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Cummins caps record 2005 with its highest quarterly earnings ever
For Immediate Release
January 30, 2006
COLUMBUS, IND. - Cummins Inc. (NYSE:CMI) completed a record 2005 with its most profitable quarter ever, driven by continued strength in its engine segment, record performance from its distribution and power generation segments and growth in major markets around much of the world.
For all of 2005, Cummins reported profits as measured by earnings before interest and taxes (EBIT) of $907 million, a 67 percent increase from 2004. Sales increased 18 percent to $9. 92 billion, from $8. 44 billion in 2004.
Net income for 2005 was $550 million, or $11. 01 a share, up 57 percent from $350 million ($7. 39 a share) in 2004. The Company's strong operating performance in 2005 allowed it to improve its cash position by $168 million, while also reducing net debt by $259 million.
In the fourth quarter of 2005, Cummins sales increased 17 percent to a record $2. 75 billion from $2. 35 billion in the same period in 2004. Net income rose 40 percent in the fourth quarter to $167 million, or $3. 31 share, from $119 million, or $2. 41 per share, during the same period in 2004.
The Company's earnings before interest and taxes (EBIT) for the fourth quarter of 2005 of $269 million - or 9. 8 percent of sales - were 56 percent higher than the same period in 2004. All four Cummins operating segments posted revenue and Segment EBIT increases.
The Company's gross margin in the fourth quarter of 2005 was 22. 5 percent compared to 20. 1 percent during the same period in 2004. For all of 2005, gross margins were 22. 0 percent - their highest level since 1997.
Cummins fourth quarter of 2005 results include tax benefits of $13. 5 million, or $0. 26 per share, related to the favorable resolution of prior year matters and additional benefits from repatriated dividends under the American Jobs Creation Act of 2004.
"Our results for both the fourth quarter and all of 2005 are outstanding," said Cummins Chairman and Chief Executive Officer Tim Solso. "This performance is evidence that we are transforming Cummins into a less cyclical, more diversified company while converting a larger percentage of sales into profit. "
"As good as the last two years have been, we are expecting 2006 to be more profitable, even if growth in our end markets moderates," Solso added. "We have significant opportunities as a result of our product mix, our leading position in many of the markets we serve, our global network of plants, technical centers, distributors and first-rate partners as well as our commitment to being a low-cost producer. "
Based on its current plans and forecasts, the Company expects to earn between $2. 50 and $2. 60 a share in the first quarter and between $11. 90 and $12. 10 a share for all of 2006.
The Company's North American engine business remains very strong, but international sales growth was even better in 2005. For all of 2005, international sales represented 51 percent of the Company's total consolidated sales and 55 percent in the fourth quarter.
The Company saw significant EBIT gains in its Engine, Power Generation and Distribution businesses in 2005. For the year, Segment EBIT for the Engine business - the Company's largest - grew 77 percent to $582 million as sales rose 23 percent. Power Generation Segment EBIT more than doubled in 2005 to $145 million. The Company's Distribution business saw its Segment EBIT increase 35 percent in 2005 to $107 million. The Company's Components Segment reported a 6 percent increase in Segment EBIT to $89 million.
Fourth-quarter of 2005 details
Engine Segment
Engine segment sales of $1. 84 billion for the quarter were 22 percent higher than the same period in 2004, and Segment EBIT rose 56 percent to $156 million, or 8. 5 percent of sales, compared to 6. 6 percent of sales during the same period in 2004. Sales were strong across nearly all end markets, with on-highway revenues up 21 percent and off-highway revenues up 28 percent.
Global shipments to the heavy-duty truck market rose 14 percent for the quarter, while shipments in the United States and Canada increased 12 percent during the quarter. Medium-duty truck and bus market shipments increased 13 percent as the Company grew its market share in key North American OEMs and saw strong gains in Europe and Brazil.
The Company also enjoyed solid growth in all major off-highway markets, with global construction market shipments up 30 percent, oil and gas shipments up 111 percent and marine shipments up 29 percent.
Power Generation Segment
Segment sales rose 11 percent from 2004 to $575 million in the quarter, while Segment EBIT more than doubled to $49 million, or 8. 5 percent of sales. Commercial sales led the segment's strong performance, with sales up 11 percent over the same period in 2004.
Brisk sales in the United States, the Middle East, India and Russia more than offset a drop in sales in China from record 2004 levels. Alternator sales improved 13 percent for the quarter, driven by rising volumes in all major regions except China and Southeast Asia.
Improved pricing accounted for much of the segment earnings growth and the Company expects to see further price realization through the first half of 2006.
Distribution Segment
This segment enjoyed a record quarter, both in terms of sales and Segment EBIT. Sales rose 15 percent to $346 million and Segment EBIT increased 18 percent to $33 million, or 9. 5 percent of sales over the same period in 2004.
Sales were strong across all product categories, with engine and power generation sales accounting for more than 70 percent of the revenue growth. From a geographic perspective, increased business in Europe and the Middle East represented much of the sales growth. Joint venture income rose 57 percent in the quarter, contributing an additional $4 million to Segment EBIT when compared to the same period in 2004.
Components Segment
Segment revenues increased 12 percent during the quarter to $535 million, while Segment EBIT rose 85 percent to $24 million, or 4. 5 percent of sales, compared to 2. 7 percent during the same period in 2004. The Company's filtration, turbocharger and fuel systems businesses all reported revenue gains.
The filtration business saw strong aftermarket sales in North and Latin America, and higher OEM sales in Europe/Middle East/Africa. Fuel system shipments rose across most product lines, notably to the Cummins heavy-duty engine plant and to our joint venture partner Scania in Europe.
Cummins caps record 2005 with its highest quarterly earnings ever
For Immediate Release
January 30, 2006
COLUMBUS, IND. - Cummins Inc. (NYSE:CMI) completed a record 2005 with its most profitable quarter ever, driven by continued strength in its engine segment, record performance from its distribution and power generation segments and growth in major markets around much of the world.
For all of 2005, Cummins reported profits as measured by earnings before interest and taxes (EBIT) of $907 million, a 67 percent increase from 2004. Sales increased 18 percent to $9. 92 billion, from $8. 44 billion in 2004.
Net income for 2005 was $550 million, or $11. 01 a share, up 57 percent from $350 million ($7. 39 a share) in 2004. The Company's strong operating performance in 2005 allowed it to improve its cash position by $168 million, while also reducing net debt by $259 million.
In the fourth quarter of 2005, Cummins sales increased 17 percent to a record $2. 75 billion from $2. 35 billion in the same period in 2004. Net income rose 40 percent in the fourth quarter to $167 million, or $3. 31 share, from $119 million, or $2. 41 per share, during the same period in 2004.
The Company's earnings before interest and taxes (EBIT) for the fourth quarter of 2005 of $269 million - or 9. 8 percent of sales - were 56 percent higher than the same period in 2004. All four Cummins operating segments posted revenue and Segment EBIT increases.
The Company's gross margin in the fourth quarter of 2005 was 22. 5 percent compared to 20. 1 percent during the same period in 2004. For all of 2005, gross margins were 22. 0 percent - their highest level since 1997.
Cummins fourth quarter of 2005 results include tax benefits of $13. 5 million, or $0. 26 per share, related to the favorable resolution of prior year matters and additional benefits from repatriated dividends under the American Jobs Creation Act of 2004.
"Our results for both the fourth quarter and all of 2005 are outstanding," said Cummins Chairman and Chief Executive Officer Tim Solso. "This performance is evidence that we are transforming Cummins into a less cyclical, more diversified company while converting a larger percentage of sales into profit. "
"As good as the last two years have been, we are expecting 2006 to be more profitable, even if growth in our end markets moderates," Solso added. "We have significant opportunities as a result of our product mix, our leading position in many of the markets we serve, our global network of plants, technical centers, distributors and first-rate partners as well as our commitment to being a low-cost producer. "
Based on its current plans and forecasts, the Company expects to earn between $2. 50 and $2. 60 a share in the first quarter and between $11. 90 and $12. 10 a share for all of 2006.
The Company's North American engine business remains very strong, but international sales growth was even better in 2005. For all of 2005, international sales represented 51 percent of the Company's total consolidated sales and 55 percent in the fourth quarter.
The Company saw significant EBIT gains in its Engine, Power Generation and Distribution businesses in 2005. For the year, Segment EBIT for the Engine business - the Company's largest - grew 77 percent to $582 million as sales rose 23 percent. Power Generation Segment EBIT more than doubled in 2005 to $145 million. The Company's Distribution business saw its Segment EBIT increase 35 percent in 2005 to $107 million. The Company's Components Segment reported a 6 percent increase in Segment EBIT to $89 million.
Fourth-quarter of 2005 details
Engine Segment
Engine segment sales of $1. 84 billion for the quarter were 22 percent higher than the same period in 2004, and Segment EBIT rose 56 percent to $156 million, or 8. 5 percent of sales, compared to 6. 6 percent of sales during the same period in 2004. Sales were strong across nearly all end markets, with on-highway revenues up 21 percent and off-highway revenues up 28 percent.
Global shipments to the heavy-duty truck market rose 14 percent for the quarter, while shipments in the United States and Canada increased 12 percent during the quarter. Medium-duty truck and bus market shipments increased 13 percent as the Company grew its market share in key North American OEMs and saw strong gains in Europe and Brazil.
The Company also enjoyed solid growth in all major off-highway markets, with global construction market shipments up 30 percent, oil and gas shipments up 111 percent and marine shipments up 29 percent.
Power Generation Segment
Segment sales rose 11 percent from 2004 to $575 million in the quarter, while Segment EBIT more than doubled to $49 million, or 8. 5 percent of sales. Commercial sales led the segment's strong performance, with sales up 11 percent over the same period in 2004.
Brisk sales in the United States, the Middle East, India and Russia more than offset a drop in sales in China from record 2004 levels. Alternator sales improved 13 percent for the quarter, driven by rising volumes in all major regions except China and Southeast Asia.
Improved pricing accounted for much of the segment earnings growth and the Company expects to see further price realization through the first half of 2006.
Distribution Segment
This segment enjoyed a record quarter, both in terms of sales and Segment EBIT. Sales rose 15 percent to $346 million and Segment EBIT increased 18 percent to $33 million, or 9. 5 percent of sales over the same period in 2004.
Sales were strong across all product categories, with engine and power generation sales accounting for more than 70 percent of the revenue growth. From a geographic perspective, increased business in Europe and the Middle East represented much of the sales growth. Joint venture income rose 57 percent in the quarter, contributing an additional $4 million to Segment EBIT when compared to the same period in 2004.
Components Segment
Segment revenues increased 12 percent during the quarter to $535 million, while Segment EBIT rose 85 percent to $24 million, or 4. 5 percent of sales, compared to 2. 7 percent during the same period in 2004. The Company's filtration, turbocharger and fuel systems businesses all reported revenue gains.
The filtration business saw strong aftermarket sales in North and Latin America, and higher OEM sales in Europe/Middle East/Africa. Fuel system shipments rose across most product lines, notably to the Cummins heavy-duty engine plant and to our joint venture partner Scania in Europe.
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