Cummins Reports First Quarter 2022 Results

  • First quarter revenues of $6.4 billion; GAAP1 Net Income of $418 million
  • EBITDA in the first quarter was 11.8 percent of sales; Diluted EPS of $2.92
  • First quarter results include costs of $158 million ($1.03 per diluted share) related to the indefinite suspension of operations in Russia, and $17 million ($0.09 per diluted share) related to the separation of the Filtration business
  • The company is raising its full year 2022 revenue guidance to be up 8 percent; an increase from up 6 percent in previous guidance
  • The company is maintaining its 2022 full year guidance for EBITDA of approximately 15.5 percent

Cummins Inc. (NYSE: CMI) today reported results for the first quarter of 2022.

First quarter revenues of $6.4 billion increased 5 percent from the same quarter in 2021. Sales in North America increased 12 percent while international revenues decreased 3 percent, driven primarily by a slowdown in China.

“Demand for our products remains strong across many of our key markets and regions, resulting in record revenues in the first quarter of 2022,” said Chairman and CEO Tom Linebarger. “We have implemented pricing actions to counter rising input costs, which contributed to solid profitability in the first quarter. Supply chain constraints continue to be a challenge and are limiting growth in our industry.”

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the first quarter were $755 million (11.8 percent of sales), compared to $980 million (16.1 percent of sales) a year ago.

Net income attributable to Cummins in the first quarter was $418 million ($2.92 per diluted share) compared to $603 million ($4.07 per diluted share) in 2021. First quarter results include costs of $158 million ($1.03 per diluted share) related to the indefinite suspension of operations in Russia, and $17 million ($0.09 per diluted share) related to the separation of the Filtration business. The costs incurred relating to the indefinite suspension of our operations in Russia include inventory write-downs, reserves on accounts receivable, the impairment of a joint venture investment, and other costs. The tax rate in the first quarter was 26.8 percent including $31 million, or $0.22 per share, of unfavorable discrete items.

2022 Outlook:

Based on the current forecast, Cummins is raising its full year 2022 revenue guidance to up 8 percent, an increase from up 6 percent due to stronger demand in North America and other markets. Full-year 2022 EBITDA is expected to be approximately 15.5 percent, in line with our previous guidance. The company plans to return approximately 50 percent of Operating Cash Flow to shareholders in the form of dividends and share repurchases.

Any expenses outside of the normal course of business associated with the separation of the Filtration business or indefinite suspension of our operations in Russia have been excluded from the outlook provided.

“We delivered solid financial performance in the first quarter in the face of many challenges in our global supply chain. The ongoing impact of COVID-19, especially in China, and the effect of the conflict in Ukraine continue to present challenges to our global operations. I am impressed with the resiliency of our employees to navigate through these difficulties and deliver for our customers. Cummins is in a strong position to keep investing in future growth, bringing new technologies to customers and returning cash to shareholders.” said President and COO Jennifer Rumsey.

First Quarter 2022 Highlights:

  • The company announced two significant acquisitions critical to advancing its product decarbonization goals while expanding its product portfolio, the acquisition of Jacobs Vehicle Systems (JVS) and the intent to acquire Meritor. JVS is a supplier of engine braking, cylinder deactivation, start and stop and thermal management technologies which are key components to meeting current and future emissions regulations. The integration of Meritor, a global leader of drivetrain, mobility, braking, aftermarket and electric powertrain solutions for commercial vehicle and industrial markets will position Cummins as one of the few companies able to provide integrated powertrain solutions across combustion as well as electric power applications through Meritor’s eAxle product.
  • Cummins was named one of the World’s Most Ethical Companies for a 15th consecutive time by Ethisphere, a global leader in defining and advancing the standards of ethical business practices. The company also earned a place on Barron’s 100 Most Sustainable U.S. Companies list, and received a perfect score on the Human Rights Campaign’s 2022 Corporate Equality Index for the 18th consecutive year.
  • Cummins hosted its biennial analyst day highlighting its long-term decarbonization growth strategy, Destination Zero, which includes making meaningful reductions in carbon emissions through advanced internal combustion technologies widely accepted by the market today, while continuing to invest in and advance zero emission technologies ahead of widespread market adoption.
  • In February, Cummins unveiled the industry’s first unified, fuel-agnostic internal combustion powertrain platforms. This technology approach will be applied across Cummins’ X-Series, L-Series and B-Series product platforms, and helps fleets reduce carbon emissions today by enabling vehicles to run on low to zero carbon fuels. The platform utilizes the internal combustion engine technology that fleets are already familiar with while also applying a high level of parts and integration commonality across fuels including diesel, natural gas, hydrogen or other fuel applications.
  • The New Power business continued to expand its green hydrogen presence globally. In North America, Florida Power & Light Company announced Cummins will supply a 25-megawatt electrolyzer system for the groundbreaking FPL Cavendish NextGen Hydrogen Hub – Florida’s first of its kind “green” hydrogen plant. The FPL Cavendish NextGen Hydrogen Hub will leverage solar energy to power the electrolysis process that produces “green,” or carbon-free, hydrogen from water.

1 Generally Accepted Accounting Principles in the U.S.

First quarter 2022 detail (all comparisons to same period in 2021):

The Engine, Distribution, Components and Power Systems results were all impacted by costs associated with the indefinite suspension of our operations in Russia.

Engine Segment

  • Sales - $2.8 billion, up 12 percent
  • Segment EBITDA - $392 million, or 14.2 percent of sales, compared to $354 million or 14.4 percent of sales. EBITDA includes $32 million of costs related to the indefinite suspension of our operations in Russia
  • On-highway revenues increased 14 percent driven by pricing actions and strong demand in the North American truck markets, and recovery in the bus market which was severely impacted by Covid-19. Off-highway revenues increased 5 percent
  • Sales increased 15 percent in North America and 4 percent in international markets

Distribution Segment

  • Sales - $2.1 billion, up 15 percent
  • Segment EBITDA - $110 million, or 5.2 percent of sales, compared to $160 million or 8.7 percent of sales. EBITDA includes $100 million of costs related to the indefinite suspension of our operations in Russia
  • Revenues in North America increased 17 percent and international sales increased by 13 percent
  • Higher revenues were primarily driven by increased demand for parts and whole goods

Components Segment

  • Sales - $2.0 billion, down 8 percent
  • Segment EBITDA - $320 million, or 16.1 percent of sales, compared to $421 million or 19.6 percent of sales. EBITDA includes $6 million of costs related to the indefinite suspension of our operations in Russia
  • Revenues in North America increased by 8 percent and international sales decreased by 21 percent due to lower demand in India and China from record demand in the first quarter of 2021

Power Systems Segment

  • Sales - $1.2 billion, up 14 percent
  • Segment EBITDA - $90 million, or 7.8 percent of sales, compared to $126 million, or 12.3 percent of sales. EBITDA includes $20 million of costs related to the indefinite suspension of our operations in Russia
  • Power generation revenues increased by 9 percent driven by strong demand in China. Industrial revenues increased 21 percent due to stronger demand in mining and oil and gas markets

New Power Segment

  • Sales - $31 million, down 11 percent
  • Segment EBITDA loss - $67 million
  • Revenues decreased due to timing of commissioning electrolyzer projects and shipments of fuel cell systems to the rail market in 2021
  • Costs associated with the development of fuel cells and electrolyzers as well as products to support battery electric vehicles are contributing to EBITDA losses

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, electric power generation systems, batteries, electrified power systems, hydrogen generation and fuel cell products. Headquartered in Columbus, Indiana (U.S.), since its founding in 1919, Cummins employs approximately 59,900 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 $2.1 billion on sales of $24.0 billion in 2021. 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; any adverse effects of the U.S. government's COVID-19 vaccine mandates; changes in taxation; global legal and ethical compliance costs and risks; increasingly stringent environmental laws and regulations; future bans or limitations on the use of diesel-powered products; raw material, transportation and labor price fluctuations and supply shortages; 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, bankruptcy 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; challenging markets for talent and ability to attract, develop and retain key personnel; climate change and global warming; 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; 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 2021 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. 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

In millions, except per share amounts

 

March 31,

2022

 

April 4,

2021

NET SALES

 

$

6,385

 

 

$

6,092

Cost of sales

 

 

4,853

 

 

 

4,606

 

GROSS MARGIN

 

 

1,532

 

 

 

1,486

 

OPERATING EXPENSES AND INCOME

 

 

 

 

Selling, general and administrative expenses

 

 

615

 

 

 

574

 

Research, development and engineering expenses

 

 

298

 

 

 

260

 

Equity, royalty and interest income from investees

 

 

96

 

 

 

166

 

Other operating expense, net

 

 

111

 

 

 

8

 

OPERATING INCOME

 

 

604

 

 

 

810

 

Interest expense

 

 

17

 

 

 

28

 

Other (expense) income, net

 

 

(9

)

 

 

1

 

INCOME BEFORE INCOME TAXES

 

 

578

 

 

 

783

 

Income tax expense

 

 

155

 

 

 

172

 

CONSOLIDATED NET INCOME

 

 

423

 

 

 

611

 

Less: Net income attributable to noncontrolling interests

 

 

5

 

 

 

8

 

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

418

 

 

$

603

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.

 

 

 

 

Basic

 

$

2.94

 

 

$

4.10

 

Diluted

 

$

2.92

 

 

$

4.07

 

 

 

 

 

 

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING

 

 

 

 

Basic

 

 

142.2

 

 

 

147.0

 

Diluted

 

 

143.1

 

 

 

148.3

 

 

 

 

 

 

(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

 

March 31,

2022

 

December 31,

2021

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

2,276

 

 

$

2,592

 

Marketable securities

 

 

527

 

 

 

595

 

Total cash, cash equivalents and marketable securities

 

 

2,803

 

 

 

3,187

 

Accounts and notes receivable, net

 

 

4,368

 

 

 

3,990

 

Inventories

 

 

4,586

 

 

 

4,355

 

Prepaid expenses and other current assets

 

 

839

 

 

 

777

 

Total current assets

 

 

12,596

 

 

 

12,309

 

Long-term assets

 

 

 

 

Property, plant and equipment, net

 

 

4,381

 

 

 

4,422

 

Investments and advances related to equity method investees

 

 

1,592

 

 

 

1,538

 

Goodwill

 

 

1,286

 

 

 

1,287

 

Other intangible assets, net

 

 

917

 

 

 

900

 

Pension assets

 

 

1,506

 

 

 

1,488

 

Other assets

 

 

1,844

 

 

 

1,766

 

Total assets

 

$

24,122

 

 

$

23,710

 

 

 

 

 

 

LIABILITIES

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable (principally trade)

 

$

3,497

 

 

$

3,021

 

Loans payable

 

 

243

 

 

 

208

 

Commercial paper

 

 

311

 

 

 

313

 

Accrued compensation, benefits and retirement costs

 

 

411

 

 

 

683

 

Current portion of accrued product warranty

 

 

798

 

 

 

755

 

Current portion of deferred revenue

 

 

883

 

 

 

855

 

Other accrued expenses

 

 

1,300

 

 

 

1,190

 

Current maturities of long-term debt

 

 

69

 

 

 

59

 

Total current liabilities

 

 

7,512

 

 

 

7,084

 

Long-term liabilities

 

 

 

 

Long-term debt

 

 

3,502

 

 

 

3,579

 

Pensions and other postretirement benefits

 

 

593

 

 

 

604

 

Accrued product warranty

 

 

709

 

 

 

684

 

Deferred revenue

 

 

877

 

 

 

850

 

Other liabilities

 

 

1,566

 

 

 

1,508

 

Total liabilities

 

$

14,759

 

 

$

14,309

 

 

 

 

 

 

EQUITY

 

 

 

 

Cummins Inc. shareholders’ equity

 

 

 

 

Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.5 shares issued

 

$

2,411

 

 

$

2,427

 

Retained earnings

 

 

16,952

 

 

 

16,741

 

Treasury stock, at cost, 81.4 and 80.0 shares

 

 

(9,412

)

 

 

(9,123

)

Accumulated other comprehensive loss

 

 

(1,515

)

 

 

(1,571

)

Total Cummins Inc. shareholders’ equity

 

 

8,436

 

 

 

8,474

 

Noncontrolling interests

 

 

927

 

 

 

927

 

Total equity

 

$

9,363

 

 

$

9,401

 

Total liabilities and equity

 

$

24,122

 

 

$

23,710

 

 

 

 

 

 

(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

In millions

 

March 31,

2022

 

April 4,

2021

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Consolidated net income

 

$

423

 

 

$

611

 

Adjustments to reconcile consolidated net income to net cash provided by operating activities

 

 

 

 

Depreciation and amortization

 

 

161

 

 

 

170

 

Deferred income taxes

 

 

(66

)

 

 

8

 

Equity in income of investees, net of dividends

 

 

(76

)

 

 

(136

)

Pension and OPEB expense

 

 

9

 

 

 

20

 

Pension contributions and OPEB payments

 

 

(43

)

 

 

(51

)

Share-based compensation expense

 

 

5

 

 

 

8

 

Russian suspension costs

 

 

158

 

 

 

 

Asset impairments and other charges

 

 

36

 

 

 

 

Loss on corporate owned life insurance

 

 

37

 

 

 

32

 

Foreign currency remeasurement and transaction exposure

 

 

(7

)

 

 

1

 

Changes in current assets and liabilities, net of acquisitions

 

 

 

 

Accounts and notes receivable

 

 

(417

)

 

 

(374

)

Inventories

 

 

(289

)

 

 

(336

)

Other current assets

 

 

(57

)

 

 

(24

)

Accounts payable

 

 

484

 

 

 

465

 

Accrued expenses

 

 

(251

)

 

 

(24

)

Changes in other liabilities

 

 

70

 

 

 

 

Other, net

 

 

(13

)

 

 

(31

)

Net cash provided by operating activities

 

 

164

 

 

 

339

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Capital expenditures

 

 

(104

)

 

 

(87

)

Investments in internal use software

 

 

(11

)

 

 

(11

)

Investments in and advances to equity investees

 

 

(32

)

 

 

(24

)

Acquisition of a business, net of cash acquired

 

 

83

 

 

 

 

Investments in marketable securities—acquisitions

 

 

(197

)

 

 

(143

)

Investments in marketable securities—liquidations

 

 

254

 

 

 

207

 

Cash flows from derivatives not designated as hedges

 

 

(2

)

 

 

14

 

Other, net

 

 

(1

)

 

 

19

 

Net cash used in investing activities

 

 

(10

)

 

 

(25

)

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Net payments of commercial paper

 

 

(2

)

 

 

(6

)

Payments on borrowings and finance lease obligations

 

 

(24

)

 

 

(16

)

Net borrowings (payments) under short-term credit agreements

 

 

29

 

 

 

(102

)

Distributions to noncontrolling interests

 

 

(14

)

 

 

(13

)

Dividend payments on common stock

 

 

(207

)

 

 

(197

)

Repurchases of common stock

 

 

(311

)

 

 

(418

)

Proceeds from issuing common stock

 

 

9

 

 

 

18

 

Other, net

 

 

23

 

 

 

(11

)

Net cash used in financing activities

 

 

(497

)

 

 

(745

)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

 

27

 

 

 

(12

)

Net decrease in cash and cash equivalents

 

 

(316

)

 

 

(443

)

Cash and cash equivalents at beginning of year

 

 

2,592

 

 

 

3,401

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

2,276

 

 

$

2,958

 

 

 

 

 

 

(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

 

Engine

 

Distribution

 

Components

 

Power Systems

 

New Power

 

Total

Segments

 

Intersegment

Eliminations

(1)

 

Total

Three months ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

 

$

2,049

 

 

$

2,111

 

 

$

1,517

 

 

$

683

 

 

$

25

 

 

$

6,385

 

 

$

 

 

$

6,385

 

Intersegment sales

 

 

704

 

 

 

6

 

 

 

471

 

 

 

477

 

 

 

6

 

 

 

1,664

 

 

 

(1,664

)

 

 

 

Total sales

 

 

2,753

 

 

 

2,117

 

 

 

1,988

 

 

 

1,160

 

 

 

31

 

 

 

8,049

 

 

 

(1,664

)

 

 

6,385

 

Research, development and engineering expenses

 

 

109

 

 

 

13

 

 

 

76

 

 

 

64

 

 

 

36

 

 

 

298

 

 

 

 

 

 

298

 

Equity, royalty and interest income (loss) from investees

 

 

44

 

(2)

 

16

 

 

 

28

 

 

 

11

 

 

 

(3

)

 

 

96

 

 

 

 

 

 

96

 

Interest income

 

 

4

 

 

 

2

 

 

 

1

 

 

 

1

 

 

 

 

 

 

8

 

 

 

 

 

 

8

 

Russian suspension costs (3)

 

 

32

 

(4)

 

100

 

 

 

6

 

 

 

20

 

 

 

 

 

 

158

 

 

 

 

 

 

158

 

EBITDA (5)

 

 

392

 

 

 

110

 

 

 

320

 

 

 

90

 

 

 

(67

)

 

 

845

 

 

 

(90

)

 

 

755

 

Depreciation and amortization (6)

 

 

51

 

 

 

28

 

 

 

43

 

 

 

31

 

 

 

7

 

 

 

160

 

 

 

 

 

 

160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA as a percentage of total sales

 

 

14.2

%

 

 

5.2

%

 

 

16.1

%

 

 

7.8

%

 

 

NM

 

 

 

10.5

%

 

 

 

 

11.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended April 4, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

 

$

1,895

 

 

$

1,827

 

 

$

1,724

 

 

$

612

 

 

$

34

 

 

$

6,092

 

 

$

 

 

$

6,092

 

Intersegment sales

 

 

564

 

 

 

8

 

 

 

428

 

 

 

410

 

 

 

1

 

 

 

1,411

 

 

 

(1,411

)

 

 

 

Total sales

 

 

2,459

 

 

 

1,835

 

 

 

2,152

 

 

 

1,022

 

 

 

35

 

 

 

7,503

 

 

 

(1,411

)

 

 

6,092

 

Research, development and engineering expenses

 

 

92

 

 

 

13

 

 

 

75

 

 

 

57

 

 

 

23

 

 

 

260

 

 

 

 

 

 

260

 

Equity, royalty and interest income from investees

 

 

113

 

 

 

17

 

 

 

19

 

 

 

12

 

 

 

5

 

 

 

166

 

 

 

 

 

 

166

 

Interest income

 

 

3

 

 

 

1

 

 

 

1

 

 

 

1

 

 

 

 

 

 

6

 

 

 

 

 

 

6

 

EBITDA (5)

 

 

354

 

 

 

160

 

 

 

421

 

 

 

126

 

 

 

(51

)

 

 

1,010

 

 

 

(30

)

 

 

980

 

Depreciation and amortization (6)

 

 

51

 

 

 

30

 

 

 

48

 

 

 

35

 

 

 

5

 

 

 

169

 

 

 

 

 

 

169

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA as a percentage of total sales

 

 

14.4

%

 

 

8.7

%

 

 

19.6

%

 

 

12.3

%

 

 

NM

 

 

 

13.5

%

 

 

 

 

16.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

"NM" - not meaningful information

(1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. EBITDA for the three months ended March 31, 2022, includes $17 million of costs associated with the planned separation of our Filtration business. There were no significant unallocated corporate expenses for the three months ended April 4, 2021.

(2) 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 suspension of our Russian operations. See "RUSSIAN OPERATIONS" note below for additional information.

(3) See "RUSSIAN OPERATIONS" note below for additional information.

(4) Includes $31 million of Russian suspension costs reflected in the Equity, royalty and interest income (loss) from investees line above.

(5) EBITDA is defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests.

(6) 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 were $1 million and $1 million for the three months ended March 31, 2022 and April 4, 2021, respectively. A portion of depreciation expense is included in Research, development and engineering expenses.

A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Net Income is shown in the table below:

 

 

Three months ended

In millions

 

March 31,

2022

 

April 4,

2021

EBITDA

 

$

755

 

 

$

980

 

 

 

 

 

 

EBITDA as a percentage of net sales

 

 

11.8

%

 

 

16.1

%

 

 

 

 

 

Less:

 

 

 

 

Interest expense

 

 

17

 

 

 

28

 

Depreciation and amortization

 

 

160

 

 

 

169

 

INCOME BEFORE INCOME TAXES

 

 

578

 

 

 

783

 

Less: Income tax expense

 

 

155

 

 

 

172

 

CONSOLIDATED NET INCOME

 

 

423

 

 

 

611

 

Less: Net income attributable to noncontrolling interests

 

 

5

 

 

 

8

 

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

418

 

 

$

603

 

 

 

 

 

 

Net income attributable to Cummins Inc. as a percentage of net sales

 

 

6.5

%

 

 

9.9

%

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.

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. Above is a reconciliation of EBITDA excluding special items to “Net income attributable to Cummins Inc.” for each of the applicable periods.

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

In millions

 

March 31,

2022

 

April 4,

2021

Manufacturing entities

 

 

 

 

Dongfeng Cummins Engine Company, Ltd.

 

$

16

 

 

$

31

Beijing Foton Cummins Engine Co., Ltd.

 

 

14

 

 

 

39

 

Tata Cummins, Ltd.

 

 

9

 

 

 

6

 

Chongqing Cummins Engine Company, Ltd.

 

 

9

 

 

 

10

 

All other manufacturers

 

 

(10

)

(1)

 

55

 

Distribution entities

 

 

 

 

Komatsu Cummins Chile, Ltda.

 

 

7

 

 

 

6

 

All other distributors

 

 

2

 

 

 

3

 

Cummins share of net income

 

 

47

 

 

 

150

 

Royalty and interest income

 

 

49

 

 

 

16

 

Equity, royalty and interest income from investees

 

$

96

 

 

$

166

 

 

 

 

 

 

(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 suspension of our Russian operations. In addition, on February 7, 2022, we purchased Westport Fuel System Inc.'s stake in Cummins Westport Joint Venture. See "RUSSIAN OPERATIONS" and "ACQUISITIONS" notes below for additional information.

RUSSIAN OPERATIONS

On March 17, 2022, the Board of Directors decided to indefinitely suspend our operations in Russia due to the ongoing conflict in Ukraine. At the time of suspension, our Russian operations included a wholly-owned distributor in Russia, an unconsolidated joint venture and direct sales into Russia from our other business units. As a result of the suspension of operations, we evaluated the recoverability of assets in Russia and assessed other liabilities that may have been incurred. We have experienced and expect to continue to experience, an inability to collect customer receivables and may be the subject of litigation in connection with our suspension of commercial operations in Russia. We will continue to evaluate the situation as conditions evolve and may take additional actions as deemed necessary in future periods. The following summarizes the costs associated with the suspension of our Russian operations in our first quarter results on our Condensed Consolidated Statements of Net Income:

In millions

 

March 31,

2022

 

Statement of Net Income Location

Inventory write-downs

 

$

59

 

Cost of sales

Accounts receivable reserves

 

 

43

 

 

Other operating expense, net

Impairment and other joint venture costs

 

 

31

 

 

Equity, royalty and interest income from investees

Other

 

 

25

 

 

Other operating expense, net

Total

 

$

158

 

 

 

ACQUISITIONS

On February 7, 2022, we purchased Westport Fuel System Inc.'s stake in the Cummins Westport Joint Venture. We will continue to operate the business as the sole owner. The purchase price was $42 million and was allocated primarily to cash, warranty and deferred revenue related to extended coverage contracts. The results of the business were reported in our Engine segment.

On February 9, 2022, we reached an agreement with Altra Industrial Motion Corp to acquire its Jacobs Vehicle Systems business and closed the transaction in April 2022. Sales of this business were $194 million in 2021. The purchase price was $346 million in cash, subject to typical adjustments related to closing working capital and other amounts and does not contain any contingent consideration. At this time, we have not completed the purchase price allocation, but expect to record approximately $270 million to $300 million of goodwill and intangibles. This acquisition will be reported in our Components segment.

On February 21, 2022, we entered into an Agreement and Plan of Merger (the Merger Agreement) with Meritor, Inc. (Meritor) and Rose NewCo Inc. (Merger Sub) pursuant to which we agreed to acquire Meritor, a global leader of drivetrain, mobility, braking, aftermarket and electric powertrain solutions for commercial vehicle and industrial markets. At closing, Merger Sub will merge into Meritor with Meritor as the surviving entity and becoming our wholly owned subsidiary. This acquisition will be reported in our Components and New Power segments. Pursuant to the terms of the Merger Agreement, we will pay $36.50 in cash per share of Meritor common stock, for a total transaction value of approximately $3.7 billion, including assumed debt and net of acquired cash. We plan to fund this acquisition with a combination of cash, commercial paper and long-term debt.

The Board of Directors of Meritor recommended that Meritor shareholders vote in favor of the transaction at a Special Meeting of Shareholders to be held on May 26, 2022. The transaction is expected to close by the end of 2022 subject to customary closing conditions and receipt of applicable regulatory approvals. The Merger Agreement contains certain customary termination rights, subject to certain limitations, that could result in either us or Meritor having to pay a termination fee to the other party. Should the Merger Agreement be terminated under such specified circumstances, Meritor could be required to pay us approximately a $74 million termination fee, and we could be required to pay Meritor a $160 million termination fee.

INCOME TAXES

Our effective tax rate for 2022 is expected to approximate 21.5 percent, excluding any discrete items that may arise.

Our effective tax rate for the three months ended March 31, 2022, was 26.8 percent and contained unfavorable discrete tax items of $31 million, or $0.22 per share, primarily due to $18 million of unfavorable changes associated with uncertainty in our Russian operations, $9 million of unfavorable changes in tax reserves and $4 million of net unfavorable other discrete tax items.

Our effective tax rate for the three months ended April 4, 2021, was 22.0 percent and contained favorable discrete items of $4 million.

CUMMINS INC. AND SUBSIDIARIES

BUSINESS UNIT SALES DATA

(Unaudited)

Engine Segment Sales by Market and Unit Shipments by Engine Classification

Sales for our Engine segment by market were as follows:

2022

 

 

 

 

 

 

 

 

 

 

In millions

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Heavy-duty truck

 

$

908

 

$

 

$

 

$

 

$

908

Medium-duty truck and bus

 

 

848

 

 

 

 

 

 

 

 

848

Light-duty automotive

 

 

498

 

 

 

 

 

 

 

 

498

Off-highway

 

 

499

 

 

 

 

 

 

 

 

499

Total sales

 

$

2,753

 

$

 

$

 

$

 

$

2,753

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

In millions

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Heavy-duty truck

 

$

827

 

$

839

 

$

861

 

$

801

 

$

3,328

Medium-duty truck and bus

 

 

674

 

 

688

 

 

713

 

 

702

 

 

2,777

Light-duty automotive

 

 

481

 

 

484

 

 

515

 

 

432

 

 

1,912

Off-highway

 

 

477

 

 

480

 

 

489

 

 

491

 

 

1,937

Total sales

 

$

2,459

 

$

2,491

 

$

2,578

 

$

2,426

 

$

9,954

Unit shipments by engine classification (including unit shipments to Power Systems and off-highway engine units included in their respective classification) were as follows:

2022

 

 

 

 

 

 

 

 

 

 

Units

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Heavy-duty

 

28,600

 

 

 

 

28,600

Medium-duty

 

72,600

 

 

 

 

72,600

Light-duty

 

66,500

 

 

 

 

66,500

Total units

 

167,700

 

 

 

 

167,700

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

Units

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Heavy-duty

 

30,700

 

29,400

 

29,200

 

28,300

 

117,600

Medium-duty

 

73,100

 

67,500

 

65,200

 

68,000

 

273,800

Light-duty

 

68,500

 

68,100

 

73,900

 

62,800

 

273,300

Total units

 

172,300

 

165,000

 

168,300

 

159,100

 

664,700

Distribution Segment Sales by Product Line

Sales for our Distribution segment by product line were as follows:

2022

 

 

 

 

 

 

 

 

 

 

In millions

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Parts

 

$

924

 

$

 

$

 

$

 

$

924

Engines

 

 

441

 

 

 

 

 

 

 

 

441

Power generation

 

 

401

 

 

 

 

 

 

 

 

401

Service

 

 

351

 

 

 

 

 

 

 

 

351

Total sales

 

$

2,117

 

$

 

$

 

$

 

$

2,117

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

In millions

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Parts

 

$

757

 

$

765

 

$

800

 

$

823

 

$

3,145

Engines

 

 

334

 

 

351

 

 

377

 

 

437

 

 

1,499

Power generation

 

 

418

 

 

454

 

 

438

 

 

452

 

 

1,762

Service

 

 

326

 

 

350

 

 

344

 

 

346

 

 

1,366

Total sales

 

$

1,835

 

$

1,920

 

$

1,959

 

$

2,058

 

$

7,772

Component Segment Sales by Business

Sales for our Components segment by business were as follows:

2022

 

 

 

 

 

 

 

 

 

 

In millions

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Emission solutions

 

$

910

 

$

 

$

 

$

 

$

910

Filtration

 

 

382

 

 

 

 

 

 

 

 

382

Turbo technologies

 

 

346

 

 

 

 

 

 

 

 

346

Electronics and fuel systems

 

 

216

 

 

 

 

 

 

 

 

216

Automated transmissions

 

 

134

 

 

 

 

 

 

 

 

134

Total sales

 

$

1,988

 

$

 

$

 

$

 

$

1,988

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

In millions

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Emission solutions

 

$

1,035

 

$

882

 

$

793

 

$

789

 

$

3,499

Filtration

 

 

372

 

 

374

 

 

354

 

 

338

 

 

1,438

Turbo technologies

 

 

367

 

 

351

 

 

325

 

 

308

 

 

1,351

Electronics and fuel systems

 

 

263

 

 

241

 

 

210

 

 

185

 

 

899

Automated transmissions

 

 

115

 

 

146

 

 

111

 

 

106

 

 

478

Total sales

 

$

2,152

 

$

1,994

 

$

1,793

 

$

1,726

 

$

7,665

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:

2022

 

 

 

 

 

 

 

 

 

 

In millions

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Power generation

 

$

664

 

$

 

$

 

$

 

$

664

Industrial

 

 

393

 

 

 

 

 

 

 

 

393

Generator technologies

 

 

103

 

 

 

 

 

 

 

 

103

Total sales

 

$

1,160

 

$

 

$

 

$

 

$

1,160

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

In millions

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Power generation

 

$

611

 

$

655

 

$

664

 

$

585

 

$

2,515

Industrial

 

 

324

 

 

399

 

 

412

 

 

399

 

 

1,534

Generator technologies

 

 

87

 

 

89

 

 

88

 

 

102

 

 

366

Total sales

 

$

1,022

 

$

1,143

 

$

1,164

 

$

1,086

 

$

4,415

High-horsepower unit shipments by engine classification were as follows:

2022

 

 

 

 

 

 

 

 

 

 

Units

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Power generation

 

2,200

 

 

 

 

2,200

Industrial

 

1,100

 

 

 

 

1,100

Total units

 

3,300

 

 

 

 

3,300

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

Units

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Power generation

 

2,100

 

1,800

 

2,500

 

2,000

 

8,400

Industrial

 

1,000

 

1,200

 

1,900

 

1,300

 

5,400

Total units

 

3,100

 

3,000

 

4,400

 

3,300

 

13,800

 

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