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Q3 2012 Earnings Call
October 31, 2012 11:00 am ET
N. Thomas Linebarger - Chairman, Chief Executive Officer and Chairman of Executive Committee
Patrick J. Ward - Chief Financial Officer and Vice President
Richard J. Freeland - Vice President and President of Engine Business
Andy Kaplowitz - Barclays Capital, Research Division
Andrew M. Casey - Wells Fargo Securities, LLC, Research Division
Jerry Revich - Goldman Sachs Group Inc., Research Division
Adam William Uhlman - Cleveland Research Company
Ann P. Duignan - JP Morgan Chase & Co, Research Division
Vance H. Edelson - Morgan Stanley, Research Division
Stephen E. Volkmann - Jefferies & Company, Inc., Research Division
David Raso - ISI Group Inc., Research Division
Eli S. Lustgarten - Longbow Research LLC
Previous Statements by CMI
» Cummins Management Discusses Q2 2012 Results - Earnings Call Transcript
» Cummins' CEO Discusses Q1 2012 Results - Earnings Call Transcript
» Cummins' CEO Discusses Q4 2011 Results - Earnings Call Transcript
I would now like to turn the presentation over to your host for today's call, Mr. Mark Smith, Executive Director of Investor Relations. Please proceed, sir.
Thank you, Tony, and good morning, everyone, and welcome to our teleconference today to discuss Cummins' results for the third quarter of 2012.
Participating with me today are our Chairman and Chief Executive Officer, Tom Linebarger; our Chief Financial Officer, Pat Ward; and the President of our Engine business, Rich Freeland. We will all be available for your questions at the end of the teleconference.
Before we start, please note that some of the information you will hear or be given today will consist of forward-looking statements within the meaning of the Securities Exchange Act of 1934. Such statements express our forecasts, expectations, hopes, beliefs and intentions on strategies regarding the future.
Our actual future results could differ materially from those projected in such forward-looking statements because of a number of risks and uncertainties. More information regarding such risks and uncertainties is available in the forward-looking disclosure statement in the slide deck and our filings with the Securities and Exchange Commission, particularly the Risk Factors section of our most recently filed annual report on Form 10-K and any subsequently filed quarterly reports on Form 10-Q.
During the course of this call, we'll be discussing certain non-GAAP financial measures, and we refer you to our website for the reconciliation of those measures to GAAP financial measures. Our press release with a copy of the financial statements and a copy of today's webcast presentation are available on our website at www.cummins.com under the heading of Investors and Media.
With that out of the way, we'll begin with our Chairman and Chief Executive Officer, Tom Linebarger.
N. Thomas Linebarger
Thank you, Mark. Good morning, everyone. Before I begin my remarks, on behalf of Cummins, I would just like to express our condolences to the families and communities who have been impacted by the devastation of Hurricane Sandy. I'm guessing that some of you on the phone have been personally affected, and I hope for a quick recovery for each of you.
Now I'll summarize our third quarter results and talk about our key markets. Pat will then take you through more details of our third quarter performance and provide an update on our full year guidance.
Revenues for the third quarter were $4.1 billion, a decrease of 11% from the third quarter of 2011. Third quarter EBIT was $496 million, a decrease of $144 million or 23% compared to the third quarter of 2011. EBIT percent for the quarter was 12%, down from 13.8% a year ago with the negative impact of lower volumes and lower joint venture income, partially offset by lower product coverage cost and material costs.
As previously announced, we now expect full year revenues to be $17 billion, down from $18 billion last year. Demand has clearly weakened in a number of our markets over the last several months. I will talk about our outlook for many of these markets, and we have included for reference a supplementary slide in today's earnings release presentation that further quantifies the change in revenue guidance by both business segment and by market.
We expect to deliver full year EBIT margins of 13.5%, down from our previous guidance of between 14.25% and 14.75%. Pat will cover the changes by business in his remarks. But overall, the reduction in demand across multiple markets and geographies is the main driver of our lower EBIT margin forecast. I will discuss the actions we are taking to reduce costs following my comments on our major markets.
In the third quarter, our revenues in North America increased 2% year-over-year. The rate of growth of our revenues in North America slowed significantly during the third quarter, with the most significant change in the North American heavy-duty truck market. As a reminder, total company revenues in North America grew 43% in the first quarter and 12% in the second quarter compared to the previous year.
In the North American heavy-duty truck market, our Engine shipments decreased by 26% compared to the third quarter last year. Although an industry-wide cut in production rates was anticipated in the third quarter, the reduction was larger than expected, and the industry is experiencing slower-than-expected new order rates. End-users are reluctant to proceed with new purchases apparently due to uncertainty about the U.S. economy and concerns about possible impacts from the fiscal cliff.