Cummins Inc. (NYSE: CMI) is on pace to report a fifth consecutive year of record sales and profits in 2008, and is poised for significant further growth over the next several years, Chairman and Chief Executive Officer Tim Solso told shareholders today at the Company's annual meeting.
Cummins shareholders re-elected all nine Cummins directors for another year and ratified the selection of PriceWaterhouse Coopers LLC as the Company's external auditing firm. Shareholders also voted to increase the number of authorized shares of common stock from 300 million to 500 million and defeated a shareholder proposal calling on the Company to take steps to adhere to the conventions of the International Labor Organization.
Speaking to shareholders from the Columbus Engine Plant, Solso recapped Cummins' 2007 performance and then outlined the Company's growth plans.
Cummins enjoyed its most profitable year ever in 2007 when it reported net earnings of $739 million on $13.05 billion in sales. The Company's total shareholder return of 118 percent in 2007 placed it 10th among the Fortune 500 companies, and its five-year average annual return of 58 percent was ninth best.
"Cummins remains on track for further profitable growth - this year and beyond - despite the economic uncertainty affecting some of our U.S. consumer-oriented markets," Solso said. "We have gained share in key markets in the U.S. in the past year, and our international presence continues to strengthen.
"Our strong financial position today gives us the flexibility to invest in the people, products, facilities and technologies for future growth."
Solso discussed the Company's growth targets for 2008: 12 percent sales growth and an Earnings Before Interest and Taxes goal of 10 percent of sales. The Company also is targeting a 20 percent return on equity and a 25 percent return on average net assets.
Solso spoke of three broad global trends - increasingly strict emissions standards, the globalization of the world economy and rising demand for energy around the world - that will benefit Cummins over the next several years.
- As a leader in emissions technology, Cummins stands to benefit from new emissions standards around the world over the next several years - both for the Company's engines and components such as exhaust aftertreatment devices, fuel systems, turbochargers and filters.
- Cummins has large and growing businesses in key international markets, such as China, India and Brazil and is pursuing growth opportunities in new emerging markets such as Russia, Vietnam and Africa.
- The Company expects continued strong growth in its joint venture operations, especially in China and India, and its North American distribution network.
- The surging demand for power in the Middle East, Asia and developing economies such as those in Africa has resulted in shortages, which is expected to continue to benefit the Company's growing Power Generation business.
Solso also outlined several key drivers for the Company's expected future growth, including:
- Cummins' deep technological capability. The Company is investing in the right technology across its full range of products, using world-class tools and methods. That investment is reflected in the recent market share gains, and has allowed the company to pursue profitable growth opportunities in many of its markets around the world.
- Cummins' strong global network, which helps insulate it from downturns in an individual market or region. Cummins does business in more than 190 countries and territories. Fifty-four percent of the Company's sales were generated outside the United States in 2007, with that number growing to 57 percent in the first quarter of 2008. Likewise, Cummins produced nearly 900,000 engines in 2007 - more than half outside the United States.
- Cummins has developed strategic partnerships with leading companies all over the world.
- Cummins has announced a large number of new products that are now being introduced or will be introduced during the next several years, including: light-duty engines in the U.S. and China by 2010; engines that meet the next wave of on- and off-highway emissions standards in the U.S. and Europe over the next few years; a new industry-leading common rail fuel system and innovative user-friendly filters.
- Cummins is investing in additional capacity across the Company. The Company has plans for 22 major facility additions or upgrades and is expanding its global distribution network.
"I'm proud of our efforts over the past several years to grow the Company and improve our financial structure, which have produced good returns for our shareholders," Solso said. "That work has positioned us extremely well, and I am more excited about the future of the Company than at any time during my 37 years with Cummins."
Board members selected
In the business portion of the meeting, Cummins shareholders elected nine directors to the Board for one-year terms. All the directors currently serve on the Board at Cummins. They are:
- Tim Solso, Chairman and Chief Executive Officer (first elected to the board in 1994)
- Joe Loughrey, President and Chief Operating Officer (2005)
- Robert J. Darnall, Retired Chairman and CEO, Inland Steel (1989)
-- Robert Herdman, Managing Director of Kalorama Partners LLC (February 2008)
- Alexis M. Herman, Chairman and CEO, New Ventures Inc. (2001)
- William I. Miller, Chairman, Irwin Management Corp. (1989)
- Georgia R. Nelson, President, Midwest Generation EME (2004)
- Carl Ware, Retired Executive Vice President, Coca-Cola Co. (2004)
- J. Lawrence Wilson, Retired Chairman and CEO, Rohm and Haas Co. (1990).