10-KPeriod: FY2001

CUMMINS INC Annual Report, Year Ended Dec 31, 2001

Filed February 28, 2002For Securities:CMI

Summary

Cummins Inc. (CMI) reported a challenging fiscal year 2001, marked by a net loss of $102 million on sales of $5.7 billion. This performance was significantly impacted by a substantial $84 million after-tax charge related to restructuring actions and asset impairment write-downs, primarily due to the downturn in the North American truck industry and the cancellation of a new engine development program. Excluding these charges, the net loss would have been $18 million. In comparison, the company reported net earnings of $8 million in 2000, which also included a $103 million after-tax restructuring charge. Despite the net loss, the company demonstrated resilience in certain segments. The Power Generation business saw a slight revenue increase, and the High-horsepower Industrial segment experienced significant sales growth. Strategic initiatives, including long-term supply agreements with major truck manufacturers like Volvo, PACCAR, and International Truck and Engine Corporation, were implemented to stabilize the heavy-duty truck engine business and reduce costs. The company also focused on expanding its international presence, with international sales representing 46% of total revenues in 2001, up from 39% in 1999, highlighting a strategic shift towards global diversification.

Key Highlights

  • 1Cummins reported a net loss of $102 million for fiscal year 2001, a significant decline from a small net profit in 2000, heavily influenced by $84 million in after-tax restructuring and asset impairment charges.
  • 2Net sales decreased by approximately 14% year-over-year to $5.7 billion in 2001, primarily driven by a 23% decline in the Engine Business, attributed to the sharp downturn in North American automotive and construction markets.
  • 3The company executed long-term supply agreements with major OEMs (Volvo, PACCAR, International Truck and Engine) to stabilize its heavy-duty truck engine business, improve cost structure, and enhance customer service.
  • 4The Power Generation segment showed resilience with a 2% revenue increase, contributing 24% of total segment sales in 2001.
  • 5International sales represented 46% of total revenues in 2001, indicating a strategic pivot towards global markets as domestic markets faced challenges.
  • 6Cummins announced the termination of its 10-13 liter engine development program in June 2001, recording a $125 million pre-tax charge but avoiding approximately $200 million in future investments.
  • 7The company continues to invest in research and development, with $204 million spent in 2001, focusing on meeting stringent emissions standards and developing new engine technologies.

Frequently Asked Questions

Cummins Inc. reported a net loss of $102 million in 2001 primarily due to significant restructuring actions and asset impairment write-downs, which resulted in an $84 million after-tax charge. These actions were a response to the continuing downturn in the North American trucking industry and the cancellation of a new engine development program.

The sharp downturn in the North American trucking industry significantly impacted Cummins' Engine Business, which saw a 23% decline in sales. This was particularly evident in the heavy-duty truck market, where sales declined by 35% compared to 2000, reflecting high inventory levels and reduced OEM production schedules.

Cummins is implementing several strategic initiatives, including entering into long-term supply agreements with major truck manufacturers (Volvo, PACCAR, International Truck and Engine) to secure stable pricing and improve customer service. They are also rationalizing their product lines, ending certain development programs to reduce costs, and focusing on expanding their international business, which now represents 46% of total sales.

The Power Generation business showed resilience in 2001, with revenues increasing by 2% year-over-year. It represents a significant portion of Cummins' overall business (24% of segment sales) and serves diverse markets including standby power, prime power in developing countries, and the growing distributed power generation market.