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...
COLUMBUS, Ind.: 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:
1 Generally Accepted Accounting Principles in the U.S.
Fourth quarter 2023 detail (all comparisons to same period in 2022):
Components Segment
Engine Segment
Distribution Segment
Power Systems Segment
Accelera Segment
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 |
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