-based awards | 12 | 11 | ||||||
| Other, net | 3 | (17 | ) | |||||
| Net cash used in financing activities | (171 | ) | (427 | ) | ||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (7 | ) | 11 | |||||
| Net decrease in cash and cash equivalents | (5 | ) | (216 | ) | ||||
| Cash and cash equivalents at beginning of year | 577 | 840 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 572 | $ | 624 | ||||
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America. | ||||||||
CUMMINS INC. AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) | |||||||||||||||||||||||
| Engine | Power Generation | Components | Distribution | Non-segment items(1) | Total | ||||||||||||||||||
| Millions | |||||||||||||||||||||||
| Three months ended September 28, 2008 | |||||||||||||||||||||||
| External sales | $ | 1,927 | $ | 653 | $ | 535 | $ | 578 | $ | — | $ | 3.693 | |||||||||||
| Intersegment sales | 352 | 235 | 266 | 3 | (856 | ) | — | ||||||||||||||||
| Total sales | 2,279 | 888 | 801 | 581 | (856 | ) | 3,693 | ||||||||||||||||
| Depreciation and amortization(2) | 43 | 9 | 16 | 6 | — | 74 | |||||||||||||||||
| Research, development and engineering expense | 75 | 11 | 27 | — | — | 113 | |||||||||||||||||
| Equity, royalty and interest income from investees | 26 | 6 | 3 | 31 | — | 66 | |||||||||||||||||
| Interest income | 2 | 1 | 1 | — | — | 4 | |||||||||||||||||
| Segment EBIT | 160 | 108 | 61 | 61 | (10 | ) | 380 | ||||||||||||||||
| Three months ended June 29, 2008 | |||||||||||||||||||||||
| External sales | $ | 2,030 | $ | 692 | $ | 584 | $ | 581 | $ | — | $ | 3,887 | |||||||||||
| Intersegment sales | 356 | 246 | 271 | — | (873 | ) | — | ||||||||||||||||
| Total sales | 2,386 | 938 | 855 | 581 | (873 | ) | 3,887 | ||||||||||||||||
| Depreciation and amortization(2) | 46 | 11 | 18 | 7 | — | 82 | |||||||||||||||||
| Research, development and engineering expense | 70 | 10 | 24 | — | — | 104 | |||||||||||||||||
| Equity, royalty and interest income from investees | 32 | 6 | 3 | 28 | — | 69 | |||||||||||||||||
| Interest income | 2 | 1 | 1 | — | — | 4 | |||||||||||||||||
| Segment EBIT | 221 | 115 | 77 | 68 | (12 | ) | 469 | ||||||||||||||||
| Three months ended September 30, 2007 | |||||||||||||||||||||||
| External sales | $ | 1,890 | $ | 594 | $ | 494 | $ | 394 | $ | — | $ | 3,372 | |||||||||||
| Intersegment sales | 263 | 182 | 247 | 1 | (693 | ) | — | ||||||||||||||||
| Total sales | 2,153 | 776 | 741 | 395 | (693 | ) | 3,372 | ||||||||||||||||
| Depreciation and amortization(2) | 45 | 11 | 14 | 3 | — | 73 | |||||||||||||||||
| Research, development and engineering expense | 56 | 8 | 18 | — | — | 82 | |||||||||||||||||
| Equity, royalty and interest income from investees | 24 | 5 | 3 | 26 | — | 58 | |||||||||||||||||
| Interest income | 6 | 1 | 1 | 1 | — | 9 | |||||||||||||||||
| Segment EBIT | 155 | 83 | 34 | 46 | (12 | ) | 306 | ||||||||||||||||
| Nine months ended September 28, 2008 | |||||||||||||||||||||||
| External sales | $ | 5,842 | $ | 1,926 | $ | 1,686 | $ | 1,600 | $ | — | $ | 11,054 | |||||||||||
| Intersegment sales | 1,032 | 687 | 790 | 7 | (2,516 | ) | — | ||||||||||||||||
| Total sales | 6,874 | 2,613 | 2,476 | 1,607 | (2,516 | ) | 11,054 | ||||||||||||||||
| Depreciation and amortization(2) | 133 | 31 | 49 | 17 | — | 230 | |||||||||||||||||
| Research, development and engineering expense | 215 | 31 | 74 | — | — | 320 | |||||||||||||||||
| Equity, royalty and interest income from investees | 91 | 17 | 10 | 84 | — | 202 | |||||||||||||||||
| Interest income | 7 | 3 | 3 | 1 | — | 14 | |||||||||||||||||
| Segment EBIT | 575 | 301 | 175 | 178 | (65 | ) | 1,164 | ||||||||||||||||
| Nine months ended September 30, 2007 | |||||||||||||||||||||||
| External sales | $ | 5,267 | $ | 1,730 | $ | 1,465 | $ | 1,070 | $ | — | $ | 9,532 | |||||||||||
| Intersegment sales | 760 | 490 | 690 | 2 | (1,942 | ) | — | ||||||||||||||||
| Total sales | 6,027 | 2,220 | 2,155 | 1,072 | (1,942 | ) | 9,532 | ||||||||||||||||
| Depreciation and amortization(2) | 132 | 31 | 43 | 8 | — | 214 | |||||||||||||||||
| Research, development and engineering expense | 159 | 25 | 52 | — | — | 236 | |||||||||||||||||
| Equity, royalty and interest income from investees | 66 | 12 | 1 | 67 | — | 146 | |||||||||||||||||
| Interest income | 20 | 4 | 2 | 1 | — | 27 | |||||||||||||||||
| Segment EBIT | 469 | 248 | 106 | 131 | (51 | ) | 903 | ||||||||||||||||
(1) Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses including flood related expenses.
(2) Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount that is included in the Condensed Consolidated Statements of Income as Interest expense.
A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Income is shown in the table below:
| Three months ended | Nine months ended | ||||||||||||||
| September 28, | June 29, | September 30, | September 28, | September 30, | |||||||||||
| 2008 | 2008 | 2007 | 2008 | 2007 | |||||||||||
| Millions | |||||||||||||||
| Segment EBIT | $ | 380 | $ | 469 | $ | 306 | $ | 1,164 | $ | 903 | |||||
| Less: | |||||||||||||||
| Interest expense | 10 | 12 | 14 | 33 | 44 | ||||||||||
| Income before income taxes and minority interests | $ | 370 | $ | 457 | $ | 292 | $ | 1,131 | $ | 859 | |||||
| CUMMINS INC. AND SUBSIDIARIES | ||||||||||||||||||||
| FINANCIAL MEASURES THAT SUPPLEMENT GAAP | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Earnings before interest, taxes and minority interests (EBIT) | ||||||||||||||||||||
We define EBIT as earnings before interest expense, provision for income taxes and minority interests in earnings of consolidated subsidiaries. We use EBIT to assess and measure the performance of our operating segments and also as a component in measuring our variable compensation programs. Below is a reconciliation of EBIT, a non-GAAP financial measure, to our consolidated net income, for each of the applicable periods: | ||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 28, | June 29, | September 30, | September 28, | September 30, | ||||||||||||||||
| 2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||
| Millions | ||||||||||||||||||||
| Earnings before interest expense, income taxes and minority interests | $ | 380 | $ | 469 | $ | 306 | $ | 1,164 | $ | 903 | ||||||||||
| EBIT as a percentage of net sales | 10.3 | % | 12.1 | % | 9.1 | % | 10.5 | % | 9.5 | % | ||||||||||
| Less: | ||||||||||||||||||||
| Interest expense | 10 | 12 | 14 | 33 | 44 | |||||||||||||||
| Income tax expense | 123 | 147 | 97 | 372 | 284 | |||||||||||||||
| Minority interests in income of consolidated subsidiaries | 18 | 17 | 11 | 47 | 34 | |||||||||||||||
| Net income | $ | 229 | $ | 293 | $ | 184 | $ | 712 | $ | 541 | ||||||||||
| Net income as a percentage of net sales | 6.2 | % | 7.5 | % | 5.5 | % | 6.4 | % | 5.7 | % | ||||||||||
We believe EBIT is a useful measure of our operating performance for the periods presented as it illustrates our operating performance without regard to financing methods, capital structure or income taxes. This measure is not in accordance with, or an alternative for, accounting principles generally accepted in the United States of America (GAAP) and may not be consistent with measures used by other companies. It should be considered supplemental data. | ||||||||||||||||||||
| Sales | |||||||||||
| $Millions | Q1 | Q2 | Q3 | Q4 | YTD | ||||||
| 2008 | |||||||||||
| Engine Business | |||||||||||
| Heavy-Duty Truck | 536 | 672 | 630 | 1,838 | |||||||
| Medium Duty Truck+Bus | 397 | 422 | 406 | 1,225 | |||||||
| Light Duty Auto+RV | 275 | 205 | 170 | 650 | |||||||
| Industrial | 733 | 804 | 788 | 2,325 | |||||||
| Stationary Power | 268 | 283 | 285 | 836 | |||||||
| TOTAL ENGINE BUSINESS | 2,209 | 2,386 | 2,279 | 0 | 6,874 | ||||||
| Power Generation | 787 | 938 | 888 | 2,613 | |||||||
| Components | 820 | 855 | 801 | 2,476 | |||||||
| Distributors | 445 | 581 | 581 | 1,607 | |||||||
| Eliminations | (787) | (873) | (856) | (2,516) | |||||||
| TOTAL | 3,474 | 3,887 | 3,693 | 0 | 11,054 | ||||||
| 2007 | |||||||||||
| Engine Business | |||||||||||
| Heavy-Duty Truck | 424 | 473 | 520 | 531 | 1,948 | ||||||
| Medium Duty Truck+Bus | 206 | 320 | 359 | 398 | 1,283 | ||||||
| Light Duty Auto+RV | 288 | 418 | 388 | 247 | 1,341 | ||||||
| Industrial | 617 | 665 | 661 | 733 | 2,676 | ||||||
| Stationary Power | 230 | 233 | 225 | 246 | 934 | ||||||
| TOTAL ENGINE BUSINESS | 1,765 | 2,109 | 2,153 | 2,155 | 8,182 | ||||||
| Power Generation | 675 | 769 | 776 | 840 | 3,060 | ||||||
| Components | 657 | 757 | 741 | 777 | 2,932 | ||||||
| Distributors | 309 | 368 | 395 | 468 | 1,540 | ||||||
| Eliminations | (589) | (660) | (693) | (724) | (2,666) | ||||||
| TOTAL | 2,817 | 3,343 | 3,372 | 3,516 | 13,048 | ||||||
| Engine Shipments | |||||||||||
| Units | Q1 | Q2 | Q3 | Q4 | YTD | ||||||
| 2008 | |||||||||||
| Midrange | 114,200 | 114,800 | 102,300 | 331,300 | |||||||
| Heavy-duty | 24,700 | 31,700 | 29,400 | 85,800 | |||||||
| High Horsepower | 4,600 | 5,500 | 5,400 | 15,500 | |||||||
| TOTAL | 143,500 | 152,000 | 137,100 | 0 | 432,600 | ||||||
| 2007 | |||||||||||
| Midrange | 107,200 | 133,500 | 130,500 | 115,600 | 486,800 | ||||||
| Heavy-duty | 19,000 | 23,800 | 24,800 | 23,800 | 91,400 | ||||||
| High Horsepower | 4,300 | 4,700 | 4,600 | 4,900 | 18,500 | ||||||
| TOTAL | 130,500 | 162,000 | 159,900 | 144,300 | 596,700 | ||||||
Contacts:
Mark Land, 317-610-2456
Director of Public
Relations
mark.d.land@cummins.com
