CMI
$231.10
Cummins
($4.90)
(2.08%)
Earnings Details
3rd Quarter September 2021
Tuesday, November 02, 2021 7:30:00 AM
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Summary

Cummins Misses

Cummins (CMI) reported 3rd Quarter September 2021 earnings of $3.61 per share on revenue of $6.0 billion. The consensus earnings estimate was $3.99 per share on revenue of $6.0 billion. The Earnings Whisper number was $4.10 per share. Revenue grew 16.6% on a year-over-year basis.

The company said it expects 2021 revenue of approximately $23.77 billion. The company's previous guidance was revenue of $23.77 billion to $24.57 billion and the current consensus revenue estimate is $24.38 billion for the year ending December 31, 2021.

Cummins Inc designs, manufactures, distributes and services diesel and natural gas engines, electric power generation systems and engine-related component products.

Results
Reported Earnings
$3.61
Earnings Whisper
$4.10
Consensus Estimate
$3.99
Reported Revenue
$5.97 Bil
Revenue Estimate
$5.98 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Cummins Reports Third Quarter 2021 Results

  • Third quarter revenues of $6.0 billion; GAAP1 Net Income of $534 million.
  • Third quarter EBITDA of 14.4 percent; Diluted EPS of $3.69.
  • The company now expects its full year 2021 revenue to be up approximately 20.0 percent; compared to prior guidance of up 20.0 to 24.0 percent.
  • The company is lowering its EBITDA guidance to be approximately 15.0 percent; compared to prior guidance of 15.5 to 16.0 percent.

 

COLUMBUS, Ind.--(BUSINESS WIRE)--Cummins Inc. (NYSE: CMI) today reported results for the third quarter of 2021.

Third quarter revenues of $6.0 billion increased 17 percent from the same quarter in 2020. Sales in North America increased 13 percent while international revenues increased 22 percent driven by strong demand across all global markets outside of China compared to the same quarter in 2020.

“Demand remained strong in the third quarter as the global economy continued to improve, driving strong sales growth across most businesses and regions outside of China, which is moderating in line with expectations,” said Chairman and CEO Tom Linebarger. “Economic trends such as order activity, freight rates, and used equipment prices remain robust across a number of our key end markets which points to strong demand extending into 2022 and beyond. Cummins is well positioned to benefit as these markets gain momentum as we continue to see orders for our products outpace our competition. Despite this strong demand, supply chain constraints continue to impact our business as well as our customers’, resulting in rising material costs, elevated logistics expenses, and other manufacturing inefficiencies and capping revenue below our expectations three months ago.”

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the third quarter was $862 million (14.4 percent of sales), compared to $876 million (17.1 percent of sales) a year ago.

Net income attributable to Cummins in the third quarter was $534 million ($3.69 per diluted share) compared to $501 million ($3.36 per diluted share) in 2020. The tax rate in the third quarter was 19.9 percent including $11 million, or $0.08 per share, of favorable discrete items.

2021 Outlook:

Based on the current forecast, Cummins is lowering its full year 2021 revenue guidance to be up approximately 20 percent versus last year, compared to prior guidance of up 20 to 24 percent. EBITDA is now expected to be approximately 15.0 percent compared to previous guidance of 15.5 to 16.0 percent of sales due to the ongoing supply chain challenges in our industry. The Company expects to return over 75 percent of Operating Cash Flow to shareholders in 2021 in the form of dividends and share repurchases.

Any expenses outside of the normal course of business associated with the evaluation of strategic alternatives for the Filtration business have been excluded from the outlook provided.

Third Quarter 2021 Highlights:

  • 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 Cummins strategy for its path to zero emissions. 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 and related infrastructure. 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.
  • The company announced it will launch a set of software features to integrate its powertrains with Automated Driving System (ADS) technologies. Cummins is a market leader in delivering powertrains that provide leading performance and fuel economy through the integration of hardware and software. With these new software features, Cummins will extend these core capabilities into the ADS space as well. Cummins is positioned to be a leader in ADS technology integration globally and is actively testing more than 100 vehicles in coordination with ADS technology companies to ensure seamless powertrain integration as ADS solutions enter commercial vehicle markets globally.
  • Cummins received two awards, totaling nearly $7 million, from the US Department of Energy for continued work on enhancing the economic viability of fuel cell powertrain solutions for heavy-duty applications, including on-highway tractor-trailers and buses. The program will drive the scale and investment needed to allow for faster adoption of hydrogen fuel cell technologies.
  • The company launched Cummins Water Works, a community focused initiative to address the global water crisis around the world by bringing fresh water to 20 million people who would otherwise not have access to it. The program will partner with leading water experts and the Water Resilience Coalition to invest in sustainable, large-scale, high-impact projects in water stressed regions.
  • The company administered over 30,000 vaccine doses in India, continuing its commitment to the safety of employees, joint venture partners, and suppliers and their families during the COVID-19 pandemic.
  • The company announced an increase in its quarterly dividend from $1.35 to $1.45 a share

1 Generally Accepted Accounting Principles in the U.S.

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

Engine Segment

  • Sales - $2.6 billion, up 22 percent
  • Segment EBITDA - $391 million, or 15.2 percent of sales, compared to $382 million or 18.1 percent of sales
  • On-highway revenues increased 22 percent driven by strong demand in the North American truck market and off-highway revenues increased 21 percent driven by strong demand in North American, Asian Pacific, and European construction markets
  • Sales increased 23 percent in North America and 19 percent in international markets

Distribution Segment

  • Sales - $2.0 billion, up 14 percent
  • Segment EBITDA - $192 million, or 9.8 percent of sales, compared to $182 million or 10.6 percent of sales
  • Revenues in North America increased 10 percent and international sales increased by 21 percent
  • Demand increased across the power generation and engine markets in addition to parts and service compared to last year.

Components Segment

  • Sales - $1.8 billion, up 16 percent
  • Segment EBITDA - $253 million, or 14.1 percent of sales, compared to $261 million or 16.9 percent of sales
  • Revenues in North America increased by 21 percent and international sales increased by 11 percent

Power Systems Segment

  • Sales - $1.2 billion, up 19 percent
  • Segment EBITDA - $134 million, or 11.5 percent of sales, compared to $101 million, or 10.3 percent of sales
  • Power generation revenues increased by 10 percent driven by growth in recreational vehicle and datacenter markets while industrial revenues increased 33 percent due to stronger demand in mining markets

New Power Segment

  • Sales - $23 million, up 28 percent
  • Segment EBITDA loss - $58 million
  • Revenues increased due to greater demand in transit and school bus markets in addition to the shipments of fuel cell systems to the rail market. Electrolyzer revenue decreased driven by timing of commissioning of projects.
  • Costs associated with the development of fuel cells and electrolyzers as well as products to support battery electric vehicles ahead of widespread adoption 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 57,825 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 $1.8 billion on sales of $19.8 billion in 2020. To learn more about Cummins, visit cummins.com.

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. 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

 

October 3,
2021

 

September 27,
2020

NET SALES

 

$

5,968

 

 

$

5,118

 

Cost of sales

 

4,554

 

 

3,769

 

GROSS MARGIN

 

1,414

 

 

1,349

 

OPERATING EXPENSES AND INCOME

 

 

 

 

Selling, general and administrative expenses

 

571

 

 

533

 

Research, development and engineering expenses

 

266

 

 

224

 

Equity, royalty and interest income from investees

 

94

 

 

98

 

Other operating expense, net

 

(5

)

 

(20

)

OPERATING INCOME

 

666

 

 

670

 

Interest expense

 

28

 

 

25

 

Other income, net

 

37

 

 

41

 

INCOME BEFORE INCOME TAXES

 

675

 

 

686

 

Income tax expense

 

134

 

 

182

 

CONSOLIDATED NET INCOME

 

541

 

 

504

 

Less: Net income attributable to noncontrolling interests

 

7

 

 

3

 

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

534

 

 

$

501

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.

 

 

 

 

Basic

 

$

3.72

 

 

$

3.39

 

Diluted

 

$

3.69

 

 

$

3.36

 

 

 

 

 

 

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING

 

 

 

 

Basic

 

143.5

 

 

147.9

 

Diluted

 

144.7

 

 

148.9

 

 

 

 

 

 

(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

In millions, except per share amounts

 

October 3,
2021

 

September 27,
2020

NET SALES

 

$

18,171

 

 

$

13,981

 

Cost of sales

 

13,793

 

 

10,448

 

GROSS MARGIN

 

4,378

 

 

3,533

 

OPERATING EXPENSES AND INCOME

 

 

 

 

Selling, general and administrative expenses

 

1,745

 

 

1,549

 

Research, development and engineering expenses

 

802

 

 

651

 

Equity, royalty and interest income from investees

 

397

 

 

342

 

Other operating expense, net

 

(17

)

 

(35

)

OPERATING INCOME

 

2,211

 

 

1,640

 

Interest expense

 

85

 

 

71

 

Other income, net

 

111

 

 

134

 

INCOME BEFORE INCOME TAXES

 

2,237

 

 

1,703

 

Income tax expense

 

473

 

 

402

 

CONSOLIDATED NET INCOME

 

1,764

 

 

1,301

 

Less: Net income attributable to noncontrolling interests

 

27

 

 

13

 

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

1,737

 

 

$

1,288

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.

 

 

 

 

Basic

 

$

11.96

 

 

$

8.69

 

Diluted

 

$

11.86

 

 

$

8.65

 

 

 

 

 

 

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING

 

 

 

 

Basic

 

145.2

 

 

148.3

 

Diluted

 

146.5

 

 

148.9

 

 

 

 

 

 

(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

 

October 3,
2021

 

December 31,
2020

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

2,588

 

 

$

3,401

 

Marketable securities

 

430

 

 

461

 

Total cash, cash equivalents and marketable securities

 

3,018

 

 

3,862

 

Accounts and notes receivable, net

 

4,152

 

 

3,820

 

Inventories

 

4,322

 

 

3,425

 

Prepaid expenses and other current assets

 

828

 

 

790

 

Total current assets

 

12,320

 

 

11,897

 

Long-term assets

 

 

 

 

Property, plant and equipment, net

 

4,185

 

 

4,255

 

Investments and advances related to equity method investees

 

1,543

 

 

1,441

 

Goodwill

 

1,289

 

 

1,293

 

Other intangible assets, net

 

921

 

 

963

 

Pension assets

 

1,100

 

 

1,042

 

Other assets

 

1,705

 

 

1,733

 

Total assets

 

$

23,063

 

 

$

22,624

 

 

 

 

 

 

LIABILITIES

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable (principally trade)

 

$

3,210

 

 

$

2,820

 

Loans payable

 

85

 

 

169

 

Commercial paper

 

200

 

 

323

 

Accrued compensation, benefits and retirement costs

 

626

 

 

484

 

Current portion of accrued product warranty

 

694

 

 

674

 

Current portion of deferred revenue

 

806

 

 

691

 

Other accrued expenses

 

1,185

 

 

1,112

 

Current maturities of long-term debt

 

55

 

 

62

 

Total current liabilities

 

6,861

 

 

6,335

 

Long-term liabilities

 

 

 

 

Long-term debt

 

3,602

 

 

3,610

 

Pensions and other postretirement benefits

 

623

 

 

630

 

Accrued product warranty

 

703

 

 

672

 

Deferred revenue

 

836

 

 

840

 

Other liabilities

 

1,435

 

 

1,548

 

Total liabilities

 

$

14,060

 

 

$

13,635

 

 

 

 

 

 

EQUITY

 

 

 

 

Cummins Inc. shareholders’ equity

 

 

 

 

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

 

$

2,412

 

 

$

2,404

 

Retained earnings

 

16,555

 

 

15,419

 

Treasury stock, at cost, 79.4 and 74.8 shares

 

(8,974

)

 

(7,779

)

Accumulated other comprehensive loss

 

(1,911

)

 

(1,982

)

Total Cummins Inc. shareholders’ equity

 

8,082

 

 

8,062

 

Noncontrolling interests

 

921

 

 

927

 

Total equity

 

$

9,003

 

 

$

8,989

 

Total liabilities and equity

 

$

23,063

 

 

$

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

In millions

 

October 3,
2021

 

September 27,
2020

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Consolidated net income

 

$

541

 

 

$

504

 

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

 

 

Depreciation and amortization

 

160

 

 

166

 

Deferred income taxes

 

27

 

 

4

 

Equity in income of investees, net of dividends

 

(36

)

 

(12

)

Pension and OPEB expense

 

21

 

 

27

 

Pension contributions and OPEB payments

 

(18

)

 

(20

)

Share-based compensation expense

 

7

 

 

10

 

Restructuring payments

 

 

 

(19

)

Gain on corporate owned life insurance

 

(1

)

 

(12

)

Foreign currency remeasurement and transaction exposure

 

17

 

 

(5

)

Changes in current assets and liabilities

 

 

 

 

Accounts and notes receivable

 

(22

)

 

(123

)

Inventories

 

(291

)

 

174

 

Other current assets

 

(27

)

 

(22

)

Accounts payable

 

39

 

 

329

 

Accrued expenses

 

266

 

 

186

 

Changes in other liabilities

 

(25

)

 

9

 

Other, net

 

(89

)

 

27

 

Net cash provided by operating activities

 

569

 

 

1,223

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Capital expenditures

 

(150

)

 

(116

)

Investments in internal use software

 

(14

)

 

(12

)

Investments in and advances to equity investees

 

(7

)

 

(13

)

Investments in marketable securities—acquisitions

 

(207

)

 

(137

)

Investments in marketable securities—liquidations

 

221

 

 

154

 

Cash flows from derivatives not designated as hedges

 

7

 

 

7

 

Other, net

 

18

 

 

14

 

Net cash used in investing activities

 

(132

)

 

(103

)

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Proceeds from borrowings

 

15

 

 

1,977

 

Net payments of commercial paper

 

 

 

(1,711

)

Payments on borrowings and finance lease obligations

 

(24

)

 

(16

)

Net borrowings under short-term credit agreements

 

9

 

 

2

 

Distributions to noncontrolling interests

 

(15

)

 

(13

)

Dividend payments on common stock

 

(207

)

 

(194

)

Repurchases of common stock

 

(138

)

 

 

Proceeds from issuing common stock

 

1

 

 

46

 

Other, net

 

2

 

 

13

 

Net cash (used in) provided by financing activities

 

(357

)

 

104

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

27

 

 

(8

)

Net increase in cash and cash equivalents

 

107

 

 

1,216

 

Cash and cash equivalents at beginning of period

 

2,481

 

 

1,751

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

2,588

 

 

$

2,967

 

 

 

 

 

 

(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

In millions

 

October 3,
2021

 

September 27,
2020

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Consolidated net income

 

$

1,764

 

 

$

1,301

 

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

 

 

 

 

Depreciation and amortization

 

497

 

 

499

 

Deferred income taxes

 

44

 

 

(7

)

Equity in income of investees, net of dividends

 

(150

)

 

(136

)

Pension and OPEB expense

 

62

 

 

81

 

Pension contributions and OPEB payments

 

(86

)

 

(102

)

Share-based compensation expense

 

25

 

 

22

 

Restructuring payments

 

(1

)

 

(100

)

Loss (gain) on corporate owned life insurance

 

11

 

 

(50

)

Foreign currency remeasurement and transaction exposure

 

27

 

 

(7

)

Changes in current assets and liabilities

 

 

 

 

Accounts and notes receivable

 

(353

)

 

47

 

Inventories

 

(919

)

 

(50

)

Other current assets

 

(45

)

 

73

 

Accounts payable

 

416

 

 

109

 

Accrued expenses

 

435

 

 

(236

)

Changes in other liabilities

 

(59

)

 

208

 

Other, net

 

(144

)

 

(72

)

Net cash provided by operating activities

 

1,524

 

 

1,580

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Capital expenditures

 

(362

)

 

(268

)

Investments in internal use software

 

(36

)

 

(33

)

Proceeds from sale of land

 

20

 

 

 

Investments in and advances to equity investees

 

3

 

 

(30

)

Investments in marketable securities—acquisitions

 

(569

)

 

(422

)

Investments in marketable securities—liquidations

 

602

 

 

408

 

Cash flows from derivatives not designated as hedges

 

19

 

 

(15

)

Other, net

 

45

 

 

23

 

Net cash used in investing activities

 

(278

)

 

(337

)

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Proceeds from borrowings

 

35

 

 

1,999

 

Net payments of commercial paper

 

(123

)

 

(344

)

Payments on borrowings and finance lease obligations

 

(57

)

 

(41

)

Net (payments) borrowings under short-term credit agreements

 

(93

)

 

6

 

Distributions to noncontrolling interests

 

(28

)

 

(26

)

Dividend payments on common stock

 

(601

)

 

(582

)

Repurchases of common stock

 

(1,228

)

 

(550

)

Proceeds from issuing common stock

 

27

 

 

78

 

Other, net

 

(11

)

 

24

 

Net cash (used in) provided by financing activities

 

(2,079

)

 

564

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

20

 

 

31

 

Net (decrease) increase in cash and cash equivalents

 

(813

)

 

1,838

 

Cash and cash equivalents at beginning of year

 

3,401

 

 

1,129

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

2,588

 

 

$

2,967

 

 

 

 

 

 

(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 October 3, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

 

$

1,961

 

 

$

1,952

 

 

$

1,347

 

 

$

688

 

 

$

20

 

 

$

5,968

 

 

$

 

 

$

5,968

 

Intersegment sales

 

617

 

 

7

 

 

446

 

 

476

 

 

3

 

 

1,549

 

 

(1,549

)

 

 

Total sales

 

2,578

 

 

1,959

 

 

1,793

 

 

1,164

 

 

23

 

 

7,517

 

 

(1,549

)

 

5,968

 

Research, development and engineering expenses

 

97

 

 

10

 

 

78

 

 

55

 

 

26

 

 

266

 

 

 

 

266

 

Equity, royalty and interest income (loss) from investees

 

61

 

 

15

 

 

10

 

 

11

 

 

(3

)

 

94

 

 

 

 

94

 

Interest income

 

3

 

 

2

 

 

1

 

 

1

 

 

 

 

7

 

 

 

 

7

 

EBITDA (2)

 

391

 

 

192

 

 

253

 

 

134

 

 

(58

)

 

912

 

 

(50

)

 

862

 

Depreciation and amortization (3)

 

53

 

 

28

 

 

44

 

 

29

 

 

5

 

 

159

 

 

 

 

159

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA as a percentage of segment sales

 

15.2

%

 

9.8

%

 

14.1

%

 

11.5

%

 

NM

 

 

12.1

%

 

 

 

14.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 27, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

 

$

1,617

 

 

$

1,715

 

 

$

1,201

 

 

$

567

 

 

$

18

 

 

$

5,118

 

 

$

 

 

$

5,118

 

Intersegment sales

 

495

 

 

6

 

 

340

 

 

414

 

 

 

 

1,255

 

 

(1,255

)

 

 

Total sales

 

2,112

 

 

1,721

 

 

1,541

 

 

981

 

 

18

 

 

6,373

 

 

(1,255

)

 

5,118

 

Research, development and engineering expenses

 

72

 

 

9

 

 

64

 

 

53

 

 

26

 

 

224

 

 

 

 

224

 

Equity, royalty and interest income (loss) from investees

 

74

 

 

13

 

 

13

 

 

 

 

(2

)

 

98

 

 

 

 

98

 

Interest income

 

1

 

 

1

 

 

1

 

 

1

 

 

 

 

4

 

 

 

 

4

 

EBITDA (2)

 

382

 

 

182

 

 

261

 

 

101

 

 

(40

)

 

886

 

 

(10

)

 

876

 

Depreciation and amortization (3)

 

51

 

 

30

 

 

47

 

 

32

 

 

5

 

 

165

 

 

 

 

165

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA as a percentage of segment sales

 

18.1

%

 

10.6

%

 

16.9

%

 

10.3

%

 

NM

 

 

13.9

%

 

 

 

17.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

"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 October 3, 2021 and September 27, 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

Nine months ended October 3, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

 

$

5,776

 

 

$

5,692

 

 

$

4,627

 

 

$

1,999

 

 

$

77

 

 

$

18,171

 

 

$

 

 

$

18,171

 

Intersegment sales

 

1,752

 

 

22

 

 

1,312

 

 

1,330

 

 

5

 

 

4,421

 

 

(4,421

)

 

 

Total sales

 

7,528

 

 

5,714

 

 

5,939

 

 

3,329

 

 

82

 

 

22,592

 

 

(4,421

)

 

18,171

 

Research, development and engineering expenses

 

288

 

 

35

 

 

232

 

 

172

 

 

75

 

 

802

 

 

 

 

802

 

Equity, royalty and interest income (loss) from investees

 

278

 

 

47

 

 

41

 

 

32

 

 

(1

)

 

397

 

 

 

 

397

 

Interest income

 

7

 

 

5

 

 

3

 

 

3

 

 

 

 

18

 

 

 

 

18

 

EBITDA (2)

 

1,147

 

 

553

 

 

975

 

 

399

 

 

(169

)

 

2,905

 

 

(89

)

 

2,816

 

Depreciation and amortization (3)

 

154

 

 

88

 

 

138

 

 

97

 

 

17

 

 

494

 

 

 

 

494

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA as a percentage of total sales

 

15.2

%

 

9.7

%

 

16.4

%

 

12.0

%

 

NM

 

 

12.9

%

 

 

 

15.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 27, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

 

$

4,133

 

 

$

5,123

 

 

$

3,192

 

 

$

1,495

 

 

$

38

 

 

$

13,981

 

 

$

 

 

$

13,981

 

Intersegment sales

 

1,560

 

 

17

 

 

1,001

 

 

1,147

 

 

 

 

3,725

 

 

(3,725

)

 

 

Total sales

 

5,693

 

 

5,140

 

 

4,193

 

 

2,642

 

 

38

 

 

17,706

 

 

(3,725

)

 

13,981

 

Research, development and engineering expenses

 

217

 

 

20

 

 

187

 

 

148

 

 

79

 

 

651

 

 

 

 

651

 

Equity, royalty and interest income (loss) from investees

 

236

 

 

45

 

 

46

 

 

18

 

 

(3

)

 

342

 

 

 

 

342

 

Interest income

 

6

 

 

3

 

 

3

 

 

3

 

 

 

 

15

 

 

 

 

15

 

EBITDA (2)

 

897

 

 

500

 

 

681

 

 

269

 

 

(121

)

 

2,226

 

 

45

 

 

2,271

 

Depreciation and amortization (3)

 

155

 

 

91

 

 

142

 

 

96

 

 

13

 

 

497

 

 

 

 

497

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA as a percentage of total sales

 

15.8

%

 

9.7

%

 

16.2

%

 

10.2

%

 

NM

 

 

12.6

%

 

 

 

16.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

"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 October 3, 2021 and September 27, 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 $2 million for the nine months ended October 3, 2021 and September 27, 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

 

Nine months ended

In millions

 

October 3,
2021

 

September 27,
2020

 

October 3,
2021

 

September 27,
2020

EBITDA

 

$

862

 

 

$

876

 

 

$

2,816

 

 

$

2,271

 

 

 

 

 

 

 

 

 

 

EBITDA as a percentage of net sales

 

14.4

%

 

17.1

%

 

15.5

%

 

16.2

%

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

Interest expense

 

28

 

 

25

 

 

85

 

 

71

 

Depreciation and amortization

 

159

 

 

165

 

 

494

 

 

497

 

INCOME BEFORE INCOME TAXES

 

675

 

 

686

 

 

2,237

 

 

1,703

 

Less: Income tax expense

 

134

 

 

182

 

 

473

 

 

402

 

CONSOLIDATED NET INCOME

 

541

 

 

504

 

 

1,764

 

 

1,301

 

Less: Net income attributable to noncontrolling interests

 

7

 

 

3

 

 

27

 

 

13

 

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

534

 

 

$

501

 

 

$

1,737

 

 

$

1,288

 

 

 

 

 

 

 

 

 

 

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

 

8.9

%

 

9.8

%

 

9.6

%

 

9.2

%

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

 

Nine months ended

 

In millions

 

October 3,
2021

 

September 27,
2020

 

October 3,
2021

 

September 27,
2020

 

Manufacturing entities

 

 

 

 

 

 

 

 

 

Beijing Foton Cummins Engine Co., Ltd.

 

$

23

 

 

$

30

 

 

$

108

 

 

$

81

 

 

Dongfeng Cummins Engine Company, Ltd.

 

11

 

 

20

 

 

63

 

 

54

 

 

Chongqing Cummins Engine Company, Ltd.

 

8

 

 

7

 

 

28

 

 

27

 

 

All other manufacturers

 

27

 

 

22

 

(1)

117

 

 

100

 

(1)(2)

Distribution entities

 

 

 

 

 

 

 

 

 

Komatsu Cummins Chile, Ltda.

 

8

 

 

6

 

 

23

 

 

23

 

 

All other distributors

 

2

 

 

1

 

 

6

 

 

1

 

 

Cummins share of net income

 

79

 

 

86

 

 

345

 

 

286

 

 

Royalty and interest income

 

15

 

 

12

 

 

52

 

 

56

 

 

Equity, royalty and interest income from investees

 

$

94

 

 

$

98

 

 

$

397

 

 

$

342

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes impairment charges of $10 million and $13 million for the three and nine months ended September 27, 2020, respectively, 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.

INCOME TAXES

Our effective tax rate for 2021 is expected to approximate 21.5 percent, excluding any discrete items that may arise.

Our effective tax rates for the three and nine months ended October 3, 2021, were 19.9 percent and 21.1 percent, respectively.

The three months ended October 3, 2021, contained favorable discrete items of $11 million, or $0.08 per share, primarily due to a $16 million favorable release of tax reserves associated with the settlement of tax positions, partially offset by $5 million of unfavorable return to provision adjustments.

The nine months ended October 3, 2021, contained favorable discrete items of $8 million, or $0.05 per share, primarily due to an $18 million favorable release of tax reserves associated with the settlement of tax positions, partially offset by $10 million of unfavorable statutory changes in tax rates, mostly in the U.K.

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

 

 

$

 

 

$

2,527

 

Medium-duty truck and bus

 

674

 

 

688

 

 

713

 

 

 

 

2,075

 

Light-duty automotive

 

481

 

 

484

 

 

515

 

 

 

 

1,480

 

Off-highway

 

477

 

 

480

 

 

489

 

 

 

 

1,446

 

Total sales

 

$

2,459

 

 

$

2,491

 

 

$

2,578

 

 

$

 

 

$

7,528

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

89,300

 

Medium-duty

 

73,100

 

 

67,500

 

 

65,200

 

 

 

205,800

 

Light-duty

 

68,500

 

 

68,100

 

 

73,900

 

 

 

210,500

 

Total units

 

172,300

 

 

165,000

 

 

168,300

 

 

 

505,600

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

$

 

 

$

2,322

 

Power generation

 

418

 

 

454

 

 

438

 

 

 

 

1,310

 

Engines

 

334

 

 

351

 

 

377

 

 

 

 

1,062

 

Service

 

326

 

 

350

 

 

344

 

 

 

 

1,020

 

Total sales

 

$

1,835

 

 

$

1,920

 

 

$

1,959

 

 

$

 

 

$

5,714

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

$

 

 

$

2,710

 

Filtration

 

372

 

 

374

 

 

354

 

 

 

 

1,100

 

Turbo technologies

 

367

 

 

351

 

 

325

 

 

 

 

1,043

 

Electronics and fuel systems

 

263

 

 

241

 

 

210

 

 

 

 

714

 

Automated transmissions

 

115

 

 

146

 

 

111

 

 

 

 

372

 

Total sales

 

$

2,152

 

 

$

1,994

 

 

$

1,793

 

 

$

 

 

$

5,939

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

$

 

 

$

1,930

 

Industrial

 

324

 

 

399

 

 

412

 

 

 

 

1,135

 

Generator technologies

 

87

 

 

89

 

 

88

 

 

 

 

264

 

Total sales

 

$

1,022

 

 

$

1,143

 

 

$

1,164

 

 

$

 

 

$

3,329

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

6,400

 

Industrial

 

1,000

 

 

1,200

 

 

1,900

 

 

 

4,100

 

Total units

 

3,100

 

 

3,000

 

 

4,400

 

 

 

10,500

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

Jon Mills
Director, External Communications
Cummins Inc.
317-658-4540
Jon.mills@cummins.com

Source: Cummins Inc.