- Fourth quarter revenues of $5.8 billion; GAAP1 Net Income of
$501 million
- Fourth quarter EBITDA of 14.4 percent; Diluted EPS of
$3.36
- Full year revenues of $19.8 billion; GAAP1 Net Income of
$1.8 billion
- EBITDA for the full year was 15.7 percent of sales; Diluted
EPS of $12.01
- The company expects full year 2021 revenues to be up 8 to 12
percent, EBITDA expected to be in the range of 15.0 to 15.5
percent
Cummins Inc. (NYSE: CMI) today reported results for the fourth
quarter of 2020.
Fourth quarter revenues of $5.8 billion increased 5 percent from
the same quarter in 2019. Sales in North America were flat while
international revenues increased 12 percent driven by strong demand
in China truck and construction markets as well as the growth in
new product sales in India.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) in the fourth quarter were $837 million (14.4 percent of
sales), compared to $682 million (12.2 percent of sales) excluding
restructuring a year ago. Fourth quarter EBITDA included $36
million of expenses associated with reorganization activities and
facility closures primarily driven by transformation initiatives in
our Distribution segment.
Net income attributable to Cummins in the fourth quarter was
$501 million ($3.36 per diluted share) compared to $390 million
($2.56 per diluted share) excluding restructuring in 2019. The tax
rate in the fourth quarter was 19.7 percent.
Revenues for the full year were $19.8 billion, 16 percent lower
than 2019. Sales in North America declined 21 percent and
international revenues declined 7 percent. Sales declined in all
major regions except China, where demand for trucks and
construction equipment reached record levels.
“We faced many challenges in 2020 driven by the severe global
impact of the COVID-19 pandemic,” said Chairman and CEO Tom
Linebarger. “I want to thank all of our employees for their
dedication to our company and our customers as they adjusted to the
unprecedented slowdown in the global economy and then responded as
demand accelerated sharply in the second half of the year, all
while facing significant disruption to their daily routines at work
and home.”
EBITDA for the year was $3.1 billion (15.7 percent of sales)
compared to $3.7 billion (15.8 percent of sales) excluding
restructuring in 2019.
Net income attributable to Cummins for the full year was $1.8
billion ($12.01 per diluted share), compared to net income of $2.4
billion ($15.05 per diluted share) excluding restructuring in 2019.
The tax rate for 2020 was 22.5 percent.
2021 Outlook:
Based on the current forecast, Cummins projects full year 2021
revenues to be up 8 to 12 percent, and EBITDA to be in the range of
15.0 and 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 2020.
“Current indicators point to improving demand in a number of key
regions and markets in 2021. However, significant uncertainty
remains, requiring continued strong focus on managing costs and
cash flow as our markets continue to recover around the world. We
are still operating under a pandemic with extreme safety measures
in place and our suppliers and customers are doing the same. This
is presenting challenges to global supply chains as our industry
responds to rising demand across multiple end markets. Having
effectively managed through an extremely challenging 2020, Cummins
is in a strong position to keep investing in future growth while
continuing to return cash to shareholders,” said Chairman and CEO
Tom Linebarger.
The Company plans to return 75 percent of Operating Cash Flow to
shareholders in the form of dividends and share repurchases.
2020 Highlights:
- The Company announced the creation of the Cummins Advocates for
Racial Equity Group to focus on police reform, criminal justice,
social justice, and economic empowerment of Black people in the
United States.
- Cummins increased its cash dividend for the 11th straight year
and returned a total of $1.4 billion to shareholders in the form of
dividends and share repurchases.
- In response to the COVID-19 pandemic, the Company used its
filter technology to provide 146 tons of filtration media to mask
manufacturers across the globe, which has been used to produce more
than 108 million masks.
- The Company established a joint venture called NPROXX to
provide hydrogen storage tank solutions to customers in multiple
applications including rail, truck, bus, and other on-highway
applications to advance the adoption of hydrogen-based
technologies.
- In November of 2020, Cummins was named to the S&P Dow Jones
Sustainability Indices for North America, one of the premier
measures of corporate sustainability, for a 15th consecutive
year.
- Cummins is one of 21 companies named a “Culture Champion” in
October 2020 by a partnership between the Massachusetts Institute
of Technology and Glassdoor, one of the world’s leading recruiting
websites. The Company receives high marks for creating cultures of
integrity and respect while ranking first in the study’s category
for promoting a diverse and inclusive workplace culture.
1 Generally Accepted Accounting Principles
in the U.S.
Fourth quarter 2020 detail (all comparisons to same period in
2019):
Engine Segment
- Sales - $2.3 billion, up 2 percent
- Segment EBITDA - $338 million, or 14.5 percent of sales,
compared to $277 million or 12.1 percent of sales excluding
restructuring
- On-highway revenues increased 1 percent and off-highway
revenues increased 4 percent
- Sales were flat in North America but increased 8 percent in
international markets primarily due to increased demand in China
and India
Distribution Segment
- Sales - $2.0 billion, down 2 percent
- Segment EBITDA - $165 million, or 8.3 percent of sales,
compared to $164 million or 8.0 percent of sales excluding
restructuring
- Revenues in North America were down 7 percent and international
sales increased by 8 percent
- Increased demand in power generation markets offset by declines
in parts and service
Components Segment
- Sales - $1.8 billion, up 18 percent
- Segment EBITDA - $280 million, or 15.3 percent of sales,
compared to $209 million or 13.4 percent of sales excluding
restructuring
- Revenues in North America increased by 1 percent and
international sales increased by 40 percent due to higher demand in
China and India
Power Systems Segment
- Sales - $989 million, down 6 percent
- Segment EBITDA - $74 million, or 7.5 percent of sales, compared
to $55 million, or 5.2 percent of sales excluding
restructuring
- Power generation revenues decreased by 2 percent while
industrial revenues decreased 12 percent due to lower demand in
mining and oil and gas markets
New Power Segment
- Sales - $34 million, up 89 percent
- Segment EBITDA loss - $51 million
- Revenues increased due to greater demand in transit and school
bus markets in addition to 29 megawatts of electrolyzer projects
commissioned
- 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. 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:
market slowdown due to the impacts from 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;
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; aligning our capacity and
production with our demand, including impacts of COVID-19; a major
customer experiencing financial distress, particularly related to
the COVID-19 pandemic; 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; disruptions in
global credit and financial markets as the result of the COVID-19
pandemic; adverse impacts from government actions to stabilize
credit markets and financial institutions and other industries;
product recalls; the development of new technologies that reduce
demand for our current products and services; policy changes in
international trade; a slowdown in infrastructure development
and/or depressed commodity prices; the U.K.'s exit from the
European Union; labor relations or work stoppages; reliance on our
executive leadership team and other key personnel; lower than
expected acceptance of new or existing products or services;
changes in the engine outsourcing practices of significant
customers; 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; challenges or unexpected costs in completing cost
reduction actions and restructuring initiatives; failure to realize
expected results from our investment in Eaton Cummins Automated
Transmission Technologies joint venture; 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; variability in material and
commodity costs; the actions of, and income from, joint ventures
and other investees that we do not directly control; changes in
taxation; global legal and ethical compliance costs and risks;
product liability claims; increasingly stringent environmental laws
and regulations; 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; future bans or limitations on the use of diesel-powered
products; the price and availability of energy; our sales mix of
products; protection and validity of our patent and other
intellectual property rights; 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 2019 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
2020
2019
NET SALES
$
5,830
$
5,578
Cost of sales
4,469
4,265
GROSS MARGIN
1,361
1,313
OPERATING EXPENSES AND INCOME
Selling, general and administrative
expenses
576
632
Research, development and engineering
expenses
255
271
Equity, royalty and interest income from
investees
110
74
Restructuring actions
—
119
Other operating expense, net
(11
)
(11
)
OPERATING INCOME
629
354
Interest expense
29
22
Other income, net
35
31
INCOME BEFORE INCOME TAXES
635
363
Income tax expense
125
65
CONSOLIDATED NET INCOME
510
298
Less: Net income (loss) attributable to
noncontrolling interests
9
(2
)
NET INCOME ATTRIBUTABLE TO CUMMINS
INC.
$
501
$
300
EARNINGS PER COMMON SHARE ATTRIBUTABLE
TO CUMMINS INC.
Basic
$
3.39
$
1.98
Diluted
$
3.36
$
1.97
WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING
Basic
148.0
151.5
Diluted
149.3
152.4
(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
2020
2019
NET SALES
$
19,811
$
23,571
Cost of sales
14,917
17,591
GROSS MARGIN
4,894
5,980
OPERATING EXPENSES AND INCOME
Selling, general and administrative
expenses
2,125
2,454
Research, development and engineering
expenses
906
1,001
Equity, royalty and interest income from
investees
452
330
Restructuring actions
—
119
Other operating expense, net
(46
)
(36
)
OPERATING INCOME
2,269
2,700
Interest expense
100
109
Other income, net
169
243
INCOME BEFORE INCOME TAXES
2,338
2,834
Income tax expense
527
566
CONSOLIDATED NET INCOME
1,811
2,268
Less: Net income attributable to
noncontrolling interests
22
8
NET INCOME ATTRIBUTABLE TO CUMMINS
INC.
$
1,789
$
2,260
EARNINGS PER COMMON SHARE ATTRIBUTABLE
TO CUMMINS INC.
Basic
$
12.07
$
14.54
Diluted
$
12.01
$
14.48
WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING
Basic
148.2
155.4
Diluted
149.0
156.1
(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,
2020
December 31,
2019
ASSETS
Current assets
Cash and cash equivalents
$
3,401
$
1,129
Marketable securities
461
341
Total cash, cash equivalents and
marketable securities
3,862
1,470
Accounts and notes receivable, net
3,820
3,670
Inventories
3,425
3,486
Prepaid expenses and other current
assets
790
761
Total current assets
11,897
9,387
Long-term assets
Property, plant and equipment, net
4,255
4,245
Investments and advances related to equity
method investees
1,441
1,237
Goodwill
1,293
1,286
Other intangible assets, net
963
1,003
Pension assets
1,042
1,001
Other assets
1,733
1,578
Total assets
$
22,624
$
19,737
LIABILITIES
Current liabilities
Accounts payable (principally trade)
$
2,820
$
2,534
Loans payable
169
100
Commercial paper
323
660
Accrued compensation, benefits and
retirement costs
484
560
Current portion of accrued product
warranty
674
803
Current portion of deferred revenue
691
533
Other accrued expenses
1,112
1,039
Current maturities of long-term debt
62
31
Total current liabilities
6,335
6,260
Long-term liabilities
Long-term debt
3,610
1,576
Pensions and OPEB
630
591
Accrued product warranty
672
645
Deferred revenue
840
821
Other liabilities
1,548
1,379
Total liabilities
$
13,635
$
11,272
EQUITY
Cummins Inc. shareholders’ equity
Common stock, $2.50 par value, 500 shares
authorized, 222.4 and 222.4 shares issued
$
2,404
$
2,346
Retained earnings
15,419
14,416
Treasury stock, at cost, 74.8 and 71.7
shares
(7,779
)
(7,225
)
Common stock held by employee benefits
trust, at cost, — and 0.2 shares
—
(2
)
Accumulated other comprehensive loss
(1,982
)
(2,028
)
Total Cummins Inc. shareholders’
equity
8,062
7,507
Noncontrolling interests
927
958
Total equity
$
8,989
$
8,465
Total liabilities and equity
$
22,624
$
19,737
(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
2020
2019
NET CASH PROVIDED BY OPERATING
ACTIVITIES
$
1,142
$
838
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures
(260
)
(305
)
Investments in internal use software
(14
)
(25
)
Investments in and advances to equity
investees
(21
)
(4
)
Investments in marketable
securities—acquisitions
(171
)
(128
)
Investments in marketable
securities—liquidations
61
93
Cash flows from derivatives not designated
as hedges
19
42
Other, net
4
6
Net cash used in investing activities
(382
)
(321
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from borrowings
15
1
Net borrowings (payments) of commercial
paper
7
(242
)
Payments on borrowings and finance lease
obligations
(32
)
(49
)
Net borrowings under short-term credit
agreements
4
—
Dividend payments on common stock
(200
)
(199
)
Repurchases of common stock
(91
)
(465
)
Proceeds from issuing common stock
10
28
Other, net
3
29
Net cash used in financing activities
(284
)
(897
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
(42
)
(51
)
Net increase (decrease) in cash and cash
equivalents
434
(431
)
Cash and cash equivalents at beginning of
period
2,967
1,560
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
$
3,401
$
1,129
(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
2020
2019
NET CASH PROVIDED BY OPERATING
ACTIVITIES
$
2,722
$
3,181
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures
(528
)
(700
)
Investments in internal use software
(47
)
(75
)
Investments in and advances to equity
investees
(51
)
(20
)
Acquisitions of businesses, net of cash
acquired
—
(237
)
Investments in marketable
securities—acquisitions
(593
)
(495
)
Investments in marketable
securities—liquidations
469
389
Cash flows from derivatives not designated
as hedges
4
(44
)
Other, net
27
32
Net cash used in investing activities
(719
)
(1,150
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from borrowings
2,014
11
Net payments of commercial paper
(337
)
(120
)
Payments on borrowings and finance lease
obligations
(73
)
(96
)
Net borrowings under short-term credit
agreements
10
53
Distributions to noncontrolling
interests
(26
)
(33
)
Dividend payments on common stock
(782
)
(761
)
Repurchases of common stock
(641
)
(1,271
)
Proceeds from issuing common stock
88
76
Other, net
27
46
Net cash provided by (used in) financing
activities
280
(2,095
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
(11
)
(110
)
Net increase (decrease) in cash and cash
equivalents
2,272
(174
)
Cash and cash equivalents at beginning of
year
1,129
1,303
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
$
3,401
$
1,129
(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, 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 total sales
14.5
%
8.3
%
15.3
%
7.5
%
NM
11.2
%
14.4
%
Three months ended December 31, 2019
External sales
$
1,691
$
2,031
$
1,198
$
640
$
18
$
5,578
$
—
$
5,578
Intersegment sales
593
7
359
414
—
1,373
(1,373
)
—
Total sales
2,284
2,038
1,557
1,054
18
6,951
(1,373
)
5,578
Research, development and engineering expenses
92
7
77
59
36
271
—
271
Equity, royalty and interest income (loss) from investees
48
17
10
(1
)
—
74
—
74
Interest income
2
3
2
1
—
8
—
8
EBITDA (excluding restructuring actions)
277
164
209
55
(50
)
655
27
682
Restructuring actions
18
37
20
12
1
88
31
119
EBITDA (2)
259
127
189
43
(51
)
567
(4
)
563
Depreciation and amortization (3)
51
29
62
30
6
178
—
178
EBITDA (excluding restructuring actions) as a percentage of total
sales
12.1
%
8.0
%
13.4
%
5.2
%
NM
9.4
%
12.2
%
EBITDA as a percentage of total sales
11.3
%
6.2
%
12.1
%
4.1
%
NM
8.2
%
10.1
%
"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 December 31, 2020. The three
months ended December 31, 2019, includes a $31 million
restructuring charge related to corporate functions.
(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, 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
%
Year ended December 31, 2019
External sales
$
7,570
$
8,040
$
5,253
$
2,670
$
38
$
23,571
$
—
$
23,571
Intersegment sales
2,486
31
1,661
1,790
—
5,968
(5,968
)
—
Total sales
10,056
8,071
6,914
4,460
38
29,539
(5,968
)
23,571
Research, development and engineering
expenses
337
28
300
230
106
1,001
—
1,001
Equity, royalty and interest income from
investees
200
52
40
38
—
330
—
330
Interest income
15
15
8
8
—
46
—
46
EBITDA (excluding restructuring
actions)
1,472
693
1,117
524
(148
)
3,658
73
3,731
Restructuring actions
18
37
20
12
1
88
31
119
EBITDA (2)
1,454
656
1,097
512
(149
)
3,570
42
3,612
Depreciation and amortization (3)
202
115
222
118
12
669
—
669
EBITDA (excluding restructuring actions)
as a percentage of total sales
14.6
%
8.6
%
16.2
%
11.7
%
NM
12.4
%
15.8
%
EBITDA as a percentage of total sales
14.5
%
8.1
%
15.9
%
11.5
%
NM
12.1
%
15.3
%
"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 year ended December 31, 2020. The year ended
December 31, 2019, includes a $31 million restructuring charge
related to corporate functions.
(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, 2020 and December 31, 2019, respectively. A
portion of depreciation expense is included in "Research,
development and engineering expenses."
CUMMINS INC. AND SUBSIDIARIES RECONCILIATION
OF 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
2020
2019
2020
2019
EBITDA excluding restructuring actions
$
837
$
682
$
3,108
$
3,731
Less: Restructuring actions
—
119
—
119
Total EBITDA
837
563
3,108
3,612
Less:
Depreciation and amortization
173
178
670
669
Interest expense
29
22
100
109
Income before income taxes
$
635
$
363
$
2,338
$
2,834
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
2020
2019
2020
2019
Manufacturing entities
Beijing Foton Cummins Engine Co., Ltd.
$
32
$
4
$
113
$
60
Dongfeng Cummins Engine Company, Ltd.
9
12
63
52
Chongqing Cummins Engine Company, Ltd.
8
9
35
41
All other manufacturers
34
(1)
12
134
(1)(2)
88
Distribution entities
Komatsu Cummins Chile, Ltda.
8
9
31
28
All other distributors
1
2
2
2
Cummins share of net income
92
48
378
271
Royalty and interest income
18
26
74
59
Equity, royalty and interest income from
investees
$
110
$
74
$
452
$
330
(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 the three and twelve months ended
December 31, 2020, was 19.7 percent and 22.5 percent,
respectively.
The three months ended December 31, 2020, contained favorable
discrete items of $1 million, or $0.01 per share, consisting of $9
million of favorable changes of provision to return adjustments
relating to tax returns filed for 2019, almost offset by $8 million
of unfavorable net other discrete items.
The twelve months ended December 31, 2020, contained $26
million, or $0.17 per share, of unfavorable net discrete tax items,
primarily due to $33 million of unfavorable changes in tax reserves
and $10 million of withholding tax adjustments, partially offset by
$15 million of favorable changes due to the India Tax Law Change.
The India Tax Law Change eliminated the dividend distribution tax
and replaced it with a lower rate withholding tax as the burden
shifted from the dividend payor to the dividend recipient for a net
favorable income statement impact of $35 million.
The India Tax Law Change resulted in the following adjustments
to the Condensed Consolidated Statements of Net Income in the year
ended December 31, 2020:
In millions
Favorable
(Unfavorable)
Equity, royalty and interest income from
investees
$
37
Income tax expense (1)
17
Less: Net income attributable to
noncontrolling interests
(19
)
Net income statement impact
$
35
(1) The adjustment to "Income tax expense"
includes $15 million of favorable discrete items.
AVAILABLE LIQUIDITY AND CREDIT RATINGS
Available Liquidity
Cash provided by operations is typically our principal source of
liquidity with $2,722 million generated in the year ended December
31, 2020. Our sources of liquidity include:
December 31, 2020
In millions
Total
U.S.
International
Primary location of
international balances
Cash and cash equivalents
$
3,401
$
1,914
$
1,487
China, Singapore, Mexico, Belgium,
Australia, Canada
Marketable securities (1)
461
86
375
India
Total
$
3,862
$
2,000
$
1,862
Available credit capacity
Revolving credit facilities (2)
$
3,177
International and other uncommitted
domestic credit facilities
$
256
(1)The majority of marketable securities
could be liquidated into cash within a few days.
(2)The five-year credit facility for $2.0
billion and the 364-day credit facility for $1.5 billion, maturing
August 2023 and August 2021, respectively, are maintained primarily
to provide backup liquidity for our commercial paper borrowings and
general corporate purposes. At December 31, 2020, we had $323
million of commercial paper outstanding, which effectively reduced
the available capacity under our revolving credit facilities to
$3.2 billion.
Credit Ratings
Our rating and outlook from each of the credit rating agencies
as of the date of filing are shown in the table below.
Long-Term
Short-Term
Credit Rating Agency (1)
Senior Debt Rating
Debt Rating
Outlook
Standard and Poor’s Rating Services
A+
A1
Stable
Moody’s Investors Service, Inc.
A2
P1
Stable
(1) Credit ratings are not recommendations
to buy, are subject to change, and each rating should be evaluated
independently of any other rating. In addition, we undertake no
obligation to update disclosures concerning our credit ratings,
whether as a result of new information, future events or
otherwise.
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 December
31,
Years ended December
31,
In millions
2020
2019
2020
2019
Net income attributable to Cummins
Inc.
$
501
$
300
$
1,789
$
2,260
Net income attributable to Cummins Inc. as
a percentage of net sales
8.6
%
5.4
%
9.0
%
9.6
%
Add:
Net income (loss) attributable to
noncontrolling interests
9
(2
)
22
8
Consolidated net income
510
298
1,811
2,268
Add:
Interest expense
29
22
100
109
Income tax expense
125
65
527
566
Depreciation and amortization
173
178
670
669
EBITDA
$
837
$
563
$
3,108
$
3,612
EBITDA as a percentage of net sales
14.4
%
10.1
%
15.7
%
15.3
%
Add:
Restructuring actions
—
119
—
119
EBITDA, excluding impact of restructuring
actions
$
837
$
682
$
3,108
$
3,731
EBITDA, excluding impact of restructuring
actions, as a percentage of net sales
14.4
%
12.2
%
15.7
%
15.8
%
Net income and diluted earnings per share (EPS) attributable
to Cummins Inc. excluding restructuring actions
We believe these are useful measures of our operating
performance for the periods presented as they illustrate our
operating performance without regard to restructuring actions.
These measures are not in accordance with, or an alternative for
GAAP and may not be consistent with measures used by other
companies. This should be considered supplemental data. The
following table reconciles net income and diluted EPS attributable
to Cummins Inc. to net income and diluted EPS attributable to
Cummins Inc. excluding restructuring actions for the following
periods:
Three months ended December
31,
2019
In millions
Net Income
Diluted EPS
Net income and diluted EPS attributable to
Cummins Inc.
$
300
$
1.97
Restructuring actions, net of tax (1)
90
0.59
Net income and diluted EPS attributable to
Cummins Inc. excluding restructuring actions
$
390
$
2.56
Year ended December
31,
2019
In millions
Net Income
Diluted EPS
Net income and diluted EPS attributable to
Cummins Inc.
$
2,260
$
14.48
Restructuring actions, net of tax (1)
90
0.57
Net income and diluted EPS attributable to
Cummins Inc. excluding restructuring actions
$
2,350
$
15.05
(1) In the fourth quarter of 2019, we
recorded restructuring actions totaling $119 million ($90 million
after-tax).
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:
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
2019
In millions
Q1
Q2
Q3
Q4
YTD
Heavy-duty truck
$
979
$
970
$
851
$
755
$
3,555
Medium-duty truck and bus
721
739
645
602
2,707
Light-duty automotive
382
480
478
464
1,804
Off-highway
571
514
442
463
1,990
Total sales
$
2,653
$
2,703
$
2,416
$
2,284
$
10,056
Unit shipments by engine classification (including unit
shipments to Power Systems and off-highway engine units included in
their respective classification) were as follows:
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
2019
Units
Q1
Q2
Q3
Q4
YTD
Heavy-duty
33,900
35,000
28,000
25,700
122,600
Medium-duty
79,000
76,400
63,200
64,800
283,400
Light-duty
56,400
64,100
62,600
62,800
245,900
Total units
169,300
175,500
153,800
153,300
651,900
Distribution Segment Sales by Product Line
Sales for our Distribution segment by product line were as
follows:
2020
In millions
Q1
Q2
Q3
Q4
YTD
Parts
$
787
$
654
$
722
$
768
$
2,931
Power generation
376
377
416
523
1,692
Service
328
297
304
334
1,263
Engines
323
277
279
371
1,250
Total sales
$
1,814
$
1,605
$
1,721
$
1,996
$
7,136
2019
In millions
Q1
Q2
Q3
Q4
YTD
Parts
$
844
$
833
$
798
$
815
$
3,290
Power generation
403
427
467
487
1,784
Service
363
373
376
367
1,479
Engines
391
395
363
369
1,518
Total sales
$
2,001
$
2,028
$
2,004
$
2,038
$
8,071
Component Segment Sales by Product Line
Sales for our Components segment by product line were as
follows:
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
2019
In millions
Q1
Q2
Q3
Q4
YTD
Emission solutions
$
854
$
828
$
745
$
695
$
3,122
Filtration
325
331
310
315
1,281
Turbo technologies
335
319
279
285
1,218
Electronics and fuel systems
198
212
170
179
759
Automated transmissions
149
156
146
83
534
Total sales
$
1,861
$
1,846
$
1,650
$
1,557
$
6,914
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:
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
2019
In millions
Q1
Q2
Q3
Q4
YTD
Power generation
$
567
$
668
$
647
$
636
$
2,518
Industrial
420
432
392
332
1,576
Generator technologies
90
103
87
86
366
Total sales
$
1,077
$
1,203
$
1,126
$
1,054
$
4,460
High-horsepower unit shipments by engine classification were as
follows:
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
2019
Units
Q1
Q2
Q3
Q4
YTD
Power generation
2,100
2,300
2,300
2,400
9,100
Industrial
1,600
1,600
1,400
1,400
6,000
Total units
3,700
3,900
3,700
3,800
15,100
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210204005161/en/
Cummins Inc. Jon Mills Phone: 317-658-4540 Email:
jon.mills@cummins.com
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