10-QPeriod: Q1 FY2009

CUMMINS INC Quarterly Report for Q1 Ended Mar 29, 2009

Filed April 30, 2009For Securities:CMI

Summary

Cummins Inc. (CMI) reported a significant decline in financial performance for the first quarter of 2009 compared to the same period in 2008, primarily due to the worsening global economic downturn. Net sales fell 30% to $2.4 billion, and net income attributable to Cummins Inc. plummeted 96% to $7 million, or $0.04 per diluted share, from $190 million, or $0.97 per diluted share, in the prior year. This sharp drop was attributed to reduced demand across all business segments, impacting gross margins and overall profitability. The company implemented targeted restructuring actions, including workforce reductions and facility consolidations, incurring $66 million in charges to align operations with lower customer demand. Despite the challenging environment, Cummins maintained a strong liquidity position, with $353 million in cash and cash equivalents and significant availability under its credit facilities. The company is focused on managing costs and capacity to align with current demand, generating positive cash flow, and continuing to invest in critical technologies for future growth. The outlook for 2009 remains cautious, with expectations of continued sales and profit declines, and the potential for further restructuring actions if market conditions worsen.

Financial Highlights

32 data points
Beta

Revenue

$2.44B

18.2% Gross Margin

Net Income

$7.00M

0.3% Net Margin

EPS (Diluted)

$0.04

Cash & Equivalents

$353.00M

Free Cash Flow

$12.00M

Financial Statements
Beta
Revenue$2.44B
Cost of Revenue$1.99B
Gross Profit$445.00M
R&D Expenses$85.00M
SG&A Expenses$300.00M
Operating Income$29.00M
Interest Expense$7.00M
Net Income$7.00M
EPS (Basic)$0.04
EPS (Diluted)$0.04
Shares Outstanding (Basic)196.80M
Shares Outstanding (Diluted)197.00M

Key Highlights

  • 1Net sales decreased by 30% to $2.4 billion in Q1 2009 compared to Q1 2008.
  • 2Net income attributable to Cummins Inc. dropped significantly by 96% to $7 million ($0.04 per diluted share) from $190 million ($0.97 per diluted share) year-over-year.
  • 3The company incurred $66 million in restructuring charges related to workforce reductions and facility closures due to the global economic downturn.
  • 4Gross margin declined by 37% due to lower volumes and increased material costs, partially offset by improved pricing.
  • 5Selling, general, and administrative expenses decreased by 15%, reflecting cost-saving measures and lower compensation.
  • 6The company maintained a strong liquidity position with $353 million in cash and cash equivalents and substantial credit facility availability.
  • 7The outlook for 2009 is cautious, with expectations of continued sales and profit declines and potential for further restructuring.

Frequently Asked Questions

The primary reason for the significant decrease in net income was the severe global economic downturn, which led to a 30% reduction in net sales and a substantial decrease in gross margins. Additionally, the company incurred $66 million in restructuring charges related to actions taken to align operations with lower demand.

Cummins is implementing targeted restructuring actions, including workforce reductions and facility consolidations, to align costs and capacity with reduced customer demand. The company is also focused on managing expenses, generating positive cash flow, and continuing to invest in critical technologies for future growth. They have temporarily suspended their stock repurchase program to conserve cash.

Cummins maintains a strong liquidity position, with $353 million in cash and cash equivalents, $65 million in marketable securities, and significant availability under its revolving credit facility and accounts receivable sales program. The company believes its financial condition and liquidity are strong enough to navigate the downturn and fund its operational, investing, and financing activities.

The outlook for 2009 is cautious. Cummins expects sales and profits to be lower than 2008 levels due to the ongoing global economic recession and credit crisis. The company anticipates continued cost reductions and production scaling to meet demand. However, there is a possibility of further restructuring actions and associated costs if market conditions worsen.