Cummins Inc. (NYSE: CMI) today reported net income for the first quarter was $7 million, or $0.04 a share, a 96 percent decrease from $190 million ($0.97 a share) a year ago.
Sales for the quarter were $2.44 billion, down 30 percent from $3.47 billion during the same period in 2008. Earnings Before Interest and Taxes of $28 million, or 1.1 percent of sales, fell 91 percent from $315 million, or 9.1 percent of sales, in the first quarter 2008.
The first-quarter results include a $66 million charge to cover the costs associated with job reduction actions taken in the quarter. Cummins announced plans to reduce its workforce by more than 4,100 employees and contract workers during the quarter in response to lower demand for its products. Excluding the restructuring charge, net income attributable to Cummins Inc. was $51 million, or $0.26 a share, and EBIT was $94 million, or 3.9 percent of sales.
All four of the company’s business segments experienced sales decreases compared to the first quarter 2008, with the largest declines coming from the Engine and Components segments.
Based on the first quarter results and Company forecasts for the remainder of the year, Cummins today revised its sales and earnings guidance downward for 2009. The Company now expects 2009 sales to be slightly more than 30 percent lower than 2008 and anticipates EBIT of 5 percent of sales for the year, excluding the restructuring charge.
“The first quarter was, as we expected, extremely challenging and we do not see the economy or our markets improving for the remainder of 2009,” said Cummins Chairman and Chief Executive Officer Tim Solso. “We have taken significant actions to lower our costs and improve our productivity in response to the global recession, which has affected virtually every market in which we operate around the world.
“We are confident that those actions, which will continue as necessary, will allow us to earn a reasonable profit in 2009, generate positive cash flow and enable us to continue to invest in the products and technologies vital to our future success.”
In addition to reducing its workforce worldwide, the company has made significant reductions in discretionary spending and has further prioritized capital expenditures to focus on the most critical projects, especially those associated with the launch of new emission compliant products in 2010. Capital spending in the first quarter was $64 million, compared to $90 million in the same period a year ago and $213 million in the fourth quarter 2008.
Components: Sales of $530 million declined 35 percent from $820 million in the first quarter 2008. Segment EBIT of $1 million (0.2 percent of sales) fell from $37 million (4.5 percent of sales) the same period a year ago. Revenues fell across all businesses in the segment and in all major geographic markets, as a result of volume declines associated with the global recession. Most of the revenue declines were the result of lower OEM and aftermarket sales in North America and Europe. Filtration business sales decreased 33 percent; turbocharger sales fell 42 percent; fuel systems sales declined 38 percent and exhaust aftertreatment sales decreased 24 percent. SAR expenses fell in total dollars, but increased as a percentage of sales compared to the first quarter 2008.