Cummins has revised its fourth quarter and full year 2008 operating results to reflect a higher warranty liability than previously reported.
The warranty liability was revised to reflect a change in estimate in the warranty costs primarily for mid-range engine products launched in 2007. In late February, Cummins' analysis of recent warranty payments indicated that a revision to our initial warranty liability estimate is appropriate.
"The company is aggressively addressing the product issues and has made modifications that have reduced the failure rate of these products," said the Cummins announcement. "The increase in the warranty liability reflects higher than expected costs associated with these repairs."
As a result of the change, the company's Earnings Before Interest and Taxes (EBIT) for the fourth quarter fell by $73 million, while net income was reduced by $46 million, or 23 cents a share. The change in earnings reflects an $82 million increase in warranty liability, offset by a $9 million reduction in variable and incentive compensation as a result of this change.
The company's revised fourth quarter EBIT was $56 million and net income was $43 million, or 22 cents a share. For the full year, the company's revised EBIT was $1.22 billion and net income was $755 million, or $3.84 a share. The earnings revisions affect the fourth quarter results of the Company's Engine and Component segments.
The warranty liability was revised to reflect a change in estimate in the warranty costs primarily for mid-range engine products launched in 2007. In late February, Cummins' analysis of recent warranty payments indicated that a revision to our initial warranty liability estimate is appropriate.
"The company is aggressively addressing the product issues and has made modifications that have reduced the failure rate of these products," said the Cummins announcement. "The increase in the warranty liability reflects higher than expected costs associated with these repairs."
As a result of the change, the company's Earnings Before Interest and Taxes (EBIT) for the fourth quarter fell by $73 million, while net income was reduced by $46 million, or 23 cents a share. The change in earnings reflects an $82 million increase in warranty liability, offset by a $9 million reduction in variable and incentive compensation as a result of this change.
The company's revised fourth quarter EBIT was $56 million and net income was $43 million, or 22 cents a share. For the full year, the company's revised EBIT was $1.22 billion and net income was $755 million, or $3.84 a share. The earnings revisions affect the fourth quarter results of the Company's Engine and Component segments.
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