UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: April 21, 2005
CUMMINS
INC.
(Exact name of registrant as specified in its charter)
|
Indiana |
1-4949 |
35-0257090 |
500
Jackson Street
P. O. Box 3005
Columbus, IN 47202-3005
(Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (812) 377-5000
Check the appropriate box below if the Form 8-K
filing is intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions.
|
[ ] |
Written communications pursuant
to Rule 425 under the Securities Act (17 CFR 230.425) |
|
[ ] |
Soliciting material pursuant to
Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
|
[ ] |
Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
|
[ ] |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial
Condition.
On April 21, 2005, Cummins Inc. issued the attached
press release reporting its financial results for the first quarter of 2005 and
reiterating financial guidance for
full-year 2005. The press release, including
attachments, is furnished as Exhibit 99 and incorporated herein by reference.
The press release contains a non-GAAP financial measure,
as defined by Securities and Exchange Commission rules. Specifically, "EBIT"
which is defined
as earnings before interest expense, provision for income
taxes and minority interests in earnings of consolidated subsidiaries and is
not a measure defined
in accordance with generally accepted accounting
principles ("GAAP"). This measure is used internally to evaluate the company's operating
performance
without regard to financing methods, capital structure and income
taxes. Management encourages investors to review our consolidated financial
statements
and publicly filed reports in their entirety and to not rely on any
single financial measure.
Item 9.01. Financial Statements and Exhibits.
|
(c) |
The following exhibit is
furnished herewith: |
99-Press Release dated April 21, 2005
SIGNATURE
Pursuant to the requirements of
the Securities Exchange act of 1934, as amended, the registrant has duly caused
this report to be signed on its behalf by
the undersigned hereunto duly
authorized.
Date: April 21, 2005
|
Cummins Inc. |
|
|
By: /s/ Marsha L. Hunt Marsha L. Hunt |
Mark
Land
Director
- Public Relations
(317) 610-2456
(812) 350-9678
(mobile)
For
Immediate Release
April 21, 2005
Cummins reports sharply higher net income for first quarter; raises 2005 earnings guidance
COLUMBUS, Ind. - Cummins Inc. (NYSE: CMI) today reported sharply higher earnings for the first quarter as a result of better margins, strong joint venture performance and increased sales in each of its business units.
For the three months ending March 27, Cummins posted net income of $97 million, or $1.96 a share on a diluted basis - nearly three times the $33 million ($0.76 a share) the Company earned in the first quarter of 2004 and well above the Company's previous guidance.
Net sales of $2.21 billion were 25 percent higher than $1.77 billion for the same period a year ago. Earnings before interest and taxes (EBIT) were $163 million in the quarter, or 7.4 percent of sales. For the first quarter of 2004, Cummins reported EBIT of $78 million, or 4.4 percent of sales.
"We continued to build off our record performance in 2004 with an excellent first quarter," said Cummins Chairman and CEO Tim Solso. "Our markets across the world remain strong and these results reflect our ability to take a greater percentage of revenue to the bottom line. Our people are executing well and those efforts are paying off."
As a result of the Company's improved performance, Cummins today is raising its earnings and sales guidance for 2005. The Company now expects to earn between $9.00 and $9.20 a share for the year, up from its previous guidance of $8.00 - $8.30 a share. The Company expects to earn between $2.25 and $2.35 a share in the second quarter. The Company is now forecasting sales for the year to be 10-12 percent greater than last year, compared to its previous forecast of a 7-8 percent increase.
The Company's first quarter performance was led by the Engine Business, which saw sales rise 31 percent from a year ago and Segment EBIT nearly triple, driven by significant strength in the North American heavy duty truck market and its global mining, marine and construction markets.
The Company's Power Generation and International Distributor Business Units posted sharply higher Segment EBIT when compared to the first quarter of 2004. Likewise, Cummins continues to see strong earnings from its joint venture operations, especially in China. For the first quarter, Cummins profits from its unconsolidated joint ventures around the world were $31 million, up from $18 million for the same period a year ago. Cummins consolidated operations in China also performed extremely well, with the markets for generators, turbochargers and filtration products remaining strong.
The Company continued to strengthen its balance sheet in the first quarter by reducing its debt by $259 million.
"We're extremely proud to have been able to pay down a substantial portion of debt," said Cummins Chief Financial Officer Jean Blackwell. "Reducing our debt is a central part of Cummins strategy to strengthen its balance sheet and improve liquidity. We believe that these efforts have resulted in metrics sufficient to justify a return to investment grade."
The Company received national recognition in the first quarter for its financial performance as well as for its efforts to be a responsible corporate citizen. In addition to being named to Business Week magazine's list of top 50 performing companies for 2004, Cummins was recognized by Business Ethics magazine as its top corporate citizen for 2005. Cummins, which has made the list each of the six years it has been compiled by the magazine, previously was ranked as high as No. 2 in 2003. Cummins also was named the best company for Asian-Americans to work by Diversity Inc. magazine.
"Cummins core values go beyond delivering superior results, and we take our commitment to employees and the communities in which we operate very seriously," Solso said. "This type of recognition is gratifying, and it speaks well to the values created at Cummins over decades - values that our 28,000 employees strive to live every day."
First quarter details
Engine segment
Segment EBIT of $114 million
was a 185 percent increase over $40 million for the same period in 2004. EBIT
margin was 7.6 percent, compared to 3.5 percent in the first quarter 2004.
Sales rose 31 percent to $1.50 billion in the first quarter.
Heavy duty truck engine revenues grew 47 percent from the first quarter of 2004. The Company also saw robust performance in its industrial engine markets, especially the mining segment. Industrial sales increased 57 percent compared to the same period last year.
Power Generation segment
Segment EBIT of $17 million
was nearly three times the $6 million reported for the first quarter of 2004.
Power Generation reported sales of $439 million, the best first quarter ever
for the segment and 19 percent higher than first quarter 2004.
Commercial demand continues to grow, especially in the Middle East, Europe and North America, where capital spending increased in the first quarter. Overall market conditions in Asia, most notably China, are strong. Expectations for summer power shortages in China continue to drive demand for large generator sets (above 500 kva).
Filtration and Other segment
Segment sales
were $403 million in the quarter, up 16 percent from the same period in 2004,
while Segment EBIT was $20 million, compared to $24 million in 2004. Strong
product demand in North America and Holset turbocharger sales in China helped
fuel the segment's performance.
Segment EBIT declined compared to first quarter 2004 as the business continues to face commodity price pressures and supply chain inefficiencies. Margins improved, resulting in a 33 percent increase in Segment EBIT from the fourth quarter 2004, despite only a 1 percent increase in revenues quarter-to-quarter.
International Distributors
segment
Segment EBIT of $12 million
was a 50 percent increase from $8 million in the first quarter 2004, while
sales for the quarter were 26 percent higher than the same period in 2004.
The segment posted record first quarter revenues of $215 million, led by especially strong distributor performance in Europe and the Middle East.
Presentation of Non-GAAP
Financial Information
EBIT is a non-GAAP financial
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.
Webcast information
Cummins management will host
a teleconference to discuss these results at 10 a.m., EST. This teleconference
will be webcast and available on the Investor Relations section of the Cummins
website at www.cummins.com.
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 more than 160 countries through its network of 550
Company-owned and independent distributor facilities and more than 5,000 dealer
locations. With more than 28,000 employees worldwide, Cummins reported sales of
$8.4 billion in 2004. Press releases can be found on the Web at www.cummins.com.
Forward Looking Statement
Disclosure
Information provided and
statements on the webcast and in this release that are 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 CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (a)
|
|
Three Months Ended |
Three Months Ended |
|
|
Millions, except per share amounts |
Mar. 27, 2005 |
Mar. 28, 2004 |
Dec. 31, 2004 |
|
|
|||
|
Net sales.............................................................................. |
$ 2,208 |
$ 1,771 |
$ 2,349 |
|
Cost of sales....................................................................... |
1,752 |
1,426 |
1,876 |
|
|
|||
|
Gross margin......................................................................... |
456 |
345 |
473 |
|
|
|||
|
Expense and other income |
|||
|
Selling and administrative expenses............................. |
259 |
223 |
281 |
|
Research and engineering expenses............................. |
63 |
56 |
66 |
|
Equity, royalty and other income from investees....... |
(31) |
(18) |
(38) |
|
28 |
27 |
31 |
|
|
2 |
6 |
(9) |
|
|
Earnings before income taxes and minority interests.... |
135 |
51 |
142 |
|
Provision for income taxes................................................. |
34 |
14 |
12 |
|
4 |
4 |
11 |
|
|
Net earnings........................................................................ |
$ 97 |
$ 33 |
$ 119 |
|
|
|||
|
Basic............................................................................... |
$ 2.20 |
$ 0.81 |
$ 2.73 |
|
Diluted............................................................................ |
1.96 |
0.76 |
2.41 |
|
|
|||
|
$ 0.30 |
$ 0.30 |
$ 0.30 |
|
|
|
|||
|
Weighted average shares outstanding |
|||
|
Basic............................................................................... |
43.9 |
40.5 |
43.6 |
|
Diluted........................................................................... |
50.8 |
47.3 |
50.7 |
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) (a)
|
Millions, except par value |
|
|
|
|
Mar. 27, 2005 |
Dec. 31, 2004 |
|
ASSETS |
||
|
Current assets |
|
|
|
$ 261 |
$ 611 |
|
|
Marketable securities.............................................................................................. |
48 |
62 |
|
Receivables, net....................................................................................................... |
1,437 |
1,160 |
|
Inventories................................................................................................................ |
1,065 |
1,016 |
|
Deferred income taxes............................................................................................. |
289 |
301 |
|
Prepaid expenses and other current assets......................................................... |
102 |
106 |
|
Total current assets............................................................................................ |
3,202 |
3,256 |
|
Long-term assets |
||
|
Property, plant and equipment, net...................................................................... |
1,606 |
1,648 |
|
Investments in and advances to equity investees............................................ |
303 |
286 |
|
Goodwill................................................................................................................... |
354 |
355 |
|
Other intangible assets, net.................................................................................. |
91 |
93 |
|
Deferred income taxes............................................................................................ |
689 |
689 |
|
Other assets............................................................................................................ |
180 |
183 |
|
Total assets.......................................................................................................... |
$ 6,425 |
$ 6,510 |
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
Current liabilities |
|
|
|
Short-term borrowings.......................................................................................... |
$ 113 |
$ 327 |
|
Accounts payable................................................................................................. |
942 |
823 |
|
Accrued product coverage and marketing expenses...................................... |
308 |
279 |
|
Other accrued expenses....................................................................................... |
644 |
751 |
|
Total current liabilities...................................................................................... |
2,007 |
2,180 |
|
Long-term liabilities |
||
|
Long-term debt..................................................................................................... |
1,255 |
1,299 |
|
Pensions................................................................................................................. |
487 |
466 |
|
Postretirement benefits other than pensions.................................................. |
570 |
570 |
|
Other long-term liabilities................................................................................... |
396 |
386 |
|
Total liabilities................................................................................................ |
4,715 |
4,901 |
|
|
|
|
|
Minority interests................................................................................................. |
216 |
208 |
|
|
|
|
|
Shareholders' equity |
|
|
|
Common stock, $2.50 par value, 48.4 and 48.2 shares issued................ |
121 |
121 |
|
Additional contributed capital.......................................................................... |
1,176 |
1,167 |
|
Retained earnings................................................................................................ |
948 |
866 |
|
Accumulated other comprehensive loss |
||
|
Minimum pension liability.............................................................................. |
(499) |
(499) |
|
Other components, net................................................................................... |
(50) |
(41) |
|
Common stock in treasury, at cost, 2.1 and 2.2 shares................................. |
(83) |
(88) |
|
Common stock held in trust for employee benefit plans, 2.1 and 2.2 shares...... |
(102) |
(104) |
|
Unearned compensation..................................................................................... |
(17) |
(21) |
|
Total shareholders' equity............................................................................. |
1,494 |
1,401 |
|
Total liabilities and shareholders' equity............................................................. |
$ 6,425 |
$ 6,510 |
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.
Certain reclassifications have been made to 2004 amounts to conform to the 2005 presentation.
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(a)
|
|
Three Months Ended |
|
|
Millions |
Mar. 27, 2005 |
Mar. 28, 2004 |
|
Cash flows from operating activities |
|
|
|
Net earnings.............................................................................................. |
$ 97 |
$ 33 |
|
Adjustments to reconcile net earnings to net cash (used in) |
||
|
provided by operating activities: |
||
|
Depreciation and amortization........................................................ |
72 |
60 |
|
(Gain) loss on disposal of property, plant and equipment......... |
(1) |
1 |
|
Deferred income tax provision........................................................ |
16 |
- |
|
Equity in earnings of investees, net of dividends....................... |
(19) |
(12) |
|
Minority interests in earnings of consolidated subsidiaries..... |
4 |
4 |
|
Pension expense............................................................................... |
26 |
22 |
|
Pension contributions...................................................................... |
(11) |
(23) |
|
Stock-based compensation expense.............................................. |
3 |
9 |
|
Tax benefit on stock options exercised......................................... |
1 |
3 |
|
Amortization of gain on terminated interest rate swaps............. |
(1) |
(2) |
|
Translation and hedging activities................................................ |
(1) |
(13) |
|
Changes in assets and liabilities: |
||
|
Receivables........................................................................................ |
(283) |
(119) |
|
Inventories......................................................................................... |
(53) |
(83) |
|
Accounts payable............................................................................ |
120 |
172 |
|
Accrued expenses............................................................................ |
(74) |
(6) |
|
Other, net................................................................................................... |
42 |
10 |
|
Net cash (used in) provided by operating activities.............................. |
(62) |
56 |
|
|
||
|
Cash flows from investing activities |
||
|
Capital expenditures................................................................................. |
(31) |
(9) |
|
Investments in internal use software..................................................... |
(6) |
(8) |
|
Proceeds from disposals of property, plant and equipment............. |
10 |
1 |
|
Investments in and advances to equity investees.............................. |
(5) |
(18) |
|
Investments in marketable securities - acquisitions........................... |
(26) |
(25) |
|
Investments in marketable securities - liquidations........................... |
39 |
30 |
|
Other, net................................................................................................... |
1 |
- |
|
Net cash used in investing activities...................................................... |
(18) |
(29) |
|
|
||
|
Cash flows from financing activities |
||
|
Proceeds from borrowings...................................................................... |
25 |
2 |
|
Payments on borrowings and capital lease obligations..................... |
(294) |
(15) |
|
Net borrowings under short-term credit agreements.......................... |
10 |
1 |
|
Distributions to minority shareholders................................................. |
(5) |
- |
|
Proceeds from issuing common stock.................................................. |
7 |
22 |
|
Dividend payments on common stock................................................. |
(14) |
(13) |
|
Other, net................................................................................................... |
3 |
- |
|
Net cash used in financing activities...................................................... |
(268) |
(3) |
|
Effect of exchange rate changes on cash and cash equivalents......... |
(2) |
(1) |
|
|
||
|
Net (decrease) increase in cash and cash equivalents........................ |
(350) |
23 |
|
Cash and cash equivalents at beginning of the year............................ |
611 |
108 |
|
Cash and cash equivalents at end of the period..................................... |
$ 261 |
$ 131 |
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.
Certain reclassifications have been made to 2004 amounts to conform to the 2005 presentation.
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
SEGMENT
INFORMATION
(Unaudited)
|
|
|
Power |
Filtration |
International Distributor |
|
|
|
|
||||||
|
Net sales |
$ 1,495 |
$ 439 |
$ 403 |
$ 215 |
$ (344) |
$ 2,208 |
|
Segment EBIT |
114 |
17 |
20 |
12 |
- |
163 |
|
Net assets |
1,358 |
623 |
808 |
205 |
-
|
2,994 |
|
Three Months Ended Mar. 28, 2004 |
||||||
|
Net sales |
$ 1,139 |
$ 369 |
$ 347 |
$ 171 |
$ (255) |
$ 1,771 |
|
Segment EBIT |
40 |
6 |
24 |
8 |
- |
78 |
|
Net assets |
1,069 |
507 |
767 |
196 |
- |
2,539 |
|
|
Three Months Ended |
|
|
|
Mar. 27, |
Mar. 28, |
|
Millions |
2005 |
2004 |
|
|
||
|
Segment EBIT.................................................................................................. |
$ 163 |
$ 78 |
|
Less: |
||
|
Interest expense.......................................................................................... |
28 |
27 |
|
Provision for income taxes........................................................................ |
34 |
14 |
|
Minority interest in earnings of consolidated subsidiaries................. |
4 |
4 |
|
Net earnings ................................................................................................... |
$ 97 |
$ 33 |
|
|
||
|
Net assets for operating segments.............................................................. |
$ 2,994 |
$ 2,539 |
|
Liabilities deducted in computing net assets............................................. |
3,252 |
2,811 |
|
(826) |
(698) |
|
|
978 |
858 |
|
|
27 |
69 |
|
|
$
6,425 |
$
5,579 |
|
The table below reconciles the segment information to the corresponding amounts in the Consolidated Financial Statements.
NON-GAAP FINANCIAL MEASURES (Unaudited)
Earnings before interest, taxes and minority interests (EBIT)
|
|
Three Months Ended |
Three Months |
|
|
|
|
|
|
|
|
Mar. 27, |
Mar. 28, |
Dec. 31, |
|
Millions |
2005 |
2004 |
2004 |
|
Earnings before interest, income taxes and minority interests........ |
$ 163 |
$ 78 |
$ 173 |
|
|
|
|
|
|
7.4% |
4.4% |
7.4% |
|
|
|
|
|
|
|
28 |
27 |
31 |
|
|
Provision for income taxes................................................................. |
34 |
14 |
12 |
|
4 |
4 |
11 |
|
|
Net earnings............................................................................................ |
$ 97 |
$ 33 |
$ 119 |
|
Net earnings as a percentage of net sales......................................... |
4.4% |
1.9% |
5.1% |
* 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.