- Third quarter revenues of $8.4 billion; GAAP1 Net Income of
$656 million
- EBITDA in the third quarter was 14.6 percent of sales;
Diluted EPS of $4.59
- Third quarter results include $26 million, or $0.14 per
diluted share, of costs related to the separation of Atmus
Filtration Technologies Inc.
- Third quarter net cash provided by operating activities was
a record $1.5 billion
- The company is raising its full year 2023 revenue guidance
to be up 18 to 21 percent; an increase from previous guidance of up
15 to 20 percent
- EBITDA is now expected to be in the range of 15.2 to 15.4
percent; narrowing the range of the previous guidance of 15.0 to
15.7 percent
Cummins Inc. (NYSE: CMI) today reported results for the third
quarter of 2023.
Third quarter revenues of $8.4 billion increased 15 percent from
the same quarter in 2022. Sales in North America increased 16
percent and international revenues increased 13 percent due to the
addition of Meritor and strong demand across most global markets.
The third quarter of 2022 included two months of consolidated
operations for Meritor following the completion of the acquisition
on August 3, 2022.
“We delivered solid profitability and record operating cash flow
in the third quarter,” said Jennifer Rumsey, Chair and CEO. “While
full year revenues are at the high end of our expectations, we are
seeing signs of moderating demand in some markets and are taking
steps to reduce costs and position the company for success in 2024.
I am deeply appreciative of our Cummins employees, who continue to
innovate for our customers and demonstrate the flexibility required
to meet global demand.”
Net income attributable to Cummins in the third quarter was $656
million, or $4.59 per diluted share compared to $400 million, or
$2.82 per diluted share in 2022. Results included costs associated
with the separation of Atmus of $26 million, or $0.14 per diluted
share, in the third quarter of 2023, and $16 million in the third
quarter of 2022. The third quarter of 2022 also included $77
million of acquisition, integration and inventory valuation
adjustments related to Meritor. The tax rate in the third quarter
was 21.4 percent including $5 million, or $0.03 per diluted share,
of favorable discrete tax items, compared to $57 million of
unfavorable discrete tax items a year ago.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) in the third quarter were $1.2 billion, or 14.6 percent of
sales, compared to $884 million, or 12.1 percent of sales, a year
ago. EBITDA for the third quarter of 2023 included the costs
related to the separation of Atmus and the third quarter of 2022
EBITDA included costs related to the separation of Atmus and costs
related to the acquisition and integration of Meritor as noted
above. The third quarter of 2022 also included a one-time employee
recognition bonus with a cost impact of $56 million.
Operating cash flow for the third quarter of 2023 was a record
inflow of $1.5 billion, compared to $382 million in the third
quarter of 2022, as we continue to focus on working capital
management within the business.
2023 Outlook:
Based on its current forecast, Cummins is raising its full year
2023 revenue guidance to be up 18 to 21 percent due to strong
demand across most markets, especially North America. EBITDA is
expected to be in the range of 15.2 to 15.4 percent of sales,
narrowing the range of the previous guidance of 15.0 to 15.7
percent of sales.
The outlook above assumes the inclusion of Atmus for the
entirety of 2023, but excludes any costs or benefits associated
with the planned separation of Atmus. Our forecast also excludes
the impact of broader cost reduction activities that are expected
in the fourth quarter. Within the Components Segment, Cummins
expects revenues of the Meritor business for 2023 to be between
$4.7 billion to $4.9 billion, consistent with prior guidance.
EBITDA is expected to be in the range of 10.5 to 11.0 percent of
sales, narrowing the range of the previous guidance of 10.3 to 11.0
percent.
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, increasing dividends and reducing debt.
“2023 will be another record year for revenue growth, however we
are seeing some signs of slowing activity and are expecting lower
demand in the fourth quarter. Our leadership team is experienced in
managing through periods of economic uncertainty and will continue
to make the decisions that ensure we drive cost improvements and
maintain a strong financial position. We’ve announced several major
partnerships this quarter as we continue to advance our Destination
Zero strategy and remain committed to investing in future growth,”
said Rumsey.
Recent Highlights:
- 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.
- On October 2nd 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. During
the third quarter, 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 in Southern California, 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.
- Cummins received several prestigious honors during the quarter,
including earning the number four spot on Forbes' sixth annual
ranking of America’s Best Employers for Women, up from last year’s
ranking at number 26. Also, Cummins was named Employer of the Year
by Diesel Progress, named a Best Place to Work for Disability
Inclusion for the third year in a row, and received a 2023 Energy
Management Insight Award from the Clean Energy Ministerial.
- Cummins increased its 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.
Third quarter 2023 detail (all comparisons to same period in
2022):
Components Segment
- Sales - $3.2 billion, up 20 percent
- Segment EBITDA - $441 million, or 13.6 percent of sales, which
includes $20 million of costs related to the separation of Atmus
compared to $297 million, or 11.0 percent of sales in the prior
year, which included $10 million of costs related to the separation
of Atmus. The third quarter of 2022 also included $77 million of
acquisition, integration and inventory valuation adjustments
related to Meritor.
- Revenues in North America increased by 21 percent and
international sales increased by 19 percent due to an additional
month of Meritor operations and increased global demand.
Engine Segment
- Sales - $2.9 billion, up 5 percent
- Segment EBITDA - $395 million, or 13.5 percent of sales,
compared to $362 million or 13.0 percent of sales
- On-highway revenues increased 8 percent driven by strong demand
in the North American truck market and pricing actions.
- Sales increased 5 percent in North America and grew 7 percent
in international markets due to an increase in global demand.
Distribution Segment
- Sales - $2.5 billion, up 13 percent
- Segment EBITDA - $306 million, or 12.1 percent of sales,
compared to $225 million, or 10.0 percent of sales
- Revenues in North America increased 14 percent and
international sales increased by 11 percent.
- 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 7 percent
- Segment EBITDA - $234 million, or 16.2 percent of sales,
compared to $193 million, or 14.3 percent of sales
- Power generation revenues increased 15 percent driven by
increased global demand and pricing actions. Industrial revenues
decreased 2 percent due to lower mining aftermarket parts
demand.
Accelera Segment
- Sales - $103 million, up 106 percent
- Segment EBITDA loss - $114 million
- Revenues increased due to higher demand for battery electric
systems, increased electrolyzer installations, and the additions of
the Siemens Commercial Vehicle business and electric powertrain
portion of the Meritor 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; uncertainties
and risks related to timing and potential value to both Atmus
Filtration Technologies Inc. (Atmus) and Cummins of the planned
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 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 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. 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
September 30,
In millions, except per share
amounts
2023
2022
NET SALES
$
8,431
$
7,333
Cost of sales
6,360
5,691
GROSS MARGIN
2,071
1,642
OPERATING EXPENSES AND INCOME
Selling, general and administrative
expenses
831
708
Research, development and engineering
expenses
376
348
Equity, royalty and interest income from
investees
118
70
Other operating expense, net
32
30
OPERATING INCOME
950
626
Interest expense
97
61
Other income, net
25
43
INCOME BEFORE INCOME TAXES
878
608
Income tax expense
188
199
CONSOLIDATED NET INCOME
690
409
Less: Net income attributable to
noncontrolling interests
34
9
NET INCOME ATTRIBUTABLE TO CUMMINS
INC.
$
656
$
400
EARNINGS PER COMMON SHARE ATTRIBUTABLE
TO CUMMINS INC.
Basic
$
4.63
$
2.83
Diluted
$
4.59
$
2.82
WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING
Basic
141.8
141.1
Diluted
142.8
142.0
(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 NET INCOME
(Unaudited) (a)
Nine months ended
September 30,
In millions, except per share
amounts
2023
2022
NET SALES
$
25,522
$
20,304
Cost of sales
19,274
15,404
GROSS MARGIN
6,248
4,900
OPERATING EXPENSES AND INCOME
Selling, general and administrative
expenses
2,457
1,945
Research, development and engineering
expenses
1,110
945
Equity, royalty and interest income from
investees
370
261
Other operating expense, net
78
144
OPERATING INCOME
2,973
2,127
Interest expense
283
112
Other income, net
166
26
INCOME BEFORE INCOME TAXES
2,856
2,041
Income tax expense
623
502
CONSOLIDATED NET INCOME
2,233
1,539
Less: Net income attributable to
noncontrolling interests
67
19
NET INCOME ATTRIBUTABLE TO CUMMINS
INC.
$
2,166
$
1,520
EARNINGS PER COMMON SHARE ATTRIBUTABLE
TO CUMMINS INC.
Basic
$
15.29
$
10.74
Diluted
$
15.19
$
10.68
WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING
Basic
141.7
141.5
Diluted
142.6
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)
In millions, except par value
September 30,
2023
December 31,
2022
ASSETS
Current assets
Cash and cash equivalents
$
2,387
$
2,020
Restricted cash
225
81
Marketable securities
452
472
Total cash, cash equivalents, restricted
cash and marketable securities
3,064
2,573
Accounts and notes receivable, net
5,662
5,202
Inventories
5,906
5,603
Prepaid expenses and other current
assets
1,280
1,073
Total current assets
15,912
14,451
Long-term assets
Property, plant and equipment, net
5,801
5,521
Investments and advances related to equity
method investees
1,785
1,759
Goodwill
2,379
2,343
Other intangible assets, net
2,518
2,687
Pension assets
1,500
1,398
Other assets
2,202
2,140
Total assets
$
32,097
$
30,299
LIABILITIES
Current liabilities
Accounts payable (principally trade)
$
4,262
$
4,252
Loans payable
231
210
Commercial paper
1,710
2,574
Current maturities of long-term debt
573
573
Accrued compensation, benefits and
retirement costs
884
617
Current portion of accrued product
warranty
731
726
Current portion of deferred revenue
1,029
1,004
Other accrued expenses
1,706
1,465
Total current liabilities
11,126
11,421
Long-term liabilities
Long-term debt
4,950
4,498
Deferred revenue
1,011
844
Other liabilities
3,332
3,311
Total liabilities
$
20,419
$
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
$
2,558
$
2,243
Retained earnings
19,520
18,037
Treasury stock, at cost, 80.8 and 81.2
shares
(9,369
)
(9,415
)
Accumulated other comprehensive loss
(2,051
)
(1,890
)
Total Cummins Inc. shareholders’
equity
10,658
8,975
Noncontrolling interests
1,020
992
Total equity
$
11,678
$
9,967
Total liabilities, redeemable
noncontrolling interests and equity
$
32,097
$
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
September 30,
In millions
2023
2022
CASH FLOWS FROM OPERATING
ACTIVITIES
Consolidated net income
$
690
$
409
Adjustments to reconcile consolidated net
income to net cash provided by operating activities
Depreciation and amortization
257
216
Deferred income taxes
(106
)
(82
)
Equity in income of investees, net of
dividends
13
32
Pension and OPEB expense
1
6
Pension contributions and OPEB
payments
(12
)
(16
)
Russian suspension costs, net of
recoveries
—
1
Changes in current assets and liabilities,
net of acquisitions
Accounts and notes receivable
188
(81
)
Inventories
85
(99
)
Other current assets
(54
)
47
Accounts payable
(22
)
(73
)
Accrued expenses
282
157
Other, net
207
(135
)
Net cash provided by operating
activities
1,529
382
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures
(280
)
(202
)
Acquisitions of businesses, net of cash
acquired
7
(2,763
)
Investments in marketable
securities—acquisitions
(328
)
(305
)
Investments in marketable
securities—liquidations
382
358
Other, net
(35
)
(8
)
Net cash used in investing activities
(254
)
(2,920
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from borrowings
42
2,020
Net borrowings of commercial paper
92
1,688
Payments on borrowings and finance lease
obligations
(163
)
(999
)
Dividend payments on common stock
(238
)
(222
)
Repurchases of common stock
—
(23
)
Payments for purchase of redeemable
noncontrolling interests
(175
)
—
Other, net
(24
)
38
Net cash (used in) provided by financing
activities
(466
)
2,502
EFFECT OF EXCHANGE RATE CHANGES ON
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
1
73
Net increase in cash, cash equivalents and
restricted cash
810
37
Cash, cash equivalents and restricted cash
at beginning of period
1,802
2,462
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH AT END OF PERIOD
$
2,612
$
2,499
(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)
Nine months ended
September 30,
In millions
2023
2022
CASH FLOWS FROM OPERATING
ACTIVITIES
Consolidated net income
$
2,233
$
1,539
Adjustments to reconcile consolidated net
income to net cash provided by operating activities
Depreciation and amortization
760
544
Deferred income taxes
(238
)
(194
)
Equity in income of investees, net of
dividends
(100
)
(30
)
Pension and OPEB expense
4
23
Pension contributions and OPEB
payments
(115
)
(71
)
Russian suspension costs, net of
recoveries
—
112
Changes in current assets and liabilities,
net of acquisitions
Accounts and notes receivable
(447
)
(333
)
Inventories
(318
)
(597
)
Other current assets
(191
)
(18
)
Accounts payable
43
353
Accrued expenses
543
(124
)
Other, net
333
(59
)
Net cash provided by operating
activities
2,507
1,145
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures
(694
)
(453
)
Acquisitions of businesses, net of cash
acquired
(127
)
(3,008
)
Investments in marketable
securities—acquisitions
(976
)
(738
)
Investments in marketable
securities—liquidations
1,002
819
Other, net
(65
)
(116
)
Net cash used in investing activities
(860
)
(3,496
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from borrowings
779
2,076
Net (payments) borrowings of commercial
paper
(566
)
2,080
Payments on borrowings and finance lease
obligations
(391
)
(1,070
)
Dividend payments on common stock
(683
)
(633
)
Repurchases of common stock
—
(370
)
Payments for purchase of redeemable
noncontrolling interests
(175
)
—
Other, net
(33
)
28
Net cash (used in) provided by financing
activities
(1,069
)
2,111
EFFECT OF EXCHANGE RATE CHANGES ON
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(67
)
147
Net increase (decrease) in cash, cash
equivalents and restricted cash
511
(93
)
Cash, cash equivalents and restricted cash
at beginning of year
2,101
2,592
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH AT END OF PERIOD
$
2,612
$
2,499
(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 September 30,
2023
External sales
$
2,780
$
2,236
$
2,519
$
798
$
98
$
8,431
$
—
$
8,431
Intersegment sales
456
695
16
646
5
1,818
(1,818
)
—
Total sales
3,236
2,931
2,535
1,444
103
10,249
(1,818
)
8,431
Research, development and engineering
expenses
93
159
14
60
50
376
—
376
Equity, royalty and interest income (loss)
from investees
26
62
22
11
(3
)
118
—
118
Interest income
8
4
9
3
—
24
—
24
EBITDA (2)
441
(3)
395
306
234
(114
)
1,262
(32
)
1,230
Depreciation and amortization (4)
120
59
28
30
18
255
—
255
EBITDA as a percentage of segment
sales
13.6
%
13.5
%
12.1
%
16.2
%
NM
12.3
%
14.6
%
Three months ended September 30,
2022
External sales
$
2,220
$
2,063
$
2,232
$
773
$
45
$
7,333
$
—
$
7,333
Intersegment sales
483
716
7
576
5
1,787
(1,787
)
—
Total sales
2,703
2,779
2,239
1,349
50
9,120
(1,787
)
7,333
Research, development and engineering
expenses
87
140
13
62
46
348
—
348
Equity, royalty and interest income (loss)
from investees
17
27
20
10
(4
)
70
—
70
Interest income
4
3
4
3
—
14
—
14
Russian suspension costs
1
—
—
—
—
1
—
1
EBITDA (2)
297
(5)
362
225
193
(95
)
982
(98
)
884
Depreciation and amortization (4)
95
51
29
30
10
215
—
215
EBITDA as a percentage of segment
sales
11.0
%
13.0
%
10.0
%
14.3
%
NM
10.8
%
12.1
%
"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 September 30, 2023 and 2022,
except for $6 million and $6 million of costs associated with the
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 $20 million of costs
associated with the separation of Atmus for the three months ended
September 30, 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 $45 million of costs related
to the acquisition and integration of Meritor and $10 million costs
associated with the separation of Atmus for the three months ended
September 30, 2022.
CUMMINS INC. AND
SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
In millions
Components
Engine
Distribution
Power Systems
Accelera
Total Segments
Intersegment Eliminations
(1)
Total
Nine months ended September 30,
2023
External sales
$
8,747
$
6,751
$
7,494
$
2,271
$
259
$
25,522
$
—
$
25,522
Intersegment sales
1,471
2,154
42
1,973
14
5,654
(5,654
)
—
Total sales
10,218
8,905
7,536
4,244
273
31,176
(5,654
)
25,522
Research, development and engineering
expenses
287
441
43
189
150
1,110
—
1,110
Equity, royalty and interest income (loss)
from investees
71
198
70
42
(11
)
370
—
370
Interest income
21
14
24
7
1
67
—
67
EBITDA (2)
1,434
(3)
1,277
940
654
(322
)
3,983
(88
)
3,895
Depreciation and amortization (4)
368
166
84
91
47
756
—
756
EBITDA as a percentage of total sales
14.0
%
14.3
%
12.5
%
15.4
%
NM
12.8
%
15.3
%
Nine months ended September 30,
2022
External sales
$
5,214
$
6,204
$
6,590
$
2,190
$
106
$
20,304
$
—
$
20,304
Intersegment sales
1,427
2,103
19
1,522
17
5,088
(5,088
)
—
Total sales
6,641
8,307
6,609
3,712
123
25,392
(5,088
)
20,304
Research, development and engineering
expenses
236
365
39
184
121
945
—
945
Equity, royalty and interest income (loss)
from investees
54
127
(5)
57
31
(8
)
261
—
261
Interest income
7
8
9
5
—
29
—
29
Russian suspension costs
5
33
(6)
55
19
—
112
—
112
EBITDA (2)
969
(7)
1,173
632
411
(239
)
2,946
(252
)
2,694
Depreciation and amortization (4)
187
151
86
92
25
541
—
541
EBITDA as a percentage of total sales
14.6
%
14.1
%
9.6
%
11.1
%
NM
11.6
%
13.3
%
"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 nine months ended September 30, 2023 and 2022,
except for $17 million and $47 million of costs associated with the
initial public offering (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 $50 million of costs
associated with the IPO and separation of Atmus for the nine months
ended September 30, 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 $4 million and $3 million for
the nine months ended September 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.
(7) Includes $56 million of costs related
to the acquisition and integration of Meritor and $15 million costs
associated with the separation of Atmus for the nine months ended
September 30, 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
Nine months ended
September 30,
September 30,
In millions
2023
2022
2023
2022
Manufacturing entities
Dongfeng Cummins Engine Company, Ltd.
$
15
$
8
$
52
$
35
Beijing Foton Cummins Engine Co., Ltd.
8
6
33
34
Chongqing Cummins Engine Company, Ltd.
7
7
29
23
Tata Cummins, Ltd.
6
5
21
19
All other manufacturers
18
11
69
14
(1)
Distribution entities
Komatsu Cummins Chile, Ltda.
13
13
40
32
All other distributors
3
3
10
8
Cummins share of net income
70
53
254
165
Royalty and interest income
48
17
116
96
Equity, royalty and interest income from
investees
$
118
$
70
$
370
$
261
(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.
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 rates for the three and nine months ended
September 30, 2023, were 21.4 percent and 21.8 percent,
respectively. Our effective tax rates for the three and nine months
ended September 30, 2022, were 32.7 percent and 24.6 percent,
respectively.
The three months ended September 30, 2023, contained net
favorable discrete tax items of $5 million, or $0.03 per share,
primarily due to $13 million of favorable return to provision
adjustments and $1 million of favorable share-based compensation
tax benefits, partially offset by $9 million of unfavorable
adjustments for uncertain tax positions.
The nine months ended September 30, 2023, contained net
favorable discrete tax items of $5 million, or $0.03 per share,
primarily due to $15 million of favorable return to provision
adjustments and $5 million of favorable share-based compensation
tax benefit, partially offset by $11 million of unfavorable
adjustments for uncertain tax positions and $4 million of other
unfavorable adjustments.
The three months ended September 30, 2022, contained unfavorable
discrete tax items of $57 million, or $0.40 per share, primarily
due to $51 million of unfavorable tax costs associated with
internal restructuring ahead of the planned separation of Atmus and
$10 million of unfavorable return to provision adjustments,
partially offset by $4 million of net favorable other discrete tax
items.
The nine months ended September 30, 2022, contained unfavorable
net discrete tax items of $52 million, or $0.37 per share,
primarily due to $69 million of unfavorable tax costs associated
with internal restructuring ahead of the planned separation of
Atmus and $10 million of unfavorable return to provision
adjustments, partially offset by $27 million of favorable changes
in tax reserves.
SUBSEQUENT EVENTS
On October 2, 2023, we purchased from the Forvia Group all of
the equity ownership of Faurecia's U.S. and Europe commercial
vehicle exhaust business for approximately €199 million, subject to
certain adjustments set forth in the agreement. This business
provides canning and assembly operations for full exhaust systems
primarily for the on-highway applications. This acquisition will be
included in our Components segment starting in the fourth quarter
of 2023.
On October 2, 2023, we repaid our $500 million senior notes, due
2023, using a combination of cash on hand and additional commercial
paper borrowings. On October 31, 2023, we repaid $150 million of
our term loan, due 2025, using cash on hand.
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 Meritor
acquisition, integration and inventory valuation adjustments. 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
Nine months ended
September 30,
September 30,
In millions
2023
2022
2023
2022
Net income attributable to Cummins
Inc.
$
656
$
400
$
2,166
$
1,520
Net income attributable to Cummins Inc. as
a percentage of net sales
7.8
%
5.5
%
8.5
%
7.5
%
Add:
Net income attributable to noncontrolling
interests
34
9
67
19
Consolidated net income
690
409
2,233
1,539
Add:
Interest expense
97
61
283
112
Income tax expense
188
199
623
502
Depreciation and amortization
255
215
756
541
EBITDA
$
1,230
$
884
$
3,895
$
2,694
EBITDA as a percentage of net sales
14.6
%
12.1
%
15.3
%
13.3
%
Add:
Atmus IPO and separation costs
26
16
67
62
Meritor acquisition, integration and
inventory valuation adjustments
—
77
—
88
EBITDA, excluding costs associated with
the IPO and separation of Atmus and impact of Meritor acquisition,
integration and inventory valuation adjustments
$
1,256
$
977
$
3,962
$
2,844
EBITDA, excluding costs associated with
the IPO and separation of Atmus and impact of Meritor acquisition,
integration and inventory valuation adjustments, as a percentage of
net sales
14.9
%
13.3
%
15.5
%
14.0
%
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
$
—
$
3,698
Emission solutions
1,056
964
893
—
2,913
Engine components
581
557
532
—
1,670
Atmus
417
417
396
—
1,230
Automated transmissions
179
179
187
—
545
Software and electronics
52
59
51
—
162
Total sales
$
3,557
$
3,425
$
3,236
$
—
$
10,218
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
$
—
$
3,347
Medium-duty truck and bus
903
942
931
—
2,776
Light-duty automotive
439
445
455
—
1,339
Off-highway
530
484
429
—
1,443
Total sales
$
2,986
$
2,988
$
2,931
$
—
$
8,905
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
—
107,400
Medium-duty
78,900
76,000
71,300
—
226,200
Light-duty
55,000
53,600
53,300
—
161,900
Total units
168,600
166,000
160,900
—
495,500
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
$
—
$
3,071
Power generation
492
614
606
—
1,712
Engines
456
531
511
—
1,498
Service
401
431
423
—
1,255
Total sales
$
2,406
$
2,595
$
2,535
$
—
$
7,536
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
$
—
$
2,474
Industrial
455
468
475
—
1,398
Generator technologies
118
135
119
—
372
Total sales
$
1,343
$
1,457
$
1,444
$
—
$
4,244
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
—
9,000
Industrial
1,500
1,600
1,800
—
4,900
Total units
4,400
4,900
4,600
—
13,900
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/20231101650939/en/
Jon Mills Director – External Communications 317-658-4540
jon.mills@cummins.com
Cummins (NYSE:CMI)
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