( BW)(IN-CUMMINS)(CUM) Cummins Inc. Reports Solid 2003 Second Quarter Earnings; Filtration and International Distributor Businesses Post Record Quarters; Engine Business Shows Significant Improvement Business Editors COLUMBUS, Ind.--(BUSINESS WIRE)--July 25, 2003--Cummins Inc. (NYSE:CUM) today reported second quarter earnings of $.34 per share, or $14 million profit after taxes, on sales of $1.54 billion. The stronger than expected earnings reflect record performance by the International Distributor and Filtration and Other Businesses. The quarter also represents significant improvement in the Engine Business, particularly due to increased sales in the Dodge Ram truck and a rebound in sales in the North American heavy-duty truck market. The performance in these three businesses bolstered profits significantly and the Power Generation Business moved closer to breakeven while absorbing $5 million of restructuring costs. "We believe this quarter's results demonstrate that we are well positioned for the market upturn. Three of our four businesses are performing well, and the fourth business has taken necessary actions to return to profitability," said Tim Solso, Chairman and Chief Executive Officer. "We are delivering the right products to the market for our customers. We are generating positive cash flow, while funding important product development programs. We remain committed to paying an attractive dividend to our shareholders and providing a good return to all our stakeholders. We will continue to tightly manage spending and believe we will benefit strongly as our markets continue to recover." Engine Business Total sales for the Engine Business in the second quarter were $889 million, a 5 percent increase from sales of $850 million a year ago. Revenues in automotive markets were 6 percent higher than the second quarter of 2002, with increases in our light-duty automotive business more than offsetting sales declines in medium-duty truck and bus engines. Overall revenue from Industrial markets was up 2 percent year-over-year, with increases in mining and government markets and decreases in revenues from rail and marine engines. The Engine Business continues to benefit from the successful launch of our complete line of emission-compliant engines. There are now more than 16,000 of the new ISX and ISM heavy-duty engines in the field, with almost 450 million miles of service accumulated. By October, the Company expects to have more than 25,000 engines in service, with close to one billion miles of reliable performance. The award-winning Cummins Turbo Diesel engine made for the Dodge Ram truck continues to perform very well and has strong market acceptance. Engine sales volume for the Dodge Ram over the last three quarters creates a new shipment record for Cummins. For the second consecutive year, our engine was named the best among all Chrysler engines and first among diesel engines for heavy-duty pickup trucks, as recently reflected in a report released by J.D. Powers and Associates. Power Generation Sales in the Power Generation Business for the second quarter were $307 million, essentially flat with the second quarter of 2002. In North America, revenues were down 2 percent compared to a year ago, with continued weak demand in our commercial genset business. Demand in our consumer business remained strong, with sales 2 percent higher than the second quarter of 2002. Outside North America, revenues increased 3 percent in total, with decreases in Latin America and parts of Asia more than offset by increases in Europe and Australia. Filtration and Other Revenues for the Filtration and Other Business were $265 million for the quarter, a 9 percent increase compared to the second quarter of 2002. This marks a record sales quarter for the segment, despite continued weakness across most markets it serves. Fleetguard secured another long-term supply agreement in the quarter with CNH Global N.V. and continues to pursue similar agreements with other major original equipment manufacturers. The segment also continues to benefit from the profitable growth of the Emission Solutions business. Emission Solutions continues to achieve growth targets, while funding technologies necessary to meet future emissions requirements. International Distributor Sales for the International Distributor Business were $169 million in the second quarter, an increase of 17 percent compared to sales of $145 million last year, with improvement across most regions. The International Distributor Business continues to demonstrate its stable earnings capabilities. Earnings performance reached a record level in the second quarter. This business is increasing parts and service revenues and is benefiting from best-practice sharing across distributors. Guidance Cummins expects third quarter earnings in the range of $.60 to $.70 per share. Our earnings guidance for the year remains in the previous range of $1.20 to $1.40 per share. The Company's free cash flow for the year is still expected to be in the range of $70 to $80 million - sufficient to fund our dividend and provide for some modest debt reduction in 2003. Cummins expects capital expenditures for the year to be below $110 million. Restatement Update On April 14th, the Company announced that it would restate prior period financial statements. This restatement required 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. The Company is pleased to announce that the re-audit and restatement work is substantially complete. Cummins is completing financial statements and disclosures and expects to file the Company's 2002 Form 10-K as well as first and second quarter Form 10-Qs for 2003 in the near future. Until the Form 10-K is filed, the Company will not release comparisons with prior periods. Once Cummins files the 2002 Form 10-K, the Company will announce the date of its Annual Shareholders Meeting. 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. Information in this press release includes certain non-GAAP financial measures. Such information is reconciled to what management believes is the most directly comparable GAAP financial measures, contained in this release, which will be furnished on a Form 8-K and may be accessed from the Cummins website at www.cummins.com. - -0- *T Cummins Inc. (Millions, except per share amounts) Unaudited FOR THE QUARTER ENDED June 29, March 30, Year-to-Date 2003 2003 2003 Net sales $1,539 $1,387 $2,926 As reported Earnings (loss) before interest and income taxes 46 (14) 32 Net earnings (loss) 14 (34) (20) Basic earnings (loss) per share $.34 $(.86) $(.52) Diluted earnings (loss) per share .34 (.86) (.52) Weighted-average number of shares for EPS Basic 39.0 38.9 39.0 Diluted 39.0 38.9 39.0 Cummins Inc. Consolidated Statement of Earnings Unaudited Second First Quarter Quarter Year-to-Date Millions, except per share amounts 2003 2003 2003 Net sales $1,539 $1,387 $2,926 Cost of goods sold 1,263 1,173 2,436 Gross margin 276 214 490 Selling and administrative expenses 200 195 395 Research and engineering expenses 50 46 96 Joint ventures and alliances (income) expense (17) (7) (24) Interest expense 20 20 40 Other (income) expense, net (3) (6) (9) Earnings (loss) before income taxes, minority interest, dividends on preferred securities of subsidiary trust and cumulative effect of change in accounting principle. 26 (34) (8) Provision (benefit) for income taxes 5 (10) (5) Minority interest 2 4 6 Dividends on preferred securities of subsidiary trust 5 6 11 Net earnings (loss) $14 $(34) $(20) Earnings Per Share Basic $.34 $(.86) $(.52) Diluted $.34 $(.86) $(.52) Average number of shares: Basic EPS 39.0 38.9 39.0 Diluted EPS 39.0 38.9 39.0 Cash dividends declared per share $.30 $.30 $.60 Cummins Inc. Consolidated Statement of Cash Flows Unaudited Second Quarter Ended Millions June 29, 2003 Cash flows provided by (used in) operating activities Net earnings $14 Adjustments to reconcile net earnings to net cash from operating activities: Depreciation and amortization 54 Equity in (income) losses of joint ventures and alliances (13) Minority interest 2 Translation and hedging activities 2 Changes in assets and liabilities: Receivables (30) Proceeds (repayments) from sale of receivables 5 Inventories (18) Accounts payable and accrued expenses 25 Other (7) Total adjustments 20 Net cash provided by operating activities 34 Cash flows provided by (used in) investing activities Property, plant and equipment: Capital expenditures (27) Proceeds from disposals 2 Investments in and advances to joint ventures and alliances 21 Purchases of marketable securities (26) Proceeds from sale of marketable securities 37 Net cash provided by investing activities 7 Net cash provided by operating and investing activities 41 Cash flows provided by (used in) financing activities Proceeds from borrowings 9 Payments on borrowings (8) Net borrowings under short term credit agreements (29) Dividend payments on common stock (13) Other (9) Net cash used in financing activities (50) Effect of exchange rate changes on cash and cash equivalents 2 Net change in cash and cash equivalents (7) Cash and cash equivalents at the beginning of the quarter 66 Cash and cash equivalents at the end of the quarter $59 Cummins Inc. Segment Information Unaudited Power Filtration International Elimina- Millions Engine Generation And Other Distributor tions Total Second Quarter Ended June 29, 2003 Net sales $889 $307 $265 $169 $(91) $1,539 Earnings (loss) before interest and income taxes 24 (15) 25 12 - 46 First Quarter Ended March 30, 2003 Net sales $816 $267 $254 $136 $(86) $1,387 Earnings (loss) before interest and income taxes (23) (17) 20 6 - (14) Year-to- Date Ended June 29, 2003 Net sales $1,705 $574 $519 $305 $(177) $2,926 Earnings (loss) before interest and income taxes 1 (32) 45 18 - 32 Product Revenues as Percent of Total Sales - ------------------------------------------ % of Consolidated Sales Q1 Q2 Q3 Q4 YTD - ---------------------------------------------------------------------- 2003: - ---------------------------------------------------------------------- Engines 45 44 44 - ---------------------------------------------------------------------- Non-Engine Products 55 56 56 - ---------------------------------------------------------------------- 2002: - ---------------------------------------------------------------------- Engines 44 46 51 41 46 - ---------------------------------------------------------------------- Non-Engine Products 56 54 49 59 54 - ---------------------------------------------------------------------- Sales - ----- $Millions Q1 Q2 Q3 Q4 YTD - ---------------------------------------------------------------------- 2003: - ---------------------------------------------------------------------- Engine Business - ---------------------------------------------------------------------- Heavy-Duty Truck 236 266 502 - ---------------------------------------------------------------------- Medium Duty Truck+Bus 122 141 263 - ---------------------------------------------------------------------- Light Duty Auto+RV 222 228 450 - ---------------------------------------------------------------------- Industrial 236 254 490 - ---------------------------------------------------------------------- TOTAL ENGINE BUSINESS 816 889 1,705 - ---------------------------------------------------------------------- Power Generation 267 307 574 - ---------------------------------------------------------------------- Int'l. Distributors 136 169 305 - ---------------------------------------------------------------------- Filtration / Other 254 265 519 - ---------------------------------------------------------------------- Eliminations (86) (91) (177) - ---------------------------------------------------------------------- TOTAL 1,387 1,539 2,926 - ---------------------------------------------------------------------- 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 - ---------------------------------------------------------------------- Engine Shipments - ---------------- Units Q1 Q2 Q3 Q4 YTD - ---------------------------------------------------------------------- 2003: - ---------------------------------------------------------------------- Midrange 66,200 69,900 136,100 - ---------------------------------------------------------------------- Heavy-duty 10,700 12,800 23,500 - ---------------------------------------------------------------------- High Horsepower 1,900 2,000 3,900 - ---------------------------------------------------------------------- TOTAL 78,800 84,700 163,500 - ---------------------------------------------------------------------- 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--BM/cg* CONTACT: Cummins Inc. Jason Rawlings, 812-377-7719