Cummins Announces Fourth Quarter and Full Year 2018 Results
Cummins Inc. (NYSE: CMI) today reported results for the fourth quarter of 2018.
Key Points
Fourth quarter revenues of $6.1 billion; GAAP1 Net Income of $579 million
EBITDA in the fourth quarter was 14.6 percent of sales; Diluted EPS of $3.63
Full year revenues of $23.8 billion; GAAP1 Net Income of $2.1 billion
EBITDA for the full year was 14.6 percent of sales; Diluted EPS of $13.15
The company expects full year 2019 revenues to be flat to up 4 percent, EBITDA expected to be in the range of 15.75 to 16.25 percent
Fourth quarter revenues of $6.1 billion increased 12 percent from the same quarter in 2017. Increased truck production in North America and stronger demand in global construction and power generation markets drove the majority of the revenue increase. Currency negatively impacted revenues by 2 percent primarily due to a stronger US dollar.
Fourth quarter sales in North America improved by 17 percent while international revenues increased by 6 percent led by growth in Europe, Asia Pacific, and Latin America.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the fourth quarter were $896 million, or 14.6 percent of sales, compared to $769 million or 14.0 percent of sales a year ago, or $808 million and 14.8 percent of sales excluding the impact of tax legislation. Fourth quarter results included EBITDA loss of $58 million related to a write-off of an investment in an electronic logging device or ELD business, and the mark to market impact on assets related to our non-qualified benefit plans.
Net income attributable to Cummins in the fourth quarter was $579 million ($3.63 per diluted share), compared to a net loss of $274 million ($1.65 per diluted share), or $503 million ($3.03 per diluted share) excluding the impact of tax legislation in the fourth quarter of 2017. Fourth quarter results were positively impacted by $25 million in discrete tax items and the impact of tax reform. Excluding these items, net income attributable to Cummins in the fourth quarter was $554 million ($3.48 per diluted share). The tax rate in the fourth quarter was 14.1 percent.
Revenues for the full year were a record $23.8 billion, 16 percent higher than 2017. Revenues in North America increased 19 percent and international sales grew 12 percent, with growth in all major regions.
EBITDA for the year was a record $3.5 billion or 14.6 percent of sales. This compares to $3.0 billion or 14.8 percent of sales in 2017, or $3.1 billion or 15.0 percent of sales excluding the impact of tax legislation.
Net income attributable to Cummins for the full year was $2.1 billion ($13.15 per diluted share), compared to a net income of $999 million ($5.97 per diluted share), or $1.8 billion ($10.62 per diluted share) excluding the impact of tax legislation. The tax rate for the full year was 20.6 percent, or 21.1 percent excluding the favorable impact of discrete tax items.
"I want to thank the more than 60,000 global employees who made our 2018 record sales and profits a reality," said Chairman and CEO Tom Linebarger. "2019 is an historic year for Cummins as we celebrate the 100th anniversary of our company, and project another record year of financial results. Our financial strength allows us to continue investing and innovating across our broad portfolio of power solutions to remain a global technology leader for the next 100 years while continuing to return significant capital to investors."
2019 Outlook:
Based on the current forecast, Cummins projects full year 2019 revenues to be flat to up 4 percent, and EBITDA to be in the range of 15.75 to 16.25 percent of sales. The Company expects to return 75 percent of Operating Cash Flow to shareholders in 2019 in the form of dividends and share repurchases.
2018 Highlights:
- The Company returned $1.9 billion or 78 percent of Operating Cash Flow to shareholders in the form of dividends and share repurchases
- On International Women’s Day 2018, Cummins launched the Cummins Powers Women program, our commitment to the advancement and prosperity of women and girls around the world
- Cummins was named to Ethisphere’s 2018 list of World’s Most Ethical Companies for a 11th consecutive year by the Ethisphere Institute
- DiversityInc named Cummins one of the Top 50 Companies for Diversity for a 12th consecutive year. Cummins ranked No. 12 on the 2018 annual list, which included more than 1,000 participating companies
- Cummins received the highest ranking possible for its environmental and social performance from Institutional Shareholder Services (ISS), a key source of information for institutional investors
- Announced the creation of the Electrified Power Business Segment and completed the acquisition of Silicon Valley-based Efficient Drivetrains, Inc. (EDI), which designs and produces hybrid and fully- electric power solutions for commercial vehicle markets, and Johnson Matthey Battery Systems.
1 Generally Accepted Accounting Principles
Forward-looking disclosure statement
Information provided in this release that is not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our forecasts, guidance, preliminary results, expectations, hopes, beliefs and intentions on strategies regarding the future. These forward-looking statements include, without limitation, statements relating to our plans and expectations for our revenues and EBITDA. Our actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including, but not limited to: any adverse consequences resulting from entering into the Settlement Agreements, including required additional mitigation projects, adverse reputational impacts and potential resulting legal actions; increased scrutiny from regulatory agencies, as well as unpredictability in the adoption, implementation and enforcement of emission standards around the world; evolving environmental and climate change legislation and regulatory initiatives; changes in international, national and regional trade laws, regulations and policies; changes in taxation; global legal and ethical compliance costs and risks; future bans or limitations on the use of diesel-powered products; raw material, transportation and labor price fluctuations and supply shortages; aligning our capacity and production with our demand; the actions of, and income from, joint ventures and other investees that we do not directly control; large truck manufacturers' and original equipment manufacturers' customers discontinuing outsourcing their engine supply needs or experiencing financial distress, or change in control; product recalls; variability in material and commodity costs; the development of new technologies that reduce demand for our current products and services; lower than expected acceptance of new or existing products or services; product liability claims; our sales mix of products; climate change, global warming, more stringent climate change regulations, accords, mitigation efforts, greenhouse gas regulations or other legislation designed to address climate change; our plan to reposition our portfolio of product offerings through exploration of strategic acquisitions, divestitures or exiting the production of certain product lines or product categories and related uncertainties of such decisions; increasing interest rates; challenging markets for talent and ability to attract, develop and retain key personnel; exposure to potential security breaches or other disruptions to our information technology (IT) environment and data security; the use of artificial intelligence in our business and in our products and challenges with properly managing its use; political, economic and other risks from operations in numerous countries including political, economic and social uncertainty and the evolving globalization of our business; competitor activity; increasing competition, including increased global competition among our customers in emerging markets; failure to meet sustainability expectations or standards, or achieve our sustainability goals; labor relations or work stoppages; foreign currency exchange rate changes; the performance of our pension plan assets and volatility of discount rates; the price and availability of energy; continued availability of financing, financial instruments and financial resources in the amounts, at the times and on the terms required to support our future business; and other risks detailed from time to time in our SEC filings, including particularly in the Risk Factors section of our 2024 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this release and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available at https://www.sec.gov or at https://investor.cummins.com in the Investor Relations section of our website.
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