- Fourth quarter 2023 revenues of $8.5 billion; GAAP1 Net Loss
of $1.4 billion
- Fourth quarter 2023 EBITDA was negative 10.3% of sales;
Diluted EPS of $(10.01)
- The results for the fourth quarter 2023 reflect:
- $2.04 billion, or $13.76 per diluted share, charge related
to the previously announced agreement to resolve U.S. regulatory
claims
- $42 million, or $0.22 per diluted share, of costs related to
the implementation of voluntary retirement and separation
programs
- $33 million, or $0.17 per diluted share, of costs related to
the separation of Atmus
- Full year 2023 revenues of $34.1 billion; GAAP1 Net Income
of $735 million
- EBITDA for full year 2023 was 8.9% of sales; Diluted EPS of
$5.15
- Full year 2024 revenues expected to decline between 2% and
5%; EBITDA expected to range between 14.4% and 15.4% of
sales
Cummins Inc. (NYSE: CMI) today reported fourth quarter and full
year 2023 results.
“High global demand for Cummins’ diverse set of innovative
products drove record full year revenues and operating cash flow in
2023,” said Jennifer Rumsey, Chair and CEO. “Excluding the impacts
related to the agreement to resolve U.S. regulatory claims, 2023
was a record year for EBITDA, Net Income and EPS for Cummins. Also,
EBITDA percent improved year over year in the Components,
Distribution and Power Systems segments. I want to thank all our
employees for delivering high-quality products to our customers and
making 2023 a successful year.”
Fourth quarter 2023 revenues of $8.5 billion increased 10% from
the same quarter in 2022. Sales in North America increased 8% and
international revenues increased 13% reflecting strong demand
across most of Cummins’ global markets during the period.
In the fourth quarter of 2023, net loss was $1.4 billion, or
$(10.01) per diluted share, compared to net earnings of $631
million, or $4.43 per diluted share, in 2022. The results reflect
the recording of a charge related to the agreement to resolve U.S.
regulatory claims previously announced in December of $2.04
billion, or $13.76 per diluted share; costs related to the
voluntary retirement and separation programs of $42 million, or
$0.22 per diluted share; and costs related to the separation of
Atmus of $33 million, or $0.17 per diluted share. The fourth
quarter of 2022 included $19 million, or $0.11 per diluted share,
of costs related to the separation of Atmus. The tax rate in the
fourth quarter of 2023 was negative 13.3% due primarily to the
non-deductible costs related to the agreement to resolve U.S.
regulatory claims.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) in the fourth quarter of 2023 was a loss of $878 million,
or negative 10.3% of sales, compared to positive $1.1 billion, or
14.2% of sales, a year ago. EBITDA for the fourth quarter of 2023
and the fourth quarter of 2022 included the costs noted above.
Revenues for the full year 2023 were $34.1 billion, 21% higher
than 2022. Sales in North America increased 22% and international
revenues increased 20% compared to 2022 due to the addition of
Meritor and strong demand across most global markets.
Net income for the full year 2023 was $735 million, or $5.15 per
diluted share, compared to $2.2 billion, or $15.12 per diluted
share, in 2022. 2023 results included costs related to the
agreement to resolve U.S. regulatory claims of $2.04 billion, or
$13.78 per diluted share, costs related to the separation of Atmus
of $100 million, or $0.54 per diluted share, and costs related to
the voluntary retirement and separation programs of $42 million, or
$0.22 per diluted share. Full year 2022 results included costs
related to the indefinite suspension of operations in Russia of
$111 million, or $0.72 per diluted share and costs related to the
separation of Atmus of $81 million, or $0.45 per diluted share. The
tax rate in 2023 was 48.3%, which is higher than our external
guidance, primarily due to the non-deductible costs related to the
agreement to resolve U.S. regulatory claims.
EBITDA in 2023 was $3.0 billion, or 8.9% of sales compared to
$3.8 billion, or 13.5% of sales, a year ago. EBITDA for 2023 and
2022 included the costs noted above.
Operating cash flow for 2023 was a record inflow of $4.0
billion, compared to $2.0 billion in 2022, as Cummins continues to
focus on working capital management within the business.
2024 Outlook:
Based on its current forecast, Cummins projects full year 2024
revenues to decline 2% to 5% on a year-over-year basis, and EBITDA
to be in the range of 14.4% and 15.4% of sales.
“In 2024, we anticipate that demand will slow particularly in
the North America heavy-duty truck market, partially offset by
strength in other key markets, and have already taken some actions
to reduce cost. We will continue to monitor global economic
indicators closely and will ensure we are prepared to adjust our
business should economic momentum slow further,” said Rumsey.
“Consistent with how we have managed Cummins through prior
cycles, and in alignment with our Destination Zero strategy, we
will continue investment in new technologies and products in 2024.
This sustained investment will ensure that the company will be
positioned to generate strong growth and profitability in both the
near- and long-terms,” concluded Rumsey.
Cummins’ 2024 outlook assumes the inclusion of Atmus for the
entirety of 2024, but excludes any costs or benefits associated
with the planned separation of Atmus. Subject to market conditions,
the intention is to split-off the company’s remaining ownership in
Atmus through an exchange offer. Until the execution of the
exchange offer, Cummins’ will continue to consolidate Atmus in its
results.
Cummins plans to continue to generate strong operating cash flow
and returns for shareholders and is committed to its long-term
strategic goal of returning 50% of operating cash flow back to
shareholders. In the near term, Cummins’ capital allocation
strategy will focus on the payment of dividends and debt reduction,
while the company continues to generate profitable growth.
2023 Highlights:
- Cummins announced the launch of Accelera™ by Cummins, a new
brand for its New Power business unit. Accelera provides a diverse
portfolio of zero-emissions solutions for many of the world’s most
vital industries empowering customers to accelerate their
transition to a sustainable future.
- Accelera by Cummins, Daimler Trucks & Buses, PACCAR and EVE
Energy announced in September a joint venture to accelerate and
localize battery cell production and the battery supply chain in
the United States. The planned joint venture will manufacture
battery cells for electric commercial vehicles and industrial
applications. Total investment by the partners is expected to be in
the range of $2-3 billion for the 21-gigawatt hour (GWh) factory
with production expected to begin in 2027. It was recently
announced in January that the joint venture had selected Marshall
County, Mississippi as the future site.
- Cummins completed its acquisition of two Faurecia commercial
vehicle manufacturing plants and their related activities, one in
Columbus, Indiana (U.S.) and one in Roermond, Netherlands. The
acquisition provides an opportunity for the Cummins Emission
Solutions business to ensure continued access to the technology and
facilities it needs to meet current and future demand for
low-emissions products and to ensure continuity for both the
employees and customers of the acquired manufacturing
facilities.
- The company announced several collaborations that further
enable our customers to achieve their decarbonization goals.
Freightliner announced they are partnering with Cummins to offer
the new Cummins X15N natural gas engine in its heavy-duty
Freightliner Cascadia trucks. Also, Cummins Inc. and Knight
Transportation, Inc. announced that the industry's largest full
truckload company has successfully tested Cummins’ new X15N engine,
using renewable natural gas to realize reductions in nitrous oxides
and greenhouse gas without compromising performance. The X15N,
which will launch in North America in 2024, is the first natural
gas engine to be designed specifically for heavy-duty and
on-highway truck applications. The X15N has already achieved
success in the heavy-duty truck market in China with strong
customer demand and market penetration.
- Progress continues to be made on the planned separation of the
Filtration business. On May 26, 2023, as part of its initial public
offering (IPO), Atmus Filtration Technologies Inc. shares began
trading on the New York Stock Exchange (NYSE) under the ticker
symbol “ATMU”. Upon completion of the IPO, Cummins retained
approximately 80.5% of Atmus’ outstanding shares. Subject to market
conditions, Cummins’ intention is to split-off the remaining
ownership in Atmus through an exchange offer as our next step in
the separation.
- Cummins received several prestigious honors during the year
that recognized the company’s sustainability efforts and impact
including: Ethisphere’s World’s Most Ethical Companies list;
Sustainalytics’ 2023 Top-Rated Companies list; S&P Dow Jones
Sustainability World Index and the S&P Dow Jones Sustainability
North America Index; and, Automotive and Components industry in
Newsweek’s annual ranking of America’s Most Responsible Companies.
In addition, Cummins received accolades recognizing its ongoing
efforts to foster caring and inclusive environments in which all
employees and innovation thrive including: one of 66 companies on
America’s Top Corporations for Women’s Business Enterprises in
2023; National Association of Corporate Directors 2023 Diversity,
Equity and Inclusion Award; 2023 best place to work for disability
inclusion; Military Friendly Employer; Top Hispanic Employer by
DiversityComm Magazine; Financial Times Diversity Leaders list in
Europe; #55 on Glassdoor’s Best Places to Work; and, a score of 100
on the 2023-2024 Corporate Equality Index.
- The company increased its cash dividend for the 14th straight
year and returned a total of $921 million to shareholders through
dividends.
1 Generally Accepted Accounting Principles in the U.S.
Fourth quarter 2023 detail (all comparisons to same period in
2022):
Components Segment
- Sales - $3.2 billion, up 3%
- Segment EBITDA - $406 million, or 12.7% of sales, which
includes $28 million of costs related to the separation of Atmus
and $9 million related to the voluntary retirement and separation
programs, compared to $377 million, or 12.2% of sales in the prior
year, which included $13 million of costs related to the separation
of Atmus, and $27 million of acquisition and integration costs
related to Meritor.
- Revenues in North America decreased by 2% and international
sales increased by 10% due to increased demand particularly in
China which had weak markets in 2022.
Engine Segment
- Sales - $2.8 billion, up 5%
- Segment EBITDA - $353 million, or 12.7% of sales, which
includes $12 million related to the voluntary retirement and
separation programs, compared to $362 million or 13.7% of
sales
- On-highway revenues increased 10% driven by strong demand in
the North American truck market and pricing actions.
- Sales increased 5% in North America and grew 8% in
international markets due to an increase in global demand.
Distribution Segment
- Sales - $2.7 billion, up 17%
- Segment EBITDA - $269 million, or 9.9% of sales, compared to
$256 million, or 11.0% of sales
- Revenues in North America increased 18% and international sales
increased by 15%.
- Higher revenues were driven by increased demand for whole
goods, especially power generation products, and pricing
actions.
Power Systems Segment
- Sales - $1.4 billion, up 8%
- Segment EBITDA - $182 million, or 12.7% of sales, compared to
$185 million, or 14.0% of sales
- Power generation revenues increased 19% driven by increased
global demand and pricing actions. Industrial revenues decreased 3%
due to lower oil and gas demand.
Accelera Segment
- Sales - $81 million, up 8%
- Segment EBITDA loss - $121 million
- Revenues increased due to higher demand for battery electric
systems and the addition of the Siemens Commercial Vehicle business
that was acquired during the fourth quarter of 2022.
- Costs associated with the development of electric powertrains,
fuel cells and electrolyzers, as well as products to support
battery electric vehicles are contributing to EBITDA losses. The
company continues to make investments to support our customers
through the energy transition and deliver future profitable
growth.
About Cummins Inc.
Cummins Inc., a global power leader, is a corporation of
complementary business segments that design, manufacture,
distribute and service a broad portfolio of power solutions. The
company’s products range from diesel, natural gas, electric and
hybrid powertrains and powertrain-related components including
filtration, aftertreatment, turbochargers, fuel systems, controls
systems, air handling systems, automated transmissions, axles,
drivelines, brakes, suspension systems, electric power generation
systems, batteries, electrified power systems, electric
powertrains, hydrogen production and fuel cell products.
Headquartered in Columbus, Indiana (U.S.), since its founding in
1919, Cummins employs approximately 73,600 people committed to
powering a more prosperous world through three global corporate
responsibility priorities critical to healthy communities:
education, environment and equality of opportunity. Cummins serves
its customers online, through a network of company-owned and
independent distributor locations, and through thousands of dealer
locations worldwide and earned about $2.2 billion on sales of $28.1
billion in 2022. See how Cummins is powering a world that's always
on by accessing news releases and more information at
https://www.cummins.com/always-on.
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, EBITDA and agreement in principle to settle
regulatory proceedings regarding our emissions certification and
compliance process for pick-up truck applications. 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 Agreement in Principle, 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; changes in international, national and regional trade laws,
regulations and policies; changes in taxation; global legal and
ethical compliance costs and risks; evolving environmental and
climate change legislation and regulatory initiatives; future bans
or limitations on the use of diesel-powered products; failure to
successfully integrate and / or failure to fully realize all of the
anticipated benefits of the acquisition of Meritor, Inc.; raw
material, transportation and labor price fluctuations and supply
shortages; any adverse effects of the conflict between Russia and
Ukraine and the global response (including government bans or
restrictions on doing business in Russia); 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; uncertainties and risks related to timing and
potential value to both Atmus Filtration Technologies Inc. (Atmus)
and Cummins of the planned final separation of Atmus, including
business, industry and market risks, as well as the risks involving
the anticipated favorable tax treatment if there is a significant
delay in the completion of the envisioned final separation; our
plan to reposition our portfolio of product offerings through
exploration of strategic acquisitions and divestitures and related
uncertainties of entering such transactions; increasing interest
rates; challenging markets for talent and ability to attract,
develop and retain key personnel; climate change, global warming,
more stringent climate change regulations, accords, mitigation
efforts, greenhouse gas regulations or other legislation designed
to address climate change; exposure to potential security breaches
or other disruptions to our information technology environment and
data security; 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 environmental, social and governance (ESG) expectations or
standards, or achieve our ESG 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 2022 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 http://www.sec.gov or at
http://www.cummins.com in the Investor Relations section of our
website.
Presentation of Non-GAAP Financial Information
EBITDA is a non-GAAP measure used in this release and is defined
and reconciled to what management believes to be the most
comparable GAAP measure in a schedule attached to this release,
except for forward-looking measures of EBITDA where a
reconciliation to the corresponding GAAP measures is not available
due to the variability, complexity and limited visibility of the
non-cash items that are excluded from the non-GAAP outlook measure.
Cummins presents this information as it believes it is useful to
understanding the Company's operating performance, and because
EBITDA is a measure used internally to assess the performance of
the operating units.
Webcast information
Cummins management will host a teleconference to discuss these
results today at 10 a.m. EST. This teleconference will be webcast
and available on the Investor Relations section of the Cummins
website at www.cummins.com. Participants wishing to view the
visuals available with the audio are encouraged to sign-in a few
minutes prior to the start of the teleconference.
CUMMINS INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF NET INCOME
(Unaudited) (a)
Three months ended
December 31,
In millions, except per share
amounts
2023
2022
NET SALES
$
8,543
$
7,770
Cost of sales
6,542
5,951
GROSS MARGIN
2,001
1,819
OPERATING EXPENSES AND INCOME
Selling, general and administrative
expenses
876
742
Research, development and engineering
expenses
390
333
Equity, royalty and interest income from
investees
113
88
Other operating expense, net
2,060
30
OPERATING (LOSS) INCOME
(1,212
)
802
Interest expense
92
87
Other income, net
74
63
(LOSS) INCOME BEFORE INCOME
TAXES
(1,230
)
778
Income tax expense
163
134
CONSOLIDATED NET (LOSS) INCOME
(1,393
)
644
Less: Net income attributable to
noncontrolling interests
38
13
NET (LOSS) INCOME ATTRIBUTABLE TO
CUMMINS INC.
$
(1,431
)
$
631
(LOSS) EARNINGS PER COMMON SHARE
ATTRIBUTABLE TO CUMMINS INC.
Basic
$
(10.08
)
$
4.47
Diluted
$
(10.01
)
$
4.43
WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING
Basic
141.9
141.3
Diluted
142.9
142.3
(a) Prepared on an unaudited basis in
accordance with accounting principles generally accepted in the
United States of America.
Years ended December
31,
In millions, except per share
amounts
2023
2022
NET SALES
$
34,065
$
28,074
Cost of sales
25,816
21,355
GROSS MARGIN
8,249
6,719
OPERATING EXPENSES AND INCOME
Selling, general and administrative
expenses
3,333
2,687
Research, development and engineering
expenses
1,500
1,278
Equity, royalty and interest income from
investees
483
349
Other operating expense, net
2,138
174
OPERATING INCOME
1,761
2,929
Interest expense
375
199
Other income, net
240
89
INCOME BEFORE INCOME TAXES
1,626
2,819
Income tax expense
786
636
CONSOLIDATED NET INCOME
840
2,183
Less: Net income attributable to
noncontrolling interests
105
32
NET INCOME ATTRIBUTABLE TO CUMMINS
INC.
$
735
$
2,151
EARNINGS PER COMMON SHARE ATTRIBUTABLE
TO CUMMINS INC.
Basic
$
5.19
$
15.20
Diluted
$
5.15
$
15.12
WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING
Basic
141.7
141.5
Diluted
142.7
142.3
(a) Prepared on an unaudited basis in
accordance with accounting principles generally accepted in the
United States of America.
CUMMINS INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited) (a)
December 31,
In millions, except par value
2023
2022
ASSETS
Current assets
Cash and cash equivalents
$
2,179
$
2,101
Marketable securities
562
472
Total cash, cash equivalents and
marketable securities
2,741
2,573
Accounts and notes receivable, net
5,583
5,202
Inventories
5,677
5,603
Prepaid expenses and other current
assets
1,197
1,073
Total current assets
15,198
14,451
Long-term assets
Property, plant and equipment, net
6,249
5,521
Investments and advances related to equity
method investees
1,800
1,759
Goodwill
2,499
2,343
Other intangible assets, net
2,519
2,687
Pension assets
1,197
1,398
Other assets
2,543
2,140
Total assets
$
32,005
$
30,299
LIABILITIES
Current liabilities
Accounts payable (principally trade)
$
4,260
$
4,252
Loans payable
280
210
Commercial paper
1,496
2,574
Current maturities of long-term debt
118
573
Accrued compensation, benefits and
retirement costs
1,108
617
Current portion of accrued product
warranty
667
726
Current portion of deferred revenue
1,220
1,004
Other accrued expenses
3,754
1,465
Total current liabilities
12,903
11,421
Long-term liabilities
Long-term debt
4,802
4,498
Deferred revenue
966
844
Other liabilities
3,430
3,311
Total liabilities
$
22,101
$
20,074
Redeemable noncontrolling
interests
$
—
$
258
EQUITY
Cummins Inc. shareholders’ equity
Common stock, $2.50 par value, 500 shares
authorized, 222.5 and 222.5 shares issued
$
2,564
$
2,243
Retained earnings
17,851
18,037
Treasury stock, at cost, 80.7 and 81.2
shares
(9,359
)
(9,415
)
Accumulated other comprehensive loss
(2,206
)
(1,890
)
Total Cummins Inc. shareholders’
equity
8,850
8,975
Noncontrolling interests
1,054
992
Total equity
$
9,904
$
9,967
Total liabilities, redeemable
noncontrolling interests and equity
$
32,005
$
30,299
(a) Prepared on an unaudited basis in
accordance with accounting principles generally accepted in the
United States of America.
CUMMINS INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited) (a)
Three months ended
December 31,
In millions
2023
2022
NET CASH PROVIDED BY OPERATING
ACTIVITIES
$
1,459
$
817
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures
(519
)
(463
)
Acquisitions of businesses, net of cash
acquired
(165
)
(183
)
Investments in marketable
securities—acquisitions
(433
)
(335
)
Investments in marketable
securities—liquidations
332
332
Other, net
2
(27
)
Net cash used in investing activities
(783
)
(676
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from borrowings
82
27
Net (payments) borrowings of commercial
paper
(213
)
181
Payments on borrowings and finance lease
obligations
(745
)
(480
)
Dividend payments on common stock
(238
)
(222
)
Repurchases of common stock
—
(4
)
Other, net
6
56
Net cash used in financing activities
(1,108
)
(442
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
(1
)
(97
)
Net decrease in cash and cash
equivalents
(433
)
(398
)
Cash and cash equivalents at beginning of
period
2,612
2,499
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
$
2,179
$
2,101
(a) Prepared on an unaudited basis in
accordance with accounting principles generally accepted in the
United States of America.
Years ended December
31,
In millions
2023
2022
NET CASH PROVIDED BY OPERATING
ACTIVITIES
$
3,966
$
1,962
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures
(1,213
)
(916
)
Acquisitions of businesses, net of cash
acquired
(292
)
(3,191
)
Investments in marketable
securities—acquisitions
(1,409
)
(1,073
)
Investments in marketable
securities—liquidations
1,334
1,151
Other, net
(63
)
(143
)
Net cash used in investing activities
(1,643
)
(4,172
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from borrowings
861
2,103
Net (payments) borrowings of commercial
paper
(779
)
2,261
Payments on borrowings and finance lease
obligations
(1,136
)
(1,550
)
Dividend payments on common stock
(921
)
(855
)
Repurchases of common stock
—
(374
)
Payments for purchase of redeemable
noncontrolling interests
(175
)
—
Other, net
(27
)
84
Net cash (used in) provided by financing
activities
(2,177
)
1,669
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
(68
)
50
Net increase (decrease) in cash and cash
equivalents
78
(491
)
Cash and cash equivalents at beginning of
year
2,101
2,592
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
$
2,179
$
2,101
(a) Prepared on an unaudited basis in
accordance with accounting principles generally accepted in the
United States of America.
CUMMINS INC. AND
SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
In millions
Components
Engine
Distribution
Power Systems
Accelera
Total Segments
Intersegment Eliminations
(1)
Total
Three months ended December 31,
2023
External sales
$
2,784
$
2,123
$
2,705
$
854
$
77
$
8,543
$
—
$
8,543
Intersegment sales
407
656
8
575
4
1,650
(1,650
)
—
Total sales
3,191
2,779
2,713
1,429
81
10,193
(1,650
)
8,543
Research, development and engineering
expenses
100
173
14
48
53
388
2
390
Equity, royalty and interest income (loss)
from investees
26
53
27
11
(4
)
113
—
113
Interest income
10
5
10
2
1
28
—
28
EBITDA (2)
406
(3)
353
269
182
(121
)
1,089
(1,967
)
(878
)
Depreciation and amortization (4)
123
59
31
31
16
260
—
260
EBITDA as a percentage of segment
sales
12.7
%
12.7
%
9.9
%
12.7
%
NM
10.7
%
(10.3
)%
Three months ended December 31,
2022
External sales
$
2,633
$
1,995
$
2,311
$
761
$
70
$
7,770
$
—
$
7,770
Intersegment sales
462
643
9
560
5
1,679
(1,679
)
—
Total sales
3,095
2,638
2,320
1,321
75
9,449
(1,679
)
7,770
Research, development and engineering
expenses
73
141
13
56
50
333
—
333
Equity, royalty and interest income from
investees
17
33
20
12
6
88
—
88
Interest income
5
6
7
2
—
20
—
20
Russian suspension recoveries
—
—
(1
)
—
—
(1
)
—
(1
)
EBITDA (2)
377
(5)
362
256
185
(95
)
1,085
20
1,105
Depreciation and amortization (4)
117
54
28
28
13
240
—
240
EBITDA as a percentage of segment
sales
12.2
%
13.7
%
11.0
%
14.0
%
NM
11.5
%
14.2
%
"NM" - not meaningful information
(1) Includes intersegment sales,
intersegment profit in inventory eliminations and unallocated
corporate expenses. The three months ended December 31, 2023,
includes $2.0 billion related to the Agreement in Principle, $21
million of voluntary separation and retirement program charges
related to corporate functions and $5 million of costs associated
with the separation of Atmus Filtration Technologies Inc. (Atmus).
The three months ended December 31, 2022, includes $6 million of
costs associated with the planned separation of Atmus.
(2) EBITDA is defined as earnings or
losses before interest expense, income taxes, depreciation and
amortization and noncontrolling interests.
(3) Includes $28 million of costs
associated with the separation of Atmus for the three months ended
December 31, 2023.
(4) Depreciation and amortization, as
shown on a segment basis, excludes the amortization of debt
discount and deferred costs included in the Condensed Consolidated
Statements of Net Income as interest expense. A portion of
depreciation expense is included in research, development and
engineering expenses.
(5) Includes $27 million of costs related
to the acquisition and integration of Meritor and $13 million costs
associated with the separation of Atmus for the three months ended
December 31, 2022.
In millions
Components
Engine
Distribution
Power Systems
Accelera
Total Segments
Intersegment Eliminations
(1)
Total
Year ended December 31, 2023
External sales
$
11,531
$
8,874
$
10,199
$
3,125
$
336
$
34,065
$
—
$
34,065
Intersegment sales
1,878
2,810
50
2,548
18
7,304
(7,304
)
—
Total sales
13,409
11,684
10,249
5,673
354
41,369
(7,304
)
34,065
Research, development and engineering
expenses
387
614
57
237
203
1,498
2
1,500
Equity, royalty and interest income (loss)
from investees
97
251
97
53
(15
)
483
—
483
Interest income
31
19
34
9
2
95
—
95
EBITDA (2)
1,840
(3)
1,630
1,209
836
(443
)
5,072
(2,055
)
3,017
Depreciation and amortization (4)
491
225
115
122
63
1,016
—
1,016
EBITDA as a percentage of total sales
13.7
%
14.0
%
11.8
%
14.7
%
NM
12.3
%
8.9
%
Year ended December 31, 2022
External sales
$
7,847
$
8,199
$
8,901
$
2,951
$
176
$
28,074
$
—
$
28,074
Intersegment sales
1,889
2,746
28
2,082
22
6,767
(6,767
)
—
Total sales
9,736
10,945
8,929
5,033
198
34,841
(6,767
)
28,074
Research, development and engineering
expenses
309
506
52
240
171
1,278
—
1,278
Equity, royalty and interest income (loss)
from investees
71
160
(5)
77
43
(2
)
349
—
349
Interest income
12
14
16
7
—
49
—
49
Russian suspension costs
5
33
(6)
54
19
—
111
—
111
EBITDA (2)
1,346
(7)
1,535
888
596
(334
)
4,031
(232
)
3,799
Depreciation and amortization (4)
304
205
114
120
38
781
—
781
EBITDA as a percentage of total sales
13.8
%
14.0
%
9.9
%
11.8
%
NM
11.6
%
13.5
%
"NM" - not meaningful information
(1) Includes intersegment sales,
intersegment profit in inventory eliminations and unallocated
corporate expenses. The year ended December 31, 2023, includes $2.0
billion related to the Agreement in Principle, $22 million of costs
associated with the initial public offering (IPO) and separation of
Atmus and $21 million of voluntary separation and retirement
program charges related to corporate functions. The year ended
December 31, 2022, includes $53 million of costs associated with
the planned separation of Atmus.
(2) EBITDA is defined as earnings or
losses before interest expense, income taxes, depreciation and
amortization and noncontrolling interests.
(3) Includes $78 million of costs
associated with the IPO and separation of Atmus for the year ended
December 31, 2023.
(4) Depreciation and amortization, as
shown on a segment basis, excludes the amortization of debt
discount and deferred costs included in the Condensed Consolidated
Statements of Net Income as interest expense. The amortization of
debt discount and deferred costs was $8 million and $3 million for
the years ended December 31, 2023 and 2022, respectively. A portion
of depreciation expense is included in research, development and
engineering expenses.
(5) Includes a $28 million impairment of
our joint venture with KAMAZ and $3 million of royalty charges as
part of our costs associated with the indefinite suspension of our
Russian operations.
(6) Includes $31 million of Russian
suspension costs reflected in the equity, royalty and interest
income (loss) from investees line above.
(7) Includes $83 million of costs related
to the acquisition and integration of Meritor and $28 million costs
associated with the separation of Atmus for the year ended December
31, 2022.
CUMMINS INC. AND
SUBSIDIARIES
SELECT FOOTNOTE DATA
(Unaudited)
EQUITY, ROYALTY AND INTEREST INCOME
FROM INVESTEES
Equity, royalty and interest income from
investees included in our Condensed Consolidated Statements of Net
Income for the reporting periods was as follows:
Three months ended December
31,
Years ended December
31,
In millions
2023
2022
2023
2022
Manufacturing entities
Beijing Foton Cummins Engine Co., Ltd.
$
14
$
3
$
47
$
37
Dongfeng Cummins Engine Company, Ltd.
13
10
65
45
Tata Cummins, Ltd.
8
8
29
27
Chongqing Cummins Engine Company, Ltd.
7
9
36
32
All other manufacturers
22
14
91
28
(1)
Distribution entities
Komatsu Cummins Chile, Ltda.
15
12
55
44
All other distributors
6
3
16
11
Cummins share of net income
85
59
339
224
Royalty and interest income
28
29
144
125
Equity, royalty and interest income from
investees
$
113
$
88
$
483
$
349
(1) Includes a $28 million impairment of
our joint venture with KAMAZ and $3 million of royalty charges as
part of our costs associated with the indefinite suspension of our
Russian operations.
AGREEMENT IN PRINCIPLE
In December 2023, we announced that we reached an agreement in
principle with the Environmental Protection Agency, the California
Air Resources Board, the Environmental and Natural Resources
Division of the U.S. Department of Justice and the California
Attorney General’s Office to resolve certain regulatory civil
claims regarding our emissions certification and compliance process
for certain engines primarily used in pick-up truck applications in
the U.S (collectively, the Agreement in Principle). As part of the
Agreement in Principle, among other things, we agreed to pay civil
penalties, complete recall requirements, undertake mitigation
projects, provide extended warranties, undertake certain testing,
take certain corporate compliance measures and make certain
payments. Failure to comply with the terms and conditions of the
Agreement in Principle will subject us to further stipulated
penalties. We recorded a charge of $2.036 billion in the fourth
quarter of 2023 to resolve the matters addressed by the Agreement
in Principle involving approximately one million of our pick-up
truck applications in the U.S. The charge is included in other
operating expense, net, in our Condensed Consolidated Statements of
Net Income.
The majority of the amount is expected to be paid in 2024 after
final regulatory and judicial approvals are obtained. As a result,
$1.938 billion is included in other current liabilities in our
Condensed Consolidated Balance Sheets with the remainder included
in other long-term liabilities. Of the total charge, $1.732 billion
(primarily related to penalties) will be non-deductible for U.S.
federal income tax purposes. The remaining amount, related to
emissions mitigation projects and payments, extended warranties and
other related compliance expenses is deductible for U.S. federal
income tax purposes.
We anticipate making $1.938 billion of the payments required by
the Agreement in Principle during 2024 through the use of our
existing liquidity and access to debt markets.
INCOME TAXES
Our effective tax rate for 2024 is expected to approximate 24.0
percent, excluding any discrete items that may arise.
Our effective tax rates for the three and twelve months ended
December 31, 2023, were negative 13.3 percent and 48.3 percent,
respectively. Our effective tax rates for the three and twelve
months ended December 31, 2022, were 17.2 percent and 22.6 percent,
respectively.
The change in effective tax rates and taxability of foreign
subsidiaries and joint ventures for the three and twelve months
ended December 31, 2023, versus the three and twelve months ended
December 31, 2022, was primarily due to the Agreement in Principle,
of which $1.732 billion (primarily related to penalties) was
non-deductible for tax purposes, jurisdictional mix of pre-tax
income and actual and planned repatriations of earnings back to the
U.S.
The three months ended December 31, 2023, contained net
unfavorable discrete tax items of $402 million, primarily due to
$398 million related to the $2.0 billion charge from the Agreement
in Principle and $4 million of net unfavorable other discrete
items. See Agreement in Principle section above.
The year ended December 31, 2023, contained unfavorable net
discrete items of $397 million, primarily due to $398 million in
the fourth quarter related to the $2.0 billion charge from the
Agreement in Principle, $22 million of unfavorable adjustments for
uncertain tax positions and $3 million of net unfavorable other
discrete tax items, partially offset by $21 million of favorable
return to provision adjustments and $5 million of favorable
share-based compensation tax benefit. See Agreement in Principle
section above.
The three months ended December 31, 2022, contained favorable
discrete tax items of $52 million, primarily due to $31 million of
favorable changes in accrued withholding taxes, $15 million of
favorable valuation allowance adjustments and $6 million of
favorable other net discrete items.
The year ended December 31, 2022, contained discrete tax items
that netted to zero, primarily due to $31 million of favorable
changes in accrued withholding taxes, $29 million of favorable
changes in tax reserves, $15 million of favorable valuation
allowance adjustments and $9 million of favorable other net
discrete items, offset by $69 million of unfavorable tax costs
associated with internal restructuring ahead of the planned
separation of Atmus and $15 million of unfavorable return to
provision adjustments related to the 2021 filed tax returns.
VOLUNTARY SEPARATION AND RETIREMENT PROGRAMS
In the fourth quarter of 2023, we initiated a voluntary employee
separation program and a voluntary early retirement program. We
incurred a charge of $42 million ($32 million after-tax) for these
actions. The majority of the voluntary actions were completed by
December 31, 2023.
CUMMINS INC. AND SUBSIDIARIES
FINANCIAL MEASURES THAT SUPPLEMENT GAAP
(Unaudited)
Reconciliation of Non GAAP measures - Earnings before
interest, income taxes, depreciation and amortization and
noncontrolling interests (EBITDA)
We believe EBITDA is a useful measure of our operating
performance as it assists investors and debt holders in comparing
our performance on a consistent basis without regard to financing
methods, capital structure, income taxes or depreciation and
amortization methods, which can vary significantly depending upon
many factors. We believe EBITDA excluding special items is a useful
measure of our operating performance without regard to the impact
of the Agreement in Principle, voluntary retirement and voluntary
separation programs and costs associated with the IPO and
separation of Atmus. This statement excludes forward looking
measures of EBITDA where a reconciliation to the corresponding GAAP
measures is not available due to the variability, complexity and
limited visibility of non-cash items that are excluded from the
non-GAAP outlook measure.
EBITDA is not in accordance with, or an alternative for,
accounting principles generally accepted in the United States
(GAAP) and may not be consistent with measures used by other
companies. It should be considered supplemental data; however, the
amounts included in the EBITDA calculation are derived from amounts
included in the Condensed Consolidated Statements of Net Income.
Below is a reconciliation of net (loss) income attributable to
Cummins Inc. to EBITDA for each of the applicable periods:
Three months ended December
31,
Years ended December
31,
In millions
2023
2022
2023
2022
Net (loss) income attributable to Cummins
Inc.
$
(1,431
)
$
631
$
735
$
2,151
Net (loss) income attributable to Cummins
Inc. as a percentage of net sales
(16.8
)%
8.1
%
2.2
%
7.7
%
Add:
Net income attributable to noncontrolling
interests
38
13
105
32
Consolidated net (loss) income
(1,393
)
644
840
2,183
Add:
Interest expense
92
87
375
199
Income tax expense
163
134
786
636
Depreciation and amortization
260
240
1,016
781
EBITDA
$
(878
)
$
1,105
$
3,017
$
3,799
EBITDA as a percentage of net sales
(10.3
)%
14.2
%
8.9
%
13.5
%
Add:
Agreement in Principle
2,036
—
2,036
—
Voluntary retirement and voluntary
separation programs
42
—
42
—
Atmus IPO and separation costs
33
19
100
81
EBITDA, excluding impact of Agreement in
Principle, voluntary retirement and voluntary separation programs
and costs associated with the IPO and separation of Atmus
$
1,233
$
1,124
$
5,195
$
3,880
EBITDA, excluding impact of Agreement in
Principle, voluntary retirement and voluntary separation programs
and costs associated with the IPO and separation of Atmus, as a
percentage of net sales
14.4
%
14.5
%
15.3
%
13.8
%
Net income and diluted earnings per share (EPS) attributable
to Cummins Inc. excluding Agreement in Principle, Voluntary
Retirement and Voluntary Separation Programs and Atmus IPO and
Separation Costs
We believe these are useful measures of our operating
performance for the periods presented as they illustrate our
operating performance without regard to the Agreement in Principle,
voluntary retirement and voluntary separations programs and the
Atmus IPO and separation costs. These measures are not in
accordance with, or an alternative for GAAP and may not be
consistent with measures used by other companies. This should be
considered supplemental data. The following table reconciles net
(loss) income and diluted EPS attributable to Cummins Inc. to net
income and diluted EPS attributable to Cummins Inc. excluding
special items for the following periods:
Three months ended December
31,
2023
In millions
Net Income
Diluted EPS
Net loss and diluted EPS attributable to
Cummins Inc.
$
(1,431
)
$
(10.01
)
Add:
Agreement in Principle, net of tax
1,966
13.76
Voluntary retirement and voluntary
separation programs, net of tax
32
0.22
Atmus separation costs, net of tax
25
0.17
Net income and diluted EPS attributable to
Cummins Inc. excluding Agreement in Principle, voluntary retirement
and voluntary separation programs and costs associated with the
separation of Atmus, net of tax
$
592
$
4.14
Year ended December
31,
2023
In millions
Net Income
Diluted EPS
Net income and diluted EPS attributable to
Cummins Inc.
$
735
$
5.15
Add:
Agreement in Principle, net of tax
1,966
13.78
Atmus IPO and separation costs, net of
tax
77
0.54
Voluntary retirement and voluntary
separation programs, net of tax
32
0.22
Net income and diluted EPS attributable to
Cummins Inc. excluding Agreement in Principle, costs associated
with the IPO and separation of Atmus and voluntary retirement and
voluntary separation programs, net of tax
$
2,810
$
19.69
CUMMINS INC. AND SUBSIDIARIES SEGMENT
SALES DATA (Unaudited)
Components Segment Sales by Business
In the second quarter of 2023, with the Atmus IPO we changed the
name of our filtration business to Atmus. Sales for our Components
segment by business, adjusted for the reorganized businesses, were
as follows:
2023
In millions
Q1
Q2
Q3
Q4
YTD
Axles and brakes
$
1,272
$
1,249
$
1,177
$
1,124
$
4,822
Emission solutions
1,056
964
893
922
3,835
Engine components
581
557
532
519
2,189
Atmus
417
417
396
399
1,629
Automated transmissions
179
179
187
169
714
Software and electronics
52
59
51
58
220
Total sales
$
3,557
$
3,425
$
3,236
$
3,191
$
13,409
2022
In millions
Q1
Q2
Q3
Q4
YTD
Axles and brakes
$
—
$
—
$
732
$
1,147
$
1,879
Emission solutions
910
863
853
868
3,494
Engine components
502
503
509
493
2,007
Atmus
382
391
399
385
1,557
Automated transmissions
134
143
159
157
593
Software and electronics
60
50
51
45
206
Total sales
$
1,988
$
1,950
$
2,703
$
3,095
$
9,736
Engine Segment Sales by Market and Unit Shipments by Engine
Classification
Sales for our Engine segment by market were as follows:
2023
In millions
Q1
Q2
Q3
Q4
YTD
Heavy-duty truck
$
1,114
$
1,117
$
1,116
$
1,052
$
4,399
Medium-duty truck and bus
903
942
931
894
3,670
Light-duty automotive
439
445
455
423
1,762
Off-highway
530
484
429
410
1,853
Total sales
$
2,986
$
2,988
$
2,931
$
2,779
$
11,684
2022
In millions
Q1
Q2
Q3
Q4
YTD
Heavy-duty truck
$
908
$
1,001
$
972
$
966
$
3,847
Medium-duty truck and bus
848
875
868
869
3,460
Light-duty automotive
498
456
466
318
1,738
Off-highway
499
443
473
485
1,900
Total sales
$
2,753
$
2,775
$
2,779
$
2,638
$
10,945
Unit shipments by engine classification (including unit
shipments to Power Systems and off-highway engine units included in
their respective classification) were as follows:
2023
Units
Q1
Q2
Q3
Q4
YTD
Heavy-duty
34,700
36,400
36,300
34,500
141,900
Medium-duty
78,900
76,000
71,300
67,900
294,100
Light-duty
55,000
53,600
53,300
49,600
211,500
Total units
168,600
166,000
160,900
152,000
647,500
2022
Units
Q1
Q2
Q3
Q4
YTD
Heavy-duty
28,600
30,900
30,200
31,000
120,700
Medium-duty
72,600
68,800
69,800
72,400
283,600
Light-duty
66,500
60,400
58,300
42,400
227,600
Total units
167,700
160,100
158,300
145,800
631,900
Distribution Segment Sales by Product Line
Sales for our Distribution segment by product line were as
follows:
2023
In millions
Q1
Q2
Q3
Q4
YTD
Parts
$
1,057
$
1,019
$
995
$
1,000
$
4,071
Power generation
492
614
606
797
2,509
Engines
456
531
511
499
1,997
Service
401
431
423
417
1,672
Total sales
$
2,406
$
2,595
$
2,535
$
2,713
$
10,249
2022
In millions
Q1
Q2
Q3
Q4
YTD
Parts
$
924
$
990
$
945
$
959
$
3,818
Power generation
401
441
431
501
1,774
Engines
441
429
449
457
1,776
Service
351
393
414
403
1,561
Total sales
$
2,117
$
2,253
$
2,239
$
2,320
$
8,929
Power Systems Segment Sales by Product Line and Unit
Shipments by Engine Classification
Sales for our Power Systems segment by product line were as
follows:
2023
In millions
Q1
Q2
Q3
Q4
YTD
Power generation
$
770
$
854
$
850
$
866
$
3,340
Industrial
455
468
475
456
1,854
Generator technologies
118
135
119
107
479
Total sales
$
1,343
$
1,457
$
1,444
$
1,429
$
5,673
2022
In millions
Q1
Q2
Q3
Q4
YTD
Power generation
$
664
$
657
$
739
$
730
$
2,790
Industrial
393
428
483
468
1,772
Generator technologies
103
118
127
123
471
Total sales
$
1,160
$
1,203
$
1,349
$
1,321
$
5,033
High-horsepower unit shipments by engine classification were as
follows:
2023
Units
Q1
Q2
Q3
Q4
YTD
Power generation
2,900
3,300
2,800
3,300
12,300
Industrial
1,500
1,600
1,800
1,800
6,700
Total units
4,400
4,900
4,600
5,100
19,000
2022
Units
Q1
Q2
Q3
Q4
YTD
Power generation
2,200
2,400
2,400
2,700
9,700
Industrial
1,100
1,200
1,200
1,400
4,900
Total units
3,300
3,600
3,600
4,100
14,600
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240205601127/en/
Jon Mills Director, Global Brand & External Communications
317-658-4540 jon.mills@cummins.com
Cummins (NYSE:CMI)
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