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Industrials : Machinery | Mid Cap Value
Company profile

Cummins Inc. designs, manufactures, distributes and services diesel and natural gas, electric and hybrid powertrains and powertrain-related components. It is also a supplier of engine braking, cylinder deactivation, start and stop and thermal management technologies. Engine segment manufactures and markets a range of diesel and natural gas-powered engines under the Cummins brand name, as well as certain customer brand names, for the heavy and medium-duty truck. The Distribution segment consists of sales and support of a range of products and services, including power generation systems, high-horsepower engines, and heavy-duty and medium-duty engines. The Components segment supplies products, including aftertreatment systems, turbochargers, filtration products, electronics and fuel systems. The Power Systems segment consists of businesses, including Power generation, Industrial and Generator technologies. The New Power segment designs, manufactures, sells, supports hydrogen production.

Closing Price
$195.02
Day's Change
9.13 (4.91%)
Bid
--
Ask
--
B/A Size
--
Day's High
195.10
Day's Low
187.93
Volume
(Average)
Volume:
1,130,490

10-day average volume:
1,044,769
1,130,490

Cummins Reports First Quarter 2022 Results

7:30 am ET May 3, 2022 (BusinessWire) Print

Cummins Inc. (NYSE: CMI) today reported results for the first quarter of 2022.

First quarter revenues of $6.4 billion increased 5 percent from the same quarter in 2021. Sales in North America increased 12 percent while international revenues decreased 3 percent, driven primarily by a slowdown in China.

"Demand for our products remains strong across many of our key markets and regions, resulting in record revenues in the first quarter of 2022," said Chairman and CEO Tom Linebarger. "We have implemented pricing actions to counter rising input costs, which contributed to solid profitability in the first quarter. Supply chain constraints continue to be a challenge and are limiting growth in our industry."

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the first quarter were $755 million (11.8 percent of sales), compared to $980 million (16.1 percent of sales) a year ago.

Net income attributable to Cummins in the first quarter was $418 million ($2.92 per diluted share) compared to $603 million ($4.07 per diluted share) in 2021. First quarter results include costs of $158 million ($1.03 per diluted share) related to the indefinite suspension of operations in Russia, and $17 million ($0.09 per diluted share) related to the separation of the Filtration business. The costs incurred relating to the indefinite suspension of our operations in Russia include inventory write-downs, reserves on accounts receivable, the impairment of a joint venture investment, and other costs. The tax rate in the first quarter was 26.8 percent including $31 million, or $0.22 per share, of unfavorable discrete items.

2022 Outlook:

Based on the current forecast, Cummins is raising its full year 2022 revenue guidance to up 8 percent, an increase from up 6 percent due to stronger demand in North America and other markets. Full-year 2022 EBITDA is expected to be approximately 15.5 percent, in line with our previous guidance. The company plans to return approximately 50 percent of Operating Cash Flow to shareholders in the form of dividends and share repurchases.

Any expenses outside of the normal course of business associated with the separation of the Filtration business or indefinite suspension of our operations in Russia have been excluded from the outlook provided.

"We delivered solid financial performance in the first quarter in the face of many challenges in our global supply chain. The ongoing impact of COVID-19, especially in China, and the effect of the conflict in Ukraine continue to present challenges to our global operations. I am impressed with the resiliency of our employees to navigate through these difficulties and deliver for our customers. Cummins is in a strong position to keep investing in future growth, bringing new technologies to customers and returning cash to shareholders." said President and COO Jennifer Rumsey.

First Quarter 2022 Highlights:

The company announced two significant acquisitions critical to advancing its product decarbonization goals while expanding its product portfolio, the acquisition of Jacobs Vehicle Systems (JVS) and the intent to acquire Meritor. JVS is a supplier of engine braking, cylinder deactivation, start and stop and thermal management technologies which are key components to meeting current and future emissions regulations. The integration of Meritor, a global leader of drivetrain, mobility, braking, aftermarket and electric powertrain solutions for commercial vehicle and industrial markets will position Cummins as one of the few companies able to provide integrated powertrain solutions across combustion as well as electric power applications through Meritor's eAxle product. Cummins was named one of the World's Most Ethical Companies for a 15th consecutive time by Ethisphere, a global leader in defining and advancing the standards of ethical business practices. The company also earned a place on Barron's 100 Most Sustainable U.S. Companies list, and received a perfect score on the Human Rights Campaign's 2022 Corporate Equality Index for the 18th consecutive year. Cummins hosted its biennial analyst day highlighting its long-term decarbonization growth strategy, Destination Zero, which includes making meaningful reductions in carbon emissions through advanced internal combustion technologies widely accepted by the market today, while continuing to invest in and advance zero emission technologies ahead of widespread market adoption. In February, Cummins unveiled the industry's first unified, fuel-agnostic internal combustion powertrain platforms. This technology approach will be applied across Cummins' X-Series, L-Series and B-Series product platforms, and helps fleets reduce carbon emissions today by enabling vehicles to run on low to zero carbon fuels. The platform utilizes the internal combustion engine technology that fleets are already familiar with while also applying a high level of parts and integration commonality across fuels including diesel, natural gas, hydrogen or other fuel applications. The New Power business continued to expand its green hydrogen presence globally. In North America, Florida Power & Light Company announced Cummins will supply a 25-megawatt electrolyzer system for the groundbreaking FPL Cavendish NextGen Hydrogen Hub - Florida's first of its kind "green" hydrogen plant. The FPL Cavendish NextGen Hydrogen Hub will leverage solar energy to power the electrolysis process that produces "green," or carbon-free, hydrogen from water.

(1) Generally Accepted Accounting Principles in the U.S.

First quarter 2022 detail (all comparisons to same period in 2021):

The Engine, Distribution, Components and Power Systems results were all impacted by costs associated with the indefinite suspension of our operations in Russia.

Engine Segment

Sales - $2.8 billion, up 12 percent Segment EBITDA - $392 million, or 14.2 percent of sales, compared to $354 million or 14.4 percent of sales. EBITDA includes $32 million of costs related to the indefinite suspension of our operations in Russia On-highway revenues increased 14 percent driven by pricing actions and strong demand in the North American truck markets, and recovery in the bus market which was severely impacted by Covid-19. Off-highway revenues increased 5 percent Sales increased 15 percent in North America and 4 percent in international markets

Distribution Segment

Sales - $2.1 billion, up 15 percent Segment EBITDA - $110 million, or 5.2 percent of sales, compared to $160 million or 8.7 percent of sales. EBITDA includes $100 million of costs related to the indefinite suspension of our operations in Russia Revenues in North America increased 17 percent and international sales increased by 13 percent Higher revenues were primarily driven by increased demand for parts and whole goods

Components Segment

Sales - $2.0 billion, down 8 percent Segment EBITDA - $320 million, or 16.1 percent of sales, compared to $421 million or 19.6 percent of sales. EBITDA includes $6 million of costs related to the indefinite suspension of our operations in Russia Revenues in North America increased by 8 percent and international sales decreased by 21 percent due to lower demand in India and China from record demand in the first quarter of 2021

Power Systems Segment

Sales - $1.2 billion, up 14 percent Segment EBITDA - $90 million, or 7.8 percent of sales, compared to $126 million, or 12.3 percent of sales. EBITDA includes $20 million of costs related to the indefinite suspension of our operations in Russia Power generation revenues increased by 9 percent driven by strong demand in China. Industrial revenues increased 21 percent due to stronger demand in mining and oil and gas markets

New Power Segment

Sales - $31 million, down 11 percent Segment EBITDA loss - $67 million Revenues decreased due to timing of commissioning electrolyzer projects and shipments of fuel cell systems to the rail market in 2021 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 59,900 people committed to powering a more prosperous world through three global corporate responsibility priorities critical to healthy communities: education, environment and equality of opportunity. Cummins serves its customers online, through a network of company-owned and independent distributor locations, and through thousands of dealer locations worldwide and earned about $2.1 billion on sales of $24.0 billion in 2021. See how Cummins is powering a world that's always on by accessing news releases and more information at https://www.cummins.com/always-on.

Forward-looking disclosure statement

Information provided in this release that is not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our forecasts, guidance, preliminary results, expectations, hopes, beliefs and intentions on strategies regarding the future. These forward-looking statements include, without limitation, statements relating to our plans and expectations for our revenues and EBITDA. Our actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including, but not limited to: any adverse results of our internal review into our emissions certification process and compliance with emission standards; increased scrutiny from regulatory agencies, as well as unpredictability in the adoption, implementation and enforcement of emission standards around the world; changes in international, national and regional trade laws, regulations and policies; any adverse effects of the U.S. government's COVID-19 vaccine mandates; changes in taxation; global legal and ethical compliance costs and risks; increasingly stringent environmental laws and regulations; future bans or limitations on the use of diesel-powered products; raw material, transportation and labor price fluctuations and supply shortages; aligning our capacity and production with our demand; the actions of, and income from, joint ventures and other investees that we do not directly control; large truck manufacturers' and original equipment manufacturers' customers discontinuing outsourcing their engine supply needs or experiencing financial distress, bankruptcy or change in control; product recalls; variability in material and commodity costs; the development of new technologies that reduce demand for our current products and services; lower than expected acceptance of new or existing products or services; product liability claims; our sales mix of products; failure to complete, adverse results from or failure to realize the expected benefits of the separation of our filtration business; our plan to reposition our portfolio of product offerings through exploration of strategic acquisitions and divestitures and related uncertainties of entering such transactions; challenging markets for talent and ability to attract, develop and retain key personnel; climate change and global warming; exposure to potential security breaches or other disruptions to our information technology environment and data security; political, economic and other risks from operations in numerous countries including political, economic and social uncertainty and the evolving globalization of our business; competitor activity; increasing competition, including increased global competition among our customers in emerging markets; labor relations or work stoppages; foreign currency exchange rate changes; the performance of our pension plan assets and volatility of discount rates; the price and availability of energy; 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 2021 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this press release and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available at http://www.sec.gov or at http://www.cummins.com in the Investor Relations section of our website.

Presentation of Non-GAAP Financial Information

EBITDA is a non-GAAP measure used in this release and is defined and reconciled to what management believes to be the most comparable GAAP measure in a schedule attached to this release. Cummins presents this information as it believes it is useful to understanding the Company's operating performance, and because EBITDA is a measure used internally to assess the performance of the operating units.

Webcast information

Cummins management will host a teleconference to discuss these results today at 10 a.m. EDT. This teleconference will be webcast and available on the Investor Relations section of the Cummins website at www.cummins.com. Participants wishing to view the visuals available with the audio are encouraged to sign-in a few minutes prior to the start of the teleconference.

                                                                                      CUMMINS INC. AND SUBSIDIARIES
                                                                             CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME
                                                                                             (Unaudited) (a)
                                                                                              
                                                                                              Three months ended
                                                                                  ----------------------------------------------------------------------------------------------------------------
In millions, except per share amounts                                              March 31,                                          April 4,
                                                                                                        2022                                                                  2021
------------------------------------------------------------                      ----------------------------------------------                        ----------------------------------------------
NET SALES                                                                         $  6,385                        $  6,092
                                                                  4,853        4,606  
   Cost of sales
                                                                                  -------------------- ------ --------------------                      -------------------- ------ --------------------
GROSS MARGIN                                                      1,532        1,486  
OPERATING EXPENSES AND INCOME                                                                   
                                                                    615          574  
   Selling, general and administrative expenses
                                                                    298          260  
   Research, development and engineering expenses
                                                                     96          166  
   Equity, royalty and interest income from investees
                                                                    111            8  
   Other operating expense, net
                                                                                  -------------------- ------ --------------------                      -------------------- ------ --------------------
OPERATING INCOME                                                    604          810  
                                                                     17           28  
   Interest expense
                                                                     (9 )                             1  
   Other (expense) income, net
                                                                                  -------------------- ------ --------------------                      -------------------- ------ --------------------
INCOME BEFORE INCOME TAXES                                          578          783  
                                                                    155          172  
   Income tax expense
                                                                                  -------------------- ------ --------------------                      -------------------- ------ --------------------
CONSOLIDATED NET INCOME                                             423          611  
                                                                      5            8  
   Less: Net income attributable to noncontrolling interests
                                                                                  -------------------- ------ --------------------                      -------------------- ------ --------------------
NET INCOME ATTRIBUTABLE TO CUMMINS INC.                                           $    418                        $    603  
                                                                                  ==================== ====== ====================                      ==================== ====== ====================
                                                                             
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.                                          
                                                                                  $   2.94                        $   4.10  
   Basic
                                                                                  $   2.92                        $   4.07  
   Diluted
                                                                             
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING                                                      
                                                                  142.2        147.0  
   Basic
                                                                  143.1        148.3  
   Diluted
                                                                             
------------------------------------------------------------ -------------------- ----------------------------------------------   -------------------- ----------------------------------------------
                                                                                                   CUMMINS INC. AND SUBSIDIARIES
                                                                                               CONDENSED CONSOLIDATED BALANCE SHEETS
                                                                                                          (Unaudited) (a)
                                                                                                       
In millions, except par value                                                                                March 31,                                        December 31,
                                                                                                                                  2022                                                                  2021
--------------------------------------------------------------------------------------                      ----------------------------------------------                        ----------------------------------------------
ASSETS                                                                                                                    
Current assets                                                                                                            
                                                                                                            $  2,276                        $  2,592  
   Cash and cash equivalents
                                                                                              527          595  
   Marketable securities
                                                                                                            -------------------- ------ --------------------                      -------------------- ------ --------------------
                                                                                            2,803        3,187  
      Total cash, cash equivalents and marketable securities
                                                                                            4,368        3,990  
   Accounts and notes receivable, net
                                                                                            4,586        4,355  
   Inventories
                                                                                              839          777  
   Prepaid expenses and other current assets
                                                                                                            -------------------- ------ --------------------                      -------------------- ------ --------------------
                                                                                           12,596       12,309  
         Total current assets
                                                                                                            -------------------- ------ --------------------                      -------------------- ------ --------------------
Long-term assets                                                                                                          
                                                                                            4,381        4,422  
   Property, plant and equipment, net
                                                                                            1,592        1,538  
   Investments and advances related to equity method investees
                                                                                            1,286        1,287  
   Goodwill
                                                                                              917          900  
   Other intangible assets, net
                                                                                            1,506        1,488  
   Pension assets
                                                                                            1,844        1,766  
   Other assets
                                                                                                            -------------------- ------ --------------------                      -------------------- ------ --------------------
                                                                                                            $ 24,122                        $ 23,710  
         Total assets
                                                                                                            ==================== ====== ====================                      ==================== ====== ====================
                                                                                                       
LIABILITIES                                                                                                               
Current liabilities                                                                                                       
                                                                                                            $  3,497                        $  3,021  
   Accounts payable (principally trade)
                                                                                              243          208  
   Loans payable
                                                                                              311          313  
   Commercial paper
                                                                                              411          683  
   Accrued compensation, benefits and retirement costs
                                                                                              798          755  
   Current portion of accrued product warranty
                                                                                              883          855  
   Current portion of deferred revenue
                                                                                            1,300        1,190  
   Other accrued expenses
                                                                                               69           59  
   Current maturities of long-term debt
                                                                                                            -------------------- ------ --------------------                      -------------------- ------ --------------------
                                                                                            7,512        7,084  
         Total current liabilities
                                                                                                            -------------------- ------ --------------------                      -------------------- ------ --------------------
Long-term liabilities                                                                                                     
                                                                                            3,502        3,579  
   Long-term debt
                                                                                              593          604  
   Pensions and other postretirement benefits
                                                                                              709          684  
   Accrued product warranty
                                                                                              877          850  
   Deferred revenue
                                                                                            1,566        1,508  
   Other liabilities
                                                                                                            -------------------- ------ --------------------                      -------------------- ------ --------------------
                                                                                                            $ 14,759                        $ 14,309  
         Total liabilities
                                                                                                            -------------------- ------ --------------------                      -------------------- ------ --------------------
                                                                                                       
EQUITY                                                                                                                    
Cummins Inc. shareholders' equity                                                              
                                                                                                            $  2,411                        $  2,427  
   Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.5 shares issued
                                                                                           16,952       16,741  
   Retained earnings
                                                                                           (9,412 )                        (9,123 )
   Treasury stock, at cost, 81.4 and 80.0 shares
                                                                                           (1,515 )                        (1,571 )
   Accumulated other comprehensive loss
                                                                                                            -------------------- ------ --------------------                      -------------------- ------ --------------------
                                                                                            8,436        8,474  
         Total Cummins Inc. shareholders' equity
Noncontrolling interests                                                                      927          927  
                                                                                                            -------------------- ------ --------------------                      -------------------- ------ --------------------
                                                                                                            $  9,363                        $  9,401  
            Total equity
                                                                                                            -------------------- ------ --------------------                      -------------------- ------ --------------------
                                                                                                            $ 24,122                        $ 23,710  
               Total liabilities and equity
                                                                                                            ==================== ====== ====================                      ==================== ====== ====================
                                                                                                       
-------------------------------------------------------------------------------------- -------------------- ----------------------------------------------   -------------------- ----------------------------------------------
                                                                                                            CUMMINS INC. AND SUBSIDIARIES
                                                                                                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                                   (Unaudited) (a)
                                                                                 
                                                                                                                                      Three months ended
                                                                                                                      ------------------------------------------------------------------------------------------------------------------------
In millions                                                                                                            March 31,                                              April 4,
                                                                                                                                            2022                                                                      2021
------------------------------------------------------------------------------------------------                      ----------------------------------------------                        ------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES                                                                                                
                                                                                                                      $    423                        $            611  
   Consolidated net income
                                                                                                                                    
   Adjustments to reconcile consolidated net income to net cash provided by operating activities
                                                                                                        161                  170  
      Depreciation and amortization
                                                                                                        (66 )                                     8  
      Deferred income taxes
                                                                                                        (76 )                                  (136 )
      Equity in income of investees, net of dividends
                                                                                                          9                   20  
      Pension and OPEB expense
                                                                                                        (43 )                                   (51 )
      Pension contributions and OPEB payments
                                                                                                          5                    8  
      Share-based compensation expense
                                                                                                        158       --  
      Russian suspension costs
                                                                                                         36       --  
      Asset impairments and other charges
                                                                                                         37                   32  
      Loss on corporate owned life insurance
                                                                                                         (7 )                                     1  
      Foreign currency remeasurement and transaction exposure
                                                                                                                                    
   Changes in current assets and liabilities, net of acquisitions
                                                                                                       (417 )                                  (374 )
      Accounts and notes receivable
                                                                                                       (289 )                                  (336 )
      Inventories
                                                                                                        (57 )                                   (24 )
      Other current assets
                                                                                                        484                  465  
      Accounts payable
                                                                                                       (251 )                                   (24 )
      Accrued expenses
                                                                                                         70       --  
   Changes in other liabilities
                                                                                                        (13 )                                   (31 )
   Other, net
                                                                                                                      -------------------- ------ --------------------                      -------------------- -------------- --------------------
Net cash provided by operating activities                                                               164                  339  
                                                                                                                      -------------------- ------ --------------------                      -------------------- -------------- --------------------
                                                                                                                 
CASH FLOWS FROM INVESTING ACTIVITIES                                                                                                
                                                                                                       (104 )                                   (87 )
   Capital expenditures
                                                                                                        (11 )                                   (11 )
   Investments in internal use software
                                                                                                        (32 )                                   (24 )
   Investments in and advances to equity investees
                                                                                                         83       --  
   Acquisition of a business, net of cash acquired
                                                                                                       (197 )                                  (143 )
   Investments in marketable securities--acquisitions
                                                                                                        254                  207  
   Investments in marketable securities--liquidations
                                                                                                         (2 )                                    14  
   Cash flows from derivatives not designated as hedges
                                                                                                         (1 )                                    19  
   Other, net
                                                                                                                      -------------------- ------ --------------------                      -------------------- -------------- --------------------
Net cash used in investing activities                                                                   (10 )                                   (25 )
                                                                                                                      -------------------- ------ --------------------                      -------------------- -------------- --------------------
                                                                                                                 
CASH FLOWS FROM FINANCING ACTIVITIES                                                                                                
                                                                                                         (2 )                                    (6 )
   Net payments of commercial paper
                                                                                                        (24 )                                   (16 )
   Payments on borrowings and finance lease obligations
                                                                                                         29                 (102 )
   Net borrowings (payments) under short-term credit agreements
                                                                                                        (14 )                                   (13 )
   Distributions to noncontrolling interests
                                                                                                       (207 )                                  (197 )
   Dividend payments on common stock
                                                                                                       (311 )                                  (418 )
   Repurchases of common stock
                                                                                                          9                   18  
   Proceeds from issuing common stock
                                                                                                         23                  (11 )
   Other, net
                                                                                                                      -------------------- ------ --------------------                      -------------------- -------------- --------------------
Net cash used in financing activities                                                                  (497 )                                  (745 )
                                                                                                                      -------------------- ------ --------------------                      -------------------- -------------- --------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                                             27                  (12 )
                                                                                                                      -------------------- ------ --------------------                      -------------------- -------------- --------------------
Net decrease in cash and cash equivalents                                                              (316 )                                  (443 )
Cash and cash equivalents at beginning of year                                                        2,592                3,401  
                                                                                                                      -------------------- ------ --------------------                      -------------------- -------------- --------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                                            $  2,276                        $          2,958  
                                                                                                                      ==================== ====== ====================                      ==================== ============== ====================
                                                                                                                 
------------------------------------------------------------------------------------------------ -------------------- ----------------------------------------------   -------------------- ------------------------------------------------------
                                                                                                                                                                                                                                     CUMMINS INC. AND SUBSIDIARIES
                                                                                                                                                                                                                                     SEGMENT INFORMATION
                                                                                                                                                                                                                                     (Unaudited)
                                                                                                                                                                                                                                                                                                              
In millions                                                                        Engine                                              Distribution                                            Components                                            Power Systems                                              New Power                                                  Total                                                Intersegment                                                   Total
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           Segments                                                                  Eliminations
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          (1)
---------------------------------------------------------                      --------------------------------------------------                        --------------------------------------------------                        --------------------------------------------------                        --------------------------------------------------                        ------------------------------------------------------                        --------------------------------------------------                        ------------------------------------------------------                        ------------------------------------------------------
Three months ended March 31, 2022                                                                                                                                                                                                                                                                                                
External sales                                                                 $      2,049                        $      2,111                        $      1,517                        $        683                        $             25                        $      6,385                        $ --                        $          6,385  
Intersegment sales                                                   704                6              471              477                    6            1,664               (1,664 )                        --  
                                                                               -------------------- ---------- --------------------                      -------------------- ---------- --------------------                      -------------------- ---------- --------------------                      -------------------- ---------- --------------------                      -------------------- -------------- --------------------                      -------------------- ---------- --------------------                      -------------------- -------------- --------------------                      -------------------- -------------- --------------------
                                                                   2,753            2,117            1,988            1,160                   31            8,049               (1,664 )                                 6,385  
   Total sales
Research, development and engineering expenses                       109               13               76               64                   36              298       --                  298  
Equity, royalty and interest income (loss) from investees             44                    (2)           16               28               11                   (3 )                                96       --                   96  
Interest income                                                        4                2                1                1       --                8       --                    8  
Russian suspension costs (3)                                          32                    (4)          100                6               20       --              158       --                  158  
EBITDA (5)                                                           392              110              320               90                  (67 )                               845                  (90 )                                   755  
Depreciation and amortization (6)                                     51               28               43               31                    7              160       --                  160  
                                                                                                                                                                                                                                                                                                              
EBITDA as a percentage of total sales                               14.2 %                               5.2 %                              16.1 %                               7.8 %                                    NM             10.5 %                                                                          11.8 %
                                                                                                                                                                                                                                                                                                              
Three months ended April 4, 2021                                                                                                                                                                                                                                                                                                 
External sales                                                                 $      1,895                        $      1,827                        $      1,724                        $        612                        $             34                        $      6,092                        $ --                        $          6,092  
Intersegment sales                                                   564                8              428              410                    1            1,411               (1,411 )                        --  
                                                                               -------------------- ---------- --------------------                      -------------------- ---------- --------------------                      -------------------- ---------- --------------------                      -------------------- ---------- --------------------                      -------------------- -------------- --------------------                      -------------------- ---------- --------------------                      -------------------- -------------- --------------------                      -------------------- -------------- --------------------
                                                                   2,459            1,835            2,152            1,022                   35            7,503               (1,411 )                                 6,092  
   Total sales
Research, development and engineering expenses                        92               13               75               57                   23              260       --                  260  
Equity, royalty and interest income from investees                   113               17               19               12                    5              166       --                  166  
Interest income                                                        3                1                1                1       --                6       --                    6  
EBITDA (5)                                                           354              160              421              126                  (51 )                             1,010                  (30 )                                   980  
Depreciation and amortization (6)                                     51               30               48               35                    5              169       --                  169  
                                                                                                                                                                                                                                                                                                              
EBITDA as a percentage of total sales                               14.4 %                               8.7 %                              19.6 %                              12.3 %                                    NM             13.5 %                                                                          16.1 %
                                                                                                                                                                                                                                                                                                              
--------------------------------------------------------- -------------------- --------------------------------------------------   -------------------- --------------------------------------------------   -------------------- --------------------------------------------------   -------------------- --------------------------------------------------   -------------------- ------------------------------------------------------   -------------------- --------------------------------------------------   -------------------- ------------------------------------------------------   -------------------- ------------------------------------------------------
"NM" - not meaningful information
(1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. EBITDA for the three months ended March 31, 2022, includes $17 million of costs associated with the planned separation of our Filtration business. There were no significant unallocated corporate expenses for the three months ended April 4, 2021.
(2) Includes a $28 million impairment of our joint venture with KAMAZ and $3 million of royalty charges as part of our costs associated with the suspension of our Russian operations. See "RUSSIAN OPERATIONS" note below for additional information.
(3) See "RUSSIAN OPERATIONS" note below for additional information.
(4) Includes $31 million of Russian suspension costs reflected in the Equity, royalty and interest income (loss) from investees line above.
(5) EBITDA is defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests.

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
                                                                                  ----------------------------------------------------------------------------------------------------------------
In millions                                                                        March 31,                                          April 4,
                                                                                                        2022                                                                  2021
------------------------------------------------------------                      ----------------------------------------------                        ----------------------------------------------
EBITDA                                                                            $    755                        $    980  
                                                                             
EBITDA as a percentage of net sales                                11.8 %                          16.1 %
                                                                             
Less:                                                                                           
                                                                     17           28  
   Interest expense
                                                                    160          169  
   Depreciation and amortization
                                                                                  -------------------- ------ --------------------                      -------------------- ------ --------------------
INCOME BEFORE INCOME TAXES                                          578          783  
                                                                    155          172  
   Less: Income tax expense
                                                                                  -------------------- ------ --------------------                      -------------------- ------ --------------------
CONSOLIDATED NET INCOME                                             423          611  
                                                                      5            8  
   Less: Net income attributable to noncontrolling interests
                                                                                  -------------------- ------ --------------------                      -------------------- ------ --------------------
NET INCOME ATTRIBUTABLE TO CUMMINS INC.                                           $    418                        $    603  
                                                                                  ==================== ====== ====================                      ==================== ====== ====================
                                                                             

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

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

CUMMINS INC. AND SUBSIDIARIES SELECT FOOTNOTE DATA (Unaudited)

EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES

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

                                                                                             Three months ended
                                                                                 ----------------------------------------------------------------------------------------------------------------
In millions                                                                       March 31,                                          April 4,
                                                                                                       2022                                                                  2021
-----------------------------------------------------------                      ----------------------------------------------                        ----------------------------------------------
Manufacturing entities                                                                         
                                                                                 $     16                        $     31
   Dongfeng Cummins Engine Company, Ltd.
                                                                    14           39  
   Beijing Foton Cummins Engine Co., Ltd.
                                                                     9            6  
   Tata Cummins, Ltd.
                                                                     9           10  
   Chongqing Cummins Engine Company, Ltd.
                                                                   (10 )                                     (1)       55  
   All other manufacturers
Distribution entities                                                                                                      
                                                                     7            6  
   Komatsu Cummins Chile, Ltda.
                                                                     2            3  
   All other distributors
                                                                                 -------------------- ------ --------------------                      -------------------- ------ --------------------
                                                                    47          150  
      Cummins share of net income
Royalty and interest income                                         49           16  
                                                                                 -------------------- ------ --------------------                      -------------------- ------ --------------------
                                                                                 $     96                        $    166  
         Equity, royalty and interest income from investees
                                                                                 ==================== ====== ====================                      ==================== ====== ====================
                                                                            
-----------------------------------------------------------

RUSSIAN OPERATIONS

On March 17, 2022, the Board of Directors decided to indefinitely suspend our operations in Russia due to the ongoing conflict in Ukraine. At the time of suspension, our Russian operations included a wholly-owned distributor in Russia, an unconsolidated joint venture and direct sales into Russia from our other business units. As a result of the suspension of operations, we evaluated the recoverability of assets in Russia and assessed other liabilities that may have been incurred. We have experienced and expect to continue to experience, an inability to collect customer receivables and may be the subject of litigation in connection with our suspension of commercial operations in Russia. We will continue to evaluate the situation as conditions evolve and may take additional actions as deemed necessary in future periods. The following summarizes the costs associated with the suspension of our Russian operations in our first quarter results on our Condensed Consolidated Statements of Net Income:

In millions                                                   March 31,                              Statement of Net Income Location
                                                                                   2022
----------------------------------------                      -------------------------------------------                        ---------------------------------------------------
Inventory write-downs                                         $  59    
                                                                                                                                  Cost of sales
Accounts receivable reserves                  43    
                                                                                                                                  Other operating expense, net
Impairment and other joint venture costs      31    
                                                                                                                                  Equity, royalty and interest income from investees
Other                                         25    
                                                                                                                                  Other operating expense, net
                                                              -------------------- --- --------------------

ACQUISITIONS

On February 7, 2022, we purchased Westport Fuel System Inc.'s stake in the Cummins Westport Joint Venture. We will continue to operate the business as the sole owner. The purchase price was $42 million and was allocated primarily to cash, warranty and deferred revenue related to extended coverage contracts. The results of the business were reported in our Engine segment.

On February 9, 2022, we reached an agreement with Altra Industrial Motion Corp to acquire its Jacobs Vehicle Systems business and closed the transaction in April 2022. Sales of this business were $194 million in 2021. The purchase price was $346 million in cash, subject to typical adjustments related to closing working capital and other amounts and does not contain any contingent consideration. At this time, we have not completed the purchase price allocation, but expect to record approximately $270 million to $300 million of goodwill and intangibles. This acquisition will be reported in our Components segment.

On February 21, 2022, we entered into an Agreement and Plan of Merger (the Merger Agreement) with Meritor, Inc. (Meritor) and Rose NewCo Inc. (Merger Sub) pursuant to which we agreed to acquire Meritor, a global leader of drivetrain, mobility, braking, aftermarket and electric powertrain solutions for commercial vehicle and industrial markets. At closing, Merger Sub will merge into Meritor with Meritor as the surviving entity and becoming our wholly owned subsidiary. This acquisition will be reported in our Components and New Power segments. Pursuant to the terms of the Merger Agreement, we will pay $36.50 in cash per share of Meritor common stock, for a total transaction value of approximately $3.7 billion, including assumed debt and net of acquired cash. We plan to fund this acquisition with a combination of cash, commercial paper and long-term debt.

The Board of Directors of Meritor recommended that Meritor shareholders vote in favor of the transaction at a Special Meeting of Shareholders to be held on May 26, 2022. The transaction is expected to close by the end of 2022 subject to customary closing conditions and receipt of applicable regulatory approvals. The Merger Agreement contains certain customary termination rights, subject to certain limitations, that could result in either us or Meritor having to pay a termination fee to the other party. Should the Merger Agreement be terminated under such specified circumstances, Meritor could be required to pay us approximately a $74 million termination fee, and we could be required to pay Meritor a $160 million termination fee.

INCOME TAXES

Our effective tax rate for 2022 is expected to approximate 21.5 percent, excluding any discrete items that may arise.

Our effective tax rate for the three months ended March 31, 2022, was 26.8 percent and contained unfavorable discrete tax items of $31 million, or $0.22 per share, primarily due to $18 million of unfavorable changes associated with uncertainty in our Russian operations, $9 million of unfavorable changes in tax reserves and $4 million of net unfavorable other discrete tax items.

Our effective tax rate for the three months ended April 4, 2021, was 22.0 percent and contained favorable discrete items of $4 million.

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:

2022                                                                                                       
In millions                                Q1                                  Q2                                    Q3                                    Q4                                  YTD
-------------------------                      ------------------------------                       ----------------------------------                       ----------------------------------                       ----------------------------------                       ------------------------------
Heavy-duty truck                               $        908                      $ --                      $ --                      $ --                      $        908
Medium-duty truck and bus            848     --     --     --            848
Light-duty automotive                498     --     --     --            498
Off-highway                          499     --     --     --            499
                                               -------------------- ----------                      -------------------- --------------                      -------------------- --------------                      -------------------- --------------                      -------------------- ----------
                                               $      2,753                      $ --                      $ --                      $ --                      $      2,753
   Total sales
                                               ==================== ==========                      ==================== ==============                      ==================== ==============                      ==================== ==============                      ==================== ==========
                                                                                  
2021                                                                                                       
In millions                                Q1                                  Q2                                    Q3                                    Q4                                  YTD
-------------------------                      ------------------------------                       ----------------------------------                       ----------------------------------                       ----------------------------------                       ------------------------------
Heavy-duty truck                               $        827                      $            839                      $            861                      $            801                      $      3,328
Medium-duty truck and bus            674                688                713                702          2,777
Light-duty automotive                481                484                515                432          1,912
Off-highway                          477                480                489                491          1,937
                                               -------------------- ----------                      -------------------- --------------                      -------------------- --------------                      -------------------- --------------                      -------------------- ----------

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

2022                                    
Units                           Q1                     Q2                     Q3                     Q4                     YTD
--------------------                      --------------------                      --------------------                      --------------------                      --------------------                      --------------------
Heavy-duty                           28,600         --         --         --                 28,600
Medium-duty                          72,600         --         --         --                 72,600
Light-duty                           66,500         --         --         --                 66,500
                                          --------------------                      --------------------                      --------------------                      --------------------                      --------------------
                                    167,700         --         --         --                167,700
   Total units
                                          ====================                      ====================                      ====================                      ====================                      ====================
                     
2021                                    
Units                           Q1                     Q2                     Q3                     Q4                     YTD
--------------------                      --------------------                      --------------------                      --------------------                      --------------------                      --------------------
Heavy-duty                           30,700                 29,400                 29,200                 28,300                117,600
Medium-duty                          73,100                 67,500                 65,200                 68,000                273,800
Light-duty                           68,500                 68,100                 73,900                 62,800                273,300
                                          --------------------                      --------------------                      --------------------                      --------------------                      --------------------

Distribution Segment Sales by Product Line

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

2022                                                                                                  
In millions                           Q1                                  Q2                                    Q3                                    Q4                                  YTD
--------------------                      ------------------------------                       ----------------------------------                       ----------------------------------                       ----------------------------------                       ------------------------------
Parts                                     $        924                      $ --                      $ --                      $ --                      $        924
Engines                         441     --     --     --            441
Power generation                401     --     --     --            401
Service                         351     --     --     --            351
                                          -------------------- ----------                      -------------------- --------------                      -------------------- --------------                      -------------------- --------------                      -------------------- ----------
                                          $      2,117                      $ --                      $ --                      $ --                      $      2,117
   Total sales
                                          ==================== ==========                      ==================== ==============                      ==================== ==============                      ==================== ==============                      ==================== ==========
                                                                             
2021                                                                                                  
In millions                           Q1                                  Q2                                    Q3                                    Q4                                  YTD
--------------------                      ------------------------------                       ----------------------------------                       ----------------------------------                       ----------------------------------                       ------------------------------
Parts                                     $        757                      $            765                      $            800                      $            823                      $      3,145
Engines                         334                351                377                437          1,499
Power generation                418                454                438                452          1,762
Service                         326                350                344                346          1,366
                                          -------------------- ----------                      -------------------- --------------                      -------------------- --------------                      -------------------- --------------                      -------------------- ----------

Component Segment Sales by Business

Sales for our Components segment by business were as follows:

2022                                                                                                          
In millions                                   Q1                                  Q2                                    Q3                                    Q4                                  YTD
----------------------------                      ------------------------------                       ----------------------------------                       ----------------------------------                       ----------------------------------                       ------------------------------
Emission solutions                                $        910                      $ --                      $ --                      $ --                      $        910
Filtration                              382     --     --     --            382
Turbo technologies                      346     --     --     --            346
Electronics and fuel systems            216     --     --     --            216
Automated transmissions                 134     --     --     --            134
                                                  -------------------- ----------                      -------------------- --------------                      -------------------- --------------                      -------------------- --------------                      -------------------- ----------
                                                  $      1,988                      $ --                      $ --                      $ --                      $      1,988
   Total sales
                                                  ==================== ==========                      ==================== ==============                      ==================== ==============                      ==================== ==============                      ==================== ==========
                                                                                     
2021                                                                                                          
In millions                                   Q1                                  Q2                                    Q3                                    Q4                                  YTD
----------------------------                      ------------------------------                       ----------------------------------                       ----------------------------------                       ----------------------------------                       ------------------------------
Emission solutions                                $      1,035                      $            882                      $            793                      $            789                      $      3,499
Filtration                              372                374                354                338          1,438
Turbo technologies                      367                351                325                308          1,351
Electronics and fuel systems            263                241                210                185            899
Automated transmissions                 115                146                111                106            478
                                                  -------------------- ----------                      -------------------- --------------                      -------------------- --------------                      -------------------- --------------                      -------------------- ----------

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:

2022                                                                                                    
In millions                             Q1                                  Q2                                    Q3                                    Q4                                  YTD
----------------------                      ------------------------------                       ----------------------------------                       ----------------------------------                       ----------------------------------                       ------------------------------
Power generation                            $        664                      $ --                      $ --                      $ --                      $        664
Industrial                        393     --     --     --            393
Generator technologies            103     --     --     --            103
                                            -------------------- ----------                      -------------------- --------------                      -------------------- --------------                      -------------------- --------------                      -------------------- ----------
                                            $      1,160                      $ --                      $ --                      $ --                      $      1,160
   Total sales
                                            ==================== ==========                      ==================== ==============                      ==================== ==============                      ==================== ==============                      ==================== ==========
                                                                               
2021                                                                                                    
In millions                             Q1                                  Q2                                    Q3                                    Q4                                  YTD
----------------------                      ------------------------------                       ----------------------------------                       ----------------------------------                       ----------------------------------                       ------------------------------
Power generation                            $        611                      $            655                      $            664                      $            585                      $      2,515
Industrial                        324                399                412                399          1,534
Generator technologies             87                 89                 88                102            366
                                            -------------------- ----------                      -------------------- --------------                      -------------------- --------------                      -------------------- --------------                      -------------------- ----------

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

2022                                    
Units                           Q1                     Q2                     Q3                     Q4                     YTD
--------------------                      --------------------                      --------------------                      --------------------                      --------------------                      --------------------
Power generation                      2,200         --         --         --                  2,200
Industrial                            1,100         --         --         --                  1,100
                                          --------------------                      --------------------                      --------------------                      --------------------                      --------------------
                                      3,300         --         --         --                  3,300
   Total units
                                          ====================                      ====================                      ====================                      ====================                      ====================
                     
2021                                    
Units                           Q1                     Q2                     Q3                     Q4                     YTD
--------------------                      --------------------                      --------------------                      --------------------                      --------------------                      --------------------
Power generation                      2,100                  1,800                  2,500                  2,000                  8,400
Industrial                            1,000                  1,200                  1,900                  1,300                  5,400
                                          --------------------                      --------------------                      --------------------                      --------------------                      --------------------

View source version on businesswire.com: https://www.businesswire.com/news/home/20220502005581/en/

SOURCE: Cummins Inc.

Jon Mills
Director, External Communications
Cummins Inc
317-658-4540
jon.mills@cummins.com
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COMTEX_406621549/1006/2022-05-03T07:30:00

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