- Record second quarter revenues of $8.6 billion; GAAP1 Net
Income of $720 million
- EBITDA in the second quarter was 15.1 percent of sales;
Diluted EPS of $5.05
- Second quarter results include $23 million, or $0.13 per
diluted share, of costs related to the separation of Atmus
Filtration Technologies Inc.
- The company is maintaining its full year 2023 guidance,
expecting revenue to be up 15 to 20 percent and EBITDA of 15.0 to
15.7 percent.
Cummins Inc. (NYSE: CMI) today reported results for the second
quarter of 2023.
Second quarter revenues of $8.6 billion increased 31 percent
from the same quarter in 2022. Sales in North America increased 31
percent and international revenues increased 32 percent due to the
addition of Meritor and strong demand across most global
markets.
“Strong demand across most of our key markets and regions
resulted in record revenues and solid profitability for the company
in the second quarter of 2023,” said Jennifer Rumsey, Chair and
CEO. “We are committed to delivering cycle-over-cycle improvement
in financial performance, returning cash to our shareholders and
prioritizing investments to continue building our product portfolio
to power our customers’ success around the world. I want to thank
our Cummins employees who continue to work tirelessly to meet
customer needs and respond to the strong demand levels by ensuring
quality products, strengthening our customer relationships, and
navigating continued supply chain constraints.”
Net income attributable to Cummins in the second quarter was
$720 million, or $5.05 per diluted share compared to $702 million,
or $4.94 per diluted share in 2022. Results included costs
associated with the separation of Atmus of $23 million, or $0.13
per diluted share, in the second quarter of 2023, and $29 million,
or $0.16 per diluted share, in the second quarter of 2022. The
second quarter of 2022 also included $47 million, or $0.33 per
diluted share, of benefit from adjusting the reserves related to
the indefinite suspension of our operations in Russia. The tax rate
in the second quarter was 22.3 percent including $3 million, or
$0.02 per diluted share, of unfavorable discrete tax items.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) in the second quarter were $1.3 billion, or 15.1 percent
of sales, compared to $1.1 billion, or 16.0 percent of sales, a
year ago. EBITDA for the second quarter of 2023 included the costs
related to the separation of Atmus and the second quarter 2022
EBITDA included the reserve release related to the indefinite
suspension of operations in Russia and costs related to the
separation of Atmus as noted above. EBITDA percentage decreased in
the second quarter principally due to the dilutive impact of
Meritor, which currently has a lower gross margin percentage than
our company average.
2023 Outlook:
Based on its current forecast, Cummins is maintaining its full
year 2023 revenue guidance to be up 15 to 20 percent due to strong
demand across most markets, especially North America. EBITDA is
still expected to be in the range of 15.0 to 15.7 percent of
sales.
The outlook above includes the projected results of the Meritor
business for 2023. The outlook assumes the inclusion of Atmus for
the entirety of 2023, but excludes any costs or benefits associated
with the planned separation of the business. Within the Components
Segment, Cummins expects revenues of the Meritor business for 2023
to be between $4.7 billion to $4.9 billion and EBITDA to be in the
range of 10.3 to 11.0 percent of sales, consistent with prior
guidance.
The company plans to continue to generate strong operating cash
flow and returns for shareholders and is committed to our long-term
strategic goal of returning 50 percent of operating cash flow back
to shareholders. In the near term, we will focus on reinvesting for
profitable growth, advancing dividends and reducing debt.
“While we see demand remaining strong through 2023 and we are
maintaining our guidance on revenue and profitability, we continue
to closely monitor global economic indicators. Should economic
momentum slow, Cummins will remain in a strong position to keep
investing in future growth, bringing new technologies to customers
as we advance our Destination Zero strategy, and returning cash to
shareholders,” said Rumsey.
Recent Highlights:
- Progress continues to be made on the separation of the
Filtration business. On May 26th, Atmus Filtration Technologies
Inc. shares began trading on the New York Stock Exchange (NYSE)
under the ticker symbol “ATMU” in connection with the initial
public offering (IPO). Upon completion of the IPO, Cummins retained
approximately 80.5% of Atmus’ outstanding shares. The Atmus IPO
generated $299 million of net proceeds and Atmus added $650 million
of debt. Cummins realizes the benefits of the IPO proceeds and the
debt issuance, as Atmus will hold the debt at full separation.
- Cummins announced two significant milestones with the 5
millionth engine produced at its Rocky Mount Engine Plant (RMEP) in
North Carolina and the 2.5 millionth engine produced at its
Jamestown Engine Plant (JEP) in New York. The 5 millionth milestone
engine was a B6.7, which was received by Daimler, who provided it
to Penske. The 2.5 millionth engine at JEP was the new 15-liter
natural gas product and provided to Kenworth.
- On April 3rd, United States President Joe Biden visited company
facilities in Fridley, Minnesota (USA), to tour Accelera by
Cummins’ first U.S. manufacturing location for electrolyzers, a key
technology to produce low- and no-carbon hydrogen. The official
ribbon cutting on May 19th marked the start of electrolyzer
production in the United States. Accelera is initially dedicating
89,000 sq. ft. of the existing Cummins power generation facility in
Fridley to electrolyzer production.
- In the second quarter, Accelera reached a milestone of backlog
electrolyzer orders totaling over $500 million. The Fridley
facility will help address that growing demand along with other
capacity being added globally.
- Cummins signed a definitive agreement with Tata Motors Limited
(TML), to manufacture a range of low- to zero-emissions technology
products in India over the next few years. As a part of this
agreement, Cummins and TML have set up a new business entity called
TCPL Green Energy Solutions Private Limited (GES), a wholly owned
subsidiary under the existing joint venture with a focus on the
development and manufacturing of sustainable technology products
that will include hydrogen-powered internal combustion engines,
fuel delivery systems, and battery electric powertrains and fuel
cell electric systems through the Accelera™ by Cummins brand.
- Cummins received a 2023 Energy Management Insight Award from
the Clean Energy Ministerial. The award recognizes organizations
demonstrating the benefits of energy management systems and meeting
the ISO 50001 international energy standard.
- Cummins announced an increase in the quarterly common stock
cash dividend from $1.57 to $1.68 per share. The company has
increased the quarterly dividend to shareholders for 14 consecutive
years.
1 Generally Accepted Accounting Principles in the U.S.
Second quarter 2023 detail (all comparisons to same period in
2022):
Components Segment
- Sales - $3.4 billion, up 76 percent
- Segment EBITDA - $486 million, or 14.2 percent of sales, which
includes $18 million of costs related to the separation of Atmus
compared to $352 million, or 18.1 percent of sales, which includes
$2 million of benefits from adjusting the reserves related to the
indefinite suspension of operations in Russia. The decline in
EBITDA percentage was driven primarily by the addition of Meritor,
which has a dilutive impact on the segment despite its improvement
in the second quarter.
- Revenues in North America increased by 70 percent and
international sales increased by 84 percent due to the addition of
Meritor and increased global demand.
Engine Segment
- Sales - $3.0 billion, up 8 percent
- Segment EBITDA - $425 million, or 14.2 percent of sales,
compared to $421 million or 15.2 percent of sales, which included
$1 million of costs from the indefinite suspension of operations in
Russia
- On-highway revenues increased 7 percent driven by strong demand
in the North American truck market and pricing actions.
- Sales increased 7 percent in North America and grew 10 percent
in international markets due to an increase in global demand.
Distribution Segment
- Sales - $2.6 billion, up 15 percent
- Segment EBITDA - $299 million, or 11.5 percent of sales,
compared to $297 million, or 13.2 percent of sales, a year ago when
results included $45 million of benefits from adjusting the
reserves related to the indefinite suspension of operations in
Russia
- Revenues in North America increased 20 percent and
international sales increased by 5 percent.
- Higher revenues were driven by increased demand for whole
goods, especially power generation products, and pricing
actions.
Power Systems Segment
- Sales - $1.5 billion, up 21 percent
- Segment EBITDA - $201 million, or 13.8 percent of sales,
compared to $128 million, or 10.6 percent of sales, which included
$1 million of benefit from adjusting the reserves related to the
indefinite suspension of operations in Russia
- Second quarter results also included $18 million of costs
related to severance costs related to transformation efforts within
the segment.
- Power generation revenues increased 30 percent driven by
increased global demand and pricing actions. Industrial revenues
increased 9 percent due to increased demand in mining and oil and
gas markets.
Accelera Segment
- Sales - $85 million, up 102 percent
- Segment EBITDA loss - $114 million
- Revenues increased due to higher demand for battery electric
systems in the North American school bus market and the additions
of the electric powertrain portion of the Meritor business and
Siemens Commercial Vehicle business.
- 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 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 results of our internal review into our emissions
certification process and compliance with emission standards;
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; failure to
complete, adverse results from or failure to realize the expected
benefits of the separation of our filtration business; 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 (GHG) 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 press
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. EDT. 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
June 30,
In millions, except per share
amounts
2023
2022
NET SALES
$
8,638
$
6,586
Cost of sales
6,490
4,860
GROSS MARGIN
2,148
1,726
OPERATING EXPENSES AND INCOME
Selling, general and administrative
expenses
873
622
Research, development and engineering
expenses
384
299
Equity, royalty and interest income from
investees
133
95
Other operating expense, net
27
3
OPERATING INCOME
997
897
Interest expense
99
34
Other income (expense), net
51
(8
)
INCOME BEFORE INCOME TAXES
949
855
Income tax expense
212
148
CONSOLIDATED NET INCOME
737
707
Less: Net income attributable to
noncontrolling interests
17
5
NET INCOME ATTRIBUTABLE TO CUMMINS
INC.
$
720
$
702
EARNINGS PER COMMON SHARE ATTRIBUTABLE
TO CUMMINS INC.
Basic
$
5.08
$
4.97
Diluted
$
5.05
$
4.94
WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING
Basic
141.7
141.2
Diluted
142.5
142.0
(a) Prepared on an unaudited basis in
accordance with accounting principles generally accepted in the
United States of America.
Six months ended
June 30,
In millions, except per share
amounts
2023
2022
NET SALES
$
17,091
$
12,971
Cost of sales
12,914
9,713
GROSS MARGIN
4,177
3,258
OPERATING EXPENSES AND INCOME
Selling, general and administrative
expenses
1,626
1,237
Research, development and engineering
expenses
734
597
Equity, royalty and interest income from
investees
252
191
Other operating expense, net
46
114
OPERATING INCOME
2,023
1,501
Interest expense
186
51
Other income (expense), net
141
(17
)
INCOME BEFORE INCOME TAXES
1,978
1,433
Income tax expense
435
303
CONSOLIDATED NET INCOME
1,543
1,130
Less: Net income attributable to
noncontrolling interests
33
10
NET INCOME ATTRIBUTABLE TO CUMMINS
INC.
$
1,510
$
1,120
EARNINGS PER COMMON SHARE ATTRIBUTABLE
TO CUMMINS INC.
Basic
$
10.66
$
7.90
Diluted
$
10.60
$
7.86
WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING
Basic
141.6
141.7
Diluted
142.5
142.5
(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)
In millions, except par value
June 30, 2023
December 31,
2022
ASSETS
Current assets
Cash and cash equivalents
$
1,802
$
2,101
Marketable securities
512
472
Total cash, cash equivalents and
marketable securities
2,314
2,573
Accounts and notes receivable, net
5,863
5,202
Inventories
6,026
5,603
Prepaid expenses and other current
assets
1,207
1,073
Total current assets
15,410
14,451
Long-term assets
Property, plant and equipment, net
5,723
5,521
Investments and advances related to equity
method investees
1,861
1,759
Goodwill
2,404
2,343
Other intangible assets, net
2,584
2,687
Pension assets
1,523
1,398
Other assets
2,230
2,140
Total assets
$
31,735
$
30,299
LIABILITIES
Current liabilities
Accounts payable (principally trade)
$
4,308
$
4,252
Loans payable
419
210
Commercial paper
1,617
2,574
Current maturities of long-term debt
575
573
Accrued compensation, benefits and
retirement costs
721
617
Current portion of accrued product
warranty
751
726
Current portion of deferred revenue
1,017
1,004
Other accrued expenses
1,637
1,465
Total current liabilities
11,045
11,421
Long-term liabilities
Long-term debt
5,089
4,498
Deferred revenue
939
844
Other liabilities
3,306
3,311
Total liabilities
$
20,379
$
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
$
2,532
$
2,243
Retained earnings
19,102
18,037
Treasury stock, at cost, 80.9 and 81.2
shares
(9,380
)
(9,415
)
Accumulated other comprehensive loss
(1,917
)
(1,890
)
Total Cummins Inc. shareholders’
equity
10,337
8,975
Noncontrolling interests
1,019
992
Total equity
$
11,356
$
9,967
Total liabilities, redeemable
noncontrolling interests and equity
$
31,735
$
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
June 30,
In millions
2023
2022
CASH FLOWS FROM OPERATING
ACTIVITIES
Consolidated net income
$
737
$
707
Adjustments to reconcile consolidated net
income to net cash provided by operating activities
Depreciation and amortization
257
167
Deferred income taxes
(94
)
(46
)
Equity in income of investees, net of
dividends
(46
)
14
Pension and OPEB expense
2
8
Pension contributions and OPEB
payments
(11
)
(12
)
Russian suspension recoveries
—
(47
)
(Gain) loss on corporate owned life
insurance
(1
)
48
Foreign currency remeasurement and
transaction exposure
(48
)
(3
)
Changes in current assets and liabilities,
net of acquisitions
Accounts and notes receivable
(14
)
165
Inventories
(140
)
(209
)
Other current assets
5
(8
)
Accounts payable
(316
)
(58
)
Accrued expenses
110
(30
)
Changes in other liabilities
11
(81
)
Other, net
31
(16
)
Net cash provided by operating
activities
483
599
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures
(221
)
(147
)
Acquisitions of businesses, net of cash
acquired
(134
)
(328
)
Investments in marketable
securities—acquisitions
(322
)
(236
)
Investments in marketable
securities—liquidations
275
207
Other, net
24
(62
)
Net cash used in investing activities
(378
)
(566
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from borrowings
694
42
Net (payments) borrowings of commercial
paper
(629
)
394
Payments on borrowings and finance lease
obligations
(86
)
(47
)
Dividend payments on common stock
(223
)
(204
)
Repurchases of common stock
—
(36
)
Other, net
4
(43
)
Net cash (used in) provided by financing
activities
(240
)
106
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
(43
)
47
Net (decrease) increase in cash and cash
equivalents
(178
)
186
Cash and cash equivalents at beginning of
period
1,980
2,276
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
$
1,802
$
2,462
(a) Prepared on an unaudited basis in
accordance with accounting principles generally accepted in the
United States of America.
Six months ended
June 30,
In millions
2023
2022
CASH FLOWS FROM OPERATING
ACTIVITIES
Consolidated net income
$
1,543
$
1,130
Adjustments to reconcile consolidated net
income to net cash provided by operating activities
Depreciation and amortization
503
328
Deferred income taxes
(132
)
(112
)
Equity in income of investees, net of
dividends
(113
)
(62
)
Pension and OPEB expense
3
17
Pension contributions and OPEB
payments
(103
)
(55
)
Russian suspension costs, net of
recoveries
—
111
(Gain) loss on corporate owned life
insurance
(20
)
85
Foreign currency remeasurement and
transaction exposure
(59
)
(10
)
Changes in current assets and liabilities,
net of acquisitions
Accounts and notes receivable
(635
)
(252
)
Inventories
(403
)
(498
)
Other current assets
(137
)
(65
)
Accounts payable
65
426
Accrued expenses
261
(281
)
Changes in other liabilities
75
(11
)
Other, net
130
12
Net cash provided by operating
activities
978
763
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures
(414
)
(251
)
Acquisitions of businesses, net of cash
acquired
(134
)
(245
)
Investments in marketable
securities—acquisitions
(648
)
(433
)
Investments in marketable
securities—liquidations
620
461
Other, net
(30
)
(108
)
Net cash used in investing activities
(606
)
(576
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from borrowings
737
56
Net (payments) borrowings of commercial
paper
(658
)
392
Payments on borrowings and finance lease
obligations
(228
)
(71
)
Dividend payments on common stock
(445
)
(411
)
Repurchases of common stock
—
(347
)
Other, net
(9
)
(10
)
Net cash used in financing activities
(603
)
(391
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
(68
)
74
Net decrease in cash and cash
equivalents
(299
)
(130
)
Cash and cash equivalents at beginning of
year
2,101
2,592
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
$
1,802
$
2,462
(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 June 30,
2023
External sales
$
2,924
$
2,263
$
2,576
$
794
$
81
$
8,638
$
—
$
8,638
Intersegment sales
501
725
19
663
4
1,912
(1,912
)
—
Total sales
3,425
2,988
2,595
1,457
85
10,550
(1,912
)
8,638
Research, development and engineering
expenses
103
148
15
66
52
384
—
384
Equity, royalty and interest income (loss)
from investees
24
71
24
18
(4
)
133
—
133
Interest income
7
7
8
2
1
25
—
25
EBITDA (2)
486
(3)
425
299
201
(114
)
1,297
7
1,304
Depreciation and amortization (4)
125
56
28
32
15
256
—
256
EBITDA as a percentage of segment
sales
14.2
%
14.2
%
11.5
%
13.8
%
NM
12.3
%
15.1
%
Three months ended June 30,
2022
External sales
$
1,477
$
2,092
$
2,247
$
734
$
36
$
6,586
$
—
$
6,586
Intersegment sales
473
683
6
469
6
1,637
(1,637
)
—
Total sales
1,950
2,775
2,253
1,203
42
8,223
(1,637
)
6,586
Research, development and engineering
expenses
73
116
13
58
39
299
—
299
Equity, royalty and interest income (loss)
from investees
9
58
21
10
(3
)
95
—
95
Interest income
2
1
3
1
—
7
—
7
Russian suspension (recoveries) costs
(2
)
1
(45
)
(1
)
—
(47
)
—
(47
)
EBITDA (2)
352
421
297
128
(79
)
1,119
(64
)
1,055
Depreciation and amortization (4)
49
49
29
31
8
166
—
166
EBITDA as a percentage of segment
sales
18.1
%
15.2
%
13.2
%
10.6
%
NM
13.6
%
16.0
%
"NM" - not meaningful information
(1) Includes intersegment sales,
intersegment profit in inventory eliminations and unallocated
corporate expenses. There were no significant unallocated corporate
expenses for the three months ended June 30, 2023 and 2022, except
for $5 million and $24 million of costs associated with the IPO and
separation of Atmus Filtration Technologies Inc. (Atmus) in 2023
and 2022, respectively.
(2) EBITDA is defined as earnings or
losses before interest expense, income taxes, depreciation and
amortization and noncontrolling interests.
(3) Includes $18 million of costs
associated with the IPO and separation of Atmus. See "DIVESTITURE
AND ACQUISITIONS," note for additional information.
(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.
In millions
Components
Engine
Distribution
Power Systems
Accelera
Total Segments
Intersegment Eliminations
(1)
Total
Six months ended June 30, 2023
External sales
$
5,967
$
4,515
$
4,975
$
1,473
$
161
$
17,091
$
—
$
17,091
Intersegment sales
1,015
1,459
26
1,327
9
3,836
(3,836
)
—
Total sales
6,982
5,974
5,001
2,800
170
20,927
(3,836
)
17,091
Research, development and engineering
expenses
194
282
29
129
100
734
—
734
Equity, royalty and interest income (loss)
from investees
45
136
48
31
(8
)
252
—
252
Interest income
13
10
15
4
1
43
—
43
EBITDA (2)
993
(3)
882
634
420
(208
)
2,721
(56
)
2,665
Depreciation and amortization (4)
248
107
56
61
29
501
—
501
EBITDA as a percentage of total sales
14.2
%
14.8
%
12.7
%
15.0
%
NM
13.0
%
15.6
%
Six months ended June 30, 2022
External sales
$
2,994
$
4,141
$
4,358
$
1,417
$
61
$
12,971
$
—
$
12,971
Intersegment sales
944
1,387
12
946
12
3,301
(3,301
)
—
Total sales
3,938
5,528
4,370
2,363
73
16,272
(3,301
)
12,971
Research, development and engineering
expenses
149
225
26
122
75
597
—
597
Equity, royalty and interest income (loss)
from investees
37
100
(5)
37
21
(4
)
191
—
191
Interest income
3
5
5
2
—
15
—
15
Russian suspension costs
4
33
(6)
55
19
—
111
—
111
EBITDA (2)
672
811
407
218
(144
)
1,964
(154
)
1,810
Depreciation and amortization (4)
92
100
57
62
15
326
—
326
EBITDA as a percentage of total sales
17.1
%
14.7
%
9.3
%
9.2
%
NM
12.1
%
14.0
%
"NM" - not meaningful information
(1) Includes intersegment sales,
intersegment profit in inventory eliminations and unallocated
corporate expenses. There were no significant unallocated corporate
expenses for the six months ended June 30, 2023 and 2022, except
for $11 million and $41 million of costs associated with the IPO
and separation of Atmus in 2023 and 2022, respectively.
(2) EBITDA is defined as earnings or
losses before interest expense, income taxes, depreciation and
amortization and noncontrolling interests.
(3) Includes $30 million of costs
associated with the IPO and separation of Atmus. See "DIVESTITURE
AND ACQUISITIONS," note for additional information.
(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 $2 million and $2 million for
the six months ended June 30, 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.
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
Six months ended
June 30,
June 30,
In millions
2023
2022
2023
2022
Manufacturing entities
Dongfeng Cummins Engine Company, Ltd.
$
18
$
11
$
37
$
27
Chongqing Cummins Engine Company, Ltd.
13
7
22
16
Beijing Foton Cummins Engine Co., Ltd.
9
14
25
28
Tata Cummins, Ltd.
7
5
15
14
All other manufacturers
32
13
51
3
(1)
Distribution entities
Komatsu Cummins Chile, Ltda.
13
12
27
19
All other distributors
4
3
7
5
Cummins share of net income
96
65
184
112
Royalty and interest income
37
30
68
79
Equity, royalty and interest income from
investees
$
133
$
95
$
252
$
191
(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.
DIVESTITURE AND ACQUISITIONS
Divestiture
Formation of Atmus Filtration Technologies Inc. (Atmus) and
Initial Public Offering (IPO)
On May 23, 2023, in connection with the Atmus IPO, Cummins
issued approximately $350 million of commercial paper with certain
lenders. On May 26, 2023, Atmus shares began trading on the New
York Stock Exchange under the symbol "ATMU." The IPO was completed
on May 30, 2023, whereby Cummins exchanged 19.5 percent
(approximately 16 million shares) of its ownership in Atmus, at
$19.50 per share, to retire $299 million of the commercial paper as
proceeds from the offering through a non-cash transaction.
In connection with the completion of the IPO, through a series
of asset and equity contributions, we transferred the filtration
business to Atmus. In exchange, Atmus transferred consideration of
approximately $650 million to Cummins, which consisted primarily of
the net proceeds from a term loan facility and revolver executed by
Atmus during May 2023.
As we still own 80.5 percent of Atmus shares, it remains
included in our Condensed Consolidated Financial Statements.
Acquisitions
Hydrogenics Corporation
On June 29, 2023, a share purchase agreement was executed with a
19 percent minority shareholder in one of our businesses,
Hydrogenics Corporation (Hydrogenics), whereby we agreed to pay the
minority shareholder $335 million for their 19 percent ownership,
including the settlement of shareholder loans of $48 million. As
part of the share purchase agreement, Hydrogenics entered into
three non-interest-bearing promissory notes with $175 million paid
on July 31, 2023, and the remaining $160 million due in three
installments through 2025.
Teksid Hierro de Mexico, S.A. de C.V.
On April 3, 2023, we acquired Teksid Hierro de Mexico, S.A. de
C.V. (Teksid MX) business for approximately $150 million, subject
to working capital and other customary adjustments. Teksid MX
operates a cast iron foundry located in Monclova, Mexico, which
primarily forges blocks and heads used in our and other
manufacturers’ engines. Teksid, Inc. facilitates the
commercialization of Teksid MX products in North America.
Meritor, Inc.
During the second quarter of 2023, we finalized our accounting
for the Meritor, Inc. acquisition. The primary components of the
change were to increase contingent liabilities by $62 million
offset by finalization of deferred taxes and tax reserves, with a
net increase to goodwill of $26 million. There was no impact to the
Condensed Consolidated Statements of Net Income for any of the
changes.
INCOME TAXES
Our effective tax rate for 2023 is expected to approximate 22.0
percent, excluding any discrete items that may arise.
Our effective tax rate for the three months ended June 30, 2023,
was 22.3 percent and contained net unfavorable discrete tax items
of $3 million, or $0.02 per share.
Our effective tax rate for the six months ended June 30, 2023,
was 22.0 percent and contained net discrete tax amounts of zero, as
the result of offsetting amounts for the first two quarters,
primarily due to share-based compensation tax benefits and other
discrete items.
Our effective tax rate for the three months ended June 30, 2022,
was 17.3 percent and contained favorable discrete tax items of $36
million, or $0.25 per share, primarily due to $36 million of
favorable changes in tax reserves, $10 million of favorable changes
associated with the indefinite suspension in our Russian operations
and $8 million of net favorable other discrete tax items, partially
offset by $18 million of unfavorable tax costs associated with
internal restructuring ahead of the planned separation of
Atmus.
Our effective tax rate for the six months ended June 30, 2022,
was 21.1 percent and contained favorable discrete items of $5
million, or $0.04 per share, primarily due to $27 million of
favorable changes in tax reserves and $4 million of net favorable
other discrete tax items, partially offset by $18 million of
unfavorable tax costs associated with internal restructuring ahead
of the planned separation of Atmus and $8 million of unfavorable
changes associated with the indefinite suspension in our Russian
operations.
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 costs
associated with the IPO and separation of Atmus and indefinite
suspension of Russian operations. 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 income attributable to Cummins
Inc.” to EBITDA for each of the applicable periods:
Three months ended
Six months ended
June 30,
June 30,
In millions
2023
2022
2023
2022
Net income attributable to Cummins
Inc.
$
720
$
702
$
1,510
$
1,120
Net income attributable to Cummins Inc. as
a percentage of net sales
8.3
%
10.7
%
8.8
%
8.6
%
Add:
Net income attributable to noncontrolling
interests
17
5
33
10
Consolidated net income
737
707
1,543
1,130
Add:
Interest expense
99
34
186
51
Income tax expense
212
148
435
303
Depreciation and amortization
256
166
501
326
EBITDA
$
1,304
$
1,055
$
2,665
$
1,810
EBITDA as a percentage of net sales
15.1
%
16.0
%
15.6
%
14.0
%
Add:
Atmus IPO and separation costs
23
29
41
46
Russian suspension (recoveries) costs
—
(47
)
—
111
EBITDA, excluding costs associated with
the IPO and separation of Atmus and indefinite suspension of
Russian operations
$
1,327
$
1,037
$
2,706
$
1,967
EBITDA, excluding costs associated with
the IPO and separation of Atmus and indefinite suspension of
Russian operations, as a percentage of net sales
15.4
%
15.7
%
15.8
%
15.2
%
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
$
—
$
—
$
2,521
Emission solutions
1,056
964
—
—
2,020
Engine components
581
557
—
—
1,138
Atmus
417
417
—
—
834
Automated transmissions
179
179
—
—
358
Software and electronics
52
59
—
—
111
Total sales
$
3,557
$
3,425
$
—
$
—
$
6,982
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
$
—
$
—
$
2,231
Medium-duty truck and bus
903
942
—
—
1,845
Light-duty automotive
439
445
—
—
884
Off-highway
530
484
—
—
1,014
Total sales
$
2,986
$
2,988
$
—
$
—
$
5,974
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
—
—
71,100
Medium-duty
78,900
76,000
—
—
154,900
Light-duty
55,000
53,600
—
—
108,600
Total units
168,600
166,000
—
—
334,600
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
$
—
$
—
$
2,076
Power generation
492
614
—
—
1,106
Engines
456
531
—
—
987
Service
401
431
—
—
832
Total sales
$
2,406
$
2,595
$
—
$
—
$
5,001
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
$
—
$
—
$
1,624
Industrial
455
468
—
—
923
Generator technologies
118
135
—
—
253
Total sales
$
1,343
$
1,457
$
—
$
—
$
2,800
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
—
—
6,200
Industrial
1,500
1,600
—
—
3,100
Total units
4,400
4,900
—
—
9,300
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/20230803973503/en/
Jon Mills Director – External Communications 317-658-4540
jon.mills@cummins.com
Cummins (NYSE:CMI)
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