Cummins Reports First Quarter 2024 Results

2 Maggio 2024

First quarter revenues of $8.4 billion; GAAP¹Net Income of $2.0 billion
EBITDA in the first quarter was 30.6% of sales; Diluted EPS of $14.03
First quarter results include a net gain of $1.3 billion, or $9.08 per diluted share, related to the separation of Atmus and $29 million, or $0.15 per diluted share, of restructuring expenses.
The company is raising its guidance for full year 2024 revenue and EBITDA after adjusting for the separation of Atmus.
Full year revenues are expected to decline 2% to 5%; prior guidance was also down 2% to 5% but assumed the inclusion of Atmus revenues for the full year.
EBITDA is now expected to be in the range of 14.5% to 15.5%; an increase from previous guidance of 14.4% to 15.4% which also included Atmus for the full year.

COLUMBUS, Ind.–(BUSINESS WIRE)–Cummins Inc. (NYSE: CMI) today reported results for the first quarter of 2024.

“We continued to see strong demand from customers in the first quarter of 2024, reflecting the quality and performance of our products,” said Jennifer Rumsey, Chair and CEO. “We delivered solid profitability and also completed the separation of Atmus, allowing Cummins to continue its focus on advancing innovative power solutions and positioning Atmus to pursue its own plans for profitable growth. I am deeply appreciative of our Cummins employees across the globe, whose broad expertise and diverse perspectives are driving our ability to innovate for our customers and meet global demand.”

First quarter revenues of $8.4 billion decreased 1% from the same quarter in 2023. Sales in North America were flat, and international revenues decreased 1% due to lower demand in China and Europe.

Net income attributable to Cummins in the first quarter was $2.0 billion, or $14.03 per diluted share, compared to $790 million, or $5.55 per diluted share, in 2023. The results reflect the gain related to the separation of Atmus, net of transaction costs and other expenses, of $1.3 billion, or $9.08 per diluted share, and restructuring expenses of $29 million, or $0.15 per diluted share. The first quarter of 2023 included costs related to the separation of Atmus of $18 million, or $0.10 per diluted share. The tax rate in the first quarter was 8.7%, primarily due to the nontaxable gain on the separation of Atmus.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the first quarter were $2.6 billion, or 30.6% of sales, compared to $1.4 billion, or 16.1% of sales, a year ago. EBITDA for the first quarter of 2024 and the first quarter of 2023 included the gain and costs noted above.

2024 Outlook:

Based on its current forecast, Cummins projects full year 2024 revenues to decline 2% to 5% on a year-over-year basis, and EBITDA to be in the range of 14.5% and 15.5% of sales. The prior guidance, which was also a decline of 2% to 5%, assumed the inclusion of the financial results of Atmus for the full year. Due to strong global demand, the revenue guidance is unchanged as compared to the prior guidance despite the separation of Atmus. The current EBITDA guidance is an increase from the prior guidance of between 14.4% and 15.4%.

Cummins plans to continue to generate strong operating cash flow and returns for shareholders and is committed to our long-term strategic goal of returning 50% of operating cash flow back to shareholders. In the near term, we will focus on reinvesting for profitable growth, dividends and reducing debt.

“We have raised our expectations on revenue and profitability for 2024 due to continued demand for Cummins’ products and services. We do still expect slowing demand in some of our key markets in the second half of the year,” said Rumsey. “Despite lower sales, Cummins is in a strong position to keep investing in future growth, bringing new technologies to customers and returning cash to shareholders.”

First Quarter 2024 Highlights:

In March, Cummins finalized the separation of Atmus Filtration Technologies Inc. through a share exchange offer in which shareholders had the option to exchange their shares of Cummins common stock for shares of Atmus. Following completion of the exchange offer, Cummins did not retain any outstanding shares of Atmus common stock.

Accelera™ by Cummins, Daimler Trucks & Buses and PACCAR selected Marshall County, Mississippi, as the future site of advanced battery cell manufacturing for their planned joint venture. The joint venture will localize battery cell production for commercial electric vehicles and is expected to create more than 2,000 U.S. manufacturing jobs, with the option for further expansion as demand grows. The 21-gigawatt hour (GWh) factory is expected to begin producing battery cells in 2027.

Cummins re-introduced the fuel agnostic platforms with a name that captures the innovation that powers the business forward, the Cummins HELM™ platforms. With higher efficiency, lower emissions and multiple fuels, the Cummins HELM™ platforms give customers control of how they navigate their own journeys as part of the energy transition. As the next product in the Cummins HELM™15-liter platform, Cummins announced it will launch the next generation diesel X15 in North America for the heavy-duty on-highway market which will be compliant with U.S. EPA and CARB 2027 aligned regulations at launch.

In April, Cummins Power Generation introduced four new generator sets to the award-winning Centum™ Series, two each powered by Cummins’ QSK50 and QSK78 engines. In response to high market demand, these new models have been engineered specifically for the most critical applications such as data centers, healthcare facilities and wastewater treatment plants. These products build on decades of experience meeting our customers’ needs and deliver a step-change improvement in power density, assured reliability, sustainability and low emissions.

Cummins received several prestigious honors during the quarter including being ranked in the Financial Times Diversity Leaders list for the third consecutive year, winning the World 50 Inclusion & Diversity Impact Award, and being named industry leader in the Commercial Vehicle and Machinery category for America’s Most JUST Companies list. Also, Cummins was named a 2024 Handshake Early Talent Award winner for its role in shaping the workforce of the future and was recognized as a 2024 Top Hispanic Employer by DiversityComm Magazine.

¹ Generally Accepted Accounting Principles in the U.S.

First quarter 2024 detail (all comparisons to same period in 2023):

Components Segment

Sales – $3.3 billion, down 6%
Segment EBITDA – $473 million, or 14.2% of sales, which includes $21 million of costs related to the separation of Atmus compared to $507 million, or 14.3% of sales, which includes $12 million of costs related to the separation of Atmus
Revenues in North America decreased by 5% and international sales decreased by 8% primarily due to lower demand in China and Europe.

Engine Segment

Sales – $2.9 billion, down 2%
Segment EBITDA – $414 million, or 14.1% of sales, compared to $457 million, or 15.3% of sales
On-highway revenues increased 1% driven by continued strong demand in the North American medium-duty truck market and pricing actions.
Sales were flat in North America and decreased 8% in international markets due to lower demand in China and Europe.

Distribution Segment

Sales – $2.5 billion, up 5%
Segment EBITDA – $294 million, or 11.6% of sales, compared to $335 million, or 13.9% of sales
Revenues in North America increased 2% and international sales increased by 14%.
Higher revenues were driven by increased demand for power generation products and pricing actions.

Power Systems Segment

Sales – $1.4 billion, up 3%
Segment EBITDA – $237 million, or 17.1% of sales, compared to $219 million, or 16.3% of sales
Power generation revenues increased 11% driven by increased global demand, particularly for the data center market. Industrial revenues decreased 8% primarily due to weaker demand in oil and gas markets.

Accelera Segment

Sales – $93 million, up 9%
Segment EBITDA loss – $101 million
Revenues increased due to increased electrolyzer installations.
Costs associated with the development of electric powertrains, fuel cells and electrolyzers, as well as products to support battery electric vehicles are contributing to EBITDA losses. The company continues to make investments to support our customers through the energy transition and deliver future profitable growth.

About Cummins Inc.

Cummins Inc., a global power solutions leader, is comprised of five business segments – Components, Engine, Distribution, Power Systems and Accelera by Cummins – supported by our global manufacturing and extensive service and support network, skilled workforce and vast technological expertise. Cummins is committed to its Destination Zero strategy, which is grounded in the company’s commitment to sustainability and helping its customers successfully navigate the energy transition with its broad portfolio of products. The products range from advanced diesel, natural gas, electric and hybrid powertrains and powertrain-related components including, aftertreatment, turbochargers, fuel systems, valvetrain technologies, controls systems, air handling systems, automated transmissions, axles, drivelines, brakes, suspension systems, electric power generation systems, batteries, electrified power systems, hydrogen production technologies and fuel cell products. Headquartered in Columbus, Indiana (U.S.), since its founding in 1919, Cummins employs approximately 75,500 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 $735 million on sales of $34.1 billion in 2023. See how Cummins is powering a world that’s always on by accessing news releases and more information at https://www.cummins.com/.

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, EBITDA and Agreement in Principle to settle regulatory proceedings regarding our emissions certification and compliance process for pick-up truck applications. 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 consequences resulting from entering into the Agreement in Principle, including required additional mitigation projects, adverse reputational impacts and potential resulting legal actions; increased scrutiny from regulatory agencies, as well as unpredictability in the adoption, implementation and enforcement of emission standards around the world; evolving environmental and climate change legislation and regulatory initiatives; changes in international, national and regional trade laws, regulations and policies; changes in taxation; global legal and ethical compliance costs and risks; future bans or limitations on the use of diesel-powered products; failure to successfully integrate and / or failure to fully realize all of the anticipated benefits of the acquisition of Meritor, Inc. (Meritor); 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, 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; climate change, global warming, more stringent climate change regulations, accords, mitigation efforts, greenhouse gas regulations or other legislation designed to address climate change; our plan to reposition our portfolio of product offerings through exploration of strategic acquisitions and divestitures and related uncertainties of entering such transactions; increasing interest rates; challenging markets for talent and ability to attract, develop and retain key personnel; 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; failure to meet environmental, social and governance (ESG) expectations or standards, or achieve our ESG goals; 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 2023 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 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, except for forward-looking measures of EBITDA where a reconciliation to the corresponding GAAP measures is not available due to the variability, complexity and limited visibility of the non-cash items that are excluded from the non-GAAP outlook measure. 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
	March 31,
In millions, except per share amounts	2024		2023
NET SALES	$	8,403	$	8,453
Cost of sales		6,362		6,424
GROSS MARGIN		2,041		2,029
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses		839		753
Research, development and engineering expenses		369		350
Equity, royalty and interest income from investees		123		119
Other operating expense, net		33		19
OPERATING INCOME		923		1,026
Interest expense		89		87
Other income, net		1,387		90
INCOME BEFORE INCOME TAXES		2,221		1,029
Income tax expense		193		223
CONSOLIDATED NET INCOME		2,028		806
Less: Net income attributable to noncontrolling interests		35		16
NET INCOME ATTRIBUTABLE TO CUMMINS INC.	$	1,993	$	790

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic	$	14.10	$	5.58
Diluted	$	14.03	$	5.55

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
Basic		141.3		141.5
Diluted		142.1		142.4

^(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 BALANCE SHEETS
(Unaudited) (a)

In millions, except par value	March 31, 2024			December 31, 2023
ASSETS
Current assets
Cash and cash equivalents	$	2,541		$	2,179
Marketable securities		510			562
Total cash, cash equivalents and marketable securities		3,051			2,741
Accounts and notes receivable, net		5,463			5,583
Inventories		5,758			5,677
Prepaid expenses and other current assets		1,348			1,197
Total current assets		15,620			15,198
Long-term assets
Property, plant and equipment, net		6,011			6,249
Investments and advances related to equity method investees		1,774			1,800
Goodwill		2,406			2,499
Other intangible assets, net		2,455			2,519
Pension assets		1,187			1,197
Other assets		2,374			2,543
Total assets	$	31,827		$	32,005

LIABILITIES
Current liabilities
Accounts payable (principally trade)	$	4,476		$	4,260
Loans payable		342			280
Commercial paper		609			1,496
Current maturities of long-term debt		113			118
Accrued compensation, benefits and retirement costs		561			1,108
Current portion of accrued product warranty		652			667
Current portion of deferred revenue		1,236			1,220
Other accrued expenses		3,697			3,754
Total current liabilities		11,686			12,903
Long-term liabilities
Long-term debt		5,771			4,802
Deferred revenue		1,061			966
Other liabilities		3,208			3,430
Total liabilities	$	21,726		$	22,101

EQUITY
Cummins Inc. shareholders’ equity
Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.5 shares issued	$	2,557		$	2,564
Retained earnings		19,605			17,851
Treasury stock, at cost, 85.7 and 80.7 shares		(10,831	)		(9,359	)
Accumulated other comprehensive loss		(2,264	)		(2,206	)
Total Cummins Inc. shareholders’ equity		9,067			8,850
Noncontrolling interests		1,034			1,054
Total equity	$	10,101		$	9,904
Total liabilities and equity	$	31,827		$	32,005

^(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
	March 31,
In millions	2024			2023
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income	$	2,028		$	806
Adjustments to reconcile consolidated net income to net cash provided by operating activities
Gain related to divestiture of Atmus		(1,333	)		—
Depreciation and amortization		265			246
Deferred income taxes		(38	)		(38	)
Equity in income of investees, net of dividends		(78	)		(67	)
Pension and OPEB expense		9			1
Pension contributions and OPEB payments		(48	)		(92	)
Changes in current assets and liabilities, net of acquisitions and divestitures
Accounts and notes receivable		(11	)		(621	)
Inventories		(354	)		(263	)
Other current assets		(175	)		(142	)
Accounts payable		327			381
Accrued expenses		(393	)		151
Other, net		77			133
Net cash provided by operating activities		276			495

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(169	)		(193	)
Acquisition of business, net of cash acquired		(59	)		—
Investments in marketable securities—acquisitions		(379	)		(326	)
Investments in marketable securities—liquidations		431			345
Cash associated with Atmus divestiture		(174	)		—
Other, net		(56	)		(54	)
Net cash used in investing activities		(406	)		(228	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings		2,398			43
Net payments of commercial paper		(887	)		(29	)
Payments on borrowings and finance lease obligations		(748	)		(142	)
Dividend payments on common stock		(239	)		(222	)
Other, net		(25	)		(13	)
Net cash provided by (used in) financing activities		499			(363	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(7	)		(25	)
Net increase (decrease) in cash and cash equivalents		362			(121	)
Cash and cash equivalents at beginning of year		2,179			2,101
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	2,541		$	1,980

^(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	Components					Engine			Distribution			Power Systems			Accelera			Total Segments			Intersegment Eliminations ⁽¹⁾			Total
Three months ended March 31, 2024
External sales	$	2,842				$	2,240		$	2,529		$	708		$	84		$	8,403		$	—		$	8,403
Intersegment sales		490					688			6			681			9			1,874			(1,874	)		—
Total sales		3,332					2,928			2,535			1,389			93			10,277			(1,874	)		8,403
Research, development and engineering expenses		84					154			14			60			55			367			2			369
Equity, royalty and interest income (loss) from investees		26					57			24			19			(3	)		123			—			123
Interest income		8					7			11			3			—			29			—			29
EBITDA ⁽²⁾		473		⁽³	⁾		414			294			237			(101	)		1,317			1,255			2,572
Depreciation and amortization ⁽⁴⁾		125					58			31			34			14			262			—			262

EBITDA as a percentage of total sales		14.2	%				14.1	%		11.6	%		17.1	%		NM			12.8	%					30.6	%

Three months ended March 31, 2023
External sales	$	3,043				$	2,252		$	2,399		$	679		$	80		$	8,453		$	—		$	8,453
Intersegment sales		514					734			7			664			5			1,924			(1,924	)		—
Total sales		3,557					2,986			2,406			1,343			85			10,377			(1,924	)		8,453
Research, development and engineering expenses		91					134			14			63			48			350			—			350
Equity, royalty and interest income (loss) from investees		21					65			24			13			(4	)		119			—			119
Interest income		6					3			7			2			—			18			—			18
EBITDA ⁽²⁾		507		⁽⁵	⁾		457			335			219			(94	)		1,424			(63	)		1,361
Depreciation and amortization ⁽⁴⁾		123					51			28			29			14			245			—			245

EBITDA as a percentage of total sales		14.3	%				15.3	%		13.9	%		16.3	%		NM			13.7	%					16.1	%

“NM” – not meaningful information
⁽¹⁾ Included intersegment sales, intersegment profit in inventory and unallocated corporate expenses. The three months ended March 31, 2024, included a $1.3 billion gain related to the divestiture of Atmus and $14 million of costs associated with the divestiture of Atmus. The three months ended March 31, 2023, included $6 million of costs associated with the divestiture of Atmus.
⁽²⁾EBITDA is defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests. 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.
⁽³⁾Included $21 million of costs associated with the divestiture of Atmus for the three months ended March 31, 2024.
⁽⁴⁾Depreciation and amortization, as shown on a segment basis, excluded 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 $1 million for the three months ended March 31, 2024 and 2023, respectively. A portion of depreciation expense is included in research, development and engineering expenses.
⁽⁵⁾Included $12 million of costs associated with the divestiture of Atmus for the three months ended March 31, 2023.

Contacts

Jon Mills

Director, External Communications

Cummins Inc.

jon.mills@cummins.com

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