Cummins Reports Fourth Quarter and Full Year 2020 Results

Cummins Inc. (NYSE: CMI) today reported results for the fourth quarter of 2020.

Fourth quarter revenues of $5.8 billion increased 5 percent from the same quarter in 2019. Sales in North America were flat while international revenues increased 12 percent driven by strong demand in China truck and construction markets as well as the growth in new product sales in India.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the fourth quarter were $837 million (14.4 percent of sales), compared to $682 million (12.2 percent of sales) excluding restructuring a year ago. Fourth quarter EBITDA included $36 million of expenses associated with reorganization activities and facility closures primarily driven by transformation initiatives in our Distribution segment.

Net income attributable to Cummins in the fourth quarter was $501 million ($3.36 per diluted share) compared to $390 million ($2.56 per diluted share) excluding restructuring in 2019. The tax rate in the fourth quarter was 19.7 percent.

Revenues for the full year were $19.8 billion, 16 percent lower than 2019. Sales in North America declined 21 percent and international revenues declined 7 percent. Sales declined in all major regions except China, where demand for trucks and construction equipment reached record levels.

“We faced many challenges in 2020 driven by the severe global impact of the COVID-19 pandemic,” said Chairman and CEO Tom Linebarger. “I want to thank all of our employees for their dedication to our company and our customers as they adjusted to the unprecedented slowdown in the global economy and then responded as demand accelerated sharply in the second half of the year, all while facing significant disruption to their daily routines at work and home.”

EBITDA for the year was $3.1 billion (15.7 percent of sales) compared to $3.7 billion (15.8 percent of sales) excluding restructuring in 2019.

Net income attributable to Cummins for the full year was $1.8 billion ($12.01 per diluted share), compared to net income of $2.4 billion ($15.05 per diluted share) excluding restructuring in 2019. The tax rate for 2020 was 22.5 percent.

2021 Outlook:

Based on the current forecast, Cummins projects full year 2021 revenues to be up 8 to 12 percent, and EBITDA to be in the range of 15.0 and 15.5 percent of sales. We expect revenues to increase in all regions and major markets except China where we expect demand to moderate after a record year in 2020.

“Current indicators point to improving demand in a number of key regions and markets in 2021. However, significant uncertainty remains, requiring continued strong focus on managing costs and cash flow as our markets continue to recover around the world. We are still operating under a pandemic with extreme safety measures in place and our suppliers and customers are doing the same. This is presenting challenges to global supply chains as our industry responds to rising demand across multiple end markets. Having effectively managed through an extremely challenging 2020, Cummins is in a strong position to keep investing in future growth while continuing to return cash to shareholders,” said Chairman and CEO Tom Linebarger.

The Company plans to return 75 percent of Operating Cash Flow to shareholders in the form of dividends and share repurchases.

2020 Highlights:

  • The Company announced the creation of the Cummins Advocates for Racial Equity Group to focus on police reform, criminal justice, social justice, and economic empowerment of Black people in the United States.
  • Cummins increased its cash dividend for the 11th straight year and returned a total of $1.4 billion to shareholders in the form of dividends and share repurchases.
  • In response to the COVID-19 pandemic, the Company used its filter technology to provide 146 tons of filtration media to mask manufacturers across the globe, which has been used to produce more than 108 million masks.
  • The Company established a joint venture called NPROXX to provide hydrogen storage tank solutions to customers in multiple applications including rail, truck, bus, and other on-highway applications to advance the adoption of hydrogen-based technologies.
  • In November of 2020, Cummins was named to the S&P Dow Jones Sustainability Indices for North America, one of the premier measures of corporate sustainability, for a 15th consecutive year.
  • Cummins is one of 21 companies named a “Culture Champion” in October 2020 by a partnership between the Massachusetts Institute of Technology and Glassdoor, one of the world’s leading recruiting websites. The Company receives high marks for creating cultures of integrity and respect while ranking first in the study’s category for promoting a diverse and inclusive workplace culture.

1 Generally Accepted Accounting Principles in the U.S.

Fourth quarter 2020 detail (all comparisons to same period in 2019):

Engine Segment

  • Sales - $2.3 billion, up 2 percent
  • Segment EBITDA - $338 million, or 14.5 percent of sales, compared to $277 million or 12.1 percent of sales excluding restructuring
  • On-highway revenues increased 1 percent and off-highway revenues increased 4 percent
  • Sales were flat in North America but increased 8 percent in international markets primarily due to increased demand in China and India

Distribution Segment

  • Sales - $2.0 billion, down 2 percent
  • Segment EBITDA - $165 million, or 8.3 percent of sales, compared to $164 million or 8.0 percent of sales excluding restructuring
  • Revenues in North America were down 7 percent and international sales increased by 8 percent
  • Increased demand in power generation markets offset by declines in parts and service

Components Segment

  • Sales - $1.8 billion, up 18 percent
  • Segment EBITDA - $280 million, or 15.3 percent of sales, compared to $209 million or 13.4 percent of sales excluding restructuring
  • Revenues in North America increased by 1 percent and international sales increased by 40 percent due to higher demand in China and India

Power Systems Segment

  • Sales - $989 million, down 6 percent
  • Segment EBITDA - $74 million, or 7.5 percent of sales, compared to $55 million, or 5.2 percent of sales excluding restructuring
  • Power generation revenues decreased by 2 percent while industrial revenues decreased 12 percent due to lower demand in mining and oil and gas markets

New Power Segment

  • Sales - $34 million, up 89 percent
  • Segment EBITDA loss - $51 million
  • Revenues increased due to greater demand in transit and school bus markets in addition to 29 megawatts of electrolyzer projects commissioned
  • Costs associated with the development of fuel cells and electrolyzers as well as products to support battery electric vehicles are contributing to EBITDA losses

About Cummins Inc.

Cummins Inc., a global power leader, is a corporation of complementary business segments that design, manufacture, distribute and service a broad portfolio of power solutions. The company’s products range from diesel, natural gas, electric and hybrid powertrains and powertrain-related components including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems, automated transmissions, electric power generation systems, batteries, electrified power systems, hydrogen generation and fuel cell products. Headquartered in Columbus, Indiana (U.S.), since its founding in 1919, Cummins employs approximately 57,825 people committed to powering a more prosperous world through three global corporate responsibility priorities critical to healthy communities: education, environment and equality of opportunity. Cummins serves its customers online, through a network of company-owned and independent distributor locations, and through thousands of dealer locations worldwide and earned about $1.8 billion on sales of $19.8 billion in 2020. See how Cummins is powering a world that’s always on by accessing news releases and more information at https://www.cummins.com/always-on.

Forward-looking disclosure statement

Information provided in this release that is not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our forecasts, guidance, preliminary results, expectations, hopes, beliefs and intentions on strategies regarding the future. These forward-looking statements include, without limitation, statements relating to our plans and expectations for our revenues and EBITDA. Our actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including, but not limited to: market slowdown due to the impacts from COVID-19 pandemic, other public health crises, epidemics or pandemics; impacts to manufacturing and supply chain abilities from an extended shutdown or disruption of our operations due to the COVID-19 pandemic; supply shortages and supplier financial risk, particularly from any of our single-sourced suppliers, including suppliers that may be impacted by the COVID-19 pandemic; aligning our capacity and production with our demand, including impacts of COVID-19; a major customer experiencing financial distress, particularly related to the COVID-19 pandemic; any adverse results of our internal review into our emissions certification process and compliance with emission standards; increased scrutiny from regulatory agencies, as well as unpredictability in the adoption, implementation and enforcement of emission standards around the world; disruptions in global credit and financial markets as the result of the COVID-19 pandemic; adverse impacts from government actions to stabilize credit markets and financial institutions and other industries; product recalls; the development of new technologies that reduce demand for our current products and services; policy changes in international trade; a slowdown in infrastructure development and/or depressed commodity prices; the U.K.'s exit from the European Union; labor relations or work stoppages; reliance on our executive leadership team and other key personnel; lower than expected acceptance of new or existing products or services; changes in the engine outsourcing practices of significant customers; our plan to reposition our portfolio of product offerings through exploration of strategic acquisitions and divestitures and related uncertainties of entering such transactions; exposure to potential security breaches or other disruptions to our information technology systems and data security; challenges or unexpected costs in completing cost reduction actions and restructuring initiatives; failure to realize expected results from our investment in Eaton Cummins Automated Transmission Technologies joint venture; political, economic and other risks from operations in numerous countries; competitor activity; increasing competition, including increased global competition among our customers in emerging markets; foreign currency exchange rate changes; variability in material and commodity costs; the actions of, and income from, joint ventures and other investees that we do not directly control; changes in taxation; global legal and ethical compliance costs and risks; product liability claims; increasingly stringent environmental laws and regulations; the performance of our pension plan assets and volatility of discount rates, particularly those related to the sustained slowdown of the global economy due to the COVID-19 pandemic; future bans or limitations on the use of diesel-powered products; the price and availability of energy; our sales mix of products; protection and validity of our patent and other intellectual property rights; the outcome of pending and future litigation and governmental proceedings; continued availability of financing, financial instruments and financial resources in the amounts, at the times and on the terms required to support our future business; and other risks detailed from time to time in our SEC filings, including particularly in the Risk Factors section of our 2019 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this press release and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available at http://www.sec.gov or at http://www.cummins.com in the Investor Relations section of our website.

Presentation of Non-GAAP Financial Information

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

Webcast information

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

 

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited) (a)

Three months ended December 31,

In millions, except per share amounts

2020

2019

NET SALES

$

5,830

$

5,578

Cost of sales

4,469

4,265

GROSS MARGIN

1,361

1,313

OPERATING EXPENSES AND INCOME

Selling, general and administrative expenses

576

632

Research, development and engineering expenses

255

271

Equity, royalty and interest income from investees

110

74

Restructuring actions

119

Other operating expense, net

(11

)

(11

)

OPERATING INCOME

629

354

Interest expense

29

22

Other income, net

35

31

INCOME BEFORE INCOME TAXES

635

363

Income tax expense

125

65

CONSOLIDATED NET INCOME

510

298

Less: Net income (loss) attributable to noncontrolling interests

9

(2

)

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

$

501

$

300

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.

Basic

$

3.39

$

1.98

Diluted

$

3.36

$

1.97

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING

Basic

148.0

151.5

Diluted

149.3

152.4

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

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited) (a)

Years ended December 31,

In millions, except per share amounts

2020

2019

NET SALES

$

19,811

$

23,571

Cost of sales

14,917

17,591

GROSS MARGIN

4,894

5,980

OPERATING EXPENSES AND INCOME

Selling, general and administrative expenses

2,125

2,454

Research, development and engineering expenses

906

1,001

Equity, royalty and interest income from investees

452

330

Restructuring actions

119

Other operating expense, net

(46

)

(36

)

OPERATING INCOME

2,269

2,700

Interest expense

100

109

Other income, net

169

243

INCOME BEFORE INCOME TAXES

2,338

2,834

Income tax expense

527

566

CONSOLIDATED NET INCOME

1,811

2,268

Less: Net income attributable to noncontrolling interests

22

8

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

$

1,789

$

2,260

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.

Basic

$

12.07

$

14.54

Diluted

$

12.01

$

14.48

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING

Basic

148.2

155.4

Diluted

149.0

156.1

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

 

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (a)

In millions, except par value

December 31,
2020

December 31,
2019

ASSETS

Current assets

Cash and cash equivalents

$

3,401

$

1,129

Marketable securities

461

341

Total cash, cash equivalents and marketable securities

3,862

1,470

Accounts and notes receivable, net

3,820

3,670

Inventories

3,425

3,486

Prepaid expenses and other current assets

790

761

Total current assets

11,897

9,387

Long-term assets

Property, plant and equipment, net

4,255

4,245

Investments and advances related to equity method investees

1,441

1,237

Goodwill

1,293

1,286

Other intangible assets, net

963

1,003

Pension assets

1,042

1,001

Other assets

1,733

1,578

Total assets

$

22,624

$

19,737

LIABILITIES

Current liabilities

Accounts payable (principally trade)

$

2,820

$

2,534

Loans payable

169

100

Commercial paper

323

660

Accrued compensation, benefits and retirement costs

484

560

Current portion of accrued product warranty

674

803

Current portion of deferred revenue

691

533

Other accrued expenses

1,112

1,039

Current maturities of long-term debt

62

31

Total current liabilities

6,335

6,260

Long-term liabilities

Long-term debt

3,610

1,576

Pensions and OPEB

630

591

Accrued product warranty

672

645

Deferred revenue

840

821

Other liabilities

1,548

1,379

Total liabilities

$

13,635

$

11,272

EQUITY

Cummins Inc. shareholders’ equity

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

$

2,404

$

2,346

Retained earnings

15,419

14,416

Treasury stock, at cost, 74.8 and 71.7 shares

(7,779

)

(7,225

)

Common stock held by employee benefits trust, at cost, — and 0.2 shares

(2

)

Accumulated other comprehensive loss

(1,982

)

(2,028

)

Total Cummins Inc. shareholders’ equity

8,062

7,507

Noncontrolling interests

927

958

Total equity

$

8,989

$

8,465

Total liabilities and equity

$

22,624

$

19,737

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

 

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (a)

Three months ended December 31,

In millions

2020

2019

NET CASH PROVIDED BY OPERATING ACTIVITIES

$

1,142

$

838

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures

(260

)

(305

)

Investments in internal use software

(14

)

(25

)

Investments in and advances to equity investees

(21

)

(4

)

Investments in marketable securities—acquisitions

(171

)

(128

)

Investments in marketable securities—liquidations

61

93

Cash flows from derivatives not designated as hedges

19

42

Other, net

4

6

Net cash used in investing activities

(382

)

(321

)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from borrowings

15

1

Net borrowings (payments) of commercial paper

7

(242

)

Payments on borrowings and finance lease obligations

(32

)

(49

)

Net borrowings under short-term credit agreements

4

Dividend payments on common stock

(200

)

(199

)

Repurchases of common stock

(91

)

(465

)

Proceeds from issuing common stock

10

28

Other, net

3

29

Net cash used in financing activities

(284

)

(897

)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

(42

)

(51

)

Net increase (decrease) in cash and cash equivalents

434

(431

)

Cash and cash equivalents at beginning of period

2,967

1,560

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

3,401

$

1,129

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

 

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (a)

Years ended December 31,

In millions

2020

2019

NET CASH PROVIDED BY OPERATING ACTIVITIES

$

2,722

$

3,181

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures

(528

)

(700

)

Investments in internal use software

(47

)

(75

)

Investments in and advances to equity investees

(51

)

(20

)

Acquisitions of businesses, net of cash acquired

(237

)

Investments in marketable securities—acquisitions

(593

)

(495

)

Investments in marketable securities—liquidations

469

389

Cash flows from derivatives not designated as hedges

4

(44

)

Other, net

27

32

Net cash used in investing activities

(719

)

(1,150

)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from borrowings

2,014

11

Net payments of commercial paper

(337

)

(120

)

Payments on borrowings and finance lease obligations

(73

)

(96

)

Net borrowings under short-term credit agreements

10

53

Distributions to noncontrolling interests

(26

)

(33

)

Dividend payments on common stock

(782

)

(761

)

Repurchases of common stock

(641

)

(1,271

)

Proceeds from issuing common stock

88

76

Other, net

27

46

Net cash provided by (used in) financing activities

280

(2,095

)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

(11

)

(110

)

Net increase (decrease) in cash and cash equivalents

2,272

(174

)

Cash and cash equivalents at beginning of year

1,129

1,303

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

3,401

$

1,129

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

 

CUMMINS INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

In millions

Engine

Distribution

Components

Power Systems

New

Power

Total

Segments

Intersegment

Eliminations (1)

Total

Three months ended December 31, 2020

External sales

$

1,792

$

1,987

$

1,458

$

560

$

33

$

5,830

$

$

5,830

Intersegment sales

537

9

373

429

1

1,349

(1,349

)

Total sales

2,329

1,996

1,831

989

34

7,179

(1,349

)

5,830

Research, development and engineering expenses

73

11

77

64

30

255

255

Equity, royalty and interest income (loss) from investees

76

17

15

3

(1

)

110

110

Interest income

3

1

1

1

6

6

EBITDA (2)

338

165

280

74

(51

)

806

31

837

Depreciation and amortization (3)

53

31

50

34

5

173

173

EBITDA as a percentage of total sales

14.5

%

8.3

%

15.3

%

7.5

%

NM

11.2

%

14.4

%

Three months ended December 31, 2019

External sales

$

1,691

$

2,031

$

1,198

$

640

$

18

$

5,578

$

$

5,578

Intersegment sales

593

7

359

414

1,373

(1,373

)

Total sales

2,284

2,038

1,557

1,054

18

6,951

(1,373

)

5,578

Research, development and engineering expenses

92

7

77

59

36

271

271

Equity, royalty and interest income (loss) from investees

48

17

10

(1

)

74

74

Interest income

2

3

2

1

8

8

EBITDA (excluding restructuring actions)

277

164

209

55

(50

)

655

27

682

Restructuring actions

18

37

20

12

1

88

31

119

EBITDA (2)

259

127

189

43

(51

)

567

(4

)

563

Depreciation and amortization (3)

51

29

62

30

6

178

178

EBITDA (excluding restructuring actions) as a percentage of total sales

12.1

%

8.0

%

13.4

%

5.2

%

NM

9.4

%

12.2

%

EBITDA as a percentage of total sales

11.3

%

6.2

%

12.1

%

4.1

%

NM

8.2

%

10.1

%

"NM" - not meaningful information

(1)Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended December 31, 2020. The three months ended December 31, 2019, includes a $31 million restructuring charge related to corporate functions.

(2)EBITDA is defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests.

(3)Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." A portion of depreciation expense is included in "Research, development and engineering expenses."

 

CUMMINS INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

In millions

Engine

Distribution

Components

Power Systems

New

Power

Total

Segments

Intersegment

Eliminations (1)

Total

Year ended December 31, 2020

External sales

$

5,925

$

7,110

$

4,650

$

2,055

$

71

$

19,811

$

$

19,811

Intersegment sales

2,097

26

1,374

1,576

1

5,074

(5,074

)

Total sales

8,022

7,136

6,024

3,631

72

24,885

(5,074

)

19,811

Research, development and engineering expenses

290

31

264

212

109

906

906

Equity, royalty and interest income (loss) from investees

312

62

61

21

(4

)

452

452

Interest income

9

4

4

4

21

21

EBITDA (2)

1,235

665

961

343

(172

)

3,032

76

3,108

Depreciation and amortization (3)

208

122

192

130

18

670

670

EBITDA as a percentage of total sales

15.4

%

9.3

%

16.0

%

9.4

%

NM

12.2

%

15.7

%

Year ended December 31, 2019

External sales

$

7,570

$

8,040

$

5,253

$

2,670

$

38

$

23,571

$

$

23,571

Intersegment sales

2,486

31

1,661

1,790

5,968

(5,968

)

Total sales

10,056

8,071

6,914

4,460

38

29,539

(5,968

)

23,571

Research, development and engineering expenses

337

28

300

230

106

1,001

1,001

Equity, royalty and interest income from investees

200

52

40

38

330

330

Interest income

15

15

8

8

46

46

EBITDA (excluding restructuring actions)

1,472

693

1,117

524

(148

)

3,658

73

3,731

Restructuring actions

18

37

20

12

1

88

31

119

EBITDA (2)

1,454

656

1,097

512

(149

)

3,570

42

3,612

Depreciation and amortization (3)

202

115

222

118

12

669

669

EBITDA (excluding restructuring actions) as a percentage of total sales

14.6

%

8.6

%

16.2

%

11.7

%

NM

12.4

%

15.8

%

EBITDA as a percentage of total sales

14.5

%

8.1

%

15.9

%

11.5

%

NM

12.1

%

15.3

%

 
"NM" - not meaningful information

(1)Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the year ended December 31, 2020. The year ended December 31, 2019, includes a $31 million restructuring charge related to corporate functions.

(2)EBITDA is defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests.

(3)Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." The amortization of debt discount and deferred costs was $3 million and $3 million for the years ended December 31, 2020 and December 31, 2019, respectively. A portion of depreciation expense is included in "Research, development and engineering expenses."

 

CUMMINS INC. AND SUBSIDIARIES
RECONCILIATION OF SEGMENT INFORMATION
(Unaudited)

A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Net Income is shown in the table below:

Three months ended December 31,

Years ended December 31,

In millions

2020

2019

2020

2019

EBITDA excluding restructuring actions

$

837

$

682

$

3,108

$

3,731

Less: Restructuring actions

119

119

Total EBITDA

837

563

3,108

3,612

Less:

Depreciation and amortization

173

178

670

669

Interest expense

29

22

100

109

Income before income taxes

$

635

$

363

$

2,338

$

2,834

 

CUMMINS INC. AND SUBSIDIARIES
SELECT FOOTNOTE DATA
(Unaudited)

EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES

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

Three months ended December 31,

Years ended December 31,

In millions

2020

2019

2020

2019

Manufacturing entities

Beijing Foton Cummins Engine Co., Ltd.

$

32

$

4

$

113

$

60

Dongfeng Cummins Engine Company, Ltd.

9

12

63

52

Chongqing Cummins Engine Company, Ltd.

8

9

35

41

All other manufacturers

34

(1)

12

134

(1)(2)

88

Distribution entities

Komatsu Cummins Chile, Ltda.

8

9

31

28

All other distributors

1

2

2

2

Cummins share of net income

92

48

378

271

Royalty and interest income

18

26

74

59

Equity, royalty and interest income from investees

$

110

$

74

$

452

$

330

 

(1)Includes loss on sale of business of $8 million for a joint venture in the Power Systems segment.

(2)Includes $37 million in favorable adjustments related to tax changes within India's 2020-2021 Union Budget of India (India Tax Law Changes) passed in March 2020 and impairment charges of $13 million for a joint venture in the Power Systems segment.

INCOME TAXES

Our effective tax rate for the three and twelve months ended December 31, 2020, was 19.7 percent and 22.5 percent, respectively.

The three months ended December 31, 2020, contained favorable discrete items of $1 million, or $0.01 per share, consisting of $9 million of favorable changes of provision to return adjustments relating to tax returns filed for 2019, almost offset by $8 million of unfavorable net other discrete items.

The twelve months ended December 31, 2020, contained $26 million, or $0.17 per share, of unfavorable net discrete tax items, primarily due to $33 million of unfavorable changes in tax reserves and $10 million of withholding tax adjustments, partially offset by $15 million of favorable changes due to the India Tax Law Change. The India Tax Law Change eliminated the dividend distribution tax and replaced it with a lower rate withholding tax as the burden shifted from the dividend payor to the dividend recipient for a net favorable income statement impact of $35 million.

The India Tax Law Change resulted in the following adjustments to the Condensed Consolidated Statements of Net Income in the year ended December 31, 2020:

In millions

Favorable

(Unfavorable)

Equity, royalty and interest income from investees

$

37

Income tax expense (1)

17

Less: Net income attributable to noncontrolling interests

(19

)

Net income statement impact

$

35

(1) The adjustment to "Income tax expense" includes $15 million of favorable discrete items.

AVAILABLE LIQUIDITY AND CREDIT RATINGS

Available Liquidity

Cash provided by operations is typically our principal source of liquidity with $2,722 million generated in the year ended December 31, 2020. Our sources of liquidity include:

December 31, 2020

In millions

Total

U.S.

International

Primary location of international balances

Cash and cash equivalents

$

3,401

$

1,914

$

1,487

China, Singapore, Mexico, Belgium, Australia, Canada

Marketable securities (1)

461

86

375

India

Total

$

3,862

$

2,000

$

1,862

Available credit capacity

Revolving credit facilities (2)

$

3,177

International and other uncommitted domestic credit facilities

$

256

 

(1)The majority of marketable securities could be liquidated into cash within a few days.

(2)The five-year credit facility for $2.0 billion and the 364-day credit facility for $1.5 billion, maturing August 2023 and August 2021, respectively, are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes. At December 31, 2020, we had $323 million of commercial paper outstanding, which effectively reduced the available capacity under our revolving credit facilities to $3.2 billion.

Credit Ratings

Our rating and outlook from each of the credit rating agencies as of the date of filing are shown in the table below.

Long-Term

Short-Term

Credit Rating Agency (1)

Senior Debt Rating

Debt Rating

Outlook

Standard and Poor’s Rating Services

A+

A1

Stable

Moody’s Investors Service, Inc.

A2

P1

Stable

(1) Credit ratings are not recommendations to buy, are subject to change, and each rating should be evaluated independently of any other rating. In addition, we undertake no obligation to update disclosures concerning our credit ratings, whether as a result of new information, future events or otherwise.

 

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

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

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

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

Three months ended December 31,

Years ended December 31,

In millions

2020

2019

2020

2019

Net income attributable to Cummins Inc.

$

501

$

300

$

1,789

$

2,260

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

8.6

%

5.4

%

9.0

%

9.6

%

Add:

Net income (loss) attributable to noncontrolling interests

9

(2

)

22

8

Consolidated net income

510

298

1,811

2,268

Add:

Interest expense

29

22

100

109

Income tax expense

125

65

527

566

Depreciation and amortization

173

178

670

669

EBITDA

$

837

$

563

$

3,108

$

3,612

EBITDA as a percentage of net sales

14.4

%

10.1

%

15.7

%

15.3

%

Add:

Restructuring actions

119

119

EBITDA, excluding impact of restructuring actions

$

837

$

682

$

3,108

$

3,731

EBITDA, excluding impact of restructuring actions, as a percentage of net sales

14.4

%

12.2

%

15.7

%

15.8

%

 

Net income and diluted earnings per share (EPS) attributable to Cummins Inc. excluding restructuring actions

We believe these are useful measures of our operating performance for the periods presented as they illustrate our operating performance without regard to restructuring actions. These measures are not in accordance with, or an alternative for GAAP and may not be consistent with measures used by other companies. This should be considered supplemental data. The following table reconciles net income and diluted EPS attributable to Cummins Inc. to net income and diluted EPS attributable to Cummins Inc. excluding restructuring actions for the following periods:

Three months ended December 31,

2019

In millions

Net Income

Diluted EPS

Net income and diluted EPS attributable to Cummins Inc.

$

300

$

1.97

Restructuring actions, net of tax (1)

90

0.59

Net income and diluted EPS attributable to Cummins Inc. excluding restructuring actions

$

390

$

2.56

 

       Year ended December 31,       

2019

In millions

Net Income

Diluted EPS

Net income and diluted EPS attributable to Cummins Inc.

$

2,260

$

14.48

Restructuring actions, net of tax (1)

90

0.57

Net income and diluted EPS attributable to Cummins Inc. excluding restructuring actions

$

2,350

$

15.05

(1) In the fourth quarter of 2019, we recorded restructuring actions totaling $119 million ($90 million after-tax).

CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)

Engine Segment Sales by Market and Unit Shipments by Engine Classification

Sales for our Engine segment by market were as follows:

2020

In millions

Q1

Q2

Q3

Q4

YTD

Heavy-duty truck

$

750

$

415

$

694

$

789

$

2,648

Medium-duty truck and bus

618

391

492

565

2,066

Light-duty automotive

353

180

522

492

1,547

Off-highway

437

437

404

483

1,761

Total sales

$

2,158

$

1,423

$

2,112

$

2,329

$

8,022

2019

In millions

Q1

Q2

Q3

Q4

YTD

Heavy-duty truck

$

979

$

970

$

851

$

755

$

3,555

Medium-duty truck and bus

721

739

645

602

2,707

Light-duty automotive

382

480

478

464

1,804

Off-highway

571

514

442

463

1,990

Total sales

$

2,653

$

2,703

$

2,416

$

2,284

$

10,056

 

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

2020

Units

Q1

Q2

Q3

Q4

YTD

Heavy-duty

25,800

15,900

23,300

27,500

92,500

Medium-duty

61,200

44,900

50,100

64,700

220,900

Light-duty

49,400

29,800

67,200

69,400

215,800

Total units

136,400

90,600

140,600

161,600

529,200

2019

Units

Q1

Q2

Q3

Q4

YTD

Heavy-duty

33,900

35,000

28,000

25,700

122,600

Medium-duty

79,000

76,400

63,200

64,800

283,400

Light-duty

56,400

64,100

62,600

62,800

245,900

Total units

169,300

175,500

153,800

153,300

651,900

 

Distribution Segment Sales by Product Line

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

2020

In millions

Q1

Q2

Q3

Q4

YTD

Parts

$

787

$

654

$

722

$

768

$

2,931

Power generation

376

377

416

523

1,692

Service

328

297

304

334

1,263

Engines

323

277

279

371

1,250

Total sales

$

1,814

$

1,605

$

1,721

$

1,996

$

7,136

2019

In millions

Q1

Q2

Q3

Q4

YTD

Parts

$

844

$

833

$

798

$

815

$

3,290

Power generation

403

427

467

487

1,784

Service

363

373

376

367

1,479

Engines

391

395

363

369

1,518

Total sales

$

2,001

$

2,028

$

2,004

$

2,038

$

8,071

 

Component Segment Sales by Product Line

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

2020

In millions

Q1

Q2

Q3

Q4

YTD

Emission solutions

$

664

$

472

$

665

$

831

$

2,632

Filtration

312

255

314

351

1,232

Turbo technologies

270

216

281

331

1,098

Electronics and fuel systems

174

164

187

229

754

Automated transmissions

82

43

94

89

308

Total sales

$

1,502

$

1,150

$

1,541

$

1,831

$

6,024

2019

In millions

Q1

Q2

Q3

Q4

YTD

Emission solutions

$

854

$

828

$

745

$

695

$

3,122

Filtration

325

331

310

315

1,281

Turbo technologies

335

319

279

285

1,218

Electronics and fuel systems

198

212

170

179

759

Automated transmissions

149

156

146

83

534

Total sales

$

1,861

$

1,846

$

1,650

$

1,557

$

6,914

 

Power Systems Segment Sales by Product Line and Unit Shipments by Engine Classification

Sales for our Power Systems segment by product line were as follows:

2020

In millions

Q1

Q2

Q3

Q4

YTD

Power generation

$

519

$

424

$

601

$

623

$

2,167

Industrial

296

291

309

292

1,188

Generator technologies

69

62

71

74

276

Total sales

$

884

$

777

$

981

$

989

$

3,631

2019

In millions

Q1

Q2

Q3

Q4

YTD

Power generation

$

567

$

668

$

647

$

636

$

2,518

Industrial

420

432

392

332

1,576

Generator technologies

90

103

87

86

366

Total sales

$

1,077

$

1,203

$

1,126

$

1,054

$

4,460

 

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

2020

Units

Q1

Q2

Q3

Q4

YTD

Power generation

1,800

1,000

2,300

2,600

7,700

Industrial

1,000

1,000

1,200

1,100

4,300

Total units

2,800

2,000

3,500

3,700

12,000

2019

Units

Q1

Q2

Q3

Q4

YTD

Power generation

2,100

2,300

2,300

2,400

9,100

Industrial

1,600

1,600

1,400

1,400

6,000

Total units

3,700

3,900

3,700

3,800

15,100

Contacts:

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

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