COLUMBUS, Ind., Apr 30, 2008 (BUSINESS WIRE) -- Cummins Inc. (NYSE: CMI) today reported significantly higher revenues, net income and Earnings Before Interest and Taxes (EBIT) for the first quarter of 2008. All four business segments reported double-digit percentage sales increases during the quarter, with earnings growing at an even faster pace than sales.

 

Sales of $3.47 billion were 23 percent higher than $2.82 billion in the first quarter 2007, due to a 25 percent increase in both the Engine and Components segments, a 44 percent increase in the Distribution business and a 17 percent rise in Power Generation sales.

 

Net income rose 33 percent to $190 million, or 97 cents per share, compared to $143 million, or 71 cents per share, during the same period in 2007. EBIT of $315 million, or 9.1 percent of sales, was 30 percent higher than $243 million (8.6 percent of sales) a year ago.

 

Cummins showed strength across all its business segments, both in the U.S. and in key international markets. Particularly strong performance in international markets - which accounted for 57 percent of the Company's sales in the quarter - helped offset rising commodity prices and sluggishness in some U.S. consumer-related markets such as pick-up truck engines, recreational vehicle products and recreational marine engines.

 

"Our strong performance in the first quarter, which came in the face of considerable economic uncertainty in the U.S., is further proof that our diversification and growth strategies are working," said Cummins Chairman and Chief Executive Officer Tim Solso. "While we are monitoring the U.S. economy closely, we intend to continue investing in opportunities around the world to fuel further growth in the future."

 

Based on the Company's performance in the first quarter and the outlook for the remainder of the year, Cummins affirmed its previous forecasts for revenues to grow by at least 12 percent from 2007 and that it expects to achieve its EBIT target of 10 percent of sales for the full year.

 

The Company also reiterated its plans to invest between $550 and $600 million in capital expenditures globally, mostly to fund new product initiatives and to create product capacity in a multitude of global markets where emissions standards are changing.

 

First-quarter demand was particularly strong for medium-duty truck engines in the United States; for commercial generator sets in India, the United Kingdom, Asia and the Middle East; and for turbochargers and exhaust aftertreatment products in North America and Europe. In addition, the Company's distribution business saw considerable growth in Europe, the Middle East and Asia Pacific.

 

In addition, the Company's joint venture earnings increased 86 percent from the same period in 2007. The improvement was primarily driven by strength in emerging markets such as China and India, and at the Company's North American distributors.

 

Sales growth was led by the Engine business, the Company's largest business segment. Heavy-duty and medium-duty truck engine shipments increased 36 percent and 68 percent, respectively, primarily due to increased market share in North America.

 

Through February, the latest month for which statistics are available, Cummins owned a market-leading share of 43 percent of the North American Class 8 truck engine market - compared to 28 percent at the same time last year. Cummins' share of the Class 7 medium-duty truck market was 55 percent through February, compared to 23 percent at the same time in 2007.

 

As another sign of the Company's strong financial performance, Standard & Poor's upgraded Cummins' investment-grade debt rating to 'BBB' from 'BBB-' in March. In its announcement of the upgrade, the agency cited "improved operating performance over the past several years - including during the expected emissions-related downturn in (North American) heavy-duty truck demand in 2007 - combined with significant on- and off-balance-sheet debt reduction, reflective of moderate financial policies."

 

First quarter details

 

Engine Segment

 

Sales of $2.21 billion were 25 percent higher than $1.77 billion for the same period in 2007. Segment EBIT increased 52 percent to $194 million, or 8.8 percent of sales, from $128 million (7.3 percent of sales). In addition to sales gains in the heavy- and medium-duty markets, sales to the commercial marine engine market rose 77 percent from 2007. Those gains, and others, more than offset a 20 percent drop in light duty automotive sales.

 

Power Generation

 

Sales increased 17 percent to $787 million from $675 million in the first quarter of 2007. Segment EBIT of $78 million (9.9 percent of sales), rose slightly from $77 million (11.4 percent of sales).

 

Commercial generator sales rose 23 percent, led by strong gains in Europe/U.K., India and the Middle East. Alternator sales increased 18 percent, while consumer sales fell 16 percent, primarily due to softness in the recreational vehicle market.

 

Components

 

Sales increased 25 percent to $820 million from $657 during the same period in 2007. Segment EBIT rose 54 percent to $37 million, or 4.5 percent of sales, from $24 million (3.7 percent of sales). Sales gains were led by a 49 percent increase in the Company's turbocharger business and a 63 percent increase in Emission Solutions.

 

The turbocharger business saw significant improvement in both sales and profit contribution to the segment. Two of the segment's businesses - filtration and fuel systems - performed at or above expectations. The Emission Solutions business remains an area of focus as the Company works to improve its profitability as sales continue to increase.

 

Distribution

 

Sales of $445 million were 44 percent higher than $309 million for the same period in 2007, led by strong engine and power generation sales in Europe, the Middle East and Asia Pacific. Segment EBIT rose 26 percent to $49 million (11 percent of sales) from $39 million (12.6 percent of sales) in 2007.

 

Much of the improvement in sales came from organic growth in markets around the world and the acquisition of a distributor business in the United States during the first quarter of 2008, which accounted for approximately one-fourth of the year-over-year quarterly sales growth. Additionally, joint venture income rose 47 percent, led by strong performance at the Company's North American distributors.

 

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.

 

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.

 

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

-------------------------------

March 30, April 1, December 31,

200820072007

--------- -------- ------------

Millions

(except per share amounts)

NET SALES$3,474$2,817$3,516

Cost of sales2,7672,2652,834

--------- -------- ------------

GROSS MARGIN707552682

OPERATING EXPENSES AND INCOME

Selling, general and administrative

expenses351283359

Research, development and

engineering expenses1038093

Equity, royalty and interest income

from investees673659

Other operating (expense) income,

net(1)(2)13

--------- -------- ------------

OPERATING INCOME319223302

Interest income6119

Interest expense111614

Other (expense) income, net(10)913

--------- -------- ------------

INCOME BEFORE INCOME TAXES AND

MINORITY INTERESTS304227310

Income tax expense1027597

Minority interest in income of

consolidated subsidiaries12915

--------- -------- ------------

NET INCOME$190$143$198

========= ======== ============

EARNINGS PER COMMON SHARE

Basic$ 0.97$ 0.72$ 1.01

Diluted$ 0.97$ 0.71$ 1.00

WEIGHTED AVERAGE SHARES OUTSTANDING

Basic195.1200.0 195.7

Diluted196.4201.1197.5

CASH DIVIDENDS DECLARED PER COMMON

SHARE$0.125$ 0.09$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 BALANCE SHEETS

(Unaudited) (a)

March 30,December 31,

20082007

---------- ------------

Millions,

(except par value)

ASSETS

Current assets

Cash and cash equivalents$446$577

Marketable securities108120

Accounts and notes receivable, net2,2241,998

Inventories1,8771,692

Deferred income taxes288276

Prepaid expenses and other current assets189152

-------------------

Total current assets5,1324,815

-------------------

Long-term assets

Property, plant and equipment4,3774,313

Accumulated depreciation(2,705)(2,668)

-------------------

Property, plant and equipment, net1,6721,645

-------------------

Investments and advances related to equity

method investees588514

Goodwill and other intangible assets, net555538

Deferred income taxes and other assets678683

-------------------

Total assets$8,625$8,195

===================

LIABILITIES

Current liabilities

Current portion of long-term debt and loans

payable$119$119

Accounts payable (principally trade)1,4541,263

Current portion of accrued product warranty347337

Accrued compensation, benefits and retirement

costs286441

Other accrued expenses656551

-------------------

Total current liabilities2,8622,711

-------------------

Long-term liabilities

Long-term debt578555

Pensions and other postretirement benefits629633

Other liabilities and deferred revenue635594

-------------------

Total liabilities4,7044,493

-------------------

MINORITY INTERESTS313293

-------------------

SHAREHOLDERS' EQUITY

Common stock, $2.50 par value, 300 shares

authorized, 203.1 and 220.4 shares issued1,7261,719

Retained earnings2,8202,660

Treasury stock, at cost, 18.4 and 18.2 shares(603)(593)

Common stock held by employee benefits trust,

at cost, 6.5 and 6.5 shares(79)(79)

Unearned compensation(8)(11)

Accumulated other comprehensive loss

Defined benefit postretirement plans(373)(378)

Other12591

-------------------

Total accumulated other comprehensive

loss(248)(287)

-------------------

Total shareholders' equity3,6083,409

-------------------

Total liabilities, minority interests and

shareholders' equity$8,625$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)

Three months ended

-------------------

March 30,April 1,

20082007

---------- --------

CASH FLOWS FROM OPERATING ACTIVITIESMillions

Net income$190$143

Adjustments to reconcile net income to net cash

provided by (used in) operating activities:

Depreciation and amortization7568

Net loss on disposal of property, plant and

equipment--2

Deferred income taxes(7)31

Equity in earnings of investees, net of

dividends(39)(12)

Minority interest in income of consolidated

subsidiaries129

Pension expense1824

Pension contributions (17)(61)

Other post-retirement benefits expense, net of

cash payments(6)(1)

Stock-based compensation expense86

Excess tax benefits on stock-based awards(10)(9)

Translation and hedging activities6(5)

Changes in current assets and liabilities, net of

acquisitions and dispositions:

Accounts and notes receivable(193)(153)

Inventories(165)(165)

Other current assets(5)(6)

Accounts payable164126

Accrued expenses(23)(140)

Changes in long-term liabilities2515

Other, net415

----------------

Net cash provided by (used in) operating

activities37(113)

----------------

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures(90)(48)

Investments in internal use software(14)(13)

Proceeds from disposals of property, plant and

equipment12

Investments in and advances to equity investees(20)(17)

Acquisition of businesses, net of cash acquired(29)(20)

Investments in marketable securities--

acquisitions(60)(68)

Investments in marketable securities--

liquidations6994

Other, net(9)(3)

----------------

Net cash used in investing activities(152)(73)

----------------

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from borrowings424

Payments on borrowings and capital lease

obligations(47)(101)

Net borrowings under short-term credit agreements14(2)

Distributions to minority shareholders(6)(6)

Dividend payments on common stock(25)(19)

Repurchases of common stock(11)(13)

Excess tax benefits on stock-based awards109

Other, net1(7)

----------------

Net cash used in financing activities(22)(135)

----------------

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH

EQUIVALENTS62

----------------

Net decrease in cash and cash equivalents(131)(319)

Cash and cash equivalents at beginning of year577840

----------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD$446$521

================

(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)

Power

Engine Generation Components

------ ---------- ----------

Millions

Three months ended March 30, 2008

External sales$1,885$581$567

Intersegment sales324206253

------ ------------------

Total sales2,209787820

Depreciation and amortization(2)441115

Research, development and engineering

expense701023

Equity, royalty and interest income

from investees3354

Interest income311

Segment EBIT1947837

Three months ended April 1, 2007

External sales$1,522$531$455

Intersegment sales243144202

------ ------------------

Total sales1,765675657

Depreciation and amortization(2)411014

Research, development and engineering

expense52820

Equity, royalty and interest income

from investees173(1)

Interest income821

Segment EBIT1287724

Three months ended December 31, 2007

External sales$1,862$645$542

Intersegment sales293195235

------ ------------------

Total sales2,155840777

Depreciation and amortization(2)441116

Research, development and engineering

expense63921

Equity, royalty and interest income

from investees2653

Interest income621

Segment EBIT1208647

Non-segment

Distributionitems(1)Total

-------------- ----------- ------

Millions

Three months ended March 30, 2008

External sales$441$--$3,474

Intersegment sales4(787)--

-----------------------------

Total sales445 (787)3,474

Depreciation and amortization(2)4--74

Research, development and engineering

expense----103

Equity, royalty and interest income

from investees25--67

Interest income1--6

Segment EBIT49(43)315

 

Three months ended April 1, 2007

External sales$309$--$2,817

Intersegment sales--(589)--

-----------------------------

Total sales309(589)2,817

Depreciation and amortization(2)2--67

Research, development and engineering

expense----80

Equity, royalty and interest income

from investees17--36

Interest income----11

Segment EBIT39(25)243

Three months ended December 31, 2007

External sales$467$--$3,516

Intersegment sales1(724)--

-----------------------------

Total sales468(724)3,516

Depreciation and amortization(2)3--74

Research, development and engineering

expense----93

Equity, royalty and interest income

from investees25--59

Interest income----9

Segment EBIT5615324

(1) Includes intersegment sales and profit in inventory eliminations

and unallocated corporate 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

-------------------------------

March 30, April 1, December 31,

200820072007

--------- -------- ------------

Millions

Segment EBIT$315$243$324

Less:

Interest expense111614

--------- -------- ------------

Income before income taxes and

minority interests$304$227$310

====== ============

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, income taxes and

minority interest in income 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

----------------------------------

March 30,April 1,December 31,

200820072007

-----------------------------

Millions

Earnings before interest expense,

income taxes and minority

interests$315$243$324

EBIT as a percentage of net sales9.1%8.6%9.2%

Less:

Interest expense111614

Income tax expense1027597

Minority interest in income of

consolidated subsidiaries12915

-----------------------------

Net income$190$143$198

=============================

Net income as a percentage of net

sales5.5%5.1%5.6%

We believe EBIT is a useful measure of our operating performance for

the period 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

$MillionsQ1Q2Q3Q4YTD

-------- -------- -------- -------- --------

2008

Engine Business

Heavy-Duty Truck536536

Medium Duty

Truck+Bus397397

Light Duty Auto+RV275275

Industrial733733

Stationary Power268268

--------------------------------------------

TOTAL ENGINE

BUSINESS2,2090002,209

Power Generation787787

Components820820

Distributors445445

Eliminations(787)(787)

--------------------------------------------

TOTAL3,4740003,474

============================================

2007

Engine Business

Heavy-Duty Truck4244735205311,948

Medium Duty

Truck+Bus2063203593981,283

Light Duty Auto+RV2884183882471,341

Industrial6176656617332,676

Stationary Power230233225246934

--------------------------------------------

TOTAL ENGINE

BUSINESS1,7652,1092,1532,1558,182

Power Generation6757697768403,060

Components6577577417772,932

Distributors3093683954681,540

Eliminations(589)(660)(693)(724)(2,666)

--------------------------------------------

TOTAL2,8173,3433,3723,51613,048

============================================

Engine Shipments

UnitsQ1Q2Q3Q4YTD

-------- -------- -------- -------- --------

2008

Midrange114,200114,200

Heavy-duty24,70024,700

High Horsepower4,6004,600

--------------------------------------------

TOTAL143,500000143,500

============================================

2007

Midrange107,200133,500130,500115,600486,800

Heavy-duty19,00023,80024,80023,80091,400

High Horsepower4,3004,7004,6004,90018,500

--------------------------------------------

TOTAL130,500162,000159,900144,300596,700

============================================