Cummins Reports Fourth Quarter and Full Year 2023 Results

Rhea-AI Summary

Cummins Inc. reported fourth quarter 2023 revenues of $8.5 billion, with a net loss of $1.4 billion. Full year 2023 revenues were $34.1 billion, with a net income of $735 million. The company expects a 2-5% revenue decline and an EBITDA range of 14.4-15.4% for full year 2024. The outlook reflects anticipated demand slowdown in the North America heavy-duty truck market. Cummins also highlighted its 2023 highlights, including the launch of Accelera by Cummins, joint ventures, acquisitions, and sustainability recognitions.

Positive

• None.

Negative

• Negative aspects include the significant net loss in the fourth quarter of 2023, the expected revenue decline and lower EBITDA for full year 2024, and the EBITDA losses in the Accelera segment.

Insights

Financial Analyst

The reported fourth quarter 2023 loss of $1.4 billion by Cummins Inc. signals a significant deviation from the prior year's net earnings, largely attributable to a one-time regulatory charge. The negative EBITDA margin of 10.3% is particularly concerning as it reflects operational losses beyond the non-recurring expenses. Investors should note the substantial increase in the tax rate to 48.3% for 2023, influenced by non-deductible costs, which may affect net income calculations and future tax planning strategies.

While the full year revenue growth of 21% indicates robust demand, the projected revenue decline for 2024 suggests a potential market slowdown, especially within the North American heavy-duty truck market. The company's capital allocation strategy focusing on dividends and debt reduction indicates a conservative approach amidst uncertain economic conditions. The commitment to returning 50% of operating cash flow to shareholders may reassure investors of continued returns despite revenue fluctuations.

Market Research Analyst

Despite the negative financial outcomes in the fourth quarter, Cummins Inc.'s overall year-over-year revenue increase and record operating cash flow highlight the company's market strength and ability to generate cash. The diversification of products, including investments in zero-emissions technologies through the Accelera brand, positions Cummins to capitalize on the shift towards sustainability. The joint venture for battery cell production indicates strategic positioning within the electric commercial vehicle market, expected to grow substantially by 2027.

The acquisition of Faurecia's manufacturing plants demonstrates Cummins' commitment to controlling its supply chain and production capabilities, which is crucial in a period of global supply chain uncertainties. The planned separation of Atmus and the successful IPO reflect a strategic move to streamline operations and focus on core competencies.

Environmental Strategist

Cummins Inc.'s Destination Zero strategy and the launch of Accelera signify a proactive approach to environmental sustainability, aligning with global decarbonization goals. The collaboration with Freightliner and Knight Transportation for the Cummins X15N natural gas engine suggests a bridging strategy towards lower-emission heavy-duty trucks, catering to immediate market demand while preparing for future zero-emission standards.

The focus on renewable natural gas and the anticipated launch of the X15N engine in North America and China underscores Cummins' commitment to emission reduction technologies. These initiatives may not only provide environmental benefits but also open up new revenue streams as industries transition towards sustainable operations.

• Fourth quarter 2023 revenues of $8.5 billion; GAAP¹ Net Loss of $1.4 billion
• Fourth quarter 2023 EBITDA was negative 10.3% of sales; Diluted EPS of $(10.01)
• The results for the fourth quarter 2023 reflect:
  • $2.04 billion, or $13.76 per diluted share, charge related to the previously announced agreement to resolve U.S. regulatory claims
  • $42 million, or $0.22 per diluted share, of costs related to the implementation of voluntary retirement and separation programs
  • $33 million, or $0.17 per diluted share, of costs related to the separation of Atmus
• Full year 2023 revenues of $34.1 billion; GAAP¹ Net Income of $735 million
• EBITDA for full year 2023 was 8.9% of sales; Diluted EPS of $5.15
• Full year 2024 revenues expected to decline between 2% and 5%; EBITDA expected to range between 14.4% and 15.4% of sales

COLUMBUS, Ind.--(BUSINESS WIRE)-- Cummins Inc. (NYSE: CMI) today reported fourth quarter and full year 2023 results.

“High global demand for Cummins’ diverse set of innovative products drove record full year revenues and operating cash flow in 2023,” said Jennifer Rumsey, Chair and CEO. “Excluding the impacts related to the agreement to resolve U.S. regulatory claims, 2023 was a record year for EBITDA, Net Income and EPS for Cummins. Also, EBITDA percent improved year over year in the Components, Distribution and Power Systems segments. I want to thank all our employees for delivering high-quality products to our customers and making 2023 a successful year.”

Fourth quarter 2023 revenues of $8.5 billion increased 10% from the same quarter in 2022. Sales in North America increased 8% and international revenues increased 13% reflecting strong demand across most of Cummins’ global markets during the period.

In the fourth quarter of 2023, net loss was $1.4 billion, or $(10.01) per diluted share, compared to net earnings of $631 million, or $4.43 per diluted share, in 2022. The results reflect the recording of a charge related to the agreement to resolve U.S. regulatory claims previously announced in December of $2.04 billion, or $13.76 per diluted share; costs related to the voluntary retirement and separation programs of $42 million, or $0.22 per diluted share; and costs related to the separation of Atmus of $33 million, or $0.17 per diluted share. The fourth quarter of 2022 included $19 million, or $0.11 per diluted share, of costs related to the separation of Atmus. The tax rate in the fourth quarter of 2023 was negative 13.3% due primarily to the non-deductible costs related to the agreement to resolve U.S. regulatory claims.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the fourth quarter of 2023 was a loss of $878 million, or negative 10.3% of sales, compared to positive $1.1 billion, or 14.2% of sales, a year ago. EBITDA for the fourth quarter of 2023 and the fourth quarter of 2022 included the costs noted above.

Revenues for the full year 2023 were $34.1 billion, 21% higher than 2022. Sales in North America increased 22% and international revenues increased 20% compared to 2022 due to the addition of Meritor and strong demand across most global markets.

Net income for the full year 2023 was $735 million, or $5.15 per diluted share, compared to $2.2 billion, or $15.12 per diluted share, in 2022. 2023 results included costs related to the agreement to resolve U.S. regulatory claims of $2.04 billion, or $13.78 per diluted share, costs related to the separation of Atmus of $100 million, or $0.54 per diluted share, and costs related to the voluntary retirement and separation programs of $42 million, or $0.22 per diluted share. Full year 2022 results included costs related to the indefinite suspension of operations in Russia of $111 million, or $0.72 per diluted share and costs related to the separation of Atmus of $81 million, or $0.45 per diluted share. The tax rate in 2023 was 48.3%, which is higher than our external guidance, primarily due to the non-deductible costs related to the agreement to resolve U.S. regulatory claims.

EBITDA in 2023 was $3.0 billion, or 8.9% of sales compared to $3.8 billion, or 13.5% of sales, a year ago. EBITDA for 2023 and 2022 included the costs noted above.

Operating cash flow for 2023 was a record inflow of $4.0 billion, compared to $2.0 billion in 2022, as Cummins continues to focus on working capital management within the business.

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 14.4% and 15.4% of sales.

“In 2024, we anticipate that demand will slow particularly in the North America heavy-duty truck market, partially offset by strength in other key markets, and have already taken some actions to reduce cost. We will continue to monitor global economic indicators closely and will ensure we are prepared to adjust our business should economic momentum slow further,” said Rumsey.

“Consistent with how we have managed Cummins through prior cycles, and in alignment with our Destination Zero strategy, we will continue investment in new technologies and products in 2024. This sustained investment will ensure that the company will be positioned to generate strong growth and profitability in both the near- and long-terms,” concluded Rumsey.

Cummins’ 2024 outlook assumes the inclusion of Atmus for the entirety of 2024, but excludes any costs or benefits associated with the planned separation of Atmus. Subject to market conditions, the intention is to split-off the company’s remaining ownership in Atmus through an exchange offer. Until the execution of the exchange offer, Cummins’ will continue to consolidate Atmus in its results.

Cummins plans to continue to generate strong operating cash flow and returns for shareholders and is committed to its long-term strategic goal of returning 50% of operating cash flow back to shareholders. In the near term, Cummins’ capital allocation strategy will focus on the payment of dividends and debt reduction, while the company continues to generate profitable growth.

2023 Highlights:

• Cummins announced the launch of Accelera™ by Cummins, a new brand for its New Power business unit. Accelera provides a diverse portfolio of zero-emissions solutions for many of the world’s most vital industries empowering customers to accelerate their transition to a sustainable future.

• Accelera by Cummins, Daimler Trucks & Buses, PACCAR and EVE Energy announced in September a joint venture to accelerate and localize battery cell production and the battery supply chain in the United States. The planned joint venture will manufacture battery cells for electric commercial vehicles and industrial applications. Total investment by the partners is expected to be in the range of $2-3 billion for the 21-gigawatt hour (GWh) factory with production expected to begin in 2027. It was recently announced in January that the joint venture had selected Marshall County, Mississippi as the future site.

• Cummins completed its acquisition of two Faurecia commercial vehicle manufacturing plants and their related activities, one in Columbus, Indiana (U.S.) and one in Roermond, Netherlands. The acquisition provides an opportunity for the Cummins Emission Solutions business to ensure continued access to the technology and facilities it needs to meet current and future demand for low-emissions products and to ensure continuity for both the employees and customers of the acquired manufacturing facilities.

• The company announced several collaborations that further enable our customers to achieve their decarbonization goals. Freightliner announced they are partnering with Cummins to offer the new Cummins X15N natural gas engine in its heavy-duty Freightliner Cascadia trucks. Also, Cummins Inc. and Knight Transportation, Inc. announced that the industry's largest full truckload company has successfully tested Cummins’ new X15N engine, using renewable natural gas to realize reductions in nitrous oxides and greenhouse gas without compromising performance. The X15N, which will launch in North America in 2024, is the first natural gas engine to be designed specifically for heavy-duty and on-highway truck applications. The X15N has already achieved success in the heavy-duty truck market in China with strong customer demand and market penetration.

• Progress continues to be made on the planned separation of the Filtration business. On May 26, 2023, as part of its initial public offering (IPO), Atmus Filtration Technologies Inc. shares began trading on the New York Stock Exchange (NYSE) under the ticker symbol “ATMU”. Upon completion of the IPO, Cummins retained approximately 80.5% of Atmus’ outstanding shares. Subject to market conditions, Cummins’ intention is to split-off the remaining ownership in Atmus through an exchange offer as our next step in the separation.

• Cummins received several prestigious honors during the year that recognized the company’s sustainability efforts and impact including: Ethisphere’s World’s Most Ethical Companies list; Sustainalytics’ 2023 Top-Rated Companies list; S&P Dow Jones Sustainability World Index and the S&P Dow Jones Sustainability North America Index; and, Automotive and Components industry in Newsweek’s annual ranking of America’s Most Responsible Companies. In addition, Cummins received accolades recognizing its ongoing efforts to foster caring and inclusive environments in which all employees and innovation thrive including: one of 66 companies on America’s Top Corporations for Women’s Business Enterprises in 2023; National Association of Corporate Directors 2023 Diversity, Equity and Inclusion Award; 2023 best place to work for disability inclusion; Military Friendly Employer; Top Hispanic Employer by DiversityComm Magazine; Financial Times Diversity Leaders list in Europe; #55 on Glassdoor’s Best Places to Work; and, a score of 100 on the 2023-2024 Corporate Equality Index.

• The company increased its cash dividend for the 14^th straight year and returned a total of $921 million to shareholders through dividends.

¹ Generally Accepted Accounting Principles in the U.S.

Fourth quarter 2023 detail (all comparisons to same period in 2022):

Components Segment

• Sales - $3.2 billion, up 3%
• Segment EBITDA - $406 million, or 12.7% of sales, which includes $28 million of costs related to the separation of Atmus and $9 million related to the voluntary retirement and separation programs, compared to $377 million, or 12.2% of sales in the prior year, which included $13 million of costs related to the separation of Atmus, and $27 million of acquisition and integration costs related to Meritor.
• Revenues in North America decreased by 2% and international sales increased by 10% due to increased demand particularly in China which had weak markets in 2022.

Engine Segment

• Sales - $2.8 billion, up 5%
• Segment EBITDA - $353 million, or 12.7% of sales, which includes $12 million related to the voluntary retirement and separation programs, compared to $362 million or 13.7% of sales
• On-highway revenues increased 10% driven by strong demand in the North American truck market and pricing actions.
• Sales increased 5% in North America and grew 8% in international markets due to an increase in global demand.

Distribution Segment

• Sales - $2.7 billion, up 17%
• Segment EBITDA - $269 million, or 9.9% of sales, compared to $256 million, or 11.0% of sales
• Revenues in North America increased 18% and international sales increased by 15%.
• Higher revenues were driven by increased demand for whole goods, especially power generation products, and pricing actions.

Power Systems Segment

• Sales - $1.4 billion, up 8%
• Segment EBITDA - $182 million, or 12.7% of sales, compared to $185 million, or 14.0% of sales
• Power generation revenues increased 19% driven by increased global demand and pricing actions. Industrial revenues decreased 3% due to lower oil and gas demand.

Accelera Segment

• Sales - $81 million, up 8%
• Segment EBITDA loss - $121 million
• Revenues increased due to higher demand for battery electric systems and the addition of the Siemens Commercial Vehicle business that was acquired during the fourth quarter of 2022.
• 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 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, axles, drivelines, brakes, suspension systems, electric power generation systems, batteries, electrified power systems, electric powertrains, hydrogen production and fuel cell products. Headquartered in Columbus, Indiana (U.S.), since its founding in 1919, Cummins employs approximately 73,600 people committed to powering a more prosperous world through three global corporate responsibility priorities critical to healthy communities: education, environment and equality of opportunity. Cummins serves its customers online, through a network of company-owned and independent distributor locations, and through thousands of dealer locations worldwide and earned about $2.2 billion on sales of $28.1 billion in 2022. 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, 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; changes in international, national and regional trade laws, regulations and policies; changes in taxation; global legal and ethical compliance costs and risks; evolving environmental and climate change legislation and regulatory initiatives; 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.; raw material, transportation and labor price fluctuations and supply shortages; any adverse effects of the conflict between Russia and Ukraine and the global response (including government bans or restrictions on doing business in Russia); 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; uncertainties and risks related to timing and potential value to both Atmus Filtration Technologies Inc. (Atmus) and Cummins of the planned final separation of Atmus, including business, industry and market risks, as well as the risks involving the anticipated favorable tax treatment if there is a significant delay in the completion of the envisioned final separation; 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; climate change, global warming, more stringent climate change regulations, accords, mitigation efforts, greenhouse gas regulations or other legislation designed to address climate change; 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 2022 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. 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		2023				2022
NET SALES		$	8,543			$	7,770
Cost of sales			6,542				5,951
GROSS MARGIN			2,001				1,819
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses			876				742
Research, development and engineering expenses			390				333
Equity, royalty and interest income from investees			113				88
Other operating expense, net			2,060				30
OPERATING (LOSS) INCOME			(1,212	)			802
Interest expense			92				87
Other income, net			74				63
(LOSS) INCOME BEFORE INCOME TAXES			(1,230	)			778
Income tax expense			163				134
CONSOLIDATED NET (LOSS) INCOME			(1,393	)			644
Less: Net income attributable to noncontrolling interests			38				13
NET (LOSS) INCOME ATTRIBUTABLE TO CUMMINS INC.		$	(1,431	)		$	631
(LOSS) EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic		$	(10.08	)		$	4.47
Diluted		$	(10.01	)		$	4.43
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
Basic			141.9				141.3
Diluted			142.9				142.3
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.

		Years ended December 31,
In millions, except per share amounts		2023				2022
NET SALES		$	34,065			$	28,074
Cost of sales			25,816				21,355
GROSS MARGIN			8,249				6,719
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses			3,333				2,687
Research, development and engineering expenses			1,500				1,278
Equity, royalty and interest income from investees			483				349
Other operating expense, net			2,138				174
OPERATING INCOME			1,761				2,929
Interest expense			375				199
Other income, net			240				89
INCOME BEFORE INCOME TAXES			1,626				2,819
Income tax expense			786				636
CONSOLIDATED NET INCOME			840				2,183
Less: Net income attributable to noncontrolling interests			105				32
NET INCOME ATTRIBUTABLE TO CUMMINS INC.		$	735			$	2,151
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic		$	5.19			$	15.20
Diluted		$	5.15			$	15.12
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
Basic			141.7				141.5
Diluted			142.7				142.3
(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)
		December 31,
In millions, except par value		2023				2022
ASSETS
Current assets
Cash and cash equivalents		$	2,179			$	2,101
Marketable securities			562				472
Total cash, cash equivalents and marketable securities			2,741				2,573
Accounts and notes receivable, net			5,583				5,202
Inventories			5,677				5,603
Prepaid expenses and other current assets			1,197				1,073
Total current assets			15,198				14,451
Long-term assets
Property, plant and equipment, net			6,249				5,521
Investments and advances related to equity method investees			1,800				1,759
Goodwill			2,499				2,343
Other intangible assets, net			2,519				2,687
Pension assets			1,197				1,398
Other assets			2,543				2,140
Total assets		$	32,005			$	30,299
LIABILITIES
Current liabilities
Accounts payable (principally trade)		$	4,260			$	4,252
Loans payable			280				210
Commercial paper			1,496				2,574
Current maturities of long-term debt			118				573
Accrued compensation, benefits and retirement costs			1,108				617
Current portion of accrued product warranty			667				726
Current portion of deferred revenue			1,220				1,004
Other accrued expenses			3,754				1,465
Total current liabilities			12,903				11,421
Long-term liabilities
Long-term debt			4,802				4,498
Deferred revenue			966				844
Other liabilities			3,430				3,311
Total liabilities		$	22,101			$	20,074
Redeemable noncontrolling interests		$	—			$	258
EQUITY
Cummins Inc. shareholders’ equity
Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.5 shares issued		$	2,564			$	2,243
Retained earnings			17,851				18,037
Treasury stock, at cost, 80.7 and 81.2 shares			(9,359	)			(9,415	)
Accumulated other comprehensive loss			(2,206	)			(1,890	)
Total Cummins Inc. shareholders’ equity			8,850				8,975
Noncontrolling interests			1,054				992
Total equity		$	9,904			$	9,967
Total liabilities, redeemable noncontrolling interests and equity		$	32,005			$	30,299
(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		2023				2022
NET CASH PROVIDED BY OPERATING ACTIVITIES		$	1,459			$	817
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures			(519	)			(463	)
Acquisitions of businesses, net of cash acquired			(165	)			(183	)
Investments in marketable securities—acquisitions			(433	)			(335	)
Investments in marketable securities—liquidations			332				332
Other, net			2				(27	)
Net cash used in investing activities			(783	)			(676	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings			82				27
Net (payments) borrowings of commercial paper			(213	)			181
Payments on borrowings and finance lease obligations			(745	)			(480	)
Dividend payments on common stock			(238	)			(222	)
Repurchases of common stock			—				(4	)
Other, net			6				56
Net cash used in financing activities			(1,108	)			(442	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			(1	)			(97	)
Net decrease in cash and cash equivalents			(433	)			(398	)
Cash and cash equivalents at beginning of period			2,612				2,499
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	2,179			$	2,101
(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.

		Years ended December 31,
In millions		2023				2022
NET CASH PROVIDED BY OPERATING ACTIVITIES		$	3,966			$	1,962
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures			(1,213	)			(916	)
Acquisitions of businesses, net of cash acquired			(292	)			(3,191	)
Investments in marketable securities—acquisitions			(1,409	)			(1,073	)
Investments in marketable securities—liquidations			1,334				1,151
Other, net			(63	)			(143	)
Net cash used in investing activities			(1,643	)			(4,172	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings			861				2,103
Net (payments) borrowings of commercial paper			(779	)			2,261
Payments on borrowings and finance lease obligations			(1,136	)			(1,550	)
Dividend payments on common stock			(921	)			(855	)
Repurchases of common stock			—				(374	)
Payments for purchase of redeemable noncontrolling interests			(175	)			—
Other, net			(27	)			84
Net cash (used in) provided by financing activities			(2,177	)			1,669
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			(68	)			50
Net increase (decrease) in cash and cash equivalents			78				(491	)
Cash and cash equivalents at beginning of year			2,101				2,592
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	2,179			$	2,101
(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 December 31, 2023
External sales		$	2,784			$	2,123			$	2,705			$	854			$	77			$	8,543			$	—			$	8,543
Intersegment sales			407				656				8				575				4				1,650				(1,650	)			—
Total sales			3,191				2,779				2,713				1,429				81				10,193				(1,650	)			8,543
Research, development and engineering expenses			100				173				14				48				53				388				2				390
Equity, royalty and interest income (loss) from investees			26				53				27				11				(4	)			113				—				113
Interest income			10				5				10				2				1				28				—				28
EBITDA (2)			406		(3)		353				269				182				(121	)			1,089				(1,967	)			(878	)
Depreciation and amortization (4)			123				59				31				31				16				260				—				260
EBITDA as a percentage of segment sales			12.7	%			12.7	%			9.9	%			12.7	%			NM				10.7	%							(10.3	)%
Three months ended December 31, 2022
External sales		$	2,633			$	1,995			$	2,311			$	761			$	70			$	7,770			$	—			$	7,770
Intersegment sales			462				643				9				560				5				1,679				(1,679	)			—
Total sales			3,095				2,638				2,320				1,321				75				9,449				(1,679	)			7,770
Research, development and engineering expenses			73				141				13				56				50				333				—				333
Equity, royalty and interest income from investees			17				33				20				12				6				88				—				88
Interest income			5				6				7				2				—				20				—				20
Russian suspension recoveries			—				—				(1	)			—				—				(1	)			—				(1	)
EBITDA (2)			377		(5)		362				256				185				(95	)			1,085				20				1,105
Depreciation and amortization (4)			117				54				28				28				13				240				—				240
EBITDA as a percentage of segment sales			12.2	%			13.7	%			11.0	%			14.0	%			NM				11.5	%							14.2	%
"NM" - not meaningful information
(1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. The three months ended December 31, 2023, includes $2.0 billion related to the Agreement in Principle, $21 million of voluntary separation and retirement program charges related to corporate functions and $5 million of costs associated with the separation of Atmus Filtration Technologies Inc. (Atmus). The three months ended December 31, 2022, includes $6 million of costs associated with the planned separation of Atmus.
(2) EBITDA is defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests.
(3) Includes $28 million of costs associated with the separation of Atmus for the three months ended December 31, 2023.
(4) 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.
(5) Includes $27 million of costs related to the acquisition and integration of Meritor and $13 million costs associated with the separation of Atmus for the three months ended December 31, 2022.

In millions		Components				Engine				Distribution				Power Systems				Accelera				Total Segments				Intersegment Eliminations (1)				Total
Year ended December 31, 2023
External sales		$	11,531			$	8,874			$	10,199			$	3,125			$	336			$	34,065			$	—			$	34,065
Intersegment sales			1,878				2,810				50				2,548				18				7,304				(7,304	)			—
Total sales			13,409				11,684				10,249				5,673				354				41,369				(7,304	)			34,065
Research, development and engineering expenses			387				614				57				237				203				1,498				2				1,500
Equity, royalty and interest income (loss) from investees			97				251				97				53				(15	)			483				—				483
Interest income			31				19				34				9				2				95				—				95
EBITDA (2)			1,840		(3)		1,630				1,209				836				(443	)			5,072				(2,055	)			3,017
Depreciation and amortization (4)			491				225				115				122				63				1,016				—				1,016
EBITDA as a percentage of total sales			13.7	%			14.0	%			11.8	%			14.7	%			NM				12.3	%							8.9	%
Year ended December 31, 2022
External sales		$	7,847			$	8,199			$	8,901			$	2,951			$	176			$	28,074			$	—			$	28,074
Intersegment sales			1,889				2,746				28				2,082				22				6,767				(6,767	)			—
Total sales			9,736				10,945				8,929				5,033				198				34,841				(6,767	)			28,074
Research, development and engineering expenses			309				506				52				240				171				1,278				—				1,278
Equity, royalty and interest income (loss) from investees			71				160		(5)		77				43				(2	)			349				—				349
Interest income			12				14				16				7				—				49				—				49
Russian suspension costs			5				33		(6)		54				19				—				111				—				111
EBITDA (2)			1,346		(7)		1,535				888				596				(334	)			4,031				(232	)			3,799
Depreciation and amortization (4)			304				205				114				120				38				781				—				781
EBITDA as a percentage of total sales			13.8	%			14.0	%			9.9	%			11.8	%			NM				11.6	%							13.5	%
"NM" - not meaningful information
(1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. The year ended December 31, 2023, includes $2.0 billion related to the Agreement in Principle, $22 million of costs associated with the initial public offering (IPO) and separation of Atmus and $21 million of voluntary separation and retirement program charges related to corporate functions. The year ended December 31, 2022, includes $53 million of costs associated with the planned separation of Atmus.
(2) EBITDA is defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests.
(3) Includes $78 million of costs associated with the IPO and separation of Atmus for the year ended December 31, 2023.
(4) 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 $8 million and $3 million for the years ended December 31, 2023 and 2022, respectively. A portion of depreciation expense is included in research, development and engineering expenses.
(5) Includes a $28 million impairment of our joint venture with KAMAZ and $3 million of royalty charges as part of our costs associated with the indefinite suspension of our Russian operations.
(6) Includes $31 million of Russian suspension costs reflected in the equity, royalty and interest income (loss) from investees line above.
(7) Includes $83 million of costs related to the acquisition and integration of Meritor and $28 million costs associated with the separation of Atmus for the year ended December 31, 2022.

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		2023				2022				2023				2022
Manufacturing entities
Beijing Foton Cummins Engine Co., Ltd.		$	14			$	3			$	47			$	37
Dongfeng Cummins Engine Company, Ltd.			13				10				65				45
Tata Cummins, Ltd.			8				8				29				27
Chongqing Cummins Engine Company, Ltd.			7				9				36				32
All other manufacturers			22				14				91				28		(1)
Distribution entities
Komatsu Cummins Chile, Ltda.			15				12				55				44
All other distributors			6				3				16				11
Cummins share of net income			85				59				339				224
Royalty and interest income			28				29				144				125
Equity, royalty and interest income from investees		$	113			$	88			$	483			$	349
(1) Includes a $28 million impairment of our joint venture with KAMAZ and $3 million of royalty charges as part of our costs associated with the indefinite suspension of our Russian operations.

AGREEMENT IN PRINCIPLE

In December 2023, we announced that we reached an agreement in principle with the Environmental Protection Agency, the California Air Resources Board, the Environmental and Natural Resources Division of the U.S. Department of Justice and the California Attorney General’s Office to resolve certain regulatory civil claims regarding our emissions certification and compliance process for certain engines primarily used in pick-up truck applications in the U.S (collectively, the Agreement in Principle). As part of the Agreement in Principle, among other things, we agreed to pay civil penalties, complete recall requirements, undertake mitigation projects, provide extended warranties, undertake certain testing, take certain corporate compliance measures and make certain payments. Failure to comply with the terms and conditions of the Agreement in Principle will subject us to further stipulated penalties. We recorded a charge of $2.036 billion in the fourth quarter of 2023 to resolve the matters addressed by the Agreement in Principle involving approximately one million of our pick-up truck applications in the U.S. The charge is included in other operating expense, net, in our Condensed Consolidated Statements of Net Income.

The majority of the amount is expected to be paid in 2024 after final regulatory and judicial approvals are obtained. As a result, $1.938 billion is included in other current liabilities in our Condensed Consolidated Balance Sheets with the remainder included in other long-term liabilities. Of the total charge, $1.732 billion (primarily related to penalties) will be non-deductible for U.S. federal income tax purposes. The remaining amount, related to emissions mitigation projects and payments, extended warranties and other related compliance expenses is deductible for U.S. federal income tax purposes.

We anticipate making $1.938 billion of the payments required by the Agreement in Principle during 2024 through the use of our existing liquidity and access to debt markets.

INCOME TAXES

Our effective tax rate for 2024 is expected to approximate 24.0 percent, excluding any discrete items that may arise.

Our effective tax rates for the three and twelve months ended December 31, 2023, were negative 13.3 percent and 48.3 percent, respectively. Our effective tax rates for the three and twelve months ended December 31, 2022, were 17.2 percent and 22.6 percent, respectively.

The change in effective tax rates and taxability of foreign subsidiaries and joint ventures for the three and twelve months ended December 31, 2023, versus the three and twelve months ended December 31, 2022, was primarily due to the Agreement in Principle, of which $1.732 billion (primarily related to penalties) was non-deductible for tax purposes, jurisdictional mix of pre-tax income and actual and planned repatriations of earnings back to the U.S.

The three months ended December 31, 2023, contained net unfavorable discrete tax items of $402 million, primarily due to $398 million related to the $2.0 billion charge from the Agreement in Principle and $4 million of net unfavorable other discrete items. See Agreement in Principle section above.

The year ended December 31, 2023, contained unfavorable net discrete items of $397 million, primarily due to $398 million in the fourth quarter related to the $2.0 billion charge from the Agreement in Principle, $22 million of unfavorable adjustments for uncertain tax positions and $3 million of net unfavorable other discrete tax items, partially offset by $21 million of favorable return to provision adjustments and $5 million of favorable share-based compensation tax benefit. See Agreement in Principle section above.

The three months ended December 31, 2022, contained favorable discrete tax items of $52 million, primarily due to $31 million of favorable changes in accrued withholding taxes, $15 million of favorable valuation allowance adjustments and $6 million of favorable other net discrete items.

The year ended December 31, 2022, contained discrete tax items that netted to zero, primarily due to $31 million of favorable changes in accrued withholding taxes, $29 million of favorable changes in tax reserves, $15 million of favorable valuation allowance adjustments and $9 million of favorable other net discrete items, offset by $69 million of unfavorable tax costs associated with internal restructuring ahead of the planned separation of Atmus and $15 million of unfavorable return to provision adjustments related to the 2021 filed tax returns.

VOLUNTARY SEPARATION AND RETIREMENT PROGRAMS

In the fourth quarter of 2023, we initiated a voluntary employee separation program and a voluntary early retirement program. We incurred a charge of $42 million ($32 million after-tax) for these actions. The majority of the voluntary actions were completed by December 31, 2023.

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. We believe EBITDA excluding special items is a useful measure of our operating performance without regard to the impact of the Agreement in Principle, voluntary retirement and voluntary separation programs and costs associated with the IPO and separation of Atmus. This statement excludes 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 non-cash items that are excluded from the non-GAAP outlook measure.

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 (loss) income attributable to Cummins Inc. to EBITDA for each of the applicable periods:

		Three months ended December 31,								Years ended December 31,
In millions		2023				2022				2023				2022
Net (loss) income attributable to Cummins Inc.		$	(1,431	)		$	631			$	735			$	2,151
Net (loss) income attributable to Cummins Inc. as a percentage of net sales			(16.8	)%			8.1	%			2.2	%			7.7	%
Add:
Net income attributable to noncontrolling interests			38				13				105				32
Consolidated net (loss) income			(1,393	)			644				840				2,183
Add:
Interest expense			92				87				375				199
Income tax expense			163				134				786				636
Depreciation and amortization			260				240				1,016				781
EBITDA		$	(878	)		$	1,105			$	3,017			$	3,799
EBITDA as a percentage of net sales			(10.3	)%			14.2	%			8.9	%			13.5	%
Add:
Agreement in Principle			2,036				—				2,036				—
Voluntary retirement and voluntary separation programs			42				—				42				—
Atmus IPO and separation costs			33				19				100				81
EBITDA, excluding impact of Agreement in Principle, voluntary retirement and voluntary separation programs and costs associated with the IPO and separation of Atmus		$	1,233			$	1,124			$	5,195			$	3,880
EBITDA, excluding impact of Agreement in Principle, voluntary retirement and voluntary separation programs and costs associated with the IPO and separation of Atmus, as a percentage of net sales			14.4	%			14.5	%			15.3	%			13.8	%

Net income and diluted earnings per share (EPS) attributable to Cummins Inc. excluding Agreement in Principle, Voluntary Retirement and Voluntary Separation Programs and Atmus IPO and Separation Costs

We believe these are useful measures of our operating performance for the periods presented as they illustrate our operating performance without regard to the Agreement in Principle, voluntary retirement and voluntary separations programs and the Atmus IPO and separation costs. 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 (loss) income and diluted EPS attributable to Cummins Inc. to net income and diluted EPS attributable to Cummins Inc. excluding special items for the following periods:

		Three months ended December 31,
		2023
In millions		Net Income				Diluted EPS
Net loss and diluted EPS attributable to Cummins Inc.		$	(1,431	)		$	(10.01	)
Add:
Agreement in Principle, net of tax			1,966				13.76
Voluntary retirement and voluntary separation programs, net of tax			32				0.22
Atmus separation costs, net of tax			25				0.17
Net income and diluted EPS attributable to Cummins Inc. excluding Agreement in Principle, voluntary retirement and voluntary separation programs and costs associated with the separation of Atmus, net of tax		$	592			$	4.14

		Year ended December 31,
		2023
In millions		Net Income				Diluted EPS
Net income and diluted EPS attributable to Cummins Inc.		$	735			$	5.15
Add:
Agreement in Principle, net of tax			1,966				13.78
Atmus IPO and separation costs, net of tax			77				0.54
Voluntary retirement and voluntary separation programs, net of tax			32				0.22
Net income and diluted EPS attributable to Cummins Inc. excluding Agreement in Principle, costs associated with the IPO and separation of Atmus and voluntary retirement and voluntary separation programs, net of tax		$	2,810			$	19.69

CUMMINS INC. AND SUBSIDIARIES
SEGMENT SALES DATA
(Unaudited)

Components Segment Sales by Business

In the second quarter of 2023, with the Atmus IPO we changed the name of our filtration business to Atmus. Sales for our Components segment by business, adjusted for the reorganized businesses, were as follows:

2023
In millions		Q1			Q2			Q3			Q4			YTD
Axles and brakes		$	1,272		$	1,249		$	1,177		$	1,124		$	4,822
Emission solutions			1,056			964			893			922			3,835
Engine components			581			557			532			519			2,189
Atmus			417			417			396			399			1,629
Automated transmissions			179			179			187			169			714
Software and electronics			52			59			51			58			220
Total sales		$	3,557		$	3,425		$	3,236		$	3,191		$	13,409
2022
In millions		Q1			Q2			Q3			Q4			YTD
Axles and brakes		$	—		$	—		$	732		$	1,147		$	1,879
Emission solutions			910			863			853			868			3,494
Engine components			502			503			509			493			2,007
Atmus			382			391			399			385			1,557
Automated transmissions			134			143			159			157			593
Software and electronics			60			50			51			45			206
Total sales		$	1,988		$	1,950		$	2,703		$	3,095		$	9,736

Engine Segment Sales by Market and Unit Shipments by Engine Classification

Sales for our Engine segment by market were as follows:

2023
In millions		Q1			Q2			Q3			Q4			YTD
Heavy-duty truck		$	1,114		$	1,117		$	1,116		$	1,052		$	4,399
Medium-duty truck and bus			903			942			931			894			3,670
Light-duty automotive			439			445			455			423			1,762
Off-highway			530			484			429			410			1,853
Total sales		$	2,986		$	2,988		$	2,931		$	2,779		$	11,684
2022
In millions		Q1			Q2			Q3			Q4			YTD
Heavy-duty truck		$	908		$	1,001		$	972		$	966		$	3,847
Medium-duty truck and bus			848			875			868			869			3,460
Light-duty automotive			498			456			466			318			1,738
Off-highway			499			443			473			485			1,900
Total sales		$	2,753		$	2,775		$	2,779		$	2,638		$	10,945

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

2023
Units		Q1		Q2		Q3		Q4		YTD
Heavy-duty		34,700		36,400		36,300		34,500		141,900
Medium-duty		78,900		76,000		71,300		67,900		294,100
Light-duty		55,000		53,600		53,300		49,600		211,500
Total units		168,600		166,000		160,900		152,000		647,500
2022
Units		Q1		Q2		Q3		Q4		YTD
Heavy-duty		28,600		30,900		30,200		31,000		120,700
Medium-duty		72,600		68,800		69,800		72,400		283,600
Light-duty		66,500		60,400		58,300		42,400		227,600
Total units		167,700		160,100		158,300		145,800		631,900

Distribution Segment Sales by Product Line

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

2023
In millions		Q1			Q2			Q3			Q4			YTD
Parts		$	1,057		$	1,019		$	995		$	1,000		$	4,071
Power generation			492			614			606			797			2,509
Engines			456			531			511			499			1,997
Service			401			431			423			417			1,672
Total sales		$	2,406		$	2,595		$	2,535		$	2,713		$	10,249
2022
In millions		Q1			Q2			Q3			Q4			YTD
Parts		$	924		$	990		$	945		$	959		$	3,818
Power generation			401			441			431			501			1,774
Engines			441			429			449			457			1,776
Service			351			393			414			403			1,561
Total sales		$	2,117		$	2,253		$	2,239		$	2,320		$	8,929

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:

2023
In millions		Q1			Q2			Q3			Q4			YTD
Power generation		$	770		$	854		$	850		$	866		$	3,340
Industrial			455			468			475			456			1,854
Generator technologies			118			135			119			107			479
Total sales		$	1,343		$	1,457		$	1,444		$	1,429		$	5,673
2022
In millions		Q1			Q2			Q3			Q4			YTD
Power generation		$	664		$	657		$	739		$	730		$	2,790
Industrial			393			428			483			468			1,772
Generator technologies			103			118			127			123			471
Total sales		$	1,160		$	1,203		$	1,349		$	1,321		$	5,033

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

2023
Units		Q1		Q2		Q3		Q4		YTD
Power generation		2,900		3,300		2,800		3,300		12,300
Industrial		1,500		1,600		1,800		1,800		6,700
Total units		4,400		4,900		4,600		5,100		19,000
2022
Units		Q1		Q2		Q3		Q4		YTD
Power generation		2,200		2,400		2,400		2,700		9,700
Industrial		1,100		1,200		1,200		1,400		4,900
Total units		3,300		3,600		3,600		4,100		14,600

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240205601127/en/

Jon Mills

Director, Global Brand & External Communications

317-658-4540

jon.mills@cummins.com

Source: Cummins Inc.

FAQ

What were Cummins Inc.'s fourth quarter 2023 revenues?

Cummins Inc.'s fourth quarter 2023 revenues were $8.5 billion.

What was Cummins Inc.'s net loss in the fourth quarter of 2023?

Cummins Inc.'s net loss in the fourth quarter of 2023 was $1.4 billion.

What were Cummins Inc.'s full year 2023 revenues?

Cummins Inc.'s full year 2023 revenues were $34.1 billion.

What was Cummins Inc.'s net income in full year 2023?

Cummins Inc.'s net income in full year 2023 was $735 million.

What is Cummins Inc.'s ticker symbol?

Cummins Inc.'s ticker symbol is CMI.

What is Cummins Inc.'s outlook for full year 2024?

Cummins Inc. expects a 2-5% revenue decline and an EBITDA range of 14.4-15.4% for full year 2024.

What were some of Cummins Inc.'s 2023 highlights?

Cummins Inc.'s 2023 highlights include the launch of Accelera by Cummins, joint ventures, acquisitions, and sustainability recognitions.