( BW)(IN-CUMMINS-INC)(CUM) Cummins First Quarter Loss Due to Global Uncertainty and Soft Markets Business Editors/Automotive Writers COLUMBUS, Ind.--(BUSINESS WIRE)--April 17, 2003--Cummins Inc. (NYSE:CUM) today reported a loss for the first quarter 2003 of $34 million, or $0.86 per share, on sales of $1.39 billion. This compares to a loss of $26 million, or $0.68 per share, on sales of $1.33 billion for the first quarter of 2002. Excluding the cumulative effect of a change in accounting principle in the first quarter of 2002, the loss was $29 million, or $0.75 per share. "These financial results reflect the continued downturn in many of our markets that began in the second half of 2000. However, I remain confident that we are providing the products that are right for our customers and that position us well in the marketplace," said Tim Solso, Chairman and Chief Executive Officer. "As we gain production efficiencies with our new products and as the markets recover, we will see our financial returns improve." The Company normally experiences seasonal weakness in the first quarter, with March being the strongest month. As a result of global uncertainty, normal gains in March were not realized. However, the Company expects to see increased earnings throughout the remainder of the year. A breakdown of results by business units, as well as a number of operational successes in the quarter, are detailed below. Engine Business Total Sales for the Engine Business in the first quarter were $816 million, a 5 percent increase from sales of $776 million a year ago. Revenues in automotive markets were 13 percent higher than the first quarter last year, primarily due to increases in light-duty automotive sales. Overall revenue from industrial markets was down 10 percent year-over-year, with softness across most segments. The Engine Business is experiencing a very successful launch of the Company's new emissions-compliant products. This complete line of new heavy-duty engines is performing well for our customers and end users. More than 8,000 engines have been shipped and order rates continue to improve. The Cummins turbo diesel engine for the award-winning Dodge Ram pickup is also performing well and continues to have strong acceptance in the marketplace. Engine shipments to DaimlerChrysler for the Dodge Ram were up 12,000 units, an increase of 60 percent from the first quarter of last year, resulting from the launch of Chrysler's new model pickup. Power Generation Sales in the Power Generation Business for the first quarter were $267 million, down 6 percent from the first quarter of 2002. In North America, revenues were down 9 percent compared to a year ago, with continued weak demand in the commercial generator set business. This decrease was partially offset by a 4 percent increase in recreational vehicle and marine business revenue compared to the first quarter of 2002. Outside North America, revenues decreased 4 percent in total, with decreases in Latin America and parts of Asia partially offset by increases in India and Australia. Filtration and Other Revenues for the Filtration and Other segment were $254 million for the quarter, an 11 percent increase compared to the first quarter of 2002. This reflects higher Filtration Business sales, with some improvement in demand as well as increased market penetration. The Filtration Business has continued to make progress in securing long-term supply agreements with major Original Equipment Manufacturers to achieve future growth. The Fleetguard Emission Solutions division is also providing profitable growth as it positions itself as the leader in the growing segment of aftertreatment technology. International Distributor Sales for the International Distributor Business were $136 million in the quarter, an increase of 10 percent compared to sales of $124 million dollars last year, with modest improvement across most regions. The International Distributor Business delivered strong results, despite a seasonally weak quarter. The Filtration and International Distributor Business Units continue to generate increasing profits and solid growth in revenue. These businesses are more stable, less cyclical and less capital intensive than our other businesses. Guidance In light of the current market conditions and first-quarter performance, guidance is being lowered for the year to $1.20 to $1.40 per share. Cummins expects second quarter results to be a profit in the range of $.10 to $.20 cents per share. Cash flow guidance for 2003 remains at around $70 million dollars aided by lower capital spending and working capital. The Company expects to generate sufficient cash to fund the dividend and provide modest debt reduction in 2003. "We remain confident that we have taken the right actions to position us for success going forward. We will continue to tightly manage spending and take additional actions where needed," said Solso. "From the depressed market conditions we are operating in today, the long term outlook remains very promising. We believe the worst is behind us, and we continue to be positioned for the upturn as a result of the two and a half years of relentless cost reduction." Accounts Payable Adjustment On April 14th, the Company also announced that it will restate prior period financial statements. The restatement relates to the previously announced need for an accounts payable adjustment primarily associated with the implementation of a new enterprise resource planning system in one of its plants. This restatement will require a re-audit of the 2000 and 2001 financial statements by the Company's new auditors, PricewaterhouseCoopers, LLP (PwC) since Arthur Andersen, LLP was Cummins auditors for those periods and is no longer providing auditing services. Cummins will file its 2002 Form 10-K as soon as practicable following the finalization of the re-audit. The Company also intends to release unaudited financial statements for 2002. The 2000 and 2001 financial statements, as previously reported, are subject to change as a result of the re-audit. 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 its customers through more than 500 company-owned and independent distributor locations in 131 countries and territories. With 23,700 employees worldwide, Cummins reported sales of $5.9 billion in 2002. Press releases by fax can be requested by calling News On Demand (toll free) at 888-329-2305. The Cummins home page can be found at www.cummins.com. Information provided in this release that is not purely historical is considered to be 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. - -0- *T CUMMINS INC. (Millions, except per share amounts) Unaudited For The First Quarter Ended Mar. 30, 2003 Mar. 31, 2002 Net sales $1,387 $1,333 Before cumulative effect of change in accounting principle Earnings (loss) before interest and income taxes - (15) Net earnings (loss) - (29) Basic earnings (loss) per share - $(.75) Diluted earnings (loss) per share - (.75) As reported Earnings (loss) before interest and income taxes (14) (15) Net earnings (loss) (34) (26) Basic earnings (loss) per share $(.86) $(.68) Diluted earnings (loss) per share (.86) (.68) Weighted-average number of shares for EPS Basic 38.9 38.5 Diluted 38.9 38.5 Cummins Inc. Consolidated Statement of Earnings Unaudited Fourth First Quarter Quarter Millions, except per share amounts 2003 2002 2002 Net sales $1,387 $1,333 $1,414 Cost of goods sold 1,173 1,107 1,191 Gross margin 214 226 223 Selling and administrative expenses 195 186 173 Research and engineering expenses 46 56 39 Joint ventures and alliances (income) expense (7) - (6) Restructuring, asset impairment and other charges - - (13) Interest expense 20 14 17 Loss on early retirement of debt - - 8 Other (income) expense, net (6) (1) 3 Earnings (loss) before income taxes, minority interest, dividends on preferred securities of subsidiary trust and cumulative effect of change in accounting principle (34) (29) 2 Provision (benefit) for income taxes (10) (9) (54) Minority interest 4 3 5 Dividends on preferred securities of subsidiary trust 6 6 5 Net earnings (loss) before cumulative effect of change in accounting principle. (34) (29) 46 Cumulative effect of change in accounting principle, net of $1 tax - 3 - Net earnings (loss) $(34) $(26) $46 Earnings Per Share Basic Net earnings (loss) before cumulative effect of change in accounting principle $ (.86) $ (.75) $ 1.19 Cumulative effect of change in accounting principle, net of tax - .07 - Net earnings (loss) (.86) (.68) $1.19 Diluted Net earnings (loss) before cumulative effect of change in accounting principle $ (.86) $ (.75) $ 1.10 Cumulative effect of change in accounting principle, net of tax - .07 - Net earnings (loss) (.86) (.68) 1.10 Average number of shares: Basic EPS 38.9 38.5 38.9 Diluted EPS 38.9 38.5 45.2 Cash dividends declared per share $.30 $.30 $.30 Cummins Inc. Consolidated Statement of Financial Position Unaudited Millions Mar. 30, 2003 Dec. 31, 2002 Assets Current assets Cash and cash equivalents $66 $217 Marketable securities 73 74 Receivables, net of allowance of $13 and $13 863 813 Inventories 699 642 Other current assets 261 236 1,962 1,982 Property, plant and equipment Land and buildings 577 579 Machinery, equipment and fixtures 2,257 2,299 Construction in process 58 69 2,892 2,947 Less accumulated depreciation 1,623 1,642 1,269 1,305 Investments in and advances to joint ventures and alliances 278 265 Goodwill, net of amortization of $51 and $51 344 344 Other intangible assets 92 95 Deferred income taxes 640 640 Other noncurrent assets 202 202 Total assets $4,787 $4,833 Liabilities and shareholders' investment Current liabilities Loans payable $24 $19 Current maturities of long-term debt 4 119 Accounts payable 520 425 Accrued product coverage and marketing expenses 226 232 Other current liabilities 463 525 1,237 1,320 Long-term debt 1,067 999 Other liabilities 1,296 1,285 Minority interest 95 91 Cummins obligated mandatorily redeemable convertible preferred securities of subsidiary trust holding solely convertible subordinated debentures of Cummins 291 291 Shareholders' investment Common stock, $2.50 par value, 48.5 and 48.6 shares issued 121 121 Additional contributed capital 1,113 1,115 Retained earnings 530 576 Accumulated other comprehensive income (530) (528) Common stock in treasury, at cost, 7.0 and 7.0 million shares (280) (280) Common stock held in trust for employee benefit plans 2.6 and 2.6 million shares (124) (128) Unearned compensation (ESOP) (29) (29) 801 847 Total liabilities and shareholders' investment $ 4,787 $ 4,833 Cummins Inc. Consolidated Statement of Cash Flows Unaudited First Quarter Ended Millions Mar. 30, 2003 Mar. 31, 2002 Cash flows from operating activities Net earnings (loss) $(34) $(26) Adjustments to reconcile net earnings (loss) to net cash from operating activities: Cumulative effect of change in accounting principle - (3) Depreciation and amortization 55 54 Restructuring and other non- recurring actions - (7) Equity in (income) losses of joint ventures and alliances (6) 7 Minority interest 4 2 Translation and hedging activities (2) 5 Changes in assets and liabilities: Receivables (50) (105) Proceeds (repayments) from sale of receivables - 35 Inventories (58) (31) Accounts payable and accrued expenses 15 25 Total adjustments (42) (18) Net cash used in operating activities (76) (44) Cash flows provided by (used in) investing activities Property, plant and equipment: Capital expenditures (16) (18) Proceeds from disposals 3 2 Investments in and advances to joint ventures and alliances (6) (7) Purchases of marketable securities (29) (22) Proceeds from sale of marketable securities 28 19 Net cash used in investing activities (20) (26) Net cash used in operating and investing activities (96) (70) Cash flows provided by (used in) financing activities Proceeds from borrowings 1 - Payments on borrowings (117) (1) Net borrowings under short term credit agreements 75 81 Dividend payments on common stock (12) (12) Other (3) (1) Net cash provided by financing activities (56) 67 Effect of exchange rate changes on cash and cash equivalents 1 (1) Net change in cash and cash equivalents (151) (4) Cash and cash equivalents at the beginning of the year 217 52 Cash and cash equivalents at the end of the quarter $ 66 $ 48 Cummins Inc. Segment Information Unaudited Power Filtration Millions Engine Generation And Other First Quarter Ended March 30, 2003 Net sales $816 $267 $254 Earnings (loss) before interest and income taxes (23) (17) 20 Net assets 813 476 659 First Quarter Ended March 31, 2002 Net sales $776 $283 $228 Earnings (loss) before interest and income taxes (19) (15) 18 Net assets 882 424 643 International Millions Distributor Eliminations Total First Quarter Ended March 30, 2003 Net sales $136 $(86) $1,387 Earnings (loss) before interest and income taxes 6 - (14) Net assets 180 - 2,128 First Quarter Ended March 31, 2002 Net sales $124 $(78) $1,333 Earnings (loss) before interest and income taxes 1 - (15) Net assets 169 - 2,118 *T - -0- *T Product Revenues as Percent of Total Sales - ---------------------------------------------------------------------- % of Consolidated Sales Q1 Q2 Q3 Q4 YTD - ---------------------------------------------------------------------- 2003: - ---------------------------------------------------------------------- Engines 45 45 - ---------------------------------------------------------------------- Non-Engine Products 55 55 - ---------------------------------------------------------------------- 2002: - ---------------------------------------------------------------------- Engines 44 46 51 41 46 - ---------------------------------------------------------------------- Non-Engine Products 56 54 49 59 54 - ---------------------------------------------------------------------- *T - -0- *T Sales - ---------------------------------------------------------------------- $Millions Q1 Q2 Q3 Q4 YTD - ------------------------------------------ ------ ------ ------ ------ 2003: - ------------------------------------------ ------ ------ ------ ------ Engine Business - ------------------------------------------ ------ ------ ------ ------ Heavy-Duty Truck 236 236 - ------------------------------------------ ------ ------ ------ ------ Medium Duty Truck+Bus 122 122 - ------------------------------------------ ------ ------ ------ ------ Light Duty Auto+RV 222 222 - ------------------------------------------ ------ ------ ------ ------ Industrial 236 236 - ------------------------------------------ ------ ------ ------ ------ Total Engine Business 816 816 - ------------------------------------------ ------ ------ ------ ------ Power Generation 267 267 - ------------------------------------------ ------ ------ ------ ------ Int'l. Distributors 136 136 - ------------------------------------------ ------ ------ ------ ------ Filtration / Other 254 254 - ------------------------------------------ ------ ------ ------ ------ Eliminations (86) (86) - ------------------------------------------ ------ ------ ------ ------ TOTAL 1,387 1,387 - ------------------------------------------ ------ ------ ------ ------ 2002: - ------------------------------------------ ------ ------ ------ ------ Engine Business - ------------------------------------------ ------ ------ ------ ------ Heavy-Duty Truck 219 265 378 207 1,069 - ------------------------------------------ ------ ------ ------ ------ Medium Duty Truck+Bus 138 157 191 113 599 - ------------------------------------------ ------ ------ ------ ------ Light Duty Auto+RV 157 179 236 209 781 - ------------------------------------------ ------ ------ ------ ------ Industrial 262 249 228 247 986 - ------------------------------------------ ------ ------ ------ ------ Total Engine Business 776 850 1,033 776 3,435 - ------------------------------------------ ------ ------ ------ ------ Power Generation 283 304 315 324 1,226 - ------------------------------------------ ------ ------ ------ ------ Int'l. Distributors 124 145 152 153 574 - ------------------------------------------ ------ ------ ------ ------ Filtration / Other 228 243 236 244 951 - ------------------------------------------ ------ ------ ------ ------ Eliminations (78) (84) (88) (83) (333) - ------------------------------------------ ------ ------ ------ ------ TOTAL 1,333 1,458 1,648 1,414 5,853 - ------------------------------------------ ------ ------ ------ ------ *T - -0- *T Engine Shipments - ---------------------------------------------------------------------- Units Q1 Q2 Q3 Q4 YTD - ------------------------------------- ------- ------- ------- -------- 2003: - ------------------------------------- ------- ------- ------- -------- Midrange 66,200 66,200 - ------------------------------------- ------- ------- ------- -------- Heavy-duty 10,700 10,700 - ------------------------------------- ------- ------- ------- -------- High Horsepower 1,900 1,900 - ------------------------------------- ------- ------- ------- -------- TOTAL 78,800 78,800 - ------------------------------------- ------- ------- ------- -------- 2002: - ------------------------------------- ------- ------- ------- -------- Midrange 60,500 67,000 71,800 65,800 265,100 - ------------------------------------- ------- ------- ------- -------- Heavy-duty 11,200 14,700 22,700 9,300 57,900 - ------------------------------------- ------- ------- ------- -------- High Horsepower 2,100 2,100 2,200 2,500 8,900 - ------------------------------------- ------- ------- ------- -------- TOTAL 73,800 83,800 96,700 77,600 331,900 - ------------------------------------- ------- ------- ------- -------- *T --30--KR/cl* CONTACT: Cummins Inc. Jason Rawlings, 812/377-7719