RESULTS OF OPERATIONS
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Three months ended
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Favorable/
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Six months ended
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Favorable/
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July 4,
2021
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June 28,
2020
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(Unfavorable)
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July 4,
2021
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June 28,
2020
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(Unfavorable)
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In millions, except per share amounts
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Amount
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Percent
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Amount
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Percent
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NET SALES
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$
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6,111
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|
|
$
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3,852
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|
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$
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2,259
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|
|
59
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%
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$
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12,203
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|
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$
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8,863
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$
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3,340
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|
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38
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%
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|
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Cost of sales
|
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4,633
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|
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2,962
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(1,671)
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(56)
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%
|
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9,239
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|
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6,679
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(2,560)
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(38)
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%
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GROSS MARGIN
|
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1,478
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|
|
890
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|
|
588
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|
66
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%
|
|
2,964
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|
2,184
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|
780
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36
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%
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OPERATING EXPENSES AND INCOME
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Selling, general and administrative expenses
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600
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|
|
470
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(130)
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(28)
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%
|
|
1,174
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|
|
1,016
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(158)
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(16)
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%
|
|
|
Research, development and engineering expenses
|
|
276
|
|
|
189
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|
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(87)
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|
|
(46)
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%
|
|
536
|
|
|
427
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|
|
(109)
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|
|
(26)
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%
|
|
|
Equity, royalty and interest income from investees
|
|
137
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|
|
115
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|
|
22
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|
|
19
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%
|
|
303
|
|
|
244
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|
|
59
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|
|
24
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%
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|
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|
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|
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Other operating expense, net
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|
(4)
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|
|
(10)
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|
|
6
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|
|
60
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%
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|
(12)
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|
|
(15)
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|
|
3
|
|
|
20
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%
|
|
|
OPERATING INCOME
|
|
735
|
|
|
336
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|
|
399
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|
NM
|
|
1,545
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|
|
970
|
|
|
575
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|
|
59
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%
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
Interest expense
|
|
29
|
|
|
23
|
|
|
(6)
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|
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(26)
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%
|
|
57
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|
|
46
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|
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(11)
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(24)
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%
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|
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Other income, net
|
|
73
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|
|
49
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|
|
24
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|
|
49
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%
|
|
74
|
|
|
93
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|
|
(19)
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(20)
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%
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INCOME BEFORE INCOME TAXES
|
|
779
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|
362
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|
|
417
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NM
|
|
1,562
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|
|
1,017
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|
545
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|
|
54
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%
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Income tax expense
|
|
167
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|
|
93
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|
(74)
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(80)
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%
|
|
339
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|
220
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(119)
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(54)
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%
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CONSOLIDATED NET INCOME
|
|
612
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|
|
269
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|
|
343
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|
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NM
|
|
1,223
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|
797
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|
|
426
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|
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53
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%
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Less: Net income (loss) attributable to noncontrolling interests
|
|
12
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|
|
(7)
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|
|
(19)
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NM
|
|
20
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|
|
10
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(10)
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(100)
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%
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NET INCOME ATTRIBUTABLE TO CUMMINS INC.
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|
$
|
600
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$
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276
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$
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324
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NM
|
|
$
|
1,203
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|
$
|
787
|
|
|
$
|
416
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53
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%
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Diluted Earnings Per Common Share Attributable to Cummins Inc.
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|
$
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4.10
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$
|
1.86
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|
|
$
|
2.24
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NM
|
|
$
|
8.16
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|
|
$
|
5.29
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|
|
$
|
2.87
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|
54
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%
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|
"NM" - not meaningful information
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|
Three months ended
|
|
Favorable/
(Unfavorable)
|
|
Six months ended
|
|
Favorable/
(Unfavorable)
|
|
|
July 4,
2021
|
|
June 28,
2020
|
|
|
July 4,
2021
|
|
June 28,
2020
|
|
Percent of sales
|
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|
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Percentage Points
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Percentage Points
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Gross margin
|
|
24.2
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%
|
|
23.1
|
%
|
|
1.1
|
|
|
24.3
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%
|
|
24.6
|
%
|
|
(0.3)
|
|
Selling, general and administrative expenses
|
|
9.8
|
%
|
|
12.2
|
%
|
|
2.4
|
|
|
9.6
|
%
|
|
11.5
|
%
|
|
1.9
|
|
Research, development and engineering expenses
|
|
4.5
|
%
|
|
4.9
|
%
|
|
0.4
|
|
|
4.4
|
%
|
|
4.8
|
%
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net Sales
Net sales for the three months ended July 4, 2021, increased by $2,259 million versus the comparable period in 2020. The primary drivers were as follows:
•Engine segment sales increased 75 percent due to higher volumes in the North American heavy-duty truck and pick-up truck markets and global medium-duty truck markets.
•Components segment sales increased 73 percent largely due to higher emission solutions demand in North America, Western Europe and India.
•Power Systems segment sales increased 47 percent primarily due to higher demand in power generation markets in North America, China and India and global mining markets.
•Distribution segment sales increased 20 percent principally due to higher demand in North America across all product lines.
•Favorable foreign currency fluctuations of 3 percent of total sales, primarily in the Chinese renminbi, Euro, Australian dollar and British pound.
Net sales for the six months ended July 4, 2021, increased $3,340 million versus the comparable period in 2020. The primary drivers were as follows:
•Components segment sales increased 56 percent largely due to higher emission solutions demand in North America, China and India.
•Engine segment sales increased 38 percent due to increased volumes in the North American heavy-duty truck and pick-up truck markets and global medium-duty truck markets.
•Power Systems segment sales increased 30 percent primarily due to higher demand in power generation markets in North America, China, India and Asia Pacific and global mining markets.
•Distribution segment sales increased 10 percent principally due to higher demand in North America, especially in the whole goods and service product lines.
•Favorable foreign currency fluctuations of 2 percent of total sales, primarily in the Chinese renminbi, Euro, Australian dollar and British pound, partially offset by the Brazilian real.
Sales to international markets (excluding the U.S. and Canada), based on location of customers, for the three and six months ended July 4, 2021, were 43 percent and 44 percent of total net sales compared with 48 percent and 42 percent of total net sales for the comparable periods in 2020. A more detailed discussion of sales by segment is presented in the “OPERATING SEGMENT RESULTS” section.
Cost of Sales
The types of expenses included in cost of sales are the following: parts and material consumption, including direct and indirect materials; salaries, wages and benefits; depreciation on production equipment and facilities and amortization of technology intangibles; estimated costs of warranty programs and campaigns; production utilities; production-related purchasing; warehousing, including receiving and inspection; freight costs; engineering support costs; repairs and maintenance; production and warehousing facility property insurance; rent for production facilities and other production overhead.
Gross Margin
Gross margin increased $588 million for the three months ended July 4, 2021 and increased 1.1 points as a percentage of sales, versus the comparable period in 2020. The increases in gross margin and gross margin as a percentage of sales were primarily due to higher volumes and improved pricing, partially offset by higher overall compensation, higher premium freight costs due to supply chain constraints and rising commodity costs.
Gross margin increased $780 million for the six months ended July 4, 2021 and decreased 0.3 points as a percentage of sales versus the comparable period in 2020. The increase in gross margin was primarily due to higher volumes and improved pricing, partially offset by higher overall compensation expenses, increased premium freight costs due to supply chain constraints and rising commodity costs. The decrease in gross margin as a percentage of sales was primarily due to higher overall compensation, increased premium freight costs due to supply chain constraints and rising commodity costs.
The provision for base warranties issued as a percent of sales for the three and six months ended July 4, 2021, was 2.4 percent and 2.5 percent, respectively, compared to 1.7 percent and 1.8 percent for the comparable periods in 2020. A detailed discussion of gross margin by segment is presented in the “OPERATING SEGMENT RESULTS” section.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $130 million for the three months ended July 4, 2021, versus the comparable period in 2020, primarily due to higher overall compensation. Overall, selling, general and administrative expenses as a percentage of sales decreased to 9.8 percent in the three months ended July 4, 2021, from 12.2 percent in the comparable period in 2020. The decrease in selling, general and administrative expenses as a percentage of sales was mainly due to sales increasing faster than selling, general and administrative expenses, despite higher compensation expenses.
Selling, general and administrative expenses increased $158 million for the six months ended July 4, 2021, versus the comparable period in 2020, primarily due to higher overall compensation. Overall, selling, general and administrative expenses as a percentage of sales decreased to 9.6 percent in the six months ended July 4, 2021, from 11.5 percent in the comparable period in 2020. The decrease in selling, general and administrative expenses as a percentage of sales was primarily due to sales increasing faster than selling, general and administrative expenses, despite higher compensation expenses.
Research, Development and Engineering Expenses
Research, development and engineering expenses increased $87 million for the three months ended July 4, 2021, versus the comparable period in 2020 primarily due to higher overall compensation, increased spending on prototypes and higher consulting expenses. Overall, research, development and engineering expenses as a percentage of sales decreased to 4.5 percent in the three months ended July 4, 2021, from 4.9 percent in the comparable period in 2020.
Research, development and engineering expenses increased $109 million for the six months ended July 4, 2021, versus the comparable period in 2020, primarily due to higher overall compensation and increased spending on prototypes. Overall, research, development and engineering expenses as a percentage of sales decreased to 4.4 percent in the six months ended July 4, 2021, from 4.8 percent in the comparable period in 2020. Research activities continue to focus on development of new products to meet future emission standards around the world, improvements in fuel economy performance of diesel and natural gas powered engines and related components as well as development activities around fully electric, hybrid and hydrogen powertrain solutions.
Equity, Royalty and Interest Income from Investees
Equity, royalty and interest income from investees increased $22 million for the three months ended July 4, 2021, versus the comparable period in 2020, primarily due to increased earnings at Beijing Foton Cummins Engine Co., Ltd. and Tata Cummins Ltd.
Equity, royalty and interest income from investees increased $59 million for the six months ended July 4, 2021, versus the comparable period in 2020, primarily due to higher earnings at Beijing Foton Cummins Engine Co., Ltd., Dongfeng Cummins Engine Co., Ltd., Tata Cummins Ltd. (excluding the 2020 benefits noted below) and Guangxi Cummins Industrial Power Co. These increases were partially offset by the absence of a $37 million favorable adjustment ($18 million of which related to Tata Cummins Ltd.) as the result of tax changes within India's 2020-2021 Union Budget of India (India Tax Law Changes) passed in March 2020 and $18 million of technology fee revenue related to Tata Cummins Ltd., both recorded in the first quarter of 2020. See Note 4, "INCOME TAXES," of the Notes to the Consolidated Financial Statements of our 2020 Form 10-K for additional information on India Tax Law Changes.
Other Operating Expense, Net
Other operating (expense) income, net was as follows:
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Three months ended
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Six months ended
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In millions
|
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July 4,
2021
|
|
June 28,
2020
|
|
|
July 4,
2021
|
|
June 28,
2020
|
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Amortization of intangible assets
|
|
$
|
(5)
|
|
|
$
|
(6)
|
|
|
|
$
|
(11)
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|
|
$
|
(11)
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|
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Loss on sale of assets, net
|
|
(2)
|
|
|
(5)
|
|
|
|
(1)
|
|
|
(6)
|
|
|
Loss on write-off of assets
|
|
—
|
|
|
(3)
|
|
|
|
(4)
|
|
|
(5)
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|
|
Royalty income, net
|
|
3
|
|
|
—
|
|
|
|
5
|
|
|
2
|
|
|
Other, net
|
|
—
|
|
|
4
|
|
|
|
(1)
|
|
|
5
|
|
|
Total other operating expense, net
|
|
$
|
(4)
|
|
|
$
|
(10)
|
|
|
|
$
|
(12)
|
|
|
$
|
(15)
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|
|
|
|
|
|
|
|
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Interest Expense
Interest expense increased $6 million and $11 million for the three and six months ended July 4, 2021, versus the comparable periods in 2020, primarily due to increased interest expense associated with our $2 billion senior unsecured notes issued in August of 2020.
Other Income, Net
Other income (expense), net was as follows:
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|
Three months ended
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Six months ended
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In millions
|
|
July 4,
2021
|
|
|
June 28,
2020
|
|
|
July 4,
2021
|
|
|
June 28,
2020
|
|
Non-service pension and OPEB credit
|
|
$
|
25
|
|
|
|
$
|
16
|
|
|
|
$
|
49
|
|
|
|
$
|
32
|
|
|
Gain (loss) on corporate owned life insurance
|
|
20
|
|
|
|
21
|
|
|
|
(12)
|
|
|
|
38
|
|
|
Gain on sale of land
|
|
18
|
|
|
|
—
|
|
|
|
18
|
|
|
|
—
|
|
|
Interest income
|
|
5
|
|
|
|
4
|
|
|
|
11
|
|
|
|
11
|
|
|
Gain on marketable securities, net
|
|
3
|
|
|
|
7
|
|
|
|
3
|
|
|
|
4
|
|
|
Foreign currency gain (loss), net
|
|
3
|
|
|
|
(2)
|
|
|
|
(2)
|
|
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net
|
|
(1)
|
|
|
|
3
|
|
|
|
7
|
|
|
|
11
|
|
|
Total other income, net
|
|
$
|
73
|
|
|
|
$
|
49
|
|
|
|
$
|
74
|
|
|
|
$
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Expense
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. Our effective tax rates for the three and six months ended June 28, 2020, were 25.7 percent and 21.6 percent, respectively.
The three months ended July 4, 2021, contained unfavorable discrete items of $7 million, 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, 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.
The three months ended June 28, 2020, contained unfavorable discrete items of $14 million, primarily due to changes in tax reserves on certain U.S. tax matters.
Noncontrolling Interests
Noncontrolling interests eliminate the income or loss attributable to non-Cummins ownership interests in our consolidated entities. Noncontrolling interests in income of consolidated subsidiaries for the three and six months ended July 4, 2021, increased $19 million and $10 million, respectively, versus the comparable periods in 2020. The increase for the three months ended July 4, 2021, was primarily due to higher earnings at Cummins India Limited and Eaton Cummins Joint Venture. The increase for the six months ended July 4, 2021, is principally due to higher earnings at Cummins India Limited and Eaton Cummins Joint Venture, partially offset by the absence of a $19 million unfavorable adjustment as the results of India Tax Law Changes passed in March 2020. See Note 4, "INCOME TAXES," of the Notes to the Consolidated Financial Statements of our 2020 Form 10-K for additional information on India Tax Law Changes.
Net Income Attributable to Cummins Inc. and Diluted Earnings Per Common Share Attributable to Cummins Inc.
Net income and diluted earnings per common share attributable to Cummins Inc. for the three months ended July 4, 2021, increased $324 million and $2.24 per diluted share versus the comparable period in 2020, primarily due to higher net sales, increased gross margin and gross margin as a percentage of sales, higher equity, royalty and interest income from investees (primarily in China and India) and a lower effective tax rate, partially offset by higher overall compensation and incremental costs associated with supply chain constraints. Diluted earnings per common share for the three months ended July 4, 2021, benefited $0.04 from fewer weighted-average shares outstanding due to the stock repurchase program.
Net income and diluted earnings per common share attributable to Cummins Inc. for the six months ended July 4, 2021, increased $416 million and $2.87 per diluted share versus the comparable period in 2020, primarily due to higher net sales, increased gross margin and higher equity, royalty and interest income from investees (primarily in China due to stronger demand for trucks and construction equipment), partially offset by higher overall compensation, incremental costs associated with supply chain constraints and mark-to-market losses on corporate owned life insurance. Diluted earnings per common share for the six months ended July 4, 2021, benefited $0.10 from fewer weighted-average shares outstanding due to the stock repurchase program.
Comprehensive Income - Foreign Currency Translation Adjustment
The foreign currency translation adjustment was a net gain of $22 million and net loss of $34 million, respectively, for the three and six months ended July 4, 2021, compared to a net loss of $11 million and $173 million, respectively, for the three and six months ended June 28, 2020 and was driven by the following:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
July 4,
2021
|
|
June 28,
2020
|
In millions
|
|
Translation adjustment
|
|
Primary currency driver vs. U.S. dollar
|
|
Translation adjustment
|
|
Primary currency driver vs. U.S. dollar
|
Wholly-owned subsidiaries
|
|
$
|
20
|
|
|
Brazilian real, Chinese renminbi, offset by Indian rupee, British pound
|
|
$
|
(7)
|
|
|
Brazilian real, Indian rupee, offset by Australian dollar, South African rand
|
Equity method investments
|
|
9
|
|
|
Chinese renminbi, offset by Indian rupee
|
|
1
|
|
|
British pound, Chinese renminbi, offset by Indian rupee
|
Consolidated subsidiaries with a noncontrolling interest
|
|
(7)
|
|
|
Indian rupee
|
|
(5)
|
|
|
Indian rupee
|
Total
|
|
$
|
22
|
|
|
|
|
$
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
July 4,
2021
|
|
June 28,
2020
|
In millions
|
|
Translation adjustment
|
|
Primary currency driver vs. U.S. dollar
|
|
Translation adjustment
|
|
Primary currency driver vs. U.S. dollar
|
Wholly-owned subsidiaries
|
|
$
|
(28)
|
|
|
British pound, Indian rupee, offset by Chinese renminbi
|
|
$
|
(131)
|
|
|
Brazilian real, Indian rupee, Chinese renminbi, British pound
|
Equity method investments
|
|
1
|
|
|
Chinese renminbi, offset by Indian rupee
|
|
(20)
|
|
|
Chinese renminbi, Indian rupee
|
Consolidated subsidiaries with a noncontrolling interest
|
|
(7)
|
|
|
Indian rupee
|
|
(22)
|
|
|
Indian rupee
|
Total
|
|
$
|
(34)
|
|
|
|
|
$
|
(173)
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING SEGMENT RESULTS
Our reportable operating segments consist of the Engine, Distribution, Components, Power Systems and New Power segments. This reporting structure is organized according to the products and markets each segment serves. We use segment EBITDA as a primary basis for the Chief Operating Decision Maker to evaluate the performance of each of our reportable operating segments. 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. Segment amounts exclude certain expenses not specifically identifiable to segments. See Note 13, "OPERATING SEGMENTS," to the Condensed Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Condensed Consolidated Statements of Net Income.
Following is a discussion of results for each of our operating segments.
Engine Segment Results
Financial data for the Engine segment was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
In millions
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
External sales
|
|
$
|
1,920
|
|
|
$
|
937
|
|
|
$
|
983
|
|
|
NM
|
|
$
|
3,815
|
|
|
$
|
2,516
|
|
|
$
|
1,299
|
|
|
52
|
%
|
Intersegment sales
|
|
571
|
|
|
486
|
|
|
85
|
|
|
17
|
%
|
|
1,135
|
|
|
1,065
|
|
|
70
|
|
|
7
|
%
|
Total sales
|
|
2,491
|
|
|
1,423
|
|
|
1,068
|
|
|
75
|
%
|
|
4,950
|
|
|
3,581
|
|
|
1,369
|
|
|
38
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, development and engineering expenses
|
|
99
|
|
|
65
|
|
|
(34)
|
|
|
(52)
|
%
|
|
191
|
|
|
145
|
|
|
(46)
|
|
|
(32)
|
%
|
Equity, royalty and interest income from investees
|
|
104
|
|
|
84
|
|
|
20
|
|
|
24
|
%
|
|
217
|
|
|
162
|
|
|
55
|
|
|
34
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
%
|
|
4
|
|
|
5
|
|
|
(1)
|
|
|
(20)
|
%
|
Segment EBITDA
|
|
402
|
|
|
150
|
|
|
252
|
|
|
NM
|
|
756
|
|
|
515
|
|
|
241
|
|
|
47
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage Points
|
|
|
|
|
|
Percentage Points
|
Segment EBITDA as a percentage of total sales
|
|
16.1
|
%
|
|
10.5
|
%
|
|
|
|
5.6
|
|
|
15.3
|
%
|
|
14.4
|
%
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
"NM" - not meaningful information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales for our Engine segment by market were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
In millions
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
Heavy-duty truck
|
|
$
|
839
|
|
|
$
|
415
|
|
|
$
|
424
|
|
|
NM
|
|
$
|
1,666
|
|
|
$
|
1,165
|
|
|
$
|
501
|
|
|
43
|
%
|
Medium-duty truck and bus
|
|
688
|
|
|
391
|
|
|
297
|
|
|
76
|
%
|
|
1,362
|
|
|
1,009
|
|
|
353
|
|
|
35
|
%
|
Light-duty automotive
|
|
484
|
|
|
180
|
|
|
304
|
|
|
NM
|
|
965
|
|
|
533
|
|
|
432
|
|
|
81
|
%
|
Total on-highway
|
|
2,011
|
|
|
986
|
|
|
1,025
|
|
|
NM
|
|
3,993
|
|
|
2,707
|
|
|
1,286
|
|
|
48
|
%
|
Off-highway
|
|
480
|
|
|
437
|
|
|
43
|
|
|
10
|
%
|
|
957
|
|
|
874
|
|
|
83
|
|
|
9
|
%
|
Total sales
|
|
$
|
2,491
|
|
|
$
|
1,423
|
|
|
$
|
1,068
|
|
|
75
|
%
|
|
$
|
4,950
|
|
|
$
|
3,581
|
|
|
$
|
1,369
|
|
|
38
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage Points
|
|
|
|
|
|
Percentage Points
|
On-highway sales as percentage of total sales
|
|
81
|
%
|
|
69
|
%
|
|
|
|
12
|
|
|
81
|
%
|
|
76
|
%
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
"NM" - not meaningful information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit shipments by engine classification (including unit shipments to Power Systems and off-highway engine units included in their respective classification) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
Heavy-duty
|
|
29,400
|
|
|
15,900
|
|
|
13,500
|
|
|
85
|
%
|
|
60,100
|
|
|
41,700
|
|
|
18,400
|
|
|
44
|
%
|
Medium-duty
|
|
67,500
|
|
|
44,900
|
|
|
22,600
|
|
|
50
|
%
|
|
140,600
|
|
|
106,100
|
|
|
34,500
|
|
|
33
|
%
|
Light-duty
|
|
68,100
|
|
|
29,800
|
|
|
38,300
|
|
|
NM
|
|
136,600
|
|
|
79,200
|
|
|
57,400
|
|
|
72
|
%
|
Total unit shipments
|
|
165,000
|
|
|
90,600
|
|
|
74,400
|
|
|
82
|
%
|
|
337,300
|
|
|
227,000
|
|
|
110,300
|
|
|
49
|
%
|
Sales
Engine segment sales for the three months ended July 4, 2021, increased $1,068 million versus the comparable period in 2020. The following were the primary drivers by market:
•Heavy-duty truck sales increased $424 million principally due to higher volumes in North America with shipments up 219 percent.
•Light-duty automotive sales increased $304 million primarily due to increased pick-up truck sales in North America with shipments up 272 percent.
•Medium-duty truck and bus sales increased $297 million mainly due to higher global medium-duty demand, especially in North America, Western Europe, Brazil and Mexico.
Our industry continues to be unfavorably impacted by supply chain constraints, primarily semiconductor chips, which are limiting our collective ability to meet end-user demand.
Engine segment sales for the six months ended July 4, 2021, increased $1,369 million versus the comparable period in 2020. The following were the primary drivers by market:
•Heavy-duty truck sales increased $501 million principally due to higher volumes in North America with shipments up 85 percent.
•Light-duty truck automotive sales increased $432 million primarily due to higher pick-up sales in North America with shipments up 113 percent.
•Medium-duty truck and bus sales increased $353 million mainly due to higher global medium-duty demand, especially in North America, Western Europe and Brazil, partially offset by lower bus sales, mainly in North America and Western Europe.
Our industry continues to be unfavorably impacted by supply chain constraints, primarily semiconductor chips, which are limiting our collective ability to meet end-user demand.
Segment EBITDA
Engine segment EBITDA for the three months ended July 4, 2021, increased $252 million versus the comparable period in 2020, primarily due to higher gross margin and increased equity, royalty and interest income from investees, partially offset by higher selling, general and administrative expenses and increased research, development and engineering expenses. The increase in gross margin and gross margin as a percentage of sales was mainly due to higher volumes and favorable pricing, partially offset by higher overall compensation, increased premium freight due to supply chain constraints and rising commodity costs. The increase in selling, general and administrative expenses was due to higher overall compensation and higher consulting expenses. The increase in research, development and engineering expenses was due to higher overall compensation and increased spending on prototypes. The increase in equity, royalty and interest income from investees was principally due to increased earnings at Beijing Foton Cummins Engine Co., Ltd. and Tata Cummins Ltd.
Engine segment EBITDA for the six months ended July 4, 2021, increased $241 million versus the comparable period in 2020, primarily due to higher gross margin and increased equity, royalty and interest income from investees, partially offset by increased selling, general and administrative expenses and higher research, development and engineering expenses. The increase in gross margin and gross margin as a percentage of sales was mainly due to higher volumes and improved pricing, partially offset by higher overall compensation, increased premium freight due to supply chain constraints and rising commodity costs. Selling, general and administrative expenses increased principally due to higher overall compensation. The increase in research, development and engineering expenses was primarily due to higher overall compensation and increased spending on prototypes. The increase in equity, royalty and interest income from investees was largely due to increased earnings at Beijing Foton Cummins Engine Co., Ltd., Dongfeng Cummins Engine Co., Ltd., Tata Cummins Ltd. (excluding the 2020 benefits noted below) and Guangxi Cummins Industrial Power Co., partially offset by the absence of an $18 million favorable adjustment related to India Tax Law Changes passed in March 2020 and $18 million of technology fee revenue both recorded in the first quarter of 2020 in Tata Cummins Ltd. See Note 4, "INCOME TAXES," of the Notes to the Consolidated Financial Statements of our 2020 Form 10-K for additional information on India Tax Law Changes.
Distribution Segment Results
Financial data for the Distribution segment was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
In millions
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
External sales
|
|
$
|
1,913
|
|
|
$
|
1,601
|
|
|
$
|
312
|
|
|
19
|
%
|
|
$
|
3,740
|
|
|
$
|
3,408
|
|
|
$
|
332
|
|
|
10
|
%
|
Intersegment sales
|
|
7
|
|
|
4
|
|
|
3
|
|
|
75
|
%
|
|
15
|
|
|
11
|
|
|
4
|
|
|
36
|
%
|
Total sales
|
|
1,920
|
|
|
1,605
|
|
|
315
|
|
|
20
|
%
|
|
3,755
|
|
|
3,419
|
|
|
336
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, development and engineering expenses
|
|
12
|
|
|
4
|
|
|
(8)
|
|
|
NM
|
|
25
|
|
|
11
|
|
|
(14)
|
|
|
NM
|
Equity, royalty and interest income from investees
|
|
15
|
|
|
11
|
|
|
4
|
|
|
36
|
%
|
|
32
|
|
|
32
|
|
|
—
|
|
|
—
|
%
|
Interest income
|
|
2
|
|
|
1
|
|
|
1
|
|
|
100
|
%
|
|
3
|
|
|
2
|
|
|
1
|
|
|
50
|
%
|
Segment EBITDA
|
|
201
|
|
|
160
|
|
|
41
|
|
|
26
|
%
|
|
361
|
|
|
318
|
|
|
43
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage Points
|
|
|
|
|
|
Percentage Points
|
Segment EBITDA as a percentage of total sales
|
|
10.5
|
%
|
|
10.0
|
%
|
|
|
|
0.5
|
|
|
9.6
|
%
|
|
9.3
|
%
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
"NM" - not meaningful information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales for our Distribution segment by region were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
In millions
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
North America
|
|
$
|
1,230
|
|
|
$
|
1,041
|
|
|
$
|
189
|
|
|
18
|
%
|
|
$
|
2,401
|
|
|
$
|
2,287
|
|
|
$
|
114
|
|
|
5
|
%
|
Asia Pacific
|
|
227
|
|
|
190
|
|
|
37
|
|
|
19
|
%
|
|
441
|
|
|
386
|
|
|
55
|
|
|
14
|
%
|
Europe
|
|
161
|
|
|
136
|
|
|
25
|
|
|
18
|
%
|
|
324
|
|
|
272
|
|
|
52
|
|
|
19
|
%
|
China
|
|
77
|
|
|
101
|
|
|
(24)
|
|
|
(24)
|
%
|
|
164
|
|
|
169
|
|
|
(5)
|
|
|
(3)
|
%
|
Africa and Middle East
|
|
69
|
|
|
38
|
|
|
31
|
|
|
82
|
%
|
|
123
|
|
|
89
|
|
|
34
|
|
|
38
|
%
|
Russia
|
|
66
|
|
|
44
|
|
|
22
|
|
|
50
|
%
|
|
123
|
|
|
86
|
|
|
37
|
|
|
43
|
%
|
Latin America
|
|
48
|
|
|
32
|
|
|
16
|
|
|
50
|
%
|
|
88
|
|
|
71
|
|
|
17
|
|
|
24
|
%
|
India
|
|
42
|
|
|
23
|
|
|
19
|
|
|
83
|
%
|
|
91
|
|
|
59
|
|
|
32
|
|
|
54
|
%
|
Total sales
|
|
$
|
1,920
|
|
|
$
|
1,605
|
|
|
$
|
315
|
|
|
20
|
%
|
|
$
|
3,755
|
|
|
$
|
3,419
|
|
|
$
|
336
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales for our Distribution segment by product line were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
In millions
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
Parts
|
|
$
|
765
|
|
|
$
|
654
|
|
|
$
|
111
|
|
|
17
|
%
|
|
$
|
1,522
|
|
|
$
|
1,441
|
|
|
$
|
81
|
|
|
6
|
%
|
Power generation
|
|
454
|
|
|
377
|
|
|
77
|
|
|
20
|
%
|
|
872
|
|
|
753
|
|
|
119
|
|
|
16
|
%
|
Engines
|
|
351
|
|
|
277
|
|
|
74
|
|
|
27
|
%
|
|
685
|
|
|
600
|
|
|
85
|
|
|
14
|
%
|
Service
|
|
350
|
|
|
297
|
|
|
53
|
|
|
18
|
%
|
|
676
|
|
|
625
|
|
|
51
|
|
|
8
|
%
|
Total sales
|
|
$
|
1,920
|
|
|
$
|
1,605
|
|
|
$
|
315
|
|
|
20
|
%
|
|
$
|
3,755
|
|
|
$
|
3,419
|
|
|
$
|
336
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
Distribution segment sales for the three months ended July 4, 2021, increased $315 million versus the comparable period in 2020. The following were the primary drivers by region:
•North American sales increased $189 million, representing 60 percent of the total change in Distribution segment sales, due to higher demand in all product lines.
•Improved demand in Asia Pacific and Africa and Middle East.
•Favorable foreign currency fluctuations, primarily in the Australian dollar, Canadian dollar and Euro.
Distribution segment sales for the six months ended July 4, 2021, increased $336 million versus the comparable period in 2020. The following were the primary drivers by region:
•North American sales increased $114 million, representing 34 percent of the total change in Distribution segment sales, due to higher demand in whole goods and service.
•Improved demand in Asia Pacific, Europe and Russia.
•Favorable foreign currency fluctuations, mainly in the Australian dollar, Euro and Canadian dollar.
Segment EBITDA
Distribution segment EBITDA for the three months ended July 4, 2021, increased $41 million versus the comparable period in 2020, primarily due to higher gross margin, an $18 million gain on sale of land and favorable foreign currency fluctuations (principally in the Australian dollar, South African rand and Canadian dollar), partially offset by increased selling, general and administrative expenses. The increase in gross margin and gross margin as a percentage of sales was mainly due to higher volume and favorable foreign currency fluctuations (primarily in the Australian dollar, Canadian dollar and South African rand), partially offset by higher overall compensation. The increase in selling, general and administrative expenses was due to higher overall compensation.
Distribution segment EBITDA for the six months ended July 4, 2021, increased $43 million versus the comparable period in 2020, primarily due to higher gross margin, an $18 million gain on sale of land and favorable foreign currency fluctuations (principally in the Australian dollar), partially offset by increased selling, general and administrative expenses. The increase in gross margin and gross margin as a percentage of sales was mainly due to higher volumes, favorable foreign currency fluctuations (primarily in the Australian dollar, Canadian dollar and South African rand) and improved pricing, partially offset by higher overall compensation. The increase in selling, general and administrative expenses was due to higher overall compensation, partially offset by decreased consulting expenses and lower travel costs.
Components Segment Results
Financial data for the Components segment was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
In millions
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
External sales
|
|
$
|
1,556
|
|
|
$
|
876
|
|
|
$
|
680
|
|
|
78
|
%
|
|
$
|
3,280
|
|
|
$
|
1,991
|
|
|
$
|
1,289
|
|
|
65
|
%
|
Intersegment sales
|
|
438
|
|
|
274
|
|
|
164
|
|
|
60
|
%
|
|
866
|
|
|
661
|
|
|
205
|
|
|
31
|
%
|
Total sales
|
|
1,994
|
|
|
1,150
|
|
|
844
|
|
|
73
|
%
|
|
4,146
|
|
|
2,652
|
|
|
1,494
|
|
|
56
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, development and engineering expenses
|
|
79
|
|
|
55
|
|
|
(24)
|
|
|
(44)
|
%
|
|
154
|
|
|
123
|
|
|
(31)
|
|
|
(25)
|
%
|
Equity, royalty and interest income from investees
|
|
12
|
|
|
12
|
|
|
—
|
|
|
—
|
%
|
|
31
|
|
|
33
|
|
|
(2)
|
|
|
(6)
|
%
|
Interest income
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
%
|
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
%
|
Segment EBITDA
|
|
301
|
|
|
141
|
|
|
160
|
|
|
NM
|
|
722
|
|
|
420
|
|
|
302
|
|
|
72
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage Points
|
|
|
|
|
|
Percentage Points
|
Segment EBITDA as a percentage of total sales
|
|
15.1
|
%
|
|
12.3
|
%
|
|
|
|
2.8
|
|
|
17.4
|
%
|
|
15.8
|
%
|
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
"NM" - not meaningful information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales for our Components segment by business were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
In millions
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
Emission solutions
|
|
$
|
882
|
|
|
$
|
472
|
|
|
$
|
410
|
|
|
87
|
%
|
|
$
|
1,917
|
|
|
$
|
1,136
|
|
|
$
|
781
|
|
|
69
|
%
|
Filtration
|
|
374
|
|
|
255
|
|
|
119
|
|
|
47
|
%
|
|
746
|
|
|
567
|
|
|
179
|
|
|
32
|
%
|
Turbo technologies
|
|
351
|
|
|
216
|
|
|
135
|
|
|
63
|
%
|
|
718
|
|
|
486
|
|
|
232
|
|
|
48
|
%
|
Electronics and fuel systems
|
|
241
|
|
|
164
|
|
|
77
|
|
|
47
|
%
|
|
504
|
|
|
338
|
|
|
166
|
|
|
49
|
%
|
Automated transmissions
|
|
146
|
|
|
43
|
|
|
103
|
|
|
NM
|
|
261
|
|
|
125
|
|
|
136
|
|
|
NM
|
Total sales
|
|
$
|
1,994
|
|
|
$
|
1,150
|
|
|
$
|
844
|
|
|
73
|
%
|
|
$
|
4,146
|
|
|
$
|
2,652
|
|
|
$
|
1,494
|
|
|
56
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
Components segment sales for the three months ended July 4, 2021, increased $844 million versus the comparable period in 2020. The following were the primary drivers by business:
•Emission solutions sales increased $410 million primarily due to stronger demand in North America, Western Europe and India.
•Turbo technologies sales increased $135 million principally due to higher demand in North America and Western Europe.
•Filtration sales increased $119 million mainly due to stronger demand in North America, Europe, Latin America and Asia Pacific.
•Favorable foreign currency fluctuations, primarily in the Chinese renminbi and Euro.
Our industry continues to be unfavorably impacted by supply chain constraints, primarily semiconductor chips, which are limiting our collective ability to meet end-user demand.
Components segment sales for the six months ended July 4, 2021, increased $1,494 million versus the comparable period in 2020. The following were the primary drivers by business:
•Emission solutions sales increased $781 million principally due to stronger demand in North America, China and India.
•Turbo technologies sales increased $232 million mainly due to higher demand in North America, Western Europe and China.
•Filtration sales increased $179 million primarily due to stronger market demand in North America, Europe, China and Asia Pacific.
•Favorable foreign currency fluctuations primarily in the Chinese renminbi and Euro.
Our industry continues to be unfavorably impacted by supply chain constraints, primarily semiconductor chips, which are limiting our collective ability to meet end-user demand.
Segment EBITDA
Components segment EBITDA for the three months ended July 4, 2021, increased $160 million versus the comparable period in 2020, as higher gross margin was partially offset by higher selling, general and administrative expenses and increased research, development and engineering expenses. The increase in gross margin and gross margin as a percentage of sales was mainly due to higher volumes, partially offset by higher overall compensation, increased premium freight due to supply chain constraints and rising commodity costs. Selling, general and administrative expenses and research, development and engineering expenses increased due to higher overall compensation.
Components segment EBITDA for the six months ended July 4, 2021, increased $302 million versus the comparable period in 2020, as higher gross margin was partially offset by higher selling, general and administrative expenses, increased research, development and engineering expenses and lower equity, royalty and interest income from investees. The increase in gross margin and gross margin as a percentage of sales was mainly due to higher volumes and favorable mix, partially offset by higher overall compensation, increased premium freight due to supply chain constraints and rising commodity costs. Selling, general and administrative expenses and research, development and engineering expenses increased due to higher overall compensation. The decrease in equity, royalty and interest income from investees was principally due to the absence of a $14 million favorable adjustment related to India Tax Law Changes passed in March 2020 in Fleetguard Filters Private Ltd., partially offset by higher earnings at Fleetguard Filters Private Ltd. (excluding the absence of 2020 tax benefit noted above). See Note 4, "INCOME TAXES," of the Notes to the Consolidated Financial Statements of our 2020 Form 10-K for additional information on India Tax Law Changes.
Power Systems Segment Results
Financial data for the Power Systems segment was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
In millions
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
External sales
|
|
$
|
699
|
|
|
$
|
428
|
|
|
$
|
271
|
|
|
63
|
%
|
|
$
|
1,311
|
|
|
$
|
928
|
|
|
$
|
383
|
|
|
41
|
%
|
Intersegment sales
|
|
444
|
|
|
349
|
|
|
95
|
|
|
27
|
%
|
|
854
|
|
|
733
|
|
|
121
|
|
|
17
|
%
|
Total sales
|
|
1,143
|
|
|
777
|
|
|
366
|
|
|
47
|
%
|
|
2,165
|
|
|
1,661
|
|
|
504
|
|
|
30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, development and engineering expenses
|
|
60
|
|
|
41
|
|
|
(19)
|
|
|
(46)
|
%
|
|
117
|
|
|
95
|
|
|
(22)
|
|
|
(23)
|
%
|
Equity, royalty and interest income from investees
|
|
9
|
|
|
9
|
|
|
—
|
|
|
—
|
%
|
|
21
|
|
|
18
|
|
|
3
|
|
|
17
|
%
|
Interest income
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
%
|
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
%
|
Segment EBITDA
|
|
139
|
|
|
91
|
|
|
48
|
|
|
53
|
%
|
|
265
|
|
|
168
|
|
|
97
|
|
|
58
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage Points
|
|
|
|
|
|
Percentage Points
|
Segment EBITDA as a percentage of total sales
|
|
12.2
|
%
|
|
11.7
|
%
|
|
|
|
0.5
|
|
|
12.2
|
%
|
|
10.1
|
%
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales for our Power Systems segment by product line were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
In millions
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
Power generation
|
|
$
|
655
|
|
|
$
|
424
|
|
|
$
|
231
|
|
|
54
|
%
|
|
$
|
1,266
|
|
|
$
|
943
|
|
|
$
|
323
|
|
|
34
|
%
|
Industrial
|
|
399
|
|
|
291
|
|
|
108
|
|
|
37
|
%
|
|
723
|
|
|
587
|
|
|
136
|
|
|
23
|
%
|
Generator technologies
|
|
89
|
|
|
62
|
|
|
27
|
|
|
44
|
%
|
|
176
|
|
|
131
|
|
|
45
|
|
|
34
|
%
|
Total sales
|
|
$
|
1,143
|
|
|
$
|
777
|
|
|
$
|
366
|
|
|
47
|
%
|
|
$
|
2,165
|
|
|
$
|
1,661
|
|
|
$
|
504
|
|
|
30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
Power Systems segment sales for the three months ended July 4, 2021, increased $366 million versus the comparable period in 2020. The following were the primary drivers by product line:
•Power generation sales increased $231 million due to higher demand in North America, China and India.
•Industrial sales increased $108 million due to stronger demand in global mining markets and higher demand in oil and gas markets in China.
•Favorable foreign currency fluctuations, primarily in the Chinese renminbi and British pound.
Power Systems segment sales for the six months ended July 4, 2021, increased $504 million versus the comparable period in 2020. The following were the primary drivers by product line:
•Power generation sales increased $323 million due to higher demand in North America, China, India and Asia Pacific.
•Industrial sales increased $136 million due to higher demand in global mining markets.
•Favorable foreign currency fluctuations primarily in the Chinese renminbi, British pound and Euro.
Segment EBITDA
Power Systems segment EBITDA for the three months ended July 4, 2021, increased $48 million versus the comparable period in 2020, as higher gross margin was partially offset by increased selling, general and administrative expenses and higher research, development and engineering expenses. The increase in gross margin and gross margin as a percentage of sales was mainly due to higher volumes and improved pricing, partially offset by unfavorable mix and higher overall compensation. Selling, general and administrative expenses increased primarily due to higher overall compensation. Research, development and engineering expenses increased primarily due to higher overall compensation and increased spending on prototypes.
Power Systems segment EBITDA for the six months ended July 4, 2021, increased $97 million versus the comparable period in 2020, mainly due to higher gross margin and favorable foreign currency fluctuations (primarily in the Chinese Renminbi), partially offset by higher selling, general and administrative expenses and increased research, development and engineering expenses. The increase in gross margin and gross margin as a percentage of sales was mainly due to higher volumes and improved pricing, partially offset by unfavorable mix and higher overall compensation. Selling, general and administrative expenses and research, development and engineering expenses increased principally due to higher overall compensation.
New Power Segment Results
The New Power segment designs, manufactures, sells and supports hydrogen production solutions as well as electrified power systems ranging from fully electric to hybrid along with innovative components and subsystems, including battery and fuel cell technologies. The New Power segment is currently in the development phase with a primary focus on research and development activities for our power systems, components and subsystems. Financial data for the New Power segment was as follows:
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|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Favorable/
|
|
Six months ended
|
|
Favorable/
|
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
|
July 4,
|
|
June 28,
|
|
(Unfavorable)
|
In millions
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
|
2021
|
|
2020
|
|
Amount
|
|
Percent
|
External sales
|
|
$
|
23
|
|
|
$
|
10
|
|
|
$
|
13
|
|
|
NM
|
|
$
|
57
|
|
|
$
|
20
|
|
|
$
|
37
|
|
|
NM
|
Intersegment sales
|
|
1
|
|
|
—
|
|
|
1
|
|
|
NM
|
|
2
|
|
|
—
|
|
|
2
|
|
|
NM
|
Total sales
|
|
24
|
|
|
10
|
|
|
14
|
|
|
NM
|
|
59
|
|
|
20
|
|
|
39
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, development and engineering expenses
|
|
26
|
|
|
24
|
|
|
(2)
|
|
|
(8)
|
%
|
|
49
|
|
|
53
|
|
|
4
|
|
|
8
|
%
|
Equity, royalty and interest (loss) income from investees
|
|
(3)
|
|
|
(1)
|
|
|
(2)
|
|
|
NM
|
|
2
|
|
|
(1)
|
|
|
3
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment EBITDA
|
|
(60)
|
|
|
(38)
|
|
|
(22)
|
|
|
(58)
|
%
|
|
(111)
|
|
|
(81)
|
|
|
(30)
|
|
|
(37)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
"NM" - not meaningful information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OUTLOOK
COVID-19 Impact
The acceleration of the COVID-19 vaccine distribution around the world is helping curb the spread of the virus and will hopefully allow the majority of our manufacturing facilities to remain open to meet increasing customer demand. While the vaccination effort continues to progress globally, many markets are still dealing with rising cases, new COVID variants and slower vaccination rollout. We continue to take necessary precautions at all our facilities both in the U.S. and abroad to mitigate the spread of the disease and prioritize the health and safety of our employees. While we are optimistic that continued vaccination distribution globally will minimize the impacts of the virus, there is still a risk of increased cases or new virus variants resulting in lower customer demand, additional facility shutdowns or supply chain constraints in the future.
In March 2021, we gained approval as a COVID-19 vaccine administrator at several U.S. sites and began offering the vaccine to our employees and their families at certain facilities in the U.S. During the second quarter of 2021, we received approval and began providing vaccines to our employees in other international locations as allowed. We continue to collaborate with health officials around the world to provide employees with access to COVID-19 vaccines. That work differs geographically due to the variability in vaccine accessibility and distribution. Our global network of medical professionals is always focused on efforts to ensure the safety of all Cummins employees, their families and our communities.
Business Outlook
Our outlook reflects the following positive trends and challenges to our business for the remainder of 2021.
Positive Trends
•We expect demand for pick-up trucks in North America to remain strong.
•We estimate North American medium-duty and heavy-duty truck demand will continue to improve from 2020 levels.
•We believe market demand for trucks in India will improve from 2020 levels.
•We anticipate our aftermarket business will continue to improve, driven primarily by increased truck utilization in North America.
•Our liquidity of $6.2 billion in cash, marketable securities and available credit facilities strengthens our position to deal with any uncertainties that may arise in the remainder of 2021.
Challenges
•Supply constraints driven by strong demand in multiple end markets and regions may lead to increased costs, including higher premium freight.
•Continued increases in material and commodity costs could negatively impact earnings.
•The shortage of key components, such as semiconductor chips, may lead to manufacturing delays, increased costs and the loss of sales.
•We expect market demand in truck and construction markets in China to decline from record levels in 2020.
•We may close or restructure certain manufacturing and distribution facilities as we evaluate the appropriate size and structure of our manufacturing and distribution capacity, which could result in additional charges.
Separation of Filtration Business
On August 3, 2021, we announced our exploration of strategic alternatives for our filtration business. Potential strategic alternatives to be explored include the separation of our filtration business into a stand-alone company. The execution of this exploration process is dependent upon business and market conditions, along with a number of other factors and considerations.
LIQUIDITY AND CAPITAL RESOURCES
Key Working Capital and Balance Sheet Data
We fund our working capital with cash from operations and short-term borrowings, including commercial paper, when necessary. Various assets and liabilities, including short-term debt, can fluctuate significantly from month to month depending on short-term liquidity needs. As a result, working capital is a prime focus of management's attention. Working capital and balance sheet measures are provided in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in millions
|
|
July 4,
2021
|
|
December 31,
2020
|
Working capital (1)
|
|
$
|
5,327
|
|
|
$
|
5,562
|
|
Current ratio
|
|
1.81
|
|
|
1.88
|
|
Accounts and notes receivable, net
|
|
$
|
4,132
|
|
|
$
|
3,820
|
|
Days' sales in receivables
|
|
59
|
|
|
69
|
|
Inventories
|
|
$
|
4,076
|
|
|
$
|
3,425
|
|
Inventory turnover
|
|
4.8
|
|
|
4.2
|
|
Accounts payable (principally trade)
|
|
$
|
3,172
|
|
|
$
|
2,820
|
|
Days' payable outstanding
|
|
57
|
|
|
68
|
|
Total debt
|
|
$
|
3,931
|
|
|
$
|
4,164
|
|
Total debt as a percent of total capital
|
|
30.9
|
%
|
|
31.7
|
%
|
|
|
|
|
|
(1) Working capital includes cash and cash equivalents.
|
|
|
|
|
Cash Flows
Cash and cash equivalents were impacted as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
In millions
|
|
July 4,
2021
|
|
June 28,
2020
|
|
Change
|
Net cash provided by operating activities
|
|
$
|
955
|
|
|
$
|
357
|
|
|
$
|
598
|
|
Net cash used in investing activities
|
|
(146)
|
|
|
(234)
|
|
|
88
|
|
Net cash (used in) provided by financing activities
|
|
(1,722)
|
|
|
460
|
|
|
(2,182)
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
(7)
|
|
|
39
|
|
|
(46)
|
|
Net (decrease) increase in cash and cash equivalents
|
|
$
|
(920)
|
|
|
$
|
622
|
|
|
$
|
(1,542)
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities increased $598 million for the six months ended July 4, 2021, versus the comparable period in 2020, primarily due to higher consolidated net income of $426 million and lower working capital requirements of $170 million. During the first six months of 2021, the lower working capital requirements resulted in a cash outflow of $431 million compared to a cash outflow of $601 million in the comparable period in 2020, mainly due to higher accounts payable and accrued expenses, partially offset by higher accounts and notes receivable, inventories and other current assets.
Net cash used in investing activities decreased $88 million for the six months ended July 4, 2021, versus the comparable period in 2020, primarily due to higher net liquidations of marketable securities of $50 million, changes in cash flows from derivatives not designated as hedges of $34 million, lower investments in and advances to equity investees of $27 million and proceeds from sale of land of $20 million, partially offset by higher capital expenditures of $60 million.
Net cash used in financing activities increased $2,182 million for the six months ended July 4, 2021, versus the comparable period in 2020, primarily due to lower net borrowings of commercial paper of $1,490 million, higher repurchases of common stock of $540 million and higher net payments under short-term credit agreements of $106 million.
The effect of exchange rate changes on cash and cash equivalents for the six months ended July 4, 2021, versus the comparable period in 2020, decreased $46 million primarily due to unfavorable fluctuations in the British pound of $57 million, partially offset by favorable fluctuations in the Chinese renminbi.
Sources of Liquidity
Cash provided by operations is typically our principal source of liquidity with $955 million generated in the six months ended July 4, 2021. Our sources of liquidity include:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 4, 2021
|
In millions
|
|
Total
|
|
U.S.
|
|
International
|
|
Primary location of international balances
|
Cash and cash equivalents
|
|
$
|
2,481
|
|
|
$
|
1,006
|
|
|
$
|
1,475
|
|
|
Singapore, China, Belgium, Mexico, Australia, Canada
|
|
|
|
|
|
|
|
|
|
Marketable securities (1)
|
|
438
|
|
|
94
|
|
|
344
|
|
|
India
|
Total
|
|
$
|
2,919
|
|
|
$
|
1,100
|
|
|
$
|
1,819
|
|
|
|
Available credit capacity
|
|
|
|
|
|
|
|
|
Revolving credit facilities (2)
|
|
$
|
3,300
|
|
|
|
|
|
|
|
International and other uncommitted domestic credit facilities
|
|
$
|
243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 July 4, 2021, we had $200 million of commercial paper outstanding, which effectively reduced the available capacity under our revolving credit facilities to $3.3 billion.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, Cash Equivalents and Marketable Securities
A significant portion of our cash flow is generated outside the U.S. We manage our worldwide cash requirements considering available funds among the many subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed. As a result, we do not anticipate any local liquidity restrictions to preclude us from funding our operating needs with local resources.
If we distribute our foreign cash balances to the U.S. or to other foreign subsidiaries, we could be required to accrue and pay withholding taxes, for example, if we repatriated cash from certain foreign subsidiaries whose earnings we asserted are completely or partially permanently reinvested. Foreign earnings for which we assert permanent reinvestment outside the U.S. consist primarily of earnings of our China, India and Netherlands domiciled subsidiaries. At present, we do not foresee a need to repatriate any earnings for which we asserted permanent reinvestment. However, to help fund cash needs of the U.S. or other international subsidiaries as they arise, we repatriate available cash from certain foreign subsidiaries whose earnings are not permanently reinvested when it is cost effective to do so.
Debt Facilities and Other Sources of Liquidity
We have access to committed credit facilities that total $3.5 billion, including the $1.5 billion 364-day facility that expires August 18, 2021 and our $2.0 billion five-year facility that expires on August 22, 2023. We maintain credit facilities at the current or higher aggregate amounts by renewing or replacing these facilities at or before expiration. These revolving credit facilities are maintained primarily to provide backup liquidity for our commercial paper borrowings and for general corporate purposes. There were no outstanding borrowings under these facilities at July 4, 2021.
We can issue up to $3.5 billion of unsecured, short-term promissory notes (commercial paper) pursuant to the Board of Directors (the Board) authorized commercial paper programs. The programs facilitate the private placement of unsecured short-term debt through third-party brokers. We intend to use the net proceeds from the commercial paper borrowings for general corporate purposes. The total combined borrowing capacity under the revolving credit facilities and commercial programs should not exceed $3.5 billion. See Note 9, "DEBT," to our Condensed Consolidated Financial Statements for additional information.
At July 4, 2021, we had $200 million of commercial paper outstanding, which effectively reduced the available capacity under our revolving credit facilities to $3.3 billion.
Supply Chain Financing
We currently have supply chain financing programs with financial intermediaries, which provide certain vendors the option to be paid by financial intermediaries earlier than the due date on the applicable invoice. When a vendor utilizes the program and receives an early payment from a financial intermediary, they take a discount on the invoice. We then pay the financial intermediary the face amount of the invoice on the regularly scheduled due date. We do not reimburse vendors for any costs they incur for participation in
the program and their participation is completely voluntary. As a result, all amounts owed to the financial intermediaries are presented as "Accounts payable" in our Condensed Consolidated Balance Sheets.
Uses of Cash
Stock Repurchases
In December 2019, the Board authorized the acquisition of up to $2.0 billion of additional common stock upon completion of the 2018 repurchase plan. In the first six months of 2021, we made the following purchases under the 2019 stock repurchase program:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions, except per share amounts
|
|
Shares
Purchased
|
|
Average Cost
Per Share
|
|
Total Cost of
Repurchases
|
|
|
|
Remaining
Authorized
Capacity (1)
|
|
|
|
|
|
|
|
|
|
|
|
April 4
|
|
1.7
|
|
|
$
|
247.35
|
|
|
$
|
418
|
|
|
|
|
$
|
1,576
|
|
July 4
|
|
2.7
|
|
|
252.66
|
|
|
672
|
|
|
|
|
904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
4.4
|
|
|
250.60
|
|
|
$
|
1,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The remaining authorized capacity under these plans was calculated based on the cost to purchase the shares but excludes commission expenses in accordance with the authorized plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We intend to repurchase outstanding shares from time to time during 2021 to enhance shareholder value.
Dividends
In July 2021, the Board authorized an increase to our quarterly dividend of 7.4 percent from $1.35 per share to $1.45 per share.
We paid dividends of $394 million during the six months ended July 4, 2021.
Capital Expenditures
Capital expenditures, including spending on internal use software, for the six months ended July 4, 2021, were $234 million versus $173 million in the comparable period in 2020. We plan to spend an estimated $725 million to $775 million in 2021 on capital expenditures, excluding internal use software, with over 50 percent of these expenditures expected to be invested in North America. In addition, we plan to spend an estimated $60 million to $70 million on internal use software in 2021.
Current Maturities of Short and Long-Term Debt
We had $200 million of commercial paper outstanding at July 4, 2021, that matures in less than one year. The maturity schedule of our existing long-term debt does not require significant cash outflows until 2023 when our 3.65% senior notes are due. Required annual long-term debt principal payments range from $30 million to $535 million over the next five years (including the remainder of 2021). See Note 9, "DEBT," to the Condensed Consolidated Financial Statements for additional information.
Pensions
Our global pension plans, including our unfunded and non-qualified plans, were 112 percent funded at December 31, 2020. Our U.S. defined benefit plan, which represented approximately 52 percent of the worldwide pension obligation, was 128 percent funded, and our U.K. defined benefit plan was 114 percent funded at December 31, 2020. The funded status of our pension plans is dependent upon a variety of variables and assumptions including return on invested assets, market interest rates and levels of voluntary contributions to the plans. In the first six months of 2021, the investment gain on our U.S. pension trust was 5.2 percent while our U.K. pension trust loss was 1.5 percent. Approximately 70 percent of our pension plan assets are held in highly liquid investments such as fixed income and equity securities. The remaining 30 percent of our plan assets are held in less liquid, but market valued investments, including real estate, private equity, venture capital, opportunistic credit and insurance contracts. During the remainder of 2021, we anticipate making $10 million in additional defined benefit pension contributions in the U.K. and $9 million in contributions to our U.S. non-qualified benefit plans. These contributions may be made from trusts or company funds either to increase pension assets or to make direct benefit payments to plan participants. We expect our 2021 annual net periodic pension cost to approximate $79 million.
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.
|
|
|
|
|
|
|
|
|
|
|
|
Management's Assessment of Liquidity
Our financial condition and liquidity remain strong. Our solid balance sheet and credit ratings enable us to have ready access to credit and the capital markets. We assess our liquidity in terms of our ability to generate adequate cash to fund our operating, investing and financing activities. We believe our existing cash and marketable securities, operating cash flow and revolving credit facilities provide us with the financial flexibility needed to fund common stock repurchases, dividend payments, targeted capital expenditures, projected pension obligations, acquisitions, working capital and debt service obligations through 2021 and beyond. We continue to generate significant cash from operations and maintain access to our expanded revolving credit facilities and commercial paper programs as noted above.
APPLICATION OF CRITICAL ACCOUNTING ESTIMATES
Our Condensed Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles that often require management to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts presented and disclosed in the financial statements. Management reviews these estimates and assumptions based on historical experience, changes in business conditions including the impacts of COVID-19 and other relevant factors they believe to be reasonable under the circumstances. In any given reporting period, our actual results may differ from the estimates and assumptions used in preparing our Condensed Consolidated Financial Statements.
Critical accounting estimates are defined as follows: the estimate requires management to make assumptions about matters that were highly uncertain at the time the estimate was made; different estimates reasonably could have been used; or if changes in the estimate are reasonably likely to occur from period to period and the change would have a material impact on our financial condition or results of operations. Our senior management has discussed the development and selection of our accounting policies, related accounting estimates and the disclosures set forth below with the Audit Committee of the Board. Our critical accounting estimates disclosed in the Form 10-K address estimating liabilities for warranty programs, assessing goodwill impairment, accounting for income taxes and pension benefits.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
A discussion of quantitative and qualitative disclosures about market risk may be found in Item 7A of our 2020 Form 10-K. There have been no material changes in this information since the filing of our 2020 Form 10-K.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, our CEO and our CFO concluded that our disclosure controls and procedures were effective to
ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) accumulated and communicated to management, including our CEO and CFO, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended July 4, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.