Company Announcements

Cummins Reports Second Quarter 2021 Results

  • Second quarter revenues of $6.1 billion; GAAP1 Net Income of $600 million.
  • Second quarter EBITDA of 15.9 percent; Diluted EPS of $4.10.
  • The company is maintaining its full year 2021 revenue guidance to be up 20 to 24 percent.
  • EBITDA is expected to be in the range of 15.5 to 16.0 percent; consistent with prior guidance.
  • Cummins is also announcing the exploration of strategic alternatives for its filtration business. Potential strategic alternatives to be explored include the separation of the Cummins Filtration business unit into a stand-alone company.

COLUMBUS, Ind.--(BUSINESS WIRE)--Aug. 3, 2021-- Cummins Inc. (NYSE: CMI) today reported results for the second quarter of 2021.

Second quarter revenues of $6.1 billion increased 59 percent from the same quarter in 2020. Sales in North America increased 74 percent while international revenues increased 42 percent driven by strong demand across all global markets compared to the same quarter in 2020, which was impacted significantly by the pandemic. Currency positively impacted sales by 3 percent primarily due to a weaker US dollar.

“Strong demand across many of our key markets drove continued sales growth in the second quarter, particularly in North America, and resulted in solid profitability,” said Chairman and CEO Tom Linebarger. “The strength of the order board reflects robust underlying demand in many of our markets which is remarkable considering the challenges and uncertainty we faced during this same period last year. I cannot thank our employees and the employees of our supply base enough for their unwavering contributions during these challenging times given the significant supply chain constraints we continue to experience in our industry.”

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter were $974 million (15.9 percent of sales), compared to $549 million (14.3 percent of sales) a year ago.

Net income attributable to Cummins in the second quarter was $600 million ($4.10 per diluted share) compared to $276 million ($1.86 per diluted share) in 2020. The tax rate in the second quarter was 21.4 percent including $7 million, or $0.05 per share, of unfavorable discrete items.

Cummins is also announcing today its exploration of strategic alternatives for its Filtration business unit. Potential strategic alternatives to be explored include the separation of the business into a stand-alone company.

Cummins Filtration, founded by Cummins in 1958, is a recognized leader in the filtration space, with a strong technological base of expertise and patents. Cummins Filtration has grown consistently, and as an independent company, would have the opportunity to accelerate growth as it further diversifies into new products and end markets. Cummins Filtration is a premier filtration platform with a broad portfolio of products for use in on-highway, heavy, medium, and light-duty trucks, off -highway industrial equipment, and power generation systems. The business benefits from a large installed base with comprehensive aftermarket coverage driving recurring revenue and cash flow visibility; and has a leading global footprint across many key regions; including North America, India, and China. Cummins Filtration is well-positioned for continued growth, sustained margin performance, and strong free cash flow generation. In 2020, the business had sales of approximately $1.2 billion.

The Cummins Board, along with management, believes a separation could realize value for Cummins and its stakeholders by, among other things, unlocking value for shareholders, enabling further enhanced focus on key strategic initiatives and empowering continued innovation in core and new technologies to power a more prosperous world. The Cummins Board and management also believe that a separation could simultaneously result in material benefits for Cummins Filtration, including:

  • Sharpened strategic focus
  • Increased operating flexibility and resources to capitalize on growth opportunities
  • Tailored capital allocation focused solely on Cummins Filtration’s growth and value creation strategy
  • Enhanced value for Cummins Filtration’s employees, customers, and other stakeholders

Chairman and CEO Tom Linebarger stated, “Cummins Filtration is a technology leader with global presence and significant runway for continued growth. We expect that the strategic alternatives we are considering will result in enhanced value for our stakeholders, and position Cummins Filtration to take advantage of enhanced opportunities to invest in organic and inorganic growth.”

The execution of this exploration process is dependent upon business and market conditions, along with a number of other factors and considerations.

2021 Outlook:

Based on the current forecast, Cummins maintains its full year 2021 revenue guidance of up 20 to 24 percent versus last year. EBITDA is expected to be in the range of 15.5 to 16.0 percent and the Company expects to return 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.

Second Quarter 2021 Highlights:

  • The company released the 18th annual Sustainability Progress report, highlighting the performance versus Cummins’ 2020 environmental goals and continued pursuit of carbon neutrality through the PLANET 2050 environmental sustainability strategy. For the first time, the report includes the racial and ethnic makeup of Cummins’ U.S. workforce. The company also posted its first report aligned to the Taskforce on Climate-Related Financial Disclosures.
  • Cummins and Iberdrola announced an agreement to partner together to accelerate the growth of business opportunities in the electrolyzer market of Iberia, promoting the green hydrogen value chain. The alliance helps to position Cummins as a leading supplier of electrolyzer systems for large-scale projects in Iberia and Iberdrola as a leading developer of electrolyzer projects and hydrogen supplier to final industrial customers. In addition to the commercial partnership, Cummins announced plans for one of the world’s largest electrolyzer plants, which is scalable to more than 1GW per year, and will be located in Castilla-La Mancha, Spain.
  • Cummins has signed a Letter of Intent for Cummins to acquire a 50% equity interest in Momentum Fuel Technologies from Rush Enterprises. The joint venture between Rush Enterprises and Cummins will produce Cummins-branded natural gas fuel delivery systems for the commercial vehicle market in North America, combining the strengths of Momentum Fuel Technologies’ compressed natural gas (CNG) fuel delivery systems, Cummins’ powertrain expertise, and the engineering and support infrastructure of both companies.
  • The Company began testing of a hydrogen-fuel internal combustion engine, taking another step forward in advancing zero carbon technology. The proof-of-concept test is building on Cummins’ existing technology leadership in gaseous-fuel applications and powertrain leadership to create new power solutions that help customers meet the energy and environmental needs of the future.
  • Carla Harris was named to the Board of Directors, bringing over 30 years of experience in investment banking, equity capital markets, equity private placements, and initial public offerings. Ms. Harris brings both the current number of women and the current number of ethnically diverse people on the board to five.
  • In May, Cummins was named to the 2021 Best Corporate Citizen list, which ranks companies on their performance in addressing climate change, the environment, financial matters, governance, human rights, stakeholders and society, workforce issues and more.

1 Generally Accepted Accounting Principles in the U.S.

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

Engine Segment

  • Sales - $2.5 billion, up 75 percent
  • Segment EBITDA - $402 million, or 16.1 percent of sales, compared to $150 million or 10.5 percent of sales
  • On-highway revenues increased 104 percent driven by strong demand in the North American truck and pickup markets and off-highway revenues increased 10 percent driven by strong demand in international construction markets
  • Sales increased 104 percent in North America and 26 percent in international markets

Distribution Segment

  • Sales - $1.9 billion, up 20 percent
  • Segment EBITDA - $201 million, or 10.5 percent of sales, compared to $160 million or 10.0 percent of sales
  • Revenues in North America increased 18 percent and international sales increased by 22 percent
  • Demand increased across the power generation and engine markets in addition to parts and service compared to last year which was impacted significantly by the pandemic.

Components Segment

  • Sales - $2.0billion, up 73 percent
  • Segment EBITDA - $301 million, or 15.1 percent of sales, compared to $141 million or 12.3 percent of sales
  • Revenues in North America increased by 108 percent and international sales increased by 46 percent

Power Systems Segment

  • Sales - $1.1 billion, up 47 percent
  • Segment EBITDA - $139 million, or 12.2 percent of sales, compared to $91 million, or 11.7 percent of sales
  • Power generation revenues increased by 54 percent driven by growth in recreational vehicle and datacenter markets while industrial revenues increased 37 percent due to stronger demand in mining markets

New Power Segment

  • Sales - $24 million, up 140 percent
  • Segment EBITDA loss - $60 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 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; 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

In millions, except per share amounts

 

July 4,
2021

 

June 28,
2020

NET SALES

 

$

6,111

 

 

$

3,852

 

Cost of sales

 

4,633

 

 

2,962

 

GROSS MARGIN

 

1,478

 

 

890

 

OPERATING EXPENSES AND INCOME

 

 

 

 

Selling, general and administrative expenses

 

600

 

 

470

 

Research, development and engineering expenses

 

276

 

 

189

 

Equity, royalty and interest income from investees

 

137

 

 

115

 

Other operating expense, net

 

(4)

 

 

(10)

 

OPERATING INCOME

 

735

 

 

336

 

Interest expense

 

29

 

 

23

 

Other income, net

 

73

 

 

49

 

INCOME BEFORE INCOME TAXES

 

779

 

 

362

 

Income tax expense

 

167

 

 

93

 

CONSOLIDATED NET INCOME

 

612

 

 

269

 

Less: Net income (loss) attributable to noncontrolling interests

 

12

 

 

(7)

 

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

600

 

 

$

276

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.

 

 

 

 

Basic

 

$

4.14

 

 

$

1.87

 

Diluted

 

$

4.10

 

 

$

1.86

 

 

 

 

 

 

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING

 

 

 

 

Basic

 

145.1

 

 

147.6

 

Diluted

 

146.5

 

 

148.0

 

 

 

 

 

 

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

 

 

 

Six months ended

In millions, except per share amounts

 

July 4,
2021

 

June 28,
2020

NET SALES

 

$

12,203

 

 

$

8,863

 

Cost of sales

 

9,239

 

 

6,679

 

GROSS MARGIN

 

2,964

 

 

2,184

 

OPERATING EXPENSES AND INCOME

 

 

 

 

Selling, general and administrative expenses

 

1,174

 

 

1,016

 

Research, development and engineering expenses

 

536

 

 

427

 

Equity, royalty and interest income from investees

 

303

 

 

244

 

Other operating expense, net

 

(12)

 

 

(15)

 

OPERATING INCOME

 

1,545

 

 

970

 

Interest expense

 

57

 

 

46

 

Other income, net

 

74

 

 

93

 

INCOME BEFORE INCOME TAXES

 

1,562

 

 

1,017

 

Income tax expense

 

339

 

 

220

 

CONSOLIDATED NET INCOME

 

1,223

 

 

797

 

Less: Net income attributable to noncontrolling interests

 

20

 

 

10

 

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

1,203

 

 

$

787

 

 

 

 

 

 

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.

 

 

 

 

Basic

 

$

8.24

 

 

$

5.30

 

Diluted

 

$

8.16

 

 

$

5.29

 

 

 

 

 

 

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING

 

 

 

 

Basic

 

146.0

 

 

148.4

 

Diluted

 

147.4

 

 

148.8

 

 

 

 

 

 

(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

 

July 4,
2021

 

December 31,
2020

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

2,481

 

 

$

3,401

 

Marketable securities

 

438

 

 

461

 

Total cash, cash equivalents and marketable securities

 

2,919

 

 

3,862

 

Accounts and notes receivable, net

 

4,132

 

 

3,820

 

Inventories

 

4,076

 

 

3,425

 

Prepaid expenses and other current assets

 

804

 

 

790

 

Total current assets

 

11,931

 

 

11,897

 

Long-term assets

 

 

 

 

Property, plant and equipment, net

 

4,174

 

 

4,255

 

Investments and advances related to equity method investees

 

1,494

 

 

1,441

 

Goodwill

 

1,291

 

 

1,293

 

Other intangible assets, net

 

942

 

 

963

 

Pension assets

 

1,096

 

 

1,042

 

Other assets

 

1,680

 

 

1,733

 

Total assets

 

$

22,608

 

 

$

22,624

 

 

 

 

 

 

LIABILITIES

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable (principally trade)

 

$

3,172

 

 

$

2,820

 

Loans payable

 

54

 

 

169

 

Commercial paper

 

200

 

 

323

 

Accrued compensation, benefits and retirement costs

 

569

 

 

484

 

Current portion of accrued product warranty

 

661

 

 

674

 

Current portion of deferred revenue

 

805

 

 

691

 

Other accrued expenses

 

1,086

 

 

1,112

 

Current maturities of long-term debt

 

57

 

 

62

 

Total current liabilities

 

6,604

 

 

6,335

 

Long-term liabilities

 

 

 

 

Long-term debt

 

3,620

 

 

3,610

 

Pensions and other postretirement benefits

 

617

 

 

630

 

Accrued product warranty

 

674

 

 

672

 

Deferred revenue

 

828

 

 

840

 

Other liabilities

 

1,472

 

 

1,548

 

Total liabilities

 

$

13,815

 

 

$

13,635

 

 

 

 

 

 

EQUITY

 

 

 

 

Cummins Inc. shareholders’ equity

 

 

 

 

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

 

$

2,405

 

 

$

2,404

 

Retained earnings

 

16,228

 

 

15,419

 

Treasury stock, at cost, 78.8 and 74.8 shares

 

(8,838)

 

 

(7,779)

 

Accumulated other comprehensive loss

 

(1,929)

 

 

(1,982)

 

Total Cummins Inc. shareholders’ equity

 

7,866

 

 

8,062

 

Noncontrolling interests

 

927

 

 

927

 

Total equity

 

$

8,793

 

 

$

8,989

 

Total liabilities and equity

 

$

22,608

 

 

$

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

 

July 4,
2021

 

June 28,
2020

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Consolidated net income

 

$

612

 

 

$

269

 

Adjustments to reconcile consolidated net income to net cash provided by (used in) operating activities

 

 

Depreciation and amortization

 

167

 

 

165

 

Deferred income taxes

 

9

 

 

 

Equity in income of investees, net of dividends

 

22

 

 

(46)

 

Pension and OPEB expense

 

21

 

 

27

 

Pension contributions and OPEB payments

 

(17)

 

 

(22)

 

Share-based compensation expense

 

10

 

 

8

 

Restructuring payments

 

(1)

 

 

(33)

 

Gain on corporate owned life insurance

 

(20)

 

 

(21)

 

Foreign currency remeasurement and transaction exposure

 

9

 

 

(5)

 

Changes in current assets and liabilities

 

 

 

 

Accounts and notes receivable

 

43

 

 

63

 

Inventories

 

(292)

 

 

(53)

 

Other current assets

 

6

 

 

16

 

Accounts payable

 

(88)

 

 

(391)

 

Accrued expenses

 

193

 

 

(101)

 

Changes in other liabilities

 

(34)

 

 

171

 

Other, net

 

(24)

 

 

(69)

 

Net cash provided by (used in) operating activities

 

616

 

 

(22)

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Capital expenditures

 

(125)

 

 

(77)

 

Investments in internal use software

 

(11)

 

 

(13)

 

Proceeds from sale of land

 

20

 

 

 

Investments in and advances to equity investees

 

34

 

 

(10)

 

Investments in marketable securities—acquisitions

 

(219)

 

 

(169)

 

Investments in marketable securities—liquidations

 

174

 

 

159

 

Cash flows from derivatives not designated as hedges

 

(2)

 

 

(28)

 

Other, net

 

8

 

 

3

 

Net cash used in investing activities

 

(121)

 

 

(135)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Net (payments) borrowings of commercial paper

 

(117)

 

 

410

 

Payments on borrowings and finance lease obligations

 

(17)

 

 

(15)

 

Net payments under short-term credit agreements

 

 

 

(21)

 

Dividend payments on common stock

 

(197)

 

 

(193)

 

Repurchases of common stock

 

(672)

 

 

 

Proceeds from issuing common stock

 

8

 

 

19

 

Other, net

 

18

 

 

26

 

Net cash (used in) provided by financing activities

 

(977)

 

 

226

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

5

 

 

(9)

 

Net (decrease) increase in cash and cash equivalents

 

(477)

 

 

60

 

Cash and cash equivalents at beginning of period

 

2,958

 

 

1,691

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

2,481

 

 

$

1,751

 

 

 

 

 

 

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

 

 

 

Six months ended

In millions

 

July 4,
2021

 

June 28,
2020

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Consolidated net income

 

$

1,223

 

 

$

797

 

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

 

 

 

 

Depreciation and amortization

 

337

 

 

333

 

Deferred income taxes

 

17

 

 

(11)

 

Equity in income of investees, net of dividends

 

(114)

 

 

(124)

 

Pension and OPEB expense

 

41

 

 

54

 

Pension contributions and OPEB payments

 

(68)

 

 

(82)

 

Share-based compensation expense

 

18

 

 

12

 

Restructuring payments

 

(1)

 

 

(81)

 

Loss (gain) on corporate owned life insurance

 

12

 

 

(38)

 

Foreign currency remeasurement and transaction exposure

 

10

 

 

(2)

 

Changes in current assets and liabilities

 

 

 

 

Accounts and notes receivable

 

(331)

 

 

170

 

Inventories

 

(628)

 

 

(224)

 

Other current assets

 

(18)

 

 

95

 

Accounts payable

 

377

 

 

(220)

 

Accrued expenses

 

169

 

 

(422)

 

Changes in other liabilities

 

(34)

 

 

199

 

Other, net

 

(55)

 

 

(99)

 

Net cash provided by operating activities

 

955

 

 

357

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Capital expenditures

 

(212)

 

 

(152)

 

Investments in internal use software

 

(22)

 

 

(21)

 

Proceeds from sale of land

 

20

 

 

 

Investments in and advances to equity investees

 

10

 

 

(17)

 

Investments in marketable securities—acquisitions

 

(362)

 

 

(285)

 

Investments in marketable securities—liquidations

 

381

 

 

254

 

Cash flows from derivatives not designated as hedges

 

12

 

 

(22)

 

Other, net

 

27

 

 

9

 

Net cash used in investing activities

 

(146)

 

 

(234)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Net (payments) borrowings of commercial paper

 

(123)

 

 

1,367

 

Payments on borrowings and finance lease obligations

 

(33)

 

 

(25)

 

Net (payments) borrowings under short-term credit agreements

 

(102)

 

 

4

 

Distributions to noncontrolling interests

 

(13)

 

 

(13)

 

Dividend payments on common stock

 

(394)

 

 

(388)

 

Repurchases of common stock

 

(1,090)

 

 

(550)

 

Proceeds from issuing common stock

 

26

 

 

32

 

Other, net

 

7

 

 

33

 

Net cash (used in) provided by financing activities

 

(1,722)

 

 

460

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

(7)

 

 

39

 

Net (decrease) increase in cash and cash equivalents

 

(920)

 

 

622

 

Cash and cash equivalents at beginning of year

 

3,401

 

 

1,129

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

2,481

 

 

$

1,751

 

 

 

 

 

 

(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 July 4, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

 

$

1,920

 

 

$

1,913

 

 

$

1,556

 

 

$

699

 

 

$

23

 

 

$

6,111

 

 

$

 

 

$

6,111

 

Intersegment sales

 

571

 

 

7

 

 

438

 

 

444

 

 

1

 

 

1,461

 

 

(1,461)

 

 

 

Total sales

 

2,491

 

 

1,920

 

 

1,994

 

 

1,143

 

 

24

 

 

7,572

 

 

(1,461)

 

 

6,111

 

Research, development and engineering expenses

 

99

 

 

12

 

 

79

 

 

60

 

 

26

 

 

276

 

 

 

 

276

 

Equity, royalty and interest income (loss) from investees

 

104

 

 

15

 

 

12

 

 

9

 

 

(3)

 

 

137

 

 

 

 

137

 

Interest income

 

1

 

 

2

 

 

1

 

 

1

 

 

 

 

5

 

 

 

 

5

 

EBITDA (2)

 

402

 

 

201

 

 

301

 

 

139

 

 

(60)

 

 

983

 

 

(9)

 

 

974

 

Depreciation and amortization (3)

 

50

 

 

30

 

 

46

 

 

33

 

 

7

 

 

166

 

 

 

 

166

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA as a percentage of segment sales

 

16.1

%

 

10.5

%

 

15.1

%

 

12.2

%

 

NM

 

13.0

%

 

 

 

15.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 28, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

 

$

937

 

 

$

1,601

 

 

$

876

 

 

$

428

 

 

$

10

 

 

$

3,852

 

 

$

 

 

$

3,852

 

Intersegment sales

 

486

 

 

4

 

 

274

 

 

349

 

 

 

 

1,113

 

 

(1,113)

 

 

 

Total sales

 

1,423

 

 

1,605

 

 

1,150

 

 

777

 

 

10

 

 

4,965

 

 

(1,113)

 

 

3,852

 

Research, development and engineering expenses

 

65

 

 

4

 

 

55

 

 

41

 

 

24

 

 

189

 

 

 

 

189

 

Equity, royalty and interest income (loss) from investees

 

84

 

 

11

 

 

12

 

 

9

 

 

(1)

 

 

115

 

 

 

 

115

 

Interest income

 

1

 

 

1

 

 

1

 

 

1

 

 

 

 

4

 

 

 

 

4

 

EBITDA (2)

 

150

 

 

160

 

 

141

 

 

91

 

 

(38)

 

 

504

 

 

45

 

 

549

 

Depreciation and amortization (3)

 

51

 

 

30

 

 

47

 

 

32

 

 

4

 

 

164

 

 

 

 

164

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA as a percentage of segment sales

 

10.5

%

 

10.0

%

 

12.3

%

 

11.7

%

 

NM

 

10.2

%

 

 

 

14.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

"NM" - not meaningful information

(1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended July 4, 2021 and June 28, 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."

 

In millions

 

Engine

 

Distribution

 

Components

 

Power Systems

 

New Power

 

Total Segments

 

Intersegment
Eliminations (1)

 

Total

Six months ended July 4, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

 

$

3,815

 

 

$

3,740

 

 

$

3,280

 

 

$

1,311

 

 

$

57

 

 

$

12,203

 

 

$

 

 

$

12,203

 

Intersegment sales

 

1,135

 

 

15

 

 

866

 

 

854

 

 

2

 

 

2,872

 

 

(2,872)

 

 

 

Total sales

 

4,950

 

 

3,755

 

 

4,146

 

 

2,165

 

 

59

 

 

15,075

 

 

(2,872)

 

 

12,203

 

Research, development and engineering expenses

 

191

 

 

25

 

 

154

 

 

117

 

 

49

 

 

536

 

 

 

 

536

 

Equity, royalty and interest income from investees

 

217

 

 

32

 

 

31

 

 

21

 

 

2

 

 

303

 

 

 

 

303

 

Interest income

 

4

 

 

3

 

 

2

 

 

2

 

 

 

 

11

 

 

 

 

11

 

EBITDA (2)

 

756

 

 

361

 

 

722

 

 

265

 

 

(111)

 

 

1,993

 

 

(39)

 

 

1,954

 

Depreciation and amortization (3)

 

101

 

 

60

 

 

94

 

 

68

 

 

12

 

 

335

 

 

 

 

335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA as a percentage of total sales

 

15.3

%

 

9.6

%

 

17.4

%

 

12.2

%

 

NM

 

13.2

%

 

 

 

16.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 28, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sales

 

$

2,516

 

 

$

3,408

 

 

$

1,991

 

 

$

928

 

 

$

20

 

 

$

8,863

 

 

$

 

 

$

8,863

 

Intersegment sales

 

1,065

 

 

11

 

 

661

 

 

733

 

 

 

 

2,470

 

 

(2,470)

 

 

 

Total sales

 

3,581

 

 

3,419

 

 

2,652

 

 

1,661

 

 

20

 

 

11,333

 

 

(2,470)

 

 

8,863

 

Research, development and engineering expenses

 

145

 

 

11

 

 

123

 

 

95

 

 

53

 

 

427

 

 

 

 

427

 

Equity, royalty and interest income (loss) from investees

 

162

 

 

32

 

 

33

 

 

18

 

 

(1)

 

 

244

 

 

 

 

244

 

Interest income

 

5

 

 

2

 

 

2

 

 

2

 

 

 

 

11

 

 

 

 

11

 

EBITDA (2)

 

515

 

 

318

 

 

420

 

 

168

 

 

(81)

 

 

1,340

 

 

55

 

 

1,395

 

Depreciation and amortization (3)

 

104

 

 

61

 

 

95

 

 

64

 

 

8

 

 

332

 

 

 

 

332

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA as a percentage of total sales

 

14.4

%

 

9.3

%

 

15.8

%

 

10.1

%

 

NM

 

11.8

%

 

 

 

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 six months ended July 4, 2021 and June 28, 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 $2 million and $1 million for the six months ended July 4, 2021 and June 28, 2020, 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

 

Six months ended

In millions

 

July 4,
2021

 

June 28,
2020

 

July 4,
2021

 

June 28,
2020

EBITDA

 

$

974

 

 

$

549

 

 

$

1,954

 

 

$

1,395

 

Less:

 

 

 

 

 

 

 

 

Interest expense

 

29

 

 

23

 

 

57

 

 

46

 

Depreciation and amortization

 

166

 

 

164

 

 

335

 

 

332

 

INCOME BEFORE INCOME TAXES

 

779

 

 

362

 

 

1,562

 

 

1,017

 

Less: Income tax expense

 

167

 

 

93

 

 

339

 

 

220

 

CONSOLIDATED NET INCOME

 

612

 

 

269

 

 

1,223

 

 

797

 

Less: Net income (loss) attributable to noncontrolling interests

 

12

 

 

(7)

 

 

20

 

 

10

 

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

 

$

600

 

 

$

276

 

 

$

1,203

 

 

$

787

 

 

 

 

 

 

 

 

 

 

CUMMINS INC. AND SUBSIDIARIES
SELECT FOOTNOTE DATA
(Unaudited)

EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES

Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Net Income for the reporting periods was as follows:

 

 

 

Three months ended

 

Six months ended

 

In millions

 

July 4,
2021

 

June 28,
2020

 

July 4,
2021

 

June 28,
2020

 

Manufacturing entities

 

 

 

 

 

 

 

 

 

Beijing Foton Cummins Engine Co., Ltd.

 

$

46

 

 

$

34

 

 

$

85

 

 

$

51

 

 

Dongfeng Cummins Engine Company, Ltd.

 

21

 

 

26

 

 

52

 

 

34

 

 

Chongqing Cummins Engine Company, Ltd.

 

10

 

 

11

 

 

20

 

 

20

 

 

All other manufacturers

 

29

 

 

23

 

 

90

 

 

78

 

(1)

Distribution entities

 

 

 

 

 

 

 

 

 

Komatsu Cummins Chile, Ltda.

 

9

 

 

7

 

 

15

 

 

17

 

 

All other distributors

 

1

 

 

 

 

4

 

 

 

 

Cummins share of net income

 

116

 

 

101

 

 

266

 

 

200

 

 

Royalty and interest income

 

21

 

 

14

 

 

37

 

 

44

 

 

Equity, royalty and interest income from investees

 

$

137

 

 

$

115

 

 

$

303

 

 

$

244

 

 

 

 

 

 

 

 

 

 

 

 

(1) 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 (lowered one percentage point), excluding any discrete items that may arise.

Our effective tax rates for the three and six months ended July 4, 2021, were 21.4 percent and 21.7 percent, respectively.

The three months ended July 4, 2021, contained unfavorable discrete items of $7 million or $0.05 per share, primarily due to a $10 million unfavorable statutory change in tax rates, mostly in the UK, partially offset by $3 million of other favorable discrete items.

The six months ended July 4, 2021, contained unfavorable discrete items of $3 million or $0.02 per share, primarily due to a $10 million unfavorable statutory change in tax rates, mostly in the UK, partially offset by $7 million of other favorable discrete items.

CUMMINS INC. AND SUBSIDIARIES
FINANCIAL MEASURES THAT SUPPLEMENT GAAP
(Unaudited)

Reconciliation of Non GAAP measures - Earnings before interest, income taxes, depreciation and amortization and noncontrolling interests (EBITDA)

We believe EBITDA is a useful measure of our operating performance as it assists investors and debt holders in comparing our performance on a consistent basis without regard to financing methods, capital structure, income taxes or depreciation and amortization methods, which can vary significantly depending upon many factors.

EBITDA is not in accordance with, or an alternative for, accounting principles generally accepted in the United States (GAAP) and may not be consistent with measures used by other companies. It should be considered supplemental data; however, the amounts included in the EBITDA calculation are derived from amounts included in the Condensed Consolidated Statements of Net Income. Below is a reconciliation of “Net income attributable to Cummins Inc.” to EBITDA for each of the applicable periods:

 

 

 

Three months ended

 

Six months ended

In millions

 

July 4,
2021

 

June 28,
2020

 

July 4,
2021

 

June 28,
2020

Net income attributable to Cummins Inc.

 

$

600

 

 

$

276

 

 

$

1,203

 

 

$

787

 

 

 

 

 

 

 

 

 

 

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

 

9.8

%

 

7.2

%

 

9.9

%

 

8.9

%

 

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

 

 

Net income (loss) attributable to noncontrolling interests

 

12

 

 

(7)

 

 

20

 

 

10

 

Consolidated net income

 

612

 

 

269

 

 

1,223

 

 

797

 

 

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

 

 

Interest expense

 

29

 

 

23

 

 

57

 

 

46

 

Income tax expense

 

167

 

 

93

 

 

339

 

 

220

 

Depreciation and amortization

 

166

 

 

164

 

 

335

 

 

332

 

EBITDA

 

$

974

 

 

$

549

 

 

$

1,954

 

 

$

1,395

 

 

 

 

 

 

 

 

 

 

EBITDA as a percentage of net sales

 

15.9

%

 

14.3

%

 

16.0

%

 

15.7

%

 

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

 

 

$

 

 

$

 

 

$

1,666

 

Medium-duty truck and bus

 

674

 

 

688

 

 

 

 

 

 

1,362

 

Light-duty automotive

 

481

 

 

484

 

 

 

 

 

 

965

 

Off-highway

 

477

 

 

480

 

 

 

 

 

 

957

 

Total sales

 

$

2,459

 

 

$

2,491

 

 

$

 

 

$

 

 

$

4,950

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

60,100

 

Medium-duty

 

73,100

 

 

67,500

 

 

 

 

 

 

140,600

 

Light-duty

 

68,500

 

 

68,100

 

 

 

 

 

 

136,600

 

Total units

 

172,300

 

 

165,000

 

 

 

 

 

 

337,300

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

$

 

 

$

 

 

$

1,522

 

Power generation

 

418

 

 

454

 

 

 

 

 

 

872

 

Engines

 

334

 

 

351

 

 

 

 

 

 

685

 

Service

 

326

 

 

350

 

 

 

 

 

 

676

 

Total sales

 

$

1,835

 

 

$

1,920

 

 

$

 

 

$

 

 

$

3,755

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

$

 

 

$

 

 

$

1,917

 

Filtration

 

372

 

 

374

 

 

 

 

 

 

746

 

Turbo technologies

 

367

 

 

351

 

 

 

 

 

 

718

 

Electronics and fuel systems

 

263

 

 

241

 

 

 

 

 

 

504

 

Automated transmissions

 

115

 

 

146

 

 

 

 

 

 

261

 

Total sales

 

$

2,152

 

 

$

1,994

 

 

$

 

 

$

 

 

$

4,146

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

$

 

 

$

 

 

$

1,266

 

Industrial

 

324

 

 

399

 

 

 

 

 

 

723

 

Generator technologies

 

87

 

 

89

 

 

 

 

 

 

176

 

Total sales

 

$

1,022

 

 

$

1,143

 

 

$

 

 

$

 

 

$

2,165

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

3,900

 

Industrial

 

1,000

 

 

1,200

 

 

 

 

 

 

2,200

 

Total units

 

3,100

 

 

3,000

 

 

 

 

 

 

6,100

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

Cummins Inc.
Jon Mills
Phone: 317-658-4540
Email:  jon.mills@cummins.com

Source: Cummins Inc.