Cummins Continues Record Performance in Second Quarter; Increases Full-Year Earnings Guidance
COLUMBUS, IND.--(BUSINESS WIRE)--
Broad gains across most of the Company's product and geographical markets led Cummins Inc. (NYSE:CMI) to record revenues and strong earnings in the second quarter.
The Company today reported second-quarter revenues of $3.34 billion, up 18 percent from $2.84 billion in the second quarter of 2006 and 10 percent higher than the previous quarterly record set in the fourth quarter of last year.
Net income of $214 million, or $2.13 per diluted share, was down 3 percent from $220 million ($2.19 per diluted share) in the second quarter of 2006, which included a $28 million ($0.28 per share) one-time tax benefit. Absent the tax benefit a year ago, net income increased 11 percent over the same period in 2006.
Earnings Before Interest and Taxes (EBIT) increased 9 percent to $354 million, from $325 million during the same period in 2006, and also was a quarterly record.
The Company's strong performance comes in the face of the emissions-related slowdown in the North American heavy-duty truck market, which is expected to be down 45 percent this year. Cummins' North American heavy-duty engine shipments fell 42 percent from a year ago, but significant growth in the Company's non-heavy duty truck engine markets and other product lines more than offset that decrease.
"This was a tremendous quarter for Cummins and is further proof that the work we have done to diversify our business is paying off," said Cummins Chairman and Chief Executive Officer Tim Solso. "Our strong performance in the first half of the year has put us in a position to make 2007 Cummins' most profitable year ever - which would be a significant feat given the challenges we have faced in the heavy-duty truck engine market."
Based on its first-half performance and its outlook for the remainder of the year, Cummins also raised its 2007 earnings guidance today to $7.15 - $7.65 from $6.00 - $6.50 a share.
The Company's Engine, Power Generation and Components businesses all reported record revenues in the second quarter, while Power Generation, Components and Distribution reported record Segment EBIT.
In the Engine business, sales to light-duty automotive and recreational vehicle markets, as well as the global medium-duty truck, bus and construction markets, were the key drivers of broad gains - lessening the impact of lower heavy-duty truck engine sales. Segment EBIT fell 2 percent from 2006.
The Company's share of the North American heavy-duty market continued to increase in the second quarter. Through May, Cummins had earned a 33.1 percent share of the market - up from 27.1 percent at the end of 2006.
The Company's Power Generation business continues to produce record sales and earnings, led by significant growth in the Company's commercial generator set and alternator product lines. Growth was strongest in North America, the Middle East and India.
The Components business - which includes filtration, exhaust aftertreatment, turbochargers and fuel systems - reported significantly improved profitability, along with record quarterly sales. Tougher emissions controls around the world are driving strong gains in this business. Cummins Filtration reported a 29 percent increase in operating profit on an 11 percent rise in revenue, while Cummins Emission Solutions is on pace to triple its sales from last year.
The Company's Distribution business reported record profit and near-record sales during the quarter. Demand for power generation equipment increased significantly in North America, Europe and the Middle East. Distributor joint venture income increased substantially from the same period in 2006 led by strong performance at the Company's North America distributor joint ventures.
Buoyed by its strong performance, Cummins also continues to invest in profitable growth opportunities and return significant value to its shareholders through actions such as the 39 percent increase in the cash dividend on Cummins stock announced in early July.
The Company expects to spend $320 - $350 million on capital projects this year - part of $2 billion in planned capital expenditures around the world in the next five years. The Company also anticipates that its unconsolidated joint ventures will spend another $1 billion on capital projects during that same period. The large majority of capital spending will go to increase capacity for emissions-compliant products across all of our businesses.
As a reflection of the Company's continuing strong performance, last week Fitch Ratings upgraded its ratings on Cummins' debt, citing the "continued improvement in Cummins' balance sheet, increased sales diversification, an improved competitive profile and solid operating performance in North America so far in 2007 despite the downturn in the heavy truck cycle" among other factors.
"This is an exciting time for Cummins," Solso said. "We have performed well this year in the face of significant challenges and continue to position ourselves for broad, global growth in the years to come. Increasingly, our businesses are working together to provide the best products and service to customers around the world, and we remain focused on providing strong returns to our shareholders."
Second-quarter details
Engine Segment
Sales increased 11 percent from the same period in 2006 to $2.11 billion. Sales to light-duty automotive and RV markets increased 23 percent; global medium-duty truck engine sales rose 30 percent and worldwide sales to the construction industry increased 24 percent.
Segment EBIT of $186 million, or 8.8 percent of sales, fell 2 percent from the second quarter of 2006 due to lower North American heavy-duty truck engine sales.
Power Generation
Sales rose 29 percent from the same period in 2006 to $769 million, while Segment EBIT increased 57 percent to $88 million, or 11.4 percent of sales. Strong volumes across most regions - especially North America, the Middle East, Europe and India - led to the improved performance.
Commercial generator sales, the largest business in the segment, rose 33 percent compared to the same period in 2006, while alternator sales increased 40 percent. Every line of business in the segment reported double-digit percentage sales growth during the quarter.
Components
Sales increased 34 percent from second quarter 2006 to $757 million, while Segment EBIT grew 41 percent to $48 million, or 6.3 percent of sales.
The improved performance was led by strong profit gains in the segment's filtration and exhaust aftertreatment businesses. Sales in Emissions Solutions, an exhaust aftertreatment business, increased by more than 250 percent over the same period in 2006, due to strong demand for its products designed to help engines meet stringent new emissions standards in the U.S. and Europe.
Distribution
Sales of $368 million were 10 percent higher than the second quarter of 2006 (24 percent higher when adjusting for a change in reporting at one of the Company's North American distributor joint ventures that took effect Jan. 1, 2007). Segment EBIT was a record $46 million, or 12.5 percent of sales, a 28 percent increase from last year.
Distributor joint venture income increased 71 percent from the same period in 2006, led by strong gains at the Company's North American distributor joint ventures. Sales of power generation equipment rose 40 percent, paced by large gains in Europe and the Middle East, while parts sales increased 24 percent. Double-digit percentage sales gains were reported in all of the segment's geographic regions.
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. Management also believes that certain other non-GAAP measures, such as net income excluding one-time tax benefits and cash flow from operations excluding pension contributions, can provide meaningful reflection of underlying trends of the business because they provide a comparison of historical information that excludes certain items that affect the overall comparability.
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 statements disclosure
Information provided in this release and on the webcast 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.
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.
Cummins reported net income of $715 million on sales of $11.4 billion in 2006. Press releases can be found on the Web at www.cummins.com.
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (a)
Three months ended Six months ended
------------------------ ----------------
July 1, July 2, April 1, July 1, July 2,
2007 2006 2007 2007 2006
------- ------- -------- -------- -------
Millions
(except per share amounts)
Net sales $ 3,343 $ 2,842 $ 2,817 $ 6,160 $ 5,520
Cost of sales 2,673 2,196 2,265 4,938 4,308
------- ------- -------- -------- -------
Gross margin 670 646 552 1,222 1,212
Operating expenses and
income
Selling and administrative
expenses 314 294 283 597 562
Research and engineering
expenses 74 80 80 154 162
Investee equity, royalty
and other income 52 37 36 88 68
Other operating income
(expenses), net 7 -- (2) 5 1
------- ------- -------- -------- -------
Operating earnings 341 309 223 564 557
Interest income 7 10 11 18 19
Interest expense 14 26 16 30 53
Other income, net 6 6 9 15 4
------- ------- -------- -------- -------
Earnings before income taxes
and minority interests 340 299 227 567 527
Provision for income taxes 112 67 75 187 152
Minority interests in
earnings of consolidated
subsidiaries 14 12 9 23 20
------- ------- -------- -------- -------
Net earnings $ 214 $ 220 $ 143 $ 357 $ 355
======= ======= ======== ======== =======
Earnings per common share(b)
Basic $ 2.14 $ 2.40 $ 1.43 $ 3.57 $ 3.94
Diluted $ 2.13 $ 2.19 $ 1.42 $ 3.55 $ 3.54
Cash dividends declared per
share $ 0.18 $ 0.15 $ 0.18 $ 0.36 $ 0.30
(a) Prepared on an unaudited basis in accordance with accounting
principles generally accepted in the United States of America.
(b) All per share amounts reflect the two-for-one stock split
distributed April 9, 2007.
Certain reclassifications have been made to 2006 amounts to
conform to the 2007 presentation.
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (a)
July 1, December 31,
2007 2006
------------ ------------
Millions
(except par value)
ASSETS
Current assets
Cash and cash equivalents $ 626 $ 840
Marketable securities 105 95
Receivables, net 2,071 1,767
Inventories 1,652 1,393
Other current assets 398 393
------------ ------------
Total current assets 4,852 4,488
Long-term assets
Property, plant and equipment, net 1,536 1,574
Investments in and advances to equity
investees 406 345
Goodwill 369 356
Other intangible assets, net 148 128
Other assets 533 574
------------ ------------
Total assets $ 7,844 $ 7,465
============ ============
LIABILITIES
Current liabilities
Short-term borrowings $ 122 $ 164
Accounts payable 1,329 1,104
Other accrued expenses 1,092 1,131
------------ ------------
Total current liabilities 2,543 2,399
Long-term liabilities
Long-term debt 544 647
Other liabilities 1,328 1,363
------------ ------------
Total liabilities 4,415 4,409
------------ ------------
MINORITY INTERESTS 270 254
------------ ------------
SHAREHOLDERS' EQUITY (b)
Common stock, $2.50 par value, 300 shares
authorized, 110.2 and 110.0 shares
issued
276 137
Additional paid-in capital 1,377 1,500
Retained earnings 2,329 2,009
Treasury stock, at cost, 6.2 and 5.8
shares (245) (212)
Common stock held in trust for employee
benefit plans, 3.8 and 3.8 shares (92) (92)
Unearned compensation (13) (14)
Accumulated other comprehensive loss (473) (526)
------------ ------------
Total shareholders' equity 3,159 2,802
------------ ------------
Total liabilities, minority interests and
shareholders' equity $ 7,844 $ 7,465
============ ============
(a) Prepared on an unaudited basis in accordance with accounting
principles generally accepted in the United States of America.
(b) All share amounts reflect the two-for-one stock split distributed
April 9, 2007.
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (a)
Six months ended
----------------
July 1, July 2,
2007 2006
-------- -------
Millions
Net cash provided by operating activities $ 156 $ 355
-------- -------
Cash flows from investing activities
Capital expenditures (108) (102)
Investments in internal use software (28) (22)
Proceeds from the disposal of property, plant and
equipment 19 24
Investments in and advances to equity investees (28) (3)
Acquisition of businesses, net of cash acquired (20) --
Investments in marketable securities--acquisitions (194) (99)
Investments in marketable securities--liquidations 191 92
Other, net (8) --
-------- -------
Net cash used in investing activities (176) (110)
-------- -------
Cash flows from financing activities
Proceeds from borrowings 4 54
Payments on borrowings and capital lease
obligations (115) (111)
Dividend payments on common stock (38) (28)
Proceeds from issuing common stock 3 6
Repurchases of common stock (36) (62)
Other, net (17) (5)
-------- -------
Net cash used in financing activities (199) (146)
-------- -------
Effect of exchange rate changes on cash and cash
equivalents 5 --
-------- -------
Net (decrease) increase in cash and cash equivalents (214) 99
Cash and cash equivalents at beginning of year 840 779
-------- -------
Cash and cash equivalents at end of period $ 626 $ 878
======== =======
(a) Prepared on an unaudited basis in accordance with accounting
principles generally accepted in the United States of America.
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
Non-
Power segment
Engine Generation Components Distribution items(1) Total
------ ---------- ---------- ------------ --------- ------
Millions
Three months
ended July
1, 2007
External
sales $1,855 $ 605 $ 516 $367 $ -- $3,343
Inter-
segment
sales 254 164 241 1 (660) --
------ ------ ------ ---- ------- ------
Net sales 2,109 769 757 368 (660) 3,343
Investee
equity,
royalty and
other
income 25 4 (1) 24 -- 52
Interest
income 6 1 -- -- -- 7
Segment EBIT 186 88 48 46 (14) 354
Three months
ended July
2, 2006
External
sales $1,680 $ 467 $ 363 $332 $ -- $2,842
Inter-
segment
sales 216 131 200 4 (551) --
------ ------ ------ ---- ------- ------
Net sales 1,896 598 563 336 (551) 2,842
Investee
equity,
royalty and
other
income 18 3 2 14 -- 37
Interest
income 7 2 -- 1 -- 10
Segment EBIT 190 56 34 36 9 325
Three months
ended April
1, 2007
External
sales $1,522 $ 531 $ 455 $309 $ -- $2,817
Inter-
segment
sales 243 144 202 -- (589) --
------ ------ ------ ---- ------- ------
Net sales 1,765 675 657 309 (589) 2,817
Investee
equity,
royalty and
other
income 17 3 (1) 17 -- 36
Interest
income 8 2 1 -- -- 11
Segment EBIT 128 77 24 39 (25) 243
Six months
ended July
1, 2007
External
sales $3,377 $1,136 $ 971 $676 $ -- $6,160
Inter-
segment
sales 497 308 443 1 (1,249) --
------ ------ ------ ---- ------- ------
Net sales 3,874 1,444 1,414 677 (1,249) 6,160
Investee
equity,
royalty and
other
income 42 7 (2) 41 -- 88
Interest
income 14 3 1 -- -- 18
Segment EBIT 314 165 72 85 (39) 597
Six months
ended July
2, 2006
External
sales $3,279 $ 878 $ 718 $645 $ -- $5,520
Inter-
segment
sales 438 256 400 8 (1,102) --
------ ------ ------ ---- ------- ------
Net sales 3,717 1,134 1,118 653 (1,102) 5,520
Investee
equity,
royalty and
other
income 35 6 4 23 -- 68
Interest
income 14 3 -- 2 -- 19
Segment EBIT 369 101 65 67 (22) 580
(1) Includes intercompany eliminations and unallocated corporate
expenses.
A reconciliation of our segment information to the corresponding
amounts in the Consolidated Financial Statements is shown in the
table below:
Three months ended Six months ended
------------------------ ----------------
July 1, July 2, April 1, July 1, July 2,
2007 2006 2007 2007 2006
------- ------- -------- -------- -------
Millions
Segment EBIT $ 354 $ 325 $ 243 $ 597 $ 580
Less:
Interest expense 14 26 16 30 53
------- ------- -------- -------- -------
Earnings before income taxes
and minority interests $ 340 $ 299 $ 227 $ 567 $ 527
======= ======= ======== ======== =======
CUMMINS INC. AND CONSOLIDATED 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 earnings, for
each of the applicable periods:
Three Months Ended Six Months Ended
------------------------ ----------------
July 1, July 2, April 1, July 1, July 2,
2007 2006 2007 2007 2006
------- ------- -------- -------- -------
Millions
Earnings before interest
expense, income taxes and
minority interests $ 354 $ 325 $ 243 $ 597 $ 580
EBIT as a percentage of net
sales 10.6% 11.4% 8.6% 9.7% 10.5%
Less:
Interest expense 14 26 16 30 53
Provision for income
taxes 112 67 75 187 152
Minority interests in
earnings of consolidated
subsidiaries 14 12 9 23 20
------- ------- -------- -------- -------
Net earnings $ 214 $ 220 $ 143 $ 357 $ 355
======= ======= ======== ======== =======
Net earnings as a
percentage of net sales 6.4% 7.7% 5.1% 5.8% 6.4%
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.
Cash from operations excluding pension contributions
For the six months ended
------------------------
July 1, July 2,
2007 2006
------------ -----------
Cash provided by operations $ 156 $ 355
Add back: pension contributions 102 83
------------ -----------
Cash provided by operations excluding pension
contributions $ 258 $ 438
============ ===========
We believe cash provided by operations excluding pension contributions
is a useful measure of our operating performance for the periods
presented as it illustrates our operating performance without regard
to funding decisions. This measure is not in accordance with, or an
alternative for, GAAP and may not be consistent with measures used by
other companies. It should be considered supplemental data.
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
SELECTED FOOTNOTE DATA
(Unaudited)
NOTE 1. EARNINGS PER SHARE
The following is a reconciliation of net earnings and weighted-average
common shares outstanding for purposes of calculating basic and
diluted net earnings per share:
Three months ended Six months ended
------------------------ ----------------
July 1, July 2, April 1, July 1, July 2,
2007 2006 2007 2007 2006
------- ------- -------- -------- -------
Millions
(except per share amounts)
Net earnings for basic EPS $ 214 $ 220 $ 143 $ 357 $ 355
Interest on junior
convertible subordinated
debentures, net of tax -- 3 -- -- 6
------- ------- -------- -------- -------
Net earnings for diluted EPS $ 214 $ 223 $ 143 $ 357 $ 361
======= ======= ======== ======== =======
Weighted-average common
shares outstanding:
Basic 100.0 91.5 100.0 100.0 90.1
Dilutive effect of stock
compensation awards 0.6 0.8 0.5 0.6 0.7
Dilutive effect of junior
convertible subordinated
debentures -- 9.4 -- -- 11.0
------- ------- -------- -------- -------
Diluted 100.6 101.7 100.5 100.6 101.8
======= ======= ======== ======== =======
Earnings per common share:
Basic $ 2.14 $ 2.40 $ 1.43 $ 3.57 $ 3.94
Diluted $ 2.13 $ 2.19 $ 1.42 $ 3.55 $ 3.54
The Board of Directors authorized a two-for-one split of Cummins stock
on March 8, 2007, which was distributed on April 9, 2007, to
shareholders of record as of March 26, 2007. All share and per share
amounts have been adjusted to reflect the two-for-one stock split.
NOTE 2. INVESTEE EQUITY, ROYALTY AND OTHER INCOME
Investee equity, royalty and other income included in our Condensed
Consolidated Statements of Earnings for the interim reporting periods
was as follows:
Three months ended Six months ended
------------------------ ----------------
July 1, July 2, April 1, July 1, July 2,
2007 2006 2007 2007 2006
------- ------- -------- -------- -------
Millions
North American distributors $ 22 $ 12 $ 15 $ 37 $ 21
Dongfeng Cummins Engine
Company, Ltd. 11 7 6 17 12
Chongqing Cummins Engine
Company, Ltd. 5 4 5 10 7
Cummins MerCruiser Diesel
Marine LLC. 4 3 3 7 4
Tata Cummins Limited 4 3 2 6 6
Fleetguard Shanghai Filter
Co. Ltd. 2 1 1 3 2
All others 2 4 1 3 8
------- ------- -------- -------- -------
Cummins share of net
earnings 50 34 33 83 60
Royalty and other income 2 3 3 5 8
------- ------- -------- -------- -------
Investee equity, royalty and
other income $ 52 $ 37 $ 36 $ 88 $ 68
======= ======= ======== ======== =======
NOTE 3. PROVISION FOR INCOME TAXES
Our tax rates are generally less than the 35 percent U.S. income tax
rate primarily because of lower taxes on foreign earnings, export tax
benefits and research tax credits.
Our effective tax rate for the three and six months ended July 1,
2007, was 33 percent. Our 2006 provision was reduced in the second
quarter by $28 million, or $0.28 per share, due to the favorable
resolution of tax uncertainties related to prior years. In addition,
our 2006 provision was also impacted in the first quarter by a $12
million, or $0.12 per share, increase for the effect of new Indiana
tax legislation. As a result, our effective tax rate for the three
and six months ended July 2, 2006, was 22 percent and 29 percent,
respectively.
NOTE 4. DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense included in operating activities
of the Condensed Consolidated Statements of Cash Flows for the six
months ended July 1, 2007 and July 2, 2006, was $142 million and $148
million, respectively.
NOTE 5. SHIPPING AND HANDLING COSTS
Our shipping and handling costs are expensed as incurred. Those
shipping and handling costs associated with operations of our
inventory distribution centers and warehouse facilities were
previously classified as "Selling and administrative expenses" in our
Condensed Consolidated Statements of Earnings. In accordance with
Emerging Issues Task Force (EITF) Issue No. 00-10 "Accounting for
Shipping and Handling Fees and Costs," we previously disclosed the
amount of shipping and handling costs included as "Selling and
administrative expenses" in the notes to our consolidated financial
statements. Beginning January 1, 2007, we revised our accounting
policy and all shipping and handling costs are now classified as
"Cost of sales." This presentation is more consistent with current
industry practice. For purposes of comparability, the $26 million and
$59 million previously classified as "Selling and administrative
expenses" in the three and six months ended July 2, 2006, has been
adjusted retrospectively to apply the new method. This change had no
impact on operating earnings, EBIT, net earnings, or earnings per
share.
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL STATEMENTS OF EARNINGS INFORMATION
(Unaudited)
Shipping and handling costs associated with operations of our
inventory distribution centers and warehouse facilities were
previously classified as "Selling and administrative expenses" in our
Consolidated Statements of Earnings. In accordance with Emerging
Issues Task Force (EITF) Issue No. 00-10 "Accounting for Shipping and
Handling Fees and Costs," we previously disclosed the amount of
shipping and handling costs included as "Selling and administrative
expenses" in the notes to our consolidated financial statements.
Beginning January 1, 2007, we revised our accounting policy and all
shipping and handling costs are classified as "Cost of sales." This
presentation is more consistent with current industry practice. For
purposes of comparability, amounts previously classified as "Selling
and administrative expenses" in previous periods have been adjusted
retrospectively to apply the new method. The Consolidated Statements
of Earnings for each of the quarterly periods in 2006 and for the
2006 and 2005 annual periods with all shipping and handling costs
included in "Cost of sales" follows:
For the three months ended For the years ended
--------------------------------- -------------------
April 2, July 2, Oct. 1, Dec. 31, Dec. 31,
2006 2006 2006 2006 2006 2005
-------- ------- ------- -------- --------- ---------
Millions
Net sales $ 2,678 $ 2,842 $ 2,809 $ 3,033 $ 11,362 $ 9,918
Cost of sales 2,112 2,196 2,192 2,397 8,897 7,874
-------- ------- ------- -------- --------- ---------
Gross margin 566 646 617 636 2,465 2,044
Operating
expenses and
income
Selling and
administrative
expenses 268 294 291 300 1,153 1,003
Research and
engineering
expenses 82 80 81 78 321 278
Investee
equity,
royalty and
other income 31 37 37 35 140 131
Other operating
income
(expenses),
net 1 -- (4) 3 -- --
-------- ------- ------- -------- --------- ---------
Operating
earnings 248 309 278 296 1,131 894
Interest income 9 10 14 14 47 24
Interest expense 27 26 23 20 96 109
Other (expenses)
income, net (2) 6 4 (7) 1 (11)
-------- ------- ------- -------- --------- ---------
Earnings before
income taxes
and minority
interests 228 299 273 283 1,083 798
Provision for
income taxes 85 67 92 80 324 216
Minority
interests in
earnings of
consolidated
subsidiaries 8 12 10 14 44 32
-------- ------- ------- -------- --------- ---------
Net earnings $ 135 $ 220 $ 171 $ 189 $ 715 $ 550
======== ======= ======= ======== ========= =========
Note:
Amounts
reclassified
from "Selling
and
administrative
expenses" to
"Cost of sales"$ 33 $ 26 $ 37 $ 34 $ 130 $ 142
Sales
$Millions Q1 Q2 Q3 Q4 YTD
-------- -------- -------- -------- --------
2007
Engine Business
Heavy-Duty Truck 424 473 897
Medium Duty
Truck+Bus 206 320 526
Light Duty
Auto+RV 288 418 706
Industrial 617 665 1,282
Stationary Power 230 233 463
--------------------------------------------
TOTAL ENGINE
BUSINESS 1,765 2,109 0 0 3,874
Power Generation 675 769 1,444
Components 657 757 1,414
Distributors 309 368 677
Eliminations (589) (660) (1,249)
--------------------------------------------
TOTAL 2,817 3,343 0 0 6,160
============================================
2006
Engine Business
Heavy-Duty Truck 608 618 632 640 2,498
Medium Duty
Truck+Bus 215 247 253 256 971
Light Duty
Auto+RV 331 341 267 322 1,261
Industrial 481 516 507 559 2,063
Stationary Power 186 174 183 175 718
--------------------------------------------
TOTAL ENGINE
BUSINESS 1,821 1,896 1,842 1,952 7,511
Power Generation 536 598 624 658 2,416
Components 555 563 564 599 2,281
Distributors 317 336 346 386 1,385
Eliminations (551) (551) (567) (562) (2,231)
--------------------------------------------
TOTAL 2,678 2,842 2,809 3,033 11,362
============================================
----------------------------------------------------------------------
----------------------------------------------------------------------
Engine Shipments
Units Q1 Q2 Q3 Q4 YTD
-------- -------- -------- -------- --------
2007
Midrange 107,200 133,500 240,700
Heavy-duty 19,000 23,800 42,800
High Horsepower 4,300 4,700 9,000
--------------------------------------------
TOTAL 130,500 162,000 0 0 292,500
============================================
2006
Midrange 114,500 121,800 104,800 118,800 459,900
Heavy-duty 30,100 31,400 31,000 30,900 123,400
High Horsepower 3,700 4,000 4,100 4,500 16,300
--------------------------------------------
TOTAL 148,300 157,200 139,900 154,200 599,600
============================================
Source: Cummins Inc.
Released July 26, 2007