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Cummins Reports Fourth Quarter and Full Year 2021 Results

  • Full year revenues of $24 billion; GAAP1 Net Income of $2.1 billion
  • EBITDA for the full year was 14.7 percent of sales; Diluted EPS of $14.61
  • Fourth quarter revenues of $5.9 billion; GAAP1 Net Income of $394 million
  • Fourth quarter EBITDA of 12.1 percent; Diluted EPS of $2.73
  • The company expects full year 2022 revenues to be up 6 percent, EBITDA expected to be approximately 15.5 percent

Cummins Inc. (NYSE: CMI) today reported full year 2021 results.

Revenues for the full year were $24 billion, 21 percent higher than 2020. Sales in North America increased 17 percent and international revenues increased 27 percent. Sales increased in all major regions compared to the prior year, which was severely impacted by the height of the COVID-19 pandemic.

EBITDA for the year was $3.5 billion (14.7 percent of sales) compared to $3.1 billion (15.7 percent of sales) in 2020.

Net income attributable to Cummins for the full year was $2.1 billion ($14.61 per diluted share), compared to net income of $1.8 billion ($12.01 per diluted share) in 2020. The tax rate for 2021 was 21.3 percent.

Fourth quarter revenues of $5.9 billion were flat with the same quarter in 2020. Sales in North America decreased 4 percent while international revenues increased 6 percent driven by strong demand across most global markets, with the exception of China, compared to the same quarter in 2020.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the fourth quarter were $705 million (12.1 percent of sales), compared to $837 million (14.4 percent of sales) a year ago.

Net income attributable to Cummins in the fourth quarter was $394 million ($2.73 per diluted share) compared to $501 million ($3.36 per diluted share) in 2020. The tax rate in the fourth quarter was 22.2 percent.

“Strong economic recovery combined with high demand for our products resulted in record full year revenues in 2021. Our industry continues to experience significant supply chain constraints resulting in elevated manufacturing, logistics, and material costs resulting in margins below our expectations, particularly in the fourth quarter,” said Chairman and CEO Tom Linebarger. “We have taken actions to improve margins in 2022 and expect to generate strong incremental margins through increased pricing, surcharges, a number of cost reduction initiatives and operational improvements. Having effectively managed through a challenging 2021, Cummins is in a solid position to keep investing in future growth while continuing to return cash to shareholders. The transition to low carbon power across industries will be a significant driver in the fight against climate change and will require a broad mix of innovative technologies to achieve these goals. This decarbonization effort represents a significant growth opportunity for Cummins as many of our OEM partners and end customers look to achieve their climate goals, while still having power solutions that fulfill their needs. Cummins key capabilities uniquely position us to lead in the transition to zero emissions.”

2022 Outlook:

Based on the current forecast, Cummins projects full year 2022 revenues to be up 6 percent, and EBITDA to be approximately 15.5 percent of sales. We expect revenues to increase in all regions and major markets except China where we expect demand to moderate after a record year in 2021.

The company plans to continue to generate strong operating cash flow and returns for shareholders.

2021 Highlights:

  • Cummins increased its cash dividend for the 12th straight year and returned a total of $2.2 billion to shareholders in the form of dividends and share repurchases. The Board of Directors authorized the repurchase of up to $2 billion in shares of common stock upon completion of the company’s 2019 $2 billion share repurchase program, reinforcing the company’s commitment to deliver strong returns to shareholders and confidence in long-term performance.
  • Cummins announced that it will bring to market a 15-liter natural gas engine for heavy-duty trucks. The 15-liter natural gas engine is an important part of Destination Zero, Cummins strategy for the best way to decarbonize our industry, focusing on reducing carbon from the technologies that are widely available today, while investing in the infrastructure capabilities and technologies with the potential to reach zero. The strategy focuses on new powertrains including advanced diesel, natural gas, hydrogen engines, hybrids, battery electric, and fuel cells along with an increased use of low carbon fuels and renewable electricity. The expanding product lineup will help achieve Cummins’ PLANET 2050 environmental goals which include lowering emissions from newly sold products by 30% by 2030 and a goal of carbon neutrality by 2050, aligned with the Paris Climate Accord targets.
  • Cummins and Sinopec announced the formation of a 50:50 joint venture, Cummins Enze, to accelerate the affordability and availability of green hydrogen in China. The joint venture will invest in an electrolyzer plant with annual capacity starting at 500 megawatts in 2023, and scalable to one gigawatt within 5 years after completion. Cummins Enze will also provide a variety of hydrogen generation system solutions to meet diversified application requirements for both small and large scale hydrogen production.
  • In August, the company announced its exploration of strategic alternatives for its Filtration business unit. The company believes the separation will create value for both companies by enabling enhanced focus on key strategic initiatives, continued innovation in core and new technologies for Cummins, and greater focus and operating flexibility for the Filtration business. The method and timing of the separation are under evaluation.
  • In response to the COVID-19 pandemic, the company launched an aggressive global effort to acquire vaccines and provide them onsite or near-site to our employees, their families and other stakeholders. By partnering with governments and health care providers, we facilitated the delivery of over 45,000 doses of approved vaccines to employees. This includes over 5,000 shots in the U.S., over 30,000 shots in India and over 10,000 shots in Mexico.
  • In October 2021, Cummins was named to the S&P Dow Jones World and North American Sustainability Indexes. It was the 16th consecutive time the company was named to the North American index and the first time on the world index since 2013. The prestigious indices rate companies on their environmental, social and governance performance.

1 Generally Accepted Accounting Principles in the U.S.

Fourth quarter 2021 detail (all comparisons to same period in 2020):

Engine Segment

  • Sales - $2.4 billion, up 4 percent
  • Segment EBITDA - $264 million, or 10.9 percent of sales, compared to $338 million or 14.5 percent of sales
  • On-highway revenues increased 5 percent and off-highway revenues increased 2 percent
  • Sales in North America decreased 4 percent while international sales increased 26 percent driven by demand across Australia, Europe, and Latin America

Distribution Segment

  • Sales - $2.1 billion, up 3 percent
  • Segment EBITDA - $178 million, or 8.6 percent of sales, compared to $165 million or 8.3 percent of sales
  • Revenues in North America were down 1 percent while international sales increased by 10 percent driven by strong demand in Russia
  • Increased engine and aftermarket demand offset a decline in power generation

Components Segment

  • Sales - $1.7 billion, down 6 percent
  • Segment EBITDA - $205 million, or 11.9 percent of sales, compared to $280 million or 15.3 percent of sales
  • Revenues in North America increased 1 percent and international sales decreased 12 percent due to lower demand in China

Power Systems Segment

  • Sales - $1.1 billion, up 10 percent
  • Segment EBITDA - $97 million, or 8.9 percent of sales, compared to $74 million, or 7.5 percent of sales
  • Power generation revenues decreased by 6 percent while industrial revenues increased 37 percent driven by strong mining demand

New Power Segment

  • Sales - $34 million, flat with the same quarter last year
  • Segment EBITDA loss - $54 million
  • Continued investment in the development of fuel cells and electrolyzers as well as products to support battery electric vehicles is expected to support strong growth in 2022 and beyond and is contributing to current 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; policy changes in international trade; any adverse effects of the U.S. government's COVID-19 vaccine mandates; the U.K.'s exit from the European Union; 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; supply shortages and supplier financial risk, particularly from any of our single-sourced suppliers, including suppliers that may be impacted by the COVID-19 pandemic; market slowdown due to the impacts from the COVID-19 pandemic, other public health crises, epidemics or pandemics; impacts to manufacturing and supply chain abilities from an extended shutdown or disruption of our operations due to the COVID-19 pandemic; aligning our capacity and production with our demand, including impacts of COVID-19; large truck manufacturers' and original equipment manufacturers' customers discontinuing outsourcing their engine supply needs or experiencing financial distress, particularly related to the COVID-19 pandemic, bankruptcy or change in control; a slowdown in infrastructure development and/or depressed commodity prices; failure to realize expected results from our investment in Eaton Cummins Automated Transmission Technologies joint venture; the actions of, and income from, joint ventures and other investees that we do not directly control; product recalls; 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; variability in material and commodity costs; product liability claims; our sales mix of products; protection and validity of our patent and other intellectual property rights; disruptions in global credit and financial markets as the result of the COVID-19 pandemic; labor relations or work stoppages; reliance on our executive leadership team and other key personnel; climate change and global warming; our plan to reposition our portfolio of product offerings through exploration of strategic acquisitions and divestitures and related uncertainties of entering such transactions; exposure to potential security breaches or other disruptions to our information technology systems and data security; political, economic and other risks from operations in numerous countries; competitor activity; increasing competition, including increased global competition among our customers in emerging markets; foreign currency exchange rate changes; the performance of our pension plan assets and volatility of discount rates, particularly those related to the sustained slowdown of the global economy due to the COVID-19 pandemic; the price and availability of energy; the outcome of pending and future litigation and governmental proceedings; 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 2020 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. EST. This teleconference will be webcast and available on the Investor Relations section of the Cummins website at www.cummins.com. Participants wishing to view the visuals available with the audio are encouraged to sign-in a few minutes prior to the start of the teleconference.

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited) (a)

 

 

 

Three months ended December 31,

In millions, except per share amounts

 

2021

 

2020

NET SALES

 

$

5,850

 

 

$

5,830

 

Cost of sales

 

 

4,533

 

 

 

4,469

 

GROSS MARGIN

 

 

1,317

 

 

 

1,361

 

OPERATING EXPENSES AND INCOME

 

 

 

 

Selling, general and administrative expenses

 

 

629

 

 

 

576

 

Research, development and engineering expenses

 

 

288

 

 

 

255

 

Equity, royalty and interest income from investees

 

 

109

 

 

 

110

 

Other operating expense, net

 

 

(14

)

 

 

(11

)

OPERATING INCOME

 

 

495

 

 

 

629

 

Interest expense

 

 

26

 

 

 

29

 

Other income, net

 

 

45

 

 

 

35

 

INCOME BEFORE INCOME TAXES

 

 

514

 

 

 

635

 

Income tax expense

 

 

114

 

 

 

125

 

CONSOLIDATED NET INCOME

 

 

400

 

 

 

510

 

Less: Net income attributable to noncontrolling interests

 

 

6

 

 

 

9

 

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

394

 

 

$

501

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.

 

 

 

 

Basic

 

$

2.76

 

 

$

3.39

 

Diluted

 

$

2.73

 

 

$

3.36

 

 

 

 

 

 

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING

 

 

 

 

Basic

 

 

142.9

 

 

 

148.0

 

Diluted

 

 

144.1

 

 

 

149.3

 

 

 

 

 

 

(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 STATEMENTS OF NET INCOME

(Unaudited) (a)

 

 

 

Years ended December 31,

In millions, except per share amounts

 

2021

 

2020

NET SALES

 

$

24,021

 

 

$

19,811

 

Cost of sales

 

 

18,326

 

 

 

14,917

 

GROSS MARGIN

 

 

5,695

 

 

 

4,894

 

OPERATING EXPENSES AND INCOME

 

 

 

 

Selling, general and administrative expenses

 

 

2,374

 

 

 

2,125

 

Research, development and engineering expenses

 

 

1,090

 

 

 

906

 

Equity, royalty and interest income from investees

 

 

506

 

 

 

452

 

Other operating expense, net

 

 

(31

)

 

 

(46

)

OPERATING INCOME

 

 

2,706

 

 

 

2,269

 

Interest expense

 

 

111

 

 

 

100

 

Other income, net

 

 

156

 

 

 

169

 

INCOME BEFORE INCOME TAXES

 

 

2,751

 

 

 

2,338

 

Income tax expense

 

 

587

 

 

 

527

 

CONSOLIDATED NET INCOME

 

 

2,164

 

 

 

1,811

 

Less: Net income attributable to noncontrolling interests

 

 

33

 

 

 

22

 

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

2,131

 

 

$

1,789

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.

 

 

 

 

Basic

 

$

14.74

 

 

$

12.07

 

Diluted

 

$

14.61

 

 

$

12.01

 

 

 

 

 

 

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING

 

 

 

 

Basic

 

 

144.6

 

 

 

148.2

 

Diluted

 

 

145.9

 

 

 

149.0

 

 

 

 

 

 

(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 BALANCE SHEETS

(Unaudited) (a)

 

In millions, except par value

 

December 31,

2021

 

December 31,

2020

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

2,592

 

 

$

3,401

 

Marketable securities

 

 

595

 

 

 

461

 

Total cash, cash equivalents and marketable securities

 

 

3,187

 

 

 

3,862

 

Accounts and notes receivable, net

 

 

3,990

 

 

 

3,820

 

Inventories

 

 

4,355

 

 

 

3,425

 

Prepaid expenses and other current assets

 

 

777

 

 

 

790

 

Total current assets

 

 

12,309

 

 

 

11,897

 

Long-term assets

 

 

 

 

Property, plant and equipment, net

 

 

4,422

 

 

 

4,255

 

Investments and advances related to equity method investees

 

 

1,538

 

 

 

1,441

 

Goodwill

 

 

1,287

 

 

 

1,293

 

Other intangible assets, net

 

 

900

 

 

 

963

 

Pension assets

 

 

1,488

 

 

 

1,042

 

Other assets

 

 

1,766

 

 

 

1,733

 

Total assets

 

$

23,710

 

 

$

22,624

 

 

 

 

 

 

LIABILITIES

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable (principally trade)

 

$

3,021

 

 

$

2,820

 

Loans payable

 

 

208

 

 

 

169

 

Commercial paper

 

 

313

 

 

 

323

 

Accrued compensation, benefits and retirement costs

 

 

683

 

 

 

484

 

Current portion of accrued product warranty

 

 

755

 

 

 

674

 

Current portion of deferred revenue

 

 

855

 

 

 

691

 

Other accrued expenses

 

 

1,190

 

 

 

1,112

 

Current maturities of long-term debt

 

 

59

 

 

 

62

 

Total current liabilities

 

 

7,084

 

 

 

6,335

 

Long-term liabilities

 

 

 

 

Long-term debt

 

 

3,579

 

 

 

3,610

 

Pensions and other postretirement benefits

 

 

604

 

 

 

630

 

Accrued product warranty

 

 

684

 

 

 

672

 

Deferred revenue

 

 

850

 

 

 

840

 

Other liabilities

 

 

1,508

 

 

 

1,548

 

Total liabilities

 

$

14,309

 

 

$

13,635

 

 

 

 

 

 

EQUITY

 

 

 

 

Cummins Inc. shareholders’ equity

 

 

 

 

Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.4 shares issued

 

$

2,427

 

 

$

2,404

 

Retained earnings

 

 

16,741

 

 

 

15,419

 

Treasury stock, at cost, 80.0 and 74.8 shares

 

 

(9,123

)

 

 

(7,779

)

Accumulated other comprehensive loss

 

 

(1,571

)

 

 

(1,982

)

Total Cummins Inc. shareholders’ equity

 

 

8,474

 

 

 

8,062

 

Noncontrolling interests

 

 

927

 

 

 

927

 

Total equity

 

$

9,401

 

 

$

8,989

 

Total liabilities and equity

 

$

23,710

 

 

$

22,624

 

 

 

 

 

 

(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (a)

 

 

 

Three months ended December 31,

In millions

 

2021

 

2020

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

$

732

 

 

$

1,142

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Capital expenditures

 

 

(372

)

 

 

(260

)

Investments in internal use software

 

 

(16

)

 

 

(14

)

Investments in and advances to equity investees

 

 

(51

)

 

 

(21

)

Investments in marketable securities—acquisitions

 

 

(237

)

 

 

(171

)

Investments in marketable securities—liquidations

 

 

71

 

 

 

61

 

Cash flows from derivatives not designated as hedges

 

 

30

 

 

 

19

 

Other, net

 

 

(20

)

 

 

4

 

Net cash used in investing activities

 

 

(595

)

 

 

(382

)

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Proceeds from borrowings

 

 

44

 

 

 

15

 

Net borrowings of commercial paper

 

 

113

 

 

 

7

 

Payments on borrowings and finance lease obligations

 

 

(16

)

 

 

(32

)

Net borrowings under short-term credit agreements

 

 

65

 

 

 

4

 

Dividend payments on common stock

 

 

(208

)

 

 

(200

)

Repurchases of common stock

 

 

(174

)

 

 

(91

)

Proceeds from issuing common stock

 

 

29

 

 

 

10

 

Other, net

 

 

(1

)

 

 

3

 

Net cash used in financing activities

 

 

(148

)

 

 

(284

)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

 

15

 

 

 

(42

)

Net increase in cash and cash equivalents

 

 

4

 

 

 

434

 

Cash and cash equivalents at beginning of period

 

 

2,588

 

 

 

2,967

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

2,592

 

 

$

3,401

 

 

 

 

 

 

(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)

 

 

 

Years ended December 31,

In millions

 

2021

 

2020

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

$

2,256

 

 

$

2,722

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Capital expenditures

 

 

(734

)

 

 

(528

)

Investments in internal use software

 

 

(52

)

 

 

(47

)

Proceeds from sale of land

 

 

20

 

 

 

 

Investments in and advances to equity investees

 

 

(48

)

 

 

(51

)

Investments in marketable securities—acquisitions

 

 

(806

)

 

 

(593

)

Investments in marketable securities—liquidations

 

 

673

 

 

 

469

 

Cash flows from derivatives not designated as hedges

 

 

49

 

 

 

4

 

Other, net

 

 

25

 

 

 

27

 

Net cash used in investing activities

 

 

(873

)

 

 

(719

)

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Proceeds from borrowings

 

 

79

 

 

 

2,014

 

Net payments of commercial paper

 

 

(10

)

 

 

(337

)

Payments on borrowings and finance lease obligations

 

 

(73

)

 

 

(73

)

Net (payments) borrowings under short-term credit agreements

 

 

(28

)

 

 

10

 

Distributions to noncontrolling interests

 

 

(28

)

 

 

(26

)

Dividend payments on common stock

 

 

(809

)

 

 

(782

)

Repurchases of common stock

 

 

(1,402

)

 

 

(641

)

Proceeds from issuing common stock

 

 

56

 

 

 

88

 

Other, net

 

 

(12

)

 

 

27

 

Net cash (used in) provided by financing activities

 

 

(2,227

)

 

 

280

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

 

35

 

 

 

(11

)

Net (decrease) increase in cash and cash equivalents

 

 

(809

)

 

 

2,272

 

Cash and cash equivalents at beginning of year

 

 

3,401

 

 

 

1,129

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

2,592

 

 

$

3,401

 

 

 

 

 

 

(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 December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

 

$

1,813

 

 

$

2,050

 

 

$

1,305

 

 

$

651

 

 

$

31

 

 

$

5,850

 

 

$

 

 

$

5,850

 

Intersegment sales

 

 

613

 

 

 

8

 

 

 

421

 

 

 

435

 

 

 

3

 

 

 

1,480

 

 

 

(1,480

)

 

 

 

Total sales

 

 

2,426

 

 

 

2,058

 

 

 

1,726

 

 

 

1,086

 

 

 

34

 

 

 

7,330

 

 

 

(1,480

)

 

 

5,850

 

Research, development and engineering expenses

 

 

111

 

 

 

13

 

 

 

75

 

 

 

62

 

 

 

27

 

 

 

288

 

 

 

 

 

 

288

 

Equity, royalty and interest income (loss) from investees

 

 

62

 

 

 

16

 

 

 

9

 

 

 

24

 

 

 

(2

)

 

 

109

 

 

 

 

 

 

109

 

Interest income

 

 

1

 

 

 

2

 

 

 

2

 

 

 

2

 

 

 

 

 

 

7

 

 

 

 

 

 

7

 

EBITDA (2)

 

 

264

 

 

 

178

 

 

 

205

 

 

 

97

 

 

 

(54

)

 

 

690

 

 

 

15

 

 

 

705

 

Depreciation and amortization (3)

 

 

51

 

 

 

28

 

 

 

45

 

 

 

34

 

 

 

7

 

 

 

165

 

 

 

 

 

 

165

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA as a percentage of segment sales

 

 

10.9

%

 

 

8.6

%

 

 

11.9

%

 

 

8.9

%

 

 

NM

 

 

 

9.4

%

 

 

 

 

12.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

 

$

1,792

 

 

$

1,987

 

 

$

1,458

 

 

$

560

 

 

$

33

 

 

$

5,830

 

 

$

 

 

$

5,830

 

Intersegment sales

 

 

537

 

 

 

9

 

 

 

373

 

 

 

429

 

 

 

1

 

 

 

1,349

 

 

 

(1,349

)

 

 

 

Total sales

 

 

2,329

 

 

 

1,996

 

 

 

1,831

 

 

 

989

 

 

 

34

 

 

 

7,179

 

 

 

(1,349

)

 

 

5,830

 

Research, development and engineering expenses

 

 

73

 

 

 

11

 

 

 

77

 

 

 

64

 

 

 

30

 

 

 

255

 

 

 

 

 

 

255

 

Equity, royalty and interest income (loss) from investees

 

 

76

 

 

 

17

 

 

 

15

 

 

 

3

 

 

 

(1

)

 

 

110

 

 

 

 

 

 

110

 

Interest income

 

 

3

 

 

 

1

 

 

 

1

 

 

 

1

 

 

 

 

 

 

6

 

 

 

 

 

 

6

 

EBITDA (2)

 

 

338

 

 

 

165

 

 

 

280

 

 

 

74

 

 

 

(51

)

 

 

806

 

 

 

31

 

 

 

837

 

Depreciation and amortization (3)

 

 

53

 

 

 

31

 

 

 

50

 

 

 

34

 

 

 

5

 

 

 

173

 

 

 

 

 

 

173

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA as a percentage of segment sales

 

 

14.5

%

 

 

8.3

%

 

 

15.3

%

 

 

7.5

%

 

 

NM

 

 

 

11.2

%

 

 

 

 

14.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

"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 December 31, 2021 and 2020.

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

(3) 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."

CUMMINS INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

 

In millions

 

Engine

 

Distribution

 

Components

 

Power

Systems

 

New Power

 

Total

Segments

 

Intersegment

Eliminations (1)

 

Total

Year ended December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

 

$

7,589

 

 

$

7,742

 

 

$

5,932

 

 

$

2,650

 

 

$

108

 

 

$

24,021

 

 

$

 

 

$

24,021

 

Intersegment sales

 

 

2,365

 

 

 

30

 

 

 

1,733

 

 

 

1,765

 

 

 

8

 

 

 

5,901

 

 

 

(5,901

)

 

 

 

Total sales

 

 

9,954

 

 

 

7,772

 

 

 

7,665

 

 

 

4,415

 

 

 

116

 

 

 

29,922

 

 

 

(5,901

)

 

 

24,021

 

Research, development and engineering expenses

 

 

399

 

 

 

48

 

 

 

307

 

 

 

234

 

 

 

102

 

 

 

1,090

 

 

 

 

 

 

1,090

 

Equity, royalty and interest income (loss) from investees

 

 

340

 

 

 

63

 

 

 

50

 

 

 

56

 

 

 

(3

)

 

 

506

 

 

 

 

 

 

506

 

Interest income

 

 

8

 

 

 

7

 

 

 

5

 

 

 

5

 

 

 

 

 

 

25

 

 

 

 

 

 

25

 

EBITDA (2)

 

 

1,411

 

 

 

731

 

 

 

1,180

 

 

 

496

 

 

 

(223

)

 

 

3,595

 

 

 

(74

)

 

 

3,521

 

Depreciation and amortization (3)

 

 

205

 

 

 

116

 

 

 

183

 

 

 

131

 

 

 

24

 

 

 

659

 

 

 

 

 

 

659

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA as a percentage of total sales

 

 

14.2

%

 

 

9.4

%

 

 

15.4

%

 

 

11.2

%

 

 

NM

 

 

 

12.0

%

 

 

 

 

14.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

 

$

5,925

 

 

$

7,110

 

 

$

4,650

 

 

$

2,055

 

 

$

71

 

 

$

19,811

 

 

$

 

 

$

19,811

 

Intersegment sales

 

 

2,097

 

 

 

26

 

 

 

1,374

 

 

 

1,576

 

 

 

1

 

 

 

5,074

 

 

 

(5,074

)

 

 

 

Total sales

 

 

8,022

 

 

 

7,136

 

 

 

6,024

 

 

 

3,631

 

 

 

72

 

 

 

24,885

 

 

 

(5,074

)

 

 

19,811

 

Research, development and engineering expenses

 

 

290

 

 

 

31

 

 

 

264

 

 

 

212

 

 

 

109

 

 

 

906

 

 

 

 

 

 

906

 

Equity, royalty and interest income (loss) from investees

 

 

312

 

 

 

62

 

 

 

61

 

 

 

21

 

 

 

(4

)

 

 

452

 

 

 

 

 

 

452

 

Interest income

 

 

9

 

 

 

4

 

 

 

4

 

 

 

4

 

 

 

 

 

 

21

 

 

 

 

 

 

21

 

EBITDA (2)

 

 

1,235

 

 

 

665

 

 

 

961

 

 

 

343

 

 

 

(172

)

 

 

3,032

 

 

 

76

 

 

 

3,108

 

Depreciation and amortization (3)

 

 

208

 

 

 

122

 

 

 

192

 

 

 

130

 

 

 

18

 

 

 

670

 

 

 

 

 

 

670

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA as a percentage of total sales

 

 

15.4

%

 

 

9.3

%

 

 

16.0

%

 

 

9.4

%

 

 

NM

 

 

 

12.2

%

 

 

 

 

15.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

"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 years ended December 31, 2021 and 2020.

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

(3) 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 $3 million and $3 million for the years ended December 31, 2021 and 2020, respectively. A portion of depreciation expense is included in "Research, development and engineering expenses."

CUMMINS INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

 

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 December 31,

 

Years ended December 31,

In millions

 

2021

 

2020

 

2021

 

2020

EBITDA

 

$

705

 

 

$

837

 

 

$

3,521

 

 

$

3,108

 

 

 

 

 

 

 

 

 

 

EBITDA as a percentage of net sales

 

 

12.1

%

 

 

14.4

%

 

 

14.7

%

 

 

15.7

%

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

Interest expense

 

 

26

 

 

 

29

 

 

 

111

 

 

 

100

 

Depreciation and amortization

 

 

165

 

 

 

173

 

 

 

659

 

 

 

670

 

INCOME BEFORE INCOME TAXES

 

 

514

 

 

 

635

 

 

 

2,751

 

 

 

2,338

 

Less: Income tax expense

 

 

114

 

 

 

125

 

 

 

587

 

 

 

527

 

CONSOLIDATED NET INCOME

 

 

400

 

 

 

510

 

 

 

2,164

 

 

 

1,811

 

Less: Net income attributable to noncontrolling interests

 

 

6

 

 

 

9

 

 

 

33

 

 

 

22

 

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

394

 

 

$

501

 

 

$

2,131

 

 

$

1,789

 

 

 

 

 

 

 

 

 

 

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

 

 

6.7

%

 

 

8.6

%

 

 

8.9

%

 

 

9.0

%

 

 

 

 

 

 

 

 

 

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 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 December 31,

 

Years ended December 31,

 

In millions

 

2021

 

2020

 

2021

 

2020

 

Manufacturing entities

 

 

 

 

 

 

 

 

 

Dongfeng Cummins Engine Company, Ltd.

 

$

19

 

$

9

 

$

82

 

$

63

 

Chongqing Cummins Engine Company, Ltd.

 

 

11

 

 

8

 

 

39

 

 

35

 

Beijing Foton Cummins Engine Co., Ltd.

 

 

4

 

 

32

 

 

112

 

 

113

 

All other manufacturers

 

 

32

 

 

34

(1)

 

149

 

 

134

(1)(2)

Distribution entities

 

 

 

 

 

 

 

 

 

Komatsu Cummins Chile, Ltda.

 

 

9

 

 

8

 

 

32

 

 

31

 

All other distributors

 

 

4

 

 

1

 

 

10

 

 

2

 

Cummins share of net income

 

 

79

 

 

92

 

 

424

 

 

378

 

Royalty and interest income

 

 

30

 

 

18

 

 

82

 

 

74

 

Equity, royalty and interest income from investees

 

$

109

 

$

110

 

$

506

 

$

452

 

 

 

 

 

 

 

 

 

 

 

(1) Includes loss on sale of business of $8 million for a joint venture in the Power Systems segment.

(2) Includes $37 million in favorable adjustments related to tax changes within India's 2020-2021 Union Budget of India (India Tax Law Changes) passed in March 2020 and impairment charges of $13 million for a joint venture in the Power Systems segment.

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 rates for the three months and year ended December 31, 2021, were 22.2 percent and 21.3 percent, respectively.

The three months ended December 31, 2021, contained unfavorable discrete tax items of $17 million, or $0.12 per share, primarily due to $11 million of unfavorable changes in U.S. research and development tax reserve and $6 million of net unfavorable other discrete tax items.

The year ended December 31, 2021, contained unfavorable net discrete tax items of $9 million, or $0.06 per share, primarily due to $12 million of unfavorable provision to return adjustments related to the 2020 filed tax returns, partially offset by $3 million of favorable other discrete tax items.

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:

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

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

In millions

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Heavy-duty truck

 

$

750

 

$

415

 

$

694

 

$

789

 

$

2,648

Medium-duty truck and bus

 

 

618

 

 

391

 

 

492

 

 

565

 

 

2,066

Light-duty automotive

 

 

353

 

 

180

 

 

522

 

 

492

 

 

1,547

Off-highway

 

 

437

 

 

437

 

 

404

 

 

483

 

 

1,761

Total sales

 

$

2,158

 

$

1,423

 

$

2,112

 

$

2,329

 

$

8,022

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

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

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

Units

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Heavy-duty

 

25,800

 

15,900

 

23,300

 

27,500

 

92,500

Medium-duty

 

61,200

 

44,900

 

50,100

 

64,700

 

220,900

Light-duty

 

49,400

 

29,800

 

67,200

 

69,400

 

215,800

Total units

 

136,400

 

90,600

 

140,600

 

161,600

 

529,200

Distribution Segment Sales by Product Line

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

2021

 

 

 

 

 

 

 

 

 

 

In millions

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Parts

 

$

757

 

$

765

 

$

800

 

$

823

 

$

3,145

Power generation

 

 

418

 

 

454

 

 

438

 

 

452

 

 

1,762

Engines

 

 

334

 

 

351

 

 

377

 

 

437

 

 

1,499

Service

 

 

326

 

 

350

 

 

344

 

 

346

 

 

1,366

Total sales

 

$

1,835

 

$

1,920

 

$

1,959

 

$

2,058

 

$

7,772

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

In millions

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Parts

 

$

787

 

$

654

 

$

722

 

$

768

 

$

2,931

Power generation

 

 

376

 

 

377

 

 

416

 

 

523

 

 

1,692

Engines

 

 

323

 

 

277

 

 

279

 

 

371

 

 

1,250

Service

 

 

328

 

 

297

 

 

304

 

 

334

 

 

1,263

Total sales

 

$

1,814

 

$

1,605

 

$

1,721

 

$

1,996

 

$

7,136

Component Segment Sales by Business

Sales for our Components segment by business were as follows:

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

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

In millions

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Emission solutions

 

$

664

 

$

472

 

$

665

 

$

831

 

$

2,632

Filtration

 

 

312

 

 

255

 

 

314

 

 

351

 

 

1,232

Turbo technologies

 

 

270

 

 

216

 

 

281

 

 

331

 

 

1,098

Electronics and fuel systems

 

 

174

 

 

164

 

 

187

 

 

229

 

 

754

Automated transmissions

 

 

82

 

 

43

 

 

94

 

 

89

 

 

308

Total sales

 

$

1,502

 

$

1,150

 

$

1,541

 

$

1,831

 

$

6,024

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:

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

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

In millions

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Power generation

 

$

519

 

$

424

 

$

601

 

$

623

 

$

2,167

Industrial

 

 

296

 

 

291

 

 

309

 

 

292

 

 

1,188

Generator technologies

 

 

69

 

 

62

 

 

71

 

 

74

 

 

276

Total sales

 

$

884

 

$

777

 

$

981

 

$

989

 

$

3,631

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

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

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

Units

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

Power generation

 

1,800

 

1,000

 

2,300

 

2,600

 

7,700

Industrial

 

1,000

 

1,000

 

1,200

 

1,100

 

4,300

Total units

 

2,800

 

2,000

 

3,500

 

3,700

 

12,000

 

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