UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE |
|
For the Quarterly Period Ended September 26, 2004 |
Commission File Number 1-4949
CUMMINS INC.
(Exact name of registrant as specified in its charter)
|
Indiana |
35‑0257090 |
|
500 Jackson Street |
|
|
Telephone (812) 377-5000 (Registrant's telephone number, including area code) |
|
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b‑2 of the Exchange Act). Yes X No o
As of September 26, 2004, there were 45,517,087 shares of $2.50 par value per share common stock outstanding.
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 26,
2004
|
Page |
||
|
PART I. FINANCIAL INFORMATION |
||
|
|
||
|
Item 1. |
Financial Statements (Unaudited) |
|
|
|
||
|
Consolidated Statements of Earnings for the three and nine months ended September 26, |
3 | |
|
2004 and September 28, 2003 |
||
|
|
||
|
Consolidated Balance Sheets at September 26, 2004 and December 31, 2003 |
4 | |
|
|
||
|
Consolidated Statements of Cash Flows for the nine months ended September 26, 2004 |
5 | |
|
and September 28, 2003 |
||
|
|
||
|
Notes to the Consolidated Financial Statements |
6 | |
|
|
||
|
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
17 |
|
|
||
|
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
33 |
|
|
||
|
Item 4 |
Controls and Procedures |
34 |
|
|
||
|
PART II. OTHER INFORMATION |
||
|
|
||
|
Item 1. |
Legal Proceedings |
34 |
|
|
||
|
Item 2. |
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
35 |
|
|
||
|
Item 6. |
Exhibits and Reports on Form 8‑K |
35 |
|
|
||
|
Signatures |
36 | |
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
|
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) |
Third Quarter Ended |
Nine Months Ended |
||
|
|
September 26, |
September 28, |
September 26, |
September 28, |
| $ Millions, except per share amounts |
2004 |
2003 |
2004 |
2003 |
|
Net sales (includes related
party sales of $165, $278, $534 and $712, respectively) |
$ 2,194 |
$ 1,634 |
$ 6,089 |
$ 4,560 |
|
Cost of goods sold (includes related party purchases of $36, $145, $226 and $398, respectively) |
1,760 |
1,341 |
4,882 |
3,773 |
| Gross margin |
434 |
293 |
1,207 |
787 |
| Expenses and other income: | ||||
| Selling and administrative expenses |
260 |
208 |
734 |
603 |
| Research and engineering expenses |
60 |
51 |
175 |
148 |
| Equity, royalty and other income from investees |
(26) |
(20) |
(73) |
(44) |
| Interest expense |
28 |
25 |
82 |
65 |
| Other income, net (Note 9) |
(6) |
(7) |
(1) |
(17) |
|
Earnings before income taxes, minority interest and dividends on preferred securities of subsidiary trust |
118 |
36 |
290 |
32 |
| (Benefit) provision for income taxes (Note 13) |
(4) |
9 |
44 |
5 |
| Minority interest in earnings of consolidated subsidiaries |
6 |
3 |
15 |
9 |
| Dividends on preferred securities of subsidiary trust |
- |
- |
- |
11 |
| Net earnings |
$ 116 |
$ 24 |
$ 231 |
$ 7 |
| Earnings Per Share (Note 11): | ||||
| Basic |
$ 2.71 |
$ 0.62 |
$ 5.54 |
$ 0.18 |
| Diluted |
$ 2.40 |
$ 0.60 |
$ 4.95 |
$ 0.18 |
| Cash dividends declared per share |
$ 0.30 |
$ 0.30 |
$ 0.90 |
$ 0.90 |
The accompanying notes are an integral part of the consolidated financial statements.
|
CUMMINS INC. AND CONSOLIDATED
SUBSIDIARIES |
|
|
|
September 26, |
December 31,* |
|
|
$ Millions |
2004 |
2003 |
|
ASSETS |
||
|
Current assets |
||
|
Cash and cash equivalents |
$ 421 |
$ 108 |
|
Marketable securities |
86 |
87 |
|
Receivables, net |
1,111 |
772 |
|
Receivables from related parties |
93 |
157 |
|
Inventories (Note 3) |
998 |
733 |
|
Other current assets |
284 |
273 |
|
Total current assets |
2,993 |
2,130 |
|
Long-term assets: |
||
|
Property, plant and equipment, net of accumulated depreciation of |
||
|
$2,206 and $1,774 |
1,570 |
1,347 |
|
Investments in and advances to equity investees |
258 |
339 |
|
Goodwill |
353 |
344 |
|
Other intangible assets, net |
91 |
92 |
|
Deferred income taxes |
711 |
663 |
|
Other assets |
192 |
211 |
|
Total assets |
$ 6,168 |
$ 5,126 |
|
|
||
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
||
|
Current liabilities: |
||
|
Loans payable |
$ 49 |
$ 28 |
|
Current maturities of long-term debt |
275 |
21 |
|
Accounts payable |
845 |
557 |
|
Accrued product coverage and marketing expenses |
300 |
246 |
|
Other accrued expenses |
672 |
539 |
|
Total current liabilities |
2,141 |
1,391 |
|
Long-term liabilities: |
||
|
Long-term debt |
1,268 |
1,380 |
|
Pensions |
387 |
446 |
|
Postretirement benefits other than pensions |
572 |
577 |
|
Other long-term liabilities |
325 |
260 |
|
Total liabilities |
4,693 |
4,054 |
|
Commitments and contingencies (Note 8) |
||
|
Minority interests |
192 |
123 |
|
Shareholders' equity: |
|
|
|
Common stock, $2.50 par value, 150 million shares authorized |
||
|
48.2 and 48.3 million shares issued |
121 |
121 |
|
Additional contributed capital |
1,156 |
1,113 |
|
Retained earnings |
760 |
569 |
|
Accumulated other comprehensive loss (Note 10) |
||
|
Minimum pension liability |
(435) |
(434) |
|
Other components, net |
(83) |
(58) |
|
Common stock in treasury, at cost, 2.7 and 5.6 million shares |
(108) |
(225) |
|
Common stock held in trust for employee benefit plans, |
||
|
2.2 and 2.3 million shares |
(106) |
(113) |
|
Unearned compensation |
(22) |
(24) |
|
Total shareholders' equity |
1,283 |
949 |
|
Total liabilities and shareholders' equity |
$ 6,168 |
$ 5,126 |
* Derived from audited financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
|
CUMMINS INC. AND CONSOLIDATED
SUBSIDIARIES |
Nine Months Ended |
|
|
September 26, |
September 28, |
|
|
$ Millions |
2004 |
2003 |
| Cash flows from operating activities | ||
| Net earnings | $ 231 | $ 7 |
| Adjustments to reconcile net earnings to net |
|
|
| cash flows provided by operating activities: |
|
|
| Depreciation and amortization | 199 | 165 |
| Equity in earnings of investees, net of dividends | (10) | (31) |
| Minority interest in earnings of consolidated subsidiaries | 15 | 9 |
| Pension expense | 68 | 47 |
| Pension contributions | (115) | (104) |
| Stock-based compensation expense | 12 | 16 |
| Tax benefit on stock options exercised |
21 |
- |
| Amortization of gain on swap unwind |
(5) |
(5) |
| Translation and hedging activities |
(11) |
(7) |
| Changes in assets and liabilities: |
|
|
| Receivables |
(250) |
(132) |
| Inventories |
(212) |
(79) |
| Accounts payable |
253 |
139 |
| Accrued expenses |
156 |
(27) |
|
Other |
16 |
15 |
|
Net cash provided by operating activities |
368 |
13 |
| Cash flows from investing activities | ||