Cummins Reports Second Quarter 2022 Results

Rhea-AI Summary

Cummins Inc. (CMI) reported second quarter 2022 revenues of $6.6 billion, up 8% from the previous year, with GAAP net income of $702 million ($4.94 per diluted share). EBITDA was 16% of sales, marking a slight increase. Cost adjustments related to the separation of the Filtration business and the suspension of operations in Russia impacted results. Despite challenges, including inflation and economic uncertainty, the company maintains its full-year guidance, expecting revenue growth of 8%. Key highlights include successful acquisitions and collaborations aimed at sustainability.

Positive

• Second quarter revenues increased 8% year-over-year to $6.6 billion.
• Net income rose to $702 million, compared to $600 million in 2021.
• EBITDA increased to $1.1 billion, or 16% of sales, compared to 15.9% a year prior.
• Successful completion of the acquisition of Jacobs Vehicle Systems in April 2022.
• Meritor's shareholders approved Cummins’ acquisition bid, enhancing growth potential.
• Collaborations announced to help achieve decarbonization in heavy-duty trucking.

Negative

• International revenues decreased by 2%, primarily due to a slowdown in China and suspension of operations in Russia.
• Mark to market losses on investments totaled $48 million, compared to gains of $20 million a year ago.
• Components segment sales declined by 2%, heavily impacted by a 19% drop in international sales.

• Second quarter revenues of $6.6 billion; GAAP¹ Net Income of $702 million (10.7 percent of sales)
• EBITDA in the second quarter was 16.0 percent of sales; Diluted EPS of $4.94
• Second quarter results include $29 million ($0.16 per diluted share) of costs related to the separation of the Filtration business, and benefit of $47 million ($0.33 per diluted share) from adjusting the reserves related to the suspension of our operations in Russia.
• The company is maintaining its full year 2022 guidance, expecting revenue to be up 8 percent and EBITDA of approximately 15.5 percent.

COLUMBUS, Ind.--(BUSINESS WIRE)-- Cummins Inc. (NYSE: CMI) today reported results for the second quarter of 2022.

Second quarter revenues of $6.6 billion increased 8 percent from the same quarter in 2021. Sales in North America increased 15 percent while international revenues decreased 2 percent, driven primarily by a slowdown in China and the indefinite suspension of our operations in Russia.

“The company achieved record revenues and solid profitability in the second quarter of 2022, with demand for our products remaining strong across most of our key markets and regions, apart from China,” said President and CEO Jennifer Rumsey. “Employees across our organization have worked tirelessly in the face of supply chain challenges and rising costs that continue to impact our industry. While navigating these challenges, we will continue to focus on enabling our customers’ success, driving cycle over cycle improvement in financial performance, investing in sustainable solutions that will protect our planet for future generations and returning excess cash to shareholders.”

Net income attributable to Cummins in the second quarter was $702 million ($4.94 per diluted share) compared to $600 million ($4.10 per diluted share) in 2021.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter were $1.1 billion (16.0 percent of sales), compared to $974 million (15.9 percent of sales) a year ago. Second quarter results include costs of $29 million ($0.16 per diluted share) related to the separation of the Filtration business, and a $47 million benefit ($0.33 per diluted share) from adjusting the reserves related to the indefinite suspension of our operations in Russia. We also experienced $48 million ($0.34 per diluted share) of mark to market losses on investments that underpin our unqualified benefit plans in the second quarter, which compares to gains of $20 million a year ago. The tax rate in the second quarter was 17.3 percent including $36 million, or $0.25 per diluted share, of favorable discrete items.

2022 Outlook:

Based on the current forecast, Cummins is maintaining its full year 2022 guidance, expecting revenue to be up 8 percent and EBITDA of approximately 15.5 percent. The company plans to return approximately 50 percent of Operating Cash Flow to shareholders in the form of dividends and share repurchases.

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

“High inflation and rising global interest rates have increased uncertainty about the pace of growth in the global economy. Demand for Cummins’ products and services remains strong, and as a result we have maintained our projection for full year revenues and profitability from three months ago,” said Rumsey. “We continue to monitor economic conditions closely and will adjust our operating plans should the outlook for our core markets weaken.”

Second Quarter 2022 Highlights:

• The company achieved significant milestones related to two previously announced acquisitions, Jacobs Vehicle Systems (JVS) and Meritor. In April 2022, Cummins completed the acquisition of JVS, adding engine braking and cylinder deactivation technologies which are key components to meeting current and future emissions regulations. On May 26th, Meritor’s shareholders voted in favor of the Cummins acquisition bid, further validating the potential of what Cummins and Meritor can achieve together. The companies are working together to complete the acquisition this week as we have received all regulatory approvals to close the transaction.
• The company announced several collaborations that further enable our customers to achieve their decarbonization goals. During the second quarter, Cummins announced collaborations with Daimler Truck North America and Scania to deliver fuel cell electric powertrains for heavy-duty truck applications, and with Komatsu on the development of zero-emissions haulage equipment, including hydrogen fuel cell solutions for large mining haul truck applications. Cummins, Chevron, and Walmart are also working together to integrate Cummins X15N natural gas engine, powered by renewable natural gas, into Walmart’s heavy-duty truck fleet.
• We continue to make progress on the planned separation of the Filtration business.
• Cummins was ranked No. 4 on Forbes 2022 list of the Best Employers for Diversity, its highest ranking ever on that particular list, and named to 3BL Media’s list of the 100 Best Corporate Citizens. In addition, the company posted its first Human Capital Management report detailing the ways the company strives to create a dynamic work environment, and published its 19^th consecutive Sustainability Progress Report.
• In July, the company announced Jennifer Rumsey, Cummins President & Chief Operating Officer, would assume the role of Chief Executive Officer, effective August 1, 2022. She is the seventh CEO, and first female, in the company’s history. Tom Linebarger, Cummins long-standing CEO, assumed the role of Executive Chairman, which includes continuing to serve as Chairman on the Board of Directors and taking on select executive responsibilities, such as the pending acquisition of Meritor.

¹ Generally Accepted Accounting Principles in the U.S.

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

The Engine, Distribution, Components and Power Systems results were all impacted by adjustments to the reserves related to the indefinite suspension of our operations in Russia.

Engine Segment

• Sales - $2.8 billion, up 11 percent
• Segment EBITDA - $422 million, or 15.2 percent of sales, compared to $402 million or 16.1 percent of sales. EBITDA includes $1 million of additional costs related to the indefinite suspension of our operations in Russia.
• On-highway revenues increased 16 percent driven by pricing actions and strong demand in the North American truck markets, strong aftermarket demand and recovery in the bus market which was severely impacted by Covid-19 in the previous year. Off-highway revenues decreased 8 percent driven by a slowdown in China construction.
• Sales increased 15 percent in North America and 1 percent in international markets, with higher demand in Western Europe offset by a decline in China.

Distribution Segment

• Sales - $2.3 billion, up 17 percent
• Segment EBITDA - $297 million, or 13.2 percent of sales, compared to $201 million or 10.5 percent of sales. EBITDA includes $45 million of benefits from adjusting the reserves related to the indefinite suspension of our operations in Russia.
• Revenues in North America increased 21 percent and international sales increased by 10 percent
• Higher revenues were primarily driven by increased demand for parts and service.

Components Segment

• Sales - $2.0 billion, down 2 percent
• Segment EBITDA - $352 million, or 18.1 percent of sales, compared to $301 million or 15.1 percent of sales. EBITDA includes $2 million of benefits from adjusting the reserves related to the indefinite suspension of our operations in Russia.
• Revenues in North America increased by 13 percent and international sales decreased by 19 percent due to lower demand in China from a high base in 2021.

Power Systems Segment

• Sales - $1.2 billion, up 5 percent
• Segment EBITDA - $128 million, or 10.6 percent of sales, compared to $139 million, or 12.2 percent of sales. EBITDA includes $1 million of benefits from adjusting the reserves related to the indefinite suspension of our operations in Russia.
• Power generation revenues were flat. Industrial revenues increased 7 percent due to stronger demand in mining and oil and gas markets for both engine systems and aftermarket products. Demand for alternators increased 33 percent due to supply chain constraints on external customers.

New Power Segment

• Sales - $42 million, up 75 percent
• Segment EBITDA loss - $80 million
• Revenues increased due to higher battery demand in the North American school bus market.
• Costs associated with the development of fuel cells and electrolyzers as well as products to support battery electric vehicles are contributing to EBITDA losses.

About Cummins Inc.

Cummins Inc., a global power leader, is a corporation of complementary business segments that design, manufacture, distribute and service a broad portfolio of power solutions. The company’s products range from diesel, natural gas, electric and hybrid powertrains and powertrain-related components including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems, automated transmissions, electric power generation systems, batteries, electrified power systems, hydrogen generation and fuel cell products. Headquartered in Columbus, Indiana (U.S.), since its founding in 1919, Cummins employs approximately 59,900 people committed to powering a more prosperous world through three global corporate responsibility priorities critical to healthy communities: education, environment and equality of opportunity. Cummins serves its customers online, through a network of company-owned and independent distributor locations, and through thousands of dealer locations worldwide and earned about $2.1 billion on sales of $24.0 billion in 2021. See how Cummins is powering a world that's always on by accessing news releases and more information at https://www.cummins.com/always-on.

Forward-looking disclosure statement

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

Presentation of Non-GAAP Financial Information

EBITDA is a non-GAAP measure used in this release and is defined and reconciled to what management believes to be the most comparable GAAP measure in a schedule attached to this release, 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 INCOME (Unaudited) (a)
		Three months ended
In millions, except per share amounts		June 30, 2022				July 4, 2021
NET SALES		$	6,586			$	6,111
Cost of sales			4,860				4,633
GROSS MARGIN			1,726				1,478
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses			622				600
Research, development and engineering expenses			299				276
Equity, royalty and interest income from investees			95				137
Other operating expense, net			3				4
OPERATING INCOME			897				735
Interest expense			34				29
Other (expense) income, net			(8	)			73
INCOME BEFORE INCOME TAXES			855				779
Income tax expense			148				167
CONSOLIDATED NET INCOME			707				612
Less: Net income attributable to noncontrolling interests			5				12
NET INCOME ATTRIBUTABLE TO CUMMINS INC.		$	702			$	600
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic		$	4.97			$	4.14
Diluted		$	4.94			$	4.10
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
Basic			141.2				145.1
Diluted			142.0				146.5
(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)
		Six months ended
In millions, except per share amounts		June 30, 2022				July 4, 2021
NET SALES		$	12,971			$	12,203
Cost of sales			9,713				9,239
GROSS MARGIN			3,258				2,964
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses			1,237				1,174
Research, development and engineering expenses			597				536
Equity, royalty and interest income from investees			191				303
Other operating expense, net			114				12
OPERATING INCOME			1,501				1,545
Interest expense			51				57
Other (expense) income, net			(17	)			74
INCOME BEFORE INCOME TAXES			1,433				1,562
Income tax expense			303				339
CONSOLIDATED NET INCOME			1,130				1,223
Less: Net income attributable to noncontrolling interests			10				20
NET INCOME ATTRIBUTABLE TO CUMMINS INC.		$	1,120			$	1,203
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic		$	7.90			$	8.24
Diluted		$	7.86			$	8.16
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
Basic			141.7				146.0
Diluted			142.5				147.4
(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		June 30, 2022				December 31, 2021
ASSETS
Current assets
Cash and cash equivalents		$	2,462			$	2,592
Marketable securities			536				595
Total cash, cash equivalents and marketable securities			2,998				3,187
Accounts and notes receivable, net			4,156				3,990
Inventories			4,765				4,355
Prepaid expenses and other current assets			843				777
Total current assets			12,762				12,309
Long-term assets
Property, plant and equipment, net			4,389				4,422
Investments and advances related to equity method investees			1,544				1,538
Goodwill			1,391				1,287
Other intangible assets, net			1,054				900
Pension assets			1,461				1,488
Other assets			1,876				1,766
Total assets		$	24,477			$	23,710
LIABILITIES
Current liabilities
Accounts payable (principally trade)		$	3,405			$	3,021
Loans payable			165				208
Commercial paper			705				313
Accrued compensation, benefits and retirement costs			443				683
Current portion of accrued product warranty			796				755
Current portion of deferred revenue			871				855
Other accrued expenses			1,221				1,190
Current maturities of long-term debt			65				59
Total current liabilities			7,671				7,084
Long-term liabilities
Long-term debt			3,490				3,579
Pensions and other postretirement benefits			589				604
Accrued product warranty			714				684
Deferred revenue			852				850
Other liabilities			1,506				1,508
Total liabilities		$	14,822			$	14,309
EQUITY
Cummins Inc. shareholders’ equity
Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.5 shares issued		$	2,423			$	2,427
Retained earnings			17,450				16,741
Treasury stock, at cost, 81.5 and 80.0 shares			(9,439	)			(9,123	)
Accumulated other comprehensive loss			(1,696	)			(1,571	)
Total Cummins Inc. shareholders’ equity			8,738				8,474
Noncontrolling interests			917				927
Total equity		$	9,655			$	9,401
Total liabilities and equity		$	24,477			$	23,710
(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
In millions		June 30, 2022				July 4, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income		$	707			$	612
Adjustments to reconcile consolidated net income to net cash provided by operating activities
Depreciation and amortization			167				167
Deferred income taxes			(46	)			9
Equity in income of investees, net of dividends			14				22
Pension and OPEB expense			8				21
Pension contributions and OPEB payments			(12	)			(17	)
Share-based compensation expense			9				10
Russian suspension recoveries			(47	)			—
Loss (gain) on corporate owned life insurance			48				(20	)
Foreign currency remeasurement and transaction exposure			(3	)			9
Changes in current assets and liabilities, net of acquisitions
Accounts and notes receivable			165				43
Inventories			(209	)			(292	)
Other current assets			(8	)			6
Accounts payable			(58	)			(88	)
Accrued expenses			(30	)			193
Changes in other liabilities			(81	)			(34	)
Other, net			(25	)			(25	)
Net cash provided by operating activities			599				616
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures			(147	)			(125	)
Investments in internal use software			(13	)			(11	)
Proceeds from sale of land			—				20
Investments in and net advances (to) from equity investees			(21	)			34
Acquisitions of businesses, net of cash acquired			(328	)			—
Investments in marketable securities—acquisitions			(236	)			(219	)
Investments in marketable securities—liquidations			207				174
Cash flows from derivatives not designated as hedges			(30	)			(2	)
Other, net			2				8
Net cash used in investing activities			(566	)			(121	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings			42				20
Net borrowings (payments) of commercial paper			394				(117	)
Payments on borrowings and finance lease obligations			(47	)			(17	)
Net borrowings under short-term credit agreements			(53	)			—
Dividend payments on common stock			(204	)			(197	)
Repurchases of common stock			(36	)			(672	)
Proceeds from issuing common stock			10				8
Other, net			—				(2	)
Net cash provided by (used in) financing activities			106				(977	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			47				5
Net increase (decrease) in cash and cash equivalents			186				(477	)
Cash and cash equivalents at beginning of period			2,276				2,958
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	2,462			$	2,481
(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)
		Six months ended
In millions		June 30, 2022				July 4, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income		$	1,130			$	1,223
Adjustments to reconcile consolidated net income to net cash provided by operating activities
Depreciation and amortization			328				337
Deferred income taxes			(112	)			17
Equity in income of investees, net of dividends			(62	)			(114	)
Pension and OPEB expense			17				41
Pension contributions and OPEB payments			(55	)			(68	)
Share-based compensation expense			14				18
Russian suspension costs, net of recoveries			111				—
Asset impairments and other charges			36				—
Loss on corporate owned life insurance			85				12
Foreign currency remeasurement and transaction exposure			(10	)			10
Changes in current assets and liabilities, net of acquisitions
Accounts and notes receivable			(252	)			(331	)
Inventories			(498	)			(628	)
Other current assets			(65	)			(18	)
Accounts payable			426				377
Accrued expenses			(281	)			169
Changes in other liabilities			(11	)			(34	)
Other, net			(38	)			(56	)
Net cash provided by operating activities			763				955
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures			(251	)			(212	)
Investments in internal use software			(24	)			(22	)
Proceeds from sale of land			—				20
Investments in and net advances (to) from equity investees			(53	)			10
Acquisitions of businesses, net of cash acquired			(245	)			—
Investments in marketable securities—acquisitions			(433	)			(362	)
Investments in marketable securities—liquidations			461				381
Cash flows from derivatives not designated as hedges			(32	)			12
Other, net			1				27
Net cash used in investing activities			(576	)			(146	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings			56				20
Net borrowings (payments) of commercial paper			392				(123	)
Payments on borrowings and finance lease obligations			(71	)			(33	)
Net payments under short-term credit agreements			(24	)			(102	)
Distributions to noncontrolling interests			(14	)			(13	)
Dividend payments on common stock			(411	)			(394	)
Repurchases of common stock			(347	)			(1,090	)
Proceeds from issuing common stock			19				26
Other, net			9				(13	)
Net cash used in financing activities			(391	)			(1,722	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			74				(7	)
Net decrease in cash and cash equivalents			(130	)			(920	)
Cash and cash equivalents at beginning of year			2,592				3,401
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	2,462			$	2,481
(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 June 30, 2022
External sales		$	2,092			$	2,247			$	1,477			$	734			$	36			$	6,586			$	—			$	6,586
Intersegment sales			683				6				473				469				6				1,637				(1,637	)			—
Total sales			2,775				2,253				1,950				1,203				42				8,223				(1,637	)			6,586
Research, development and engineering expenses			116				13				73				58				39				299				—				299
Equity, royalty and interest income (loss) from investees			59				21				9				10				(4	)			95				—				95
Interest income			1				3				2				1				—				7				—				7
Russian suspension costs (recoveries) (2)			1				(45	)			(2	)			(1	)			—				(47	)			—				(47	)
EBITDA (3)			422				297				352				128				(80	)			1,119				(64	)			1,055
Depreciation and amortization (4)			49				29				49				31				8				166				—				166
EBITDA as a percentage of segment sales			15.2	%			13.2	%			18.1	%			10.6	%			NM				13.6	%							16.0	%
Three months ended July 4, 2021
External sales		$	1,920			$	1,913			$	1,556			$	699			$	23			$	6,111			$	—			$	6,111
Intersegment sales			571				7				438				444				1				1,461				(1,461	)			—
Total sales			2,491				1,920				1,994				1,143				24				7,572				(1,461	)			6,111
Research, development and engineering expenses			99				12				79				60				26				276				—				276
Equity, royalty and interest income (loss) from investees			104				15				12				9				(3	)			137				—				137
Interest income			1				2				1				1				—				5				—				5
EBITDA (3)			402				201				301				139				(60	)			983				(9	)			974
Depreciation and amortization (4)			50				30				46				33				7				166				—				166
EBITDA as a percentage of segment sales			16.1	%			10.5	%			15.1	%			12.2	%			NM				13.0	%							15.9	%
"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 June 30, 2022 and July 4, 2021, except for $24 million of filtration separation costs in 2022.
(2) See "RUSSIAN OPERATIONS" note for additional information.
(3) EBITDA is defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests.
(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.

CUMMINS INC. AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited)
In millions		Engine				Distribution				Components				Power Systems				New Power				Total Segments				Intersegment Eliminations (1)				Total
Six months ended June 30, 2022
External sales		$	4,141			$	4,358			$	2,994			$	1,417			$	61			$	12,971			$	—			$	12,971
Intersegment sales			1,387				12				944				946				12				3,301				(3,301	)			—
Total sales			5,528				4,370				3,938				2,363				73				16,272				(3,301	)			12,971
Research, development and engineering expenses			225				26				149				122				75				597				—				597
Equity, royalty and interest income (loss) from investees			103		(2)		37				37				21				(7	)			191				—				191
Interest income			5				5				3				2				—				15				—				15
Russian suspension costs (3)			33		(4)		55				4				19				—				111				—				111
EBITDA (5)			814				407				672				218				(147	)			1,964				(154	)			1,810
Depreciation and amortization (6)			100				57				92				62				15				326				—				326
EBITDA as a percentage of total sales			14.7	%			9.3	%			17.1	%			9.2	%			NM				12.1	%							14.0	%
Six months ended July 4, 2021
External sales		$	3,815			$	3,740			$	3,280			$	1,311			$	57			$	12,203			$	—			$	12,203
Intersegment sales			1,135				15				866				854				2				2,872				(2,872	)			—
Total sales			4,950				3,755				4,146				2,165				59				15,075				(2,872	)			12,203
Research, development and engineering expenses			191				25				154				117				49				536				—				536
Equity, royalty and interest income from investees			217				32				31				21				2				303				—				303
Interest income			4				3				2				2				—				11				—				11
EBITDA (5)			756				361				722				265				(111	)			1,993				(39	)			1,954
Depreciation and amortization (6)			101				60				94				68				12				335				—				335
EBITDA as a percentage of total sales			15.3	%			9.6	%			17.4	%			12.2	%			NM				13.2	%							16.0	%
"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 six months ended June 30, 2022 and July 4, 2021, except for $41 million of filtration separation costs in 2022.
(2) Includes a $28 million impairment of our joint venture with KAMAZ and $3 million of royalty charges as part of our costs associated with the suspension of our Russian operations. See "RUSSIAN OPERATIONS" note below for additional information.
(3) See "RUSSIAN OPERATIONS" note for additional information.
(4) Includes $31 million of Russian suspension costs reflected in the Equity, royalty and interest income (loss) from investees line above.
(5) EBITDA is defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests.
(6) 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 $2 million and $2 million for the six months ended June 30, 2022 and July 4, 2021, respectively. A portion of depreciation expense is included in Research, development and engineering expenses.

CUMMINS INC. AND SUBSIDIARIES 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								Six months ended
In millions		June 30, 2022				July 4, 2021				June 30, 2022				July 4, 2021
EBITDA		$	1,055			$	974			$	1,810			$	1,954
EBITDA as a percentage of net sales			16.0	%			15.9	%			14.0	%			16.0	%
Less:
Interest expense			34				29				51				57
Depreciation and amortization			166				166				326				335
INCOME BEFORE INCOME TAXES			855				779				1,433				1,562
Less: Income tax expense			148				167				303				339
CONSOLIDATED NET INCOME			707				612				1,130				1,223
Less: Net income attributable to noncontrolling interests			5				12				10				20
NET INCOME ATTRIBUTABLE TO CUMMINS INC.		$	702			$	600			$	1,120			$	1,203
Net income attributable to Cummins Inc. as a percentage of net sales			10.7	%			9.8	%			8.6	%			9.9	%
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. 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. Above is a reconciliation of EBITDA to “Net income attributable to Cummins Inc.” for each of the applicable periods.

CUMMINS INC. AND SUBSIDIARIES SELECT FOOTNOTE DATA (Unaudited)
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES
Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Net Income for the reporting periods was as follows:
		Three months ended								Six months ended
In millions		June 30, 2022				July 4, 2021				June 30, 2022				July 4, 2021
Manufacturing entities
Beijing Foton Cummins Engine Co., Ltd.		$	14			$	46			$	28			$	85
Dongfeng Cummins Engine Company, Ltd.			11				21				27				52
Chongqing Cummins Engine Company, Ltd.			7				10				16				20
Tata Cummins, Ltd.			5				1				14				7
All other manufacturers			13				28				3		(1)		83
Distribution entities
Komatsu Cummins Chile, Ltda.			12				9				19				15
All other distributors			3				1				5				4
Cummins share of net income			65				116				112				266
Royalty and interest income			30				21				79				37
Equity, royalty and interest income from investees		$	95			$	137			$	191			$	303
(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 suspension of our Russian operations. In addition, on February 7, 2022, we purchased Westport Fuel System Inc.'s stake in Cummins Westport Joint Venture. See "RUSSIAN OPERATIONS" note below for additional information.

RUSSIAN OPERATIONS
On March 17, 2022, the Board of Directors (the Board) decided to indefinitely suspend our operations in Russia due to the ongoing conflict in Ukraine. At the time of suspension, our Russian operations included a wholly-owned distributor in Russia, an unconsolidated joint venture (the Unconsolidated JV) with KAMAZ Publicly Traded Company (KAMAZ), a Russian truck manufacturer with whom we share the Unconsolidated JV, and direct sales into Russia from our other business segments. As a result of the suspension of operations, we evaluated the recoverability of assets in Russia and assessed other potential liabilities. We experienced and expect to continue to experience, an inability to collect customer receivables and may be the subject of litigation as a consequence of our suspension of commercial operations in Russia. We recorded a charge of $158 million in the first quarter related to these actions. In the second quarter, we recovered certain inventory and other expense amounts reserved in the first quarter and incurred some small additional charges resulting in a net recovery of $47 million. As of June 30, 2022, we had approximately $17 million of inventory and $26 million of receivables in Russia, all of which are fully reserved. In addition, we have cash balances of $84 million, some of which will be used to fund ongoing employee, tax and contract settlement obligations. The following summarizes the costs (recoveries) associated with the suspension of our Russian operations in our Condensed Consolidated Statements of Net Income:
		Three months ended				Six months ended
In millions		June 30, 2022				June 30, 2022				Statement of Net Income Location
Inventory write-downs		$	(40	)		$	19			Cost of sales
Accounts receivable reserves			—				43			Other operating expense, net
Impairment and other joint venture costs			—				31			Equity, royalty and interest income from investees
Other			(7	)			18			Other operating expense, net
Total		$	(47	)		$	111

We will continue to evaluate the situation as conditions evolve and may take additional actions as deemed necessary in future periods.

ACQUISITIONS

On April 8, 2022, we completed the acquisition of Jacobs Vehicle Systems business (Jacobs) from Altra Industrial Motion Corp. Sales of this business were $194 million in 2021. The purchase price was $346 million in cash, subject to typical adjustments related to closing working capital and other amounts and does not contain any contingent consideration. Jacobs is a supplier of engine braking, cylinder deactivation and start and stop thermal management technologies. The acquisition furthers our investment in key technologies and capabilities to drive growth, while securing our supply base.

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

On May 26th, Meritor's shareholders voted in favor of our acquisition bid. The companies are working together to complete the acquisition this week as we have received all regulatory approvals to close the transaction.

INCOME TAXES

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

Our effective tax rate for the three months ended June 30, 2022, was 17.3 percent and contained favorable discrete tax items of $36 million, or $0.25 per share, primarily due to $36 million of favorable changes in tax reserves, $10 million of favorable changes associated with uncertainty in our Russian operations and $8 million of net favorable other discrete tax items, partially offset by $18 million of unfavorable tax costs associated with internal restructuring ahead of the planned separation of our filtration business.

Our effective tax rate for the six months ended June 30, 2022, was 21.1 percent and contained favorable discrete tax items of $5 million, or $0.04 per share, primarily due to $27 million of favorable changes in tax reserves and $4 million of net favorable other discrete tax items, partially offset by $18 million of unfavorable tax costs associated with internal restructuring ahead of the planned separation of our filtration business and $8 million of unfavorable changes associated with uncertainty in our Russian operations.

Our effective tax rate for the three months ended July 4, 2021, was 21.4 percent and contained unfavorable discrete items of $7 million, or $0.05 per share, primarily due to a $10 million unfavorable statutory change in tax rates (mostly in the UK), partially offset by $3 million of other favorable discrete items.

Our effective tax rate for the six months ended July 4, 2021, was 21.7 percent and contained unfavorable discrete items of $3 million, or $0.02 per share, primarily due to a $10 million unfavorable statutory change in tax rates (mostly in the UK), partially offset by $7 million of other favorable discrete items.

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

Engine Segment Sales by Market and Unit Shipments by Engine Classification

Sales for our Engine segment by market were as follows:

2022
In millions		Q1				Q2				Q3				Q4				YTD
Heavy-duty truck		$	908			$	1,001			$	—			$	—			$	1,909
Medium-duty truck and bus			848				875				—				—				1,723
Light-duty automotive			498				456				—				—				954
Off-highway			499				443				—				—				942
Total sales		$	2,753			$	2,775			$	—			$	—			$	5,528
2021
In millions		Q1				Q2				Q3				Q4				YTD
Heavy-duty truck		$	827			$	839			$	861			$	801			$	3,328
Medium-duty truck and bus			674				688				713				702				2,777
Light-duty automotive			481				484				515				432				1,912
Off-highway			477				480				489				491				1,937
Total sales		$	2,459			$	2,491			$	2,578			$	2,426			$	9,954

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

2022
Units		Q1			Q2			Q3			Q4			YTD
Heavy-duty		28,600			30,900									59,500
Medium-duty		72,600			68,800									141,400
Light-duty		66,500			60,400									126,900
Total units		167,700			160,100			—			—			327,800
2021
Units		Q1			Q2			Q3			Q4			YTD
Heavy-duty		30,700			29,400			29,200			28,300			117,600
Medium-duty		73,100			67,500			65,200			68,000			273,800
Light-duty		68,500			68,100			73,900			62,800			273,300
Total units		172,300			165,000			168,300			159,100			664,700

Distribution Segment Sales by Product Line

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

2022
In millions		Q1				Q2				Q3				Q4				YTD
Parts		$	924			$	990			$	—			$	—			$	1,914
Engines			441				429				—				—				870
Power generation			401				441				—				—				842
Service			351				393				—				—				744
Total sales		$	2,117			$	2,253			$	—			$	—			$	4,370
2021
In millions		Q1				Q2				Q3				Q4				YTD
Parts		$	757			$	765			$	800			$	823			$	3,145
Engines			334				351				377				437				1,499
Power generation			418				454				438				452				1,762
Service			326				350				344				346				1,366
Total sales		$	1,835			$	1,920			$	1,959			$	2,058			$	7,772

Component Segment Sales by Business

Sales for our Components segment by business were as follows:

2022
In millions		Q1				Q2				Q3				Q4				YTD
Emission solutions		$	910			$	863			$	—			$	—			$	1,773
Filtration			382				391				—				—				773
Turbo technologies			346				355				—				—				701
Electronics and fuel systems			216				198				—				—				414
Automated transmissions			134				143				—				—				277
Total sales		$	1,988			$	1,950			$	—			$	—			$	3,938
2021
In millions		Q1				Q2				Q3				Q4				YTD
Emission solutions		$	1,035			$	882			$	793			$	789			$	3,499
Filtration			372				374				354				338				1,438
Turbo technologies			367				351				325				308				1,351
Electronics and fuel systems			263				241				210				185				899
Automated transmissions			115				146				111				106				478
Total sales		$	2,152			$	1,994			$	1,793			$	1,726			$	7,665

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

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

2022
In millions		Q1				Q2				Q3				Q4				YTD
Power generation		$	664			$	657			$	—			$	—			$	1,321
Industrial			393				428				—				—				821
Generator technologies			103				118				—				—				221
Total sales		$	1,160			$	1,203			$	—			$	—			$	2,363
2021
In millions		Q1				Q2				Q3				Q4				YTD
Power generation		$	611			$	655			$	664			$	585			$	2,515
Industrial			324				399				412				399				1,534
Generator technologies			87				89				88				102				366
Total sales		$	1,022			$	1,143			$	1,164			$	1,086			$	4,415

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

2022
Units		Q1			Q2			Q3			Q4			YTD
Power generation		2,200			2,400			—			—			4,600
Industrial		1,100			1,200			—			—			2,300
Total units		3,300			3,600			—			—			6,900
2021
Units		Q1			Q2			Q3			Q4			YTD
Power generation		2,100			1,800			2,500			2,000			8,400
Industrial		1,000			1,200			1,900			1,300			5,400
Total units		3,100			3,000			4,400			3,300			13,800

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220802005228/en/

Jon Mills

Director, External Communications

Cummins Inc.

317-658-4540

jon.mills@cummins.com

Source: Cummins Inc.

FAQ

What are Cummins' second quarter 2022 revenue and net income figures?

Cummins reported second quarter 2022 revenues of $6.6 billion and a net income of $702 million.

How did Cummins perform in terms of EBITDA in the second quarter of 2022?

Cummins achieved an EBITDA of $1.1 billion, which is 16% of sales.

What is Cummins’ full-year guidance for 2022?

Cummins expects revenue growth of 8% and EBITDA of approximately 15.5% for the full year 2022.

What were the significant impacts on Cummins' international revenues?

International revenues decreased by 2% due to a slowdown in China and suspension of operations in Russia.

What acquisitions did Cummins complete in 2022?

Cummins completed the acquisition of Jacobs Vehicle Systems in April 2022, and the acquisition of Meritor is pending.