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,
| December 31,
| ||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 3,401 | $ | 1,129 | ||||
Marketable securities | 461 | 341 | ||||||
Total cash, cash equivalents and marketable securities | 3,862 | 1,470 | ||||||
Accounts and notes receivable, net | 3,820 | 3,670 | ||||||
Inventories | 3,425 | 3,486 | ||||||
Prepaid expenses and other current assets | 790 | 761 | ||||||
Total current assets | 11,897 | 9,387 | ||||||
Long-term assets | ||||||||
Property, plant and equipment, net | 4,255 | 4,245 | ||||||
Investments and advances related to equity method investees | 1,441 | 1,237 | ||||||
Goodwill | 1,293 | 1,286 | ||||||
Other intangible assets, net | 963 | 1,003 | ||||||
Pension assets | 1,042 | 1,001 | ||||||
Other assets | 1,733 | 1,578 | ||||||
Total assets | $ | 22,624 | $ | 19,737 | ||||
LIABILITIES | ||||||||
Current liabilities | ||||||||
Accounts payable (principally trade) | $ | 2,820 | $ | 2,534 | ||||
Loans payable | 169 | 100 | ||||||
Commercial paper | 323 | 660 | ||||||
Accrued compensation, benefits and retirement costs | 484 | 560 | ||||||
Current portion of accrued product warranty | 674 | 803 | ||||||
Current portion of deferred revenue | 691 | 533 | ||||||
Other accrued expenses | 1,112 | 1,039 | ||||||
Current maturities of long-term debt | 62 | 31 | ||||||
Total current liabilities | 6,335 | 6,260 | ||||||
Long-term liabilities | ||||||||
Long-term debt | 3,610 | 1,576 | ||||||
Pensions and OPEB | 630 | 591 | ||||||
Accrued product warranty | 672 | 645 | ||||||
Deferred revenue | 840 | 821 | ||||||
Other liabilities | 1,548 | 1,379 | ||||||
Total liabilities | $ | 13,635 | $ | 11,272 | ||||
EQUITY | ||||||||
Cummins Inc. shareholders’ equity | ||||||||
Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.4 shares issued | $ | 2,404 | $ | 2,346 | ||||
Retained earnings | 15,419 | 14,416 | ||||||
Treasury stock, at cost, 74.8 and 71.7 shares | (7,779 | ) | (7,225 | ) | ||||
Common stock held by employee benefits trust, at cost, — and 0.2 shares | — | (2 | ) | |||||
Accumulated other comprehensive loss | (1,982 | ) | (2,028 | ) | ||||
Total Cummins Inc. shareholders’ equity | 8,062 | 7,507 | ||||||
Noncontrolling interests | 927 | 958 | ||||||
Total equity | $ | 8,989 | $ | 8,465 | ||||
Total liabilities and equity | $ | 22,624 | $ | 19,737 | ||||
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America. | ||||||||
CUMMINS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (a) | ||||||||
Three months ended December 31, | ||||||||
In millions | 2020 | 2019 | ||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | $ | 1,142 | $ | 838 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Capital expenditures | (260 | ) | (305 | ) | ||||
Investments in internal use software | (14 | ) | (25 | ) | ||||
Investments in and advances to equity investees | (21 | ) | (4 | ) | ||||
Investments in marketable securities—acquisitions | (171 | ) | (128 | ) | ||||
Investments in marketable securities—liquidations | 61 | 93 | ||||||
Cash flows from derivatives not designated as hedges | 19 | 42 | ||||||
Other, net | 4 | 6 | ||||||
Net cash used in investing activities | (382 | ) | (321 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from borrowings | 15 | 1 | ||||||
Net borrowings (payments) of commercial paper | 7 | (242 | ) | |||||
Payments on borrowings and finance lease obligations | (32 | ) | (49 | ) | ||||
Net borrowings under short-term credit agreements | 4 | — | ||||||
Dividend payments on common stock | (200 | ) | (199 | ) | ||||
Repurchases of common stock | (91 | ) | (465 | ) | ||||
Proceeds from issuing common stock | 10 | 28 | ||||||
Other, net | 3 | 29 | ||||||
Net cash used in financing activities | (284 | ) | (897 | ) | ||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (42 | ) | (51 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 434 | (431 | ) | |||||
Cash and cash equivalents at beginning of period | 2,967 | 1,560 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 3,401 | $ | 1,129 | ||||
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America. | ||||||||
CUMMINS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (a) | ||||||||
Years ended December 31, | ||||||||
In millions | 2020 | 2019 | ||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | $ | 2,722 | $ | 3,181 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Capital expenditures | (528 | ) | (700 | ) | ||||
Investments in internal use software | (47 | ) | (75 | ) | ||||
Investments in and advances to equity investees | (51 | ) | (20 | ) | ||||
Acquisitions of businesses, net of cash acquired | — | (237 | ) | |||||
Investments in marketable securities—acquisitions | (593 | ) | (495 | ) | ||||
Investments in marketable securities—liquidations | 469 | 389 | ||||||
Cash flows from derivatives not designated as hedges | 4 | (44 | ) | |||||
Other, net | 27 | 32 | ||||||
Net cash used in investing activities | (719 | ) | (1,150 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from borrowings | 2,014 | 11 | ||||||
Net payments of commercial paper | (337 | ) | (120 | ) | ||||
Payments on borrowings and finance lease obligations | (73 | ) | (96 | ) | ||||
Net borrowings under short-term credit agreements | 10 | 53 | ||||||
Distributions to noncontrolling interests | (26 | ) | (33 | ) | ||||
Dividend payments on common stock | (782 | ) | (761 | ) | ||||
Repurchases of common stock | (641 | ) | (1,271 | ) | ||||
Proceeds from issuing common stock | 88 | 76 | ||||||
Other, net | 27 | 46 | ||||||
Net cash provided by (used in) financing activities | 280 | (2,095 | ) | |||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (11 | ) | (110 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 2,272 | (174 | ) | |||||
Cash and cash equivalents at beginning of year | 1,129 | 1,303 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 3,401 | $ | 1,129 | ||||
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America. | ||||||||
CUMMINS INC. AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) | ||||||||||||||||||||||||||||||||
| In millions | Engine | Distribution | Components | Power Systems | New Power | Total Segments | Intersegment Eliminations (1) | Total | ||||||||||||||||||||||||
| Three months ended December 31, 2020 | ||||||||||||||||||||||||||||||||
| External sales | $ | 1,792 | $ | 1,987 | $ | 1,458 | $ | 560 | $ | 33 | $ | 5,830 | $ | — | $ | 5,830 | ||||||||||||||||
| Intersegment sales | 537 | 9 | 373 | 429 | 1 | 1,349 | (1,349 | ) | — | |||||||||||||||||||||||
| Total sales | 2,329 | 1,996 | 1,831 | 989 | 34 | 7,179 | (1,349 | ) | 5,830 | |||||||||||||||||||||||
| Research, development and engineering expenses | 73 | 11 | 77 | 64 | 30 | 255 | — | 255 | ||||||||||||||||||||||||
| Equity, royalty and interest income (loss) from investees | 76 | 17 | 15 | 3 | (1 | ) | 110 | — | 110 | |||||||||||||||||||||||
| Interest income | 3 | 1 | 1 | 1 | — | 6 | — | 6 | ||||||||||||||||||||||||
| EBITDA (2) | 338 | 165 | 280 | 74 | (51 | ) | 806 | 31 | 837 | |||||||||||||||||||||||
| Depreciation and amortization (3) | 53 | 31 | 50 | 34 | 5 | 173 | — | 173 | ||||||||||||||||||||||||
| EBITDA as a percentage of total sales | 14.5 | % | 8.3 | % | 15.3 | % | 7.5 | % | NM | 11.2 | % | 14.4 | % | |||||||||||||||||||
| Three months ended December 31, 2019 | ||||||||||||||||||||||||||||||||
| External sales | $ | 1,691 | $ | 2,031 | $ | 1,198 | $ | 640 | $ | 18 | $ | 5,578 | $ | — | $ | 5,578 | ||||||||||||||||
| Intersegment sales | 593 | 7 | 359 | 414 | — | 1,373 | (1,373 | ) | — | |||||||||||||||||||||||
| Total sales | 2,284 | 2,038 | 1,557 | 1,054 | 18 | 6,951 | (1,373 | ) | 5,578 | |||||||||||||||||||||||
| Research, development and engineering expenses | 92 | 7 | 77 | 59 | 36 | 271 | — | 271 | ||||||||||||||||||||||||
| Equity, royalty and interest income (loss) from investees | 48 | 17 | 10 | (1 | ) | — | 74 | — | 74 | |||||||||||||||||||||||
| Interest income | 2 | 3 | 2 | 1 | — | 8 | — | 8 | ||||||||||||||||||||||||
| EBITDA (excluding restructuring actions) | 277 | 164 | 209 | 55 | (50 | ) | 655 | 27 | 682 | |||||||||||||||||||||||
| Restructuring actions | 18 | 37 | 20 | 12 | 1 | 88 | 31 | 119 | ||||||||||||||||||||||||
| EBITDA (2) | 259 | 127 | 189 | 43 | (51 | ) | 567 | (4 | ) | 563 | ||||||||||||||||||||||
| Depreciation and amortization (3) | 51 | 29 | 62 | 30 | 6 | 178 | — | 178 | ||||||||||||||||||||||||
| EBITDA (excluding restructuring actions) as a percentage of total sales | 12.1 | % | 8.0 | % | 13.4 | % | 5.2 | % | NM | 9.4 | % | 12.2 | % | |||||||||||||||||||
| EBITDA as a percentage of total sales | 11.3 | % | 6.2 | % | 12.1 | % | 4.1 | % | NM | 8.2 | % | 10.1 | % | |||||||||||||||||||
| "NM" - not meaningful information | ||||||||||||||||||||||||||||||||
(1)Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended December 31, 2020. The three months ended December 31, 2019, includes a $31 million restructuring charge related to corporate functions. | ||||||||||||||||||||||||||||||||
(2)EBITDA is defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests. | ||||||||||||||||||||||||||||||||
(3)Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." A portion of depreciation expense is included in "Research, development and engineering expenses." | ||||||||||||||||||||||||||||||||
CUMMINS INC. AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) | ||||||||||||||||||||||||||||||||
| In millions | Engine | Distribution | Components | Power Systems | New Power | Total Segments | Intersegment Eliminations (1) | Total | ||||||||||||||||||||||||
Year ended December 31, 2020 | ||||||||||||||||||||||||||||||||
External sales | $ | 5,925 | $ | 7,110 | $ | 4,650 | $ | 2,055 | $ | 71 | $ | 19,811 | $ | — | $ | 19,811 | ||||||||||||||||
Intersegment sales | 2,097 | 26 | 1,374 | 1,576 | 1 | 5,074 | (5,074 | ) | — | |||||||||||||||||||||||
Total sales | 8,022 | 7,136 | 6,024 | 3,631 | 72 | 24,885 | (5,074 | ) | 19,811 | |||||||||||||||||||||||
Research, development and engineering expenses | 290 | 31 | 264 | 212 | 109 | 906 | — | 906 | ||||||||||||||||||||||||
Equity, royalty and interest income (loss) from investees | 312 | 62 | 61 | 21 | (4 | ) | 452 | — | 452 | |||||||||||||||||||||||
Interest income | 9 | 4 | 4 | 4 | — | 21 | — | 21 | ||||||||||||||||||||||||
EBITDA (2) | 1,235 | 665 | 961 | 343 | (172 | ) | 3,032 | 76 | 3,108 | |||||||||||||||||||||||
Depreciation and amortization (3) | 208 | 122 | 192 | 130 | 18 | 670 | — | 670 | ||||||||||||||||||||||||
EBITDA as a percentage of total sales | 15.4 | % | 9.3 | % | 16.0 | % | 9.4 | % | NM | 12.2 | % | 15.7 | % | |||||||||||||||||||
Year ended December 31, 2019 | ||||||||||||||||||||||||||||||||
External sales | $ | 7,570 | $ | 8,040 | $ | 5,253 | $ | 2,670 | $ | 38 | $ | 23,571 | $ | — | $ | 23,571 | ||||||||||||||||
Intersegment sales | 2,486 | 31 | 1,661 | 1,790 | — | 5,968 | (5,968 | ) | — | |||||||||||||||||||||||
Total sales | 10,056 | 8,071 | 6,914 | 4,460 | 38 | 29,539 | (5,968 | ) | 23,571 | |||||||||||||||||||||||
Research, development and engineering expenses | 337 | 28 | 300 | 230 | 106 | 1,001 | — | 1,001 | ||||||||||||||||||||||||
Equity, royalty and interest income from investees | 200 | 52 | 40 | 38 | — | 330 | — | 330 | ||||||||||||||||||||||||
Interest income | 15 | 15 | 8 | 8 | — | 46 | — | 46 | ||||||||||||||||||||||||
EBITDA (excluding restructuring actions) | 1,472 | 693 | 1,117 | 524 | (148 | ) | 3,658 | 73 | 3,731 | |||||||||||||||||||||||
Restructuring actions | 18 | 37 | 20 | 12 | 1 | 88 | 31 | 119 | ||||||||||||||||||||||||
EBITDA (2) | 1,454 | 656 | 1,097 | 512 | (149 | ) | 3,570 | 42 | 3,612 | |||||||||||||||||||||||
Depreciation and amortization (3) | 202 | 115 | 222 | 118 | 12 | 669 | — | 669 | ||||||||||||||||||||||||
EBITDA (excluding restructuring actions) as a percentage of total sales | 14.6 | % | 8.6 | % | 16.2 | % | 11.7 | % | NM | 12.4 | % | 15.8 | % | |||||||||||||||||||
EBITDA as a percentage of total sales | 14.5 | % | 8.1 | % | 15.9 | % | 11.5 | % | NM | 12.1 | % | 15.3 | % | |||||||||||||||||||
| "NM" - not meaningful information | ||||||||||||||||||||||||||||||||
(1)Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the year ended December 31, 2020. The year ended December 31, 2019, includes a $31 million restructuring charge related to corporate functions. | ||||||||||||||||||||||||||||||||
(2)EBITDA is defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests. | ||||||||||||||||||||||||||||||||
(3)Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." The amortization of debt discount and deferred costs was $3 million and $3 million for the years ended December 31, 2020 and December 31, 2019, respectively. A portion of depreciation expense is included in "Research, development and engineering expenses." | ||||||||||||||||||||||||||||||||
CUMMINS INC. AND SUBSIDIARIES
RECONCILIATION OF SEGMENT INFORMATION
(Unaudited)
A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Net Income is shown in the table below:
Three months ended December 31, | Years ended December 31, | |||||||||||
In millions | 2020 | 2019 | 2020 | 2019 | ||||||||
EBITDA excluding restructuring actions | $ | 837 | $ | 682 | $ | 3,108 | $ | 3,731 | ||||
Less: Restructuring actions | — | 119 | — | 119 | ||||||||
Total EBITDA | 837 | 563 | 3,108 | 3,612 | ||||||||
Less: | ||||||||||||
Depreciation and amortization | 173 | 178 | 670 | 669 | ||||||||
Interest expense | 29 | 22 | 100 | 109 | ||||||||
Income before income taxes | $ | 635 | $ | 363 | $ | 2,338 | $ | 2,834 | ||||
CUMMINS INC. AND SUBSIDIARIES
SELECT FOOTNOTE DATA
(Unaudited)
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES
Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Net Income for the reporting periods was as follows:
Three months ended December 31, | Years ended December 31, | |||||||||||
In millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Manufacturing entities | ||||||||||||
Beijing Foton Cummins Engine Co., Ltd. | $ | 32 | $ | 4 | $ | 113 | $ | 60 | ||||
Dongfeng Cummins Engine Company, Ltd. | 9 | 12 | 63 | 52 | ||||||||
Chongqing Cummins Engine Company, Ltd. | 8 | 9 | 35 | 41 | ||||||||
All other manufacturers | 34 | (1) | 12 | 134 | (1)(2) | 88 | ||||||
Distribution entities | ||||||||||||
Komatsu Cummins Chile, Ltda. | 8 | 9 | 31 | 28 | ||||||||
All other distributors | 1 | 2 | 2 | 2 | ||||||||
Cummins share of net income | 92 | 48 | 378 | 271 | ||||||||
Royalty and interest income | 18 | 26 | 74 | 59 | ||||||||
Equity, royalty and interest income from investees | $ | 110 | $ | 74 | $ | 452 | $ | 330 | ||||
(1)Includes loss on sale of business of $8 million for a joint venture in the Power Systems segment. | ||||||||||||
(2)Includes $37 million in favorable adjustments related to tax changes within India's 2020-2021 Union Budget of India (India Tax Law Changes) passed in March 2020 and impairment charges of $13 million for a joint venture in the Power Systems segment. | ||||||||||||
INCOME TAXES
Our effective tax rate for the three and twelve months ended December 31, 2020, was 19.7 percent and 22.5 percent, respectively.
The three months ended December 31, 2020, contained favorable discrete items of $1 million, or $0.01 per share, consisting of $9 million of favorable changes of provision to return adjustments relating to tax returns filed for 2019, almost offset by $8 million of unfavorable net other discrete items.
The twelve months ended December 31, 2020, contained $26 million, or $0.17 per share, of unfavorable net discrete tax items, primarily due to $33 million of unfavorable changes in tax reserves and $10 million of withholding tax adjustments, partially offset by $15 million of favorable changes due to the India Tax Law Change. The India Tax Law Change eliminated the dividend distribution tax and replaced it with a lower rate withholding tax as the burden shifted from the dividend payor to the dividend recipient for a net favorable income statement impact of $35 million.
The India Tax Law Change resulted in the following adjustments to the Condensed Consolidated Statements of Net Income in the year ended December 31, 2020:
In millions | Favorable (Unfavorable) | |||
Equity, royalty and interest income from investees | $ | 37 | ||
Income tax expense (1) | 17 | |||
Less: Net income attributable to noncontrolling interests | (19 | ) | ||
Net income statement impact | $ | 35 | ||
(1) The adjustment to "Income tax expense" includes $15 million of favorable discrete items. | ||||
AVAILABLE LIQUIDITY AND CREDIT RATINGS
Available Liquidity
Cash provided by operations is typically our principal source of liquidity with $2,722 million generated in the year ended December 31, 2020. Our sources of liquidity include:
December 31, 2020 | ||||||||||||||
In millions | Total | U.S. | International | Primary location of international balances | ||||||||||
Cash and cash equivalents | $ | 3,401 | $ | 1,914 | $ | 1,487 | China, Singapore, Mexico, Belgium, Australia, Canada | |||||||
Marketable securities (1) | 461 | 86 | 375 | India | ||||||||||
Total | $ | 3,862 | $ | 2,000 | $ | 1,862 | ||||||||
Available credit capacity | ||||||||||||||
Revolving credit facilities (2) | $ | 3,177 | ||||||||||||
International and other uncommitted domestic credit facilities | $ | 256 | ||||||||||||
(1)The majority of marketable securities could be liquidated into cash within a few days. | ||||||||||||||
(2)The five-year credit facility for $2.0 billion and the 364-day credit facility for $1.5 billion, maturing August 2023 and August 2021, respectively, are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes. At December 31, 2020, we had $323 million of commercial paper outstanding, which effectively reduced the available capacity under our revolving credit facilities to $3.2 billion. | ||||||||||||||
Credit Ratings
Our rating and outlook from each of the credit rating agencies as of the date of filing are shown in the table below.
Long-Term | Short-Term | |||||
Credit Rating Agency (1) | Senior Debt Rating | Debt Rating | Outlook | |||
Standard and Poor’s Rating Services | A+ | A1 | Stable | |||
Moody’s Investors Service, Inc. | A2 | P1 | Stable | |||
(1) Credit ratings are not recommendations to buy, are subject to change, and each rating should be evaluated independently of any other rating. In addition, we undertake no obligation to update disclosures concerning our credit ratings, whether as a result of new information, future events or otherwise. | ||||||
CUMMINS INC. AND SUBSIDIARIES
FINANCIAL MEASURES THAT SUPPLEMENT GAAP
(Unaudited)
Reconciliation of Non GAAP measures - Earnings before interest, income taxes, depreciation and amortization and noncontrolling interests (EBITDA)
We believe EBITDA is a useful measure of our operating performance as it assists investors and debt holders in comparing our performance on a consistent basis without regard to financing methods, capital structure, income taxes or depreciation and amortization methods, which can vary significantly depending upon many factors.
EBITDA is not in accordance with, or an alternative for, accounting principles generally accepted in the United States (GAAP) and may not be consistent with measures used by other companies. It should be considered supplemental data; however, the amounts included in the EBITDA calculation are derived from amounts included in the Condensed Consolidated Statements of Net Income. Below is a reconciliation of “Net income attributable to Cummins Inc.” to EBITDA for each of the applicable periods:
Three months ended December 31, | Years ended December 31, | |||||||||||||||
In millions | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Net income attributable to Cummins Inc. | $ | 501 | $ | 300 | $ | 1,789 | $ | 2,260 | ||||||||
Net income attributable to Cummins Inc. as a percentage of net sales | 8.6 | % | 5.4 | % | 9.0 | % | 9.6 | % | ||||||||
Add: | ||||||||||||||||
Net income (loss) attributable to noncontrolling interests | 9 | (2 | ) | 22 | 8 | |||||||||||
Consolidated net income | 510 | 298 | 1,811 | 2,268 | ||||||||||||
Add: | ||||||||||||||||
Interest expense | 29 | 22 | 100 | 109 | ||||||||||||
Income tax expense | 125 | 65 | 527 | 566 | ||||||||||||
Depreciation and amortization | 173 | 178 | 670 | 669 | ||||||||||||
EBITDA | $ | 837 | $ | 563 | $ | 3,108 | $ | 3,612 | ||||||||
EBITDA as a percentage of net sales | 14.4 | % | 10.1 | % | 15.7 | % | 15.3 | % | ||||||||
Add: | ||||||||||||||||
Restructuring actions | — | 119 | — | 119 | ||||||||||||
EBITDA, excluding impact of restructuring actions | $ | 837 | $ | 682 | $ | 3,108 | $ | 3,731 | ||||||||
EBITDA, excluding impact of restructuring actions, as a percentage of net sales | 14.4 | % | 12.2 | % | 15.7 | % | 15.8 | % | ||||||||
Net income and diluted earnings per share (EPS) attributable to Cummins Inc. excluding restructuring actions
We believe these are useful measures of our operating performance for the periods presented as they illustrate our operating performance without regard to restructuring actions. These measures are not in accordance with, or an alternative for GAAP and may not be consistent with measures used by other companies. This should be considered supplemental data. The following table reconciles net income and diluted EPS attributable to Cummins Inc. to net income and diluted EPS attributable to Cummins Inc. excluding restructuring actions for the following periods:
Three months ended December 31, | |||||||||
2019 | |||||||||
In millions | Net Income | Diluted EPS | |||||||
Net income and diluted EPS attributable to Cummins Inc. | $ | 300 | $ | 1.97 | |||||
Restructuring actions, net of tax (1) | 90 | 0.59 | |||||||
Net income and diluted EPS attributable to Cummins Inc. excluding restructuring actions | $ | 390 | $ | 2.56 | |||||
Year ended December 31, | |||||||||
2019 | |||||||||
In millions | Net Income | Diluted EPS | |||||||
Net income and diluted EPS attributable to Cummins Inc. | $ | 2,260 | $ | 14.48 | |||||
Restructuring actions, net of tax (1) | 90 | 0.57 | |||||||
Net income and diluted EPS attributable to Cummins Inc. excluding restructuring actions | $ | 2,350 | $ | 15.05 | |||||
(1) In the fourth quarter of 2019, we recorded restructuring actions totaling $119 million ($90 million after-tax). | |||||||||
CUMMINS INC. AND SUBSIDIARIES
BUSINESS UNIT SALES DATA
(Unaudited)
Engine Segment Sales by Market and Unit Shipments by Engine Classification
Sales for our Engine segment by market were as follows:
2020 | ||||||||||||||||||||
In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||
Heavy-duty truck | $ | 750 | $ | 415 | $ | 694 | $ | 789 | $ | 2,648 | ||||||||||
Medium-duty truck and bus | 618 | 391 | 492 | 565 | 2,066 | |||||||||||||||
Light-duty automotive | 353 | 180 | 522 | 492 | 1,547 | |||||||||||||||
Off-highway | 437 | 437 | 404 | 483 | 1,761 | |||||||||||||||
Total sales | $ | 2,158 | $ | 1,423 | $ | 2,112 | $ | 2,329 | $ | 8,022 | ||||||||||
2019 | ||||||||||||||||||||
In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||
Heavy-duty truck | $ | 979 | $ | 970 | $ | 851 | $ | 755 | $ | 3,555 | ||||||||||
Medium-duty truck and bus | 721 | 739 | 645 | 602 | 2,707 | |||||||||||||||
Light-duty automotive | 382 | 480 | 478 | 464 | 1,804 | |||||||||||||||
Off-highway | 571 | 514 | 442 | 463 | 1,990 | |||||||||||||||
Total sales | $ | 2,653 | $ | 2,703 | $ | 2,416 | $ | 2,284 | $ | 10,056 | ||||||||||
Unit shipments by engine classification (including unit shipments to Power Systems and off-highway engine units included in their respective classification) were as follows:
2020 | |||||||||||||||
Units | Q1 | Q2 | Q3 | Q4 | YTD | ||||||||||
Heavy-duty | 25,800 | 15,900 | 23,300 | 27,500 | 92,500 | ||||||||||
Medium-duty | 61,200 | 44,900 | 50,100 | 64,700 | 220,900 | ||||||||||
Light-duty | 49,400 | 29,800 | 67,200 | 69,400 | 215,800 | ||||||||||
Total units | 136,400 | 90,600 | 140,600 | 161,600 | 529,200 | ||||||||||
2019 | |||||||||||||||
Units | Q1 | Q2 | Q3 | Q4 | YTD | ||||||||||
Heavy-duty | 33,900 | 35,000 | 28,000 | 25,700 | 122,600 | ||||||||||
Medium-duty | 79,000 | 76,400 | 63,200 | 64,800 | 283,400 | ||||||||||
Light-duty | 56,400 | 64,100 | 62,600 | 62,800 | 245,900 | ||||||||||
Total units | 169,300 | 175,500 | 153,800 | 153,300 | 651,900 | ||||||||||
Distribution Segment Sales by Product Line
Sales for our Distribution segment by product line were as follows:
2020 | ||||||||||||||||||||
In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||
Parts | $ | 787 | $ | 654 | $ | 722 | $ | 768 | $ | 2,931 | ||||||||||
Power generation | 376 | 377 | 416 | 523 | 1,692 | |||||||||||||||
Service | 328 | 297 | 304 | 334 | 1,263 | |||||||||||||||
Engines | 323 | 277 | 279 | 371 | 1,250 | |||||||||||||||
Total sales | $ | 1,814 | $ | 1,605 | $ | 1,721 | $ | 1,996 | $ | 7,136 | ||||||||||
2019 | ||||||||||||||||||||
In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||
Parts | $ | 844 | $ | 833 | $ | 798 | $ | 815 | $ | 3,290 | ||||||||||
Power generation | 403 | 427 | 467 | 487 | 1,784 | |||||||||||||||
Service | 363 | 373 | 376 | 367 | 1,479 | |||||||||||||||
Engines | 391 | 395 | 363 | 369 | 1,518 | |||||||||||||||
Total sales | $ | 2,001 | $ | 2,028 | $ | 2,004 | $ | 2,038 | $ | 8,071 | ||||||||||
Component Segment Sales by Product Line
Sales for our Components segment by product line were as follows:
2020 | ||||||||||||||||||||
In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||
Emission solutions | $ | 664 | $ | 472 | $ | 665 | $ | 831 | $ | 2,632 | ||||||||||
Filtration | 312 | 255 | 314 | 351 | 1,232 | |||||||||||||||
Turbo technologies | 270 | 216 | 281 | 331 | 1,098 | |||||||||||||||
Electronics and fuel systems | 174 | 164 | 187 | 229 | 754 | |||||||||||||||
Automated transmissions | 82 | 43 | 94 | 89 | 308 | |||||||||||||||
Total sales | $ | 1,502 | $ | 1,150 | $ | 1,541 | $ | 1,831 | $ | 6,024 | ||||||||||
2019 | ||||||||||||||||||||
In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||
Emission solutions | $ | 854 | $ | 828 | $ | 745 | $ | 695 | $ | 3,122 | ||||||||||
Filtration | 325 | 331 | 310 | 315 | 1,281 | |||||||||||||||
Turbo technologies | 335 | 319 | 279 | 285 | 1,218 | |||||||||||||||
Electronics and fuel systems | 198 | 212 | 170 | 179 | 759 | |||||||||||||||
Automated transmissions | 149 | 156 | 146 | 83 | 534 | |||||||||||||||
Total sales | $ | 1,861 | $ | 1,846 | $ | 1,650 | $ | 1,557 | $ | 6,914 | ||||||||||
Power Systems Segment Sales by Product Line and Unit Shipments by Engine Classification
Sales for our Power Systems segment by product line were as follows:
2020 | ||||||||||||||||||||
In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||
Power generation | $ | 519 | $ | 424 | $ | 601 | $ | 623 | $ | 2,167 | ||||||||||
Industrial | 296 | 291 | 309 | 292 | 1,188 | |||||||||||||||
Generator technologies | 69 | 62 | 71 | 74 | 276 | |||||||||||||||
Total sales | $ | 884 | $ | 777 | $ | 981 | $ | 989 | $ | 3,631 | ||||||||||
2019 | ||||||||||||||||||||
In millions | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||
Power generation | $ | 567 | $ | 668 | $ | 647 | $ | 636 | $ | 2,518 | ||||||||||
Industrial | 420 | 432 | 392 | 332 | 1,576 | |||||||||||||||
Generator technologies | 90 | 103 | 87 | 86 | 366 | |||||||||||||||
Total sales | $ | 1,077 | $ | 1,203 | $ | 1,126 | $ | 1,054 | $ | 4,460 | ||||||||||
High-horsepower unit shipments by engine classification were as follows:
2020 | |||||||||||||||
Units | Q1 | Q2 | Q3 | Q4 | YTD | ||||||||||
Power generation | 1,800 | 1,000 | 2,300 | 2,600 | 7,700 | ||||||||||
Industrial | 1,000 | 1,000 | 1,200 | 1,100 | 4,300 | ||||||||||
Total units | 2,800 | 2,000 | 3,500 | 3,700 | 12,000 | ||||||||||
2019 | |||||||||||||||
Units | Q1 | Q2 | Q3 | Q4 | YTD | ||||||||||
Power generation | 2,100 | 2,300 | 2,300 | 2,400 | 9,100 | ||||||||||
Industrial | 1,600 | 1,600 | 1,400 | 1,400 | 6,000 | ||||||||||
Total units | 3,700 | 3,900 | 3,700 | 3,800 | 15,100 | ||||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20210204005161/en/
Contacts:
Jon Mills
Phone: 317-658-4540
Email: jon.mills@cummins.com
