Cummins Reports Fourth Quarter and Full Year 2021 Results

• Full year revenues of $24 billion; GAAP¹ Net Income of $2.1 billion
• EBITDA for the full year was 14.7 percent of sales; Diluted EPS of $14.61
• Fourth quarter revenues of $5.9 billion; GAAP¹ Net Income of $394 million
• Fourth quarter EBITDA of 12.1 percent; Diluted EPS of $2.73
• The company expects full year 2022 revenues to be up 6 percent, EBITDA expected to be approximately 15.5 percent

COLUMBUS, Ind.--(BUSINESS WIRE)-- Cummins Inc. (NYSE: CMI) today reported full year 2021 results.

Revenues for the full year were $24 billion, 21 percent higher than 2020. Sales in North America increased 17 percent and international revenues increased 27 percent. Sales increased in all major regions compared to the prior year, which was severely impacted by the height of the COVID-19 pandemic.

EBITDA for the year was $3.5 billion (14.7 percent of sales) compared to $3.1 billion (15.7 percent of sales) in 2020.

Net income attributable to Cummins for the full year was $2.1 billion ($14.61 per diluted share), compared to net income of $1.8 billion ($12.01 per diluted share) in 2020. The tax rate for 2021 was 21.3 percent.

Fourth quarter revenues of $5.9 billion were flat with the same quarter in 2020. Sales in North America decreased 4 percent while international revenues increased 6 percent driven by strong demand across most global markets, with the exception of China, compared to the same quarter in 2020.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the fourth quarter were $705 million (12.1 percent of sales), compared to $837 million (14.4 percent of sales) a year ago.

Net income attributable to Cummins in the fourth quarter was $394 million ($2.73 per diluted share) compared to $501 million ($3.36 per diluted share) in 2020. The tax rate in the fourth quarter was 22.2 percent.

“Strong economic recovery combined with high demand for our products resulted in record full year revenues in 2021. Our industry continues to experience significant supply chain constraints resulting in elevated manufacturing, logistics, and material costs resulting in margins below our expectations, particularly in the fourth quarter,” said Chairman and CEO Tom Linebarger. “We have taken actions to improve margins in 2022 and expect to generate strong incremental margins through increased pricing, surcharges, a number of cost reduction initiatives and operational improvements. Having effectively managed through a challenging 2021, Cummins is in a solid position to keep investing in future growth while continuing to return cash to shareholders. The transition to low carbon power across industries will be a significant driver in the fight against climate change and will require a broad mix of innovative technologies to achieve these goals. This decarbonization effort represents a significant growth opportunity for Cummins as many of our OEM partners and end customers look to achieve their climate goals, while still having power solutions that fulfill their needs. Cummins key capabilities uniquely position us to lead in the transition to zero emissions.”

2022 Outlook:

Based on the current forecast, Cummins projects full year 2022 revenues to be up 6 percent, and EBITDA to be approximately 15.5 percent of sales. We expect revenues to increase in all regions and major markets except China where we expect demand to moderate after a record year in 2021.

The company plans to continue to generate strong operating cash flow and returns for shareholders.

2021 Highlights:

• Cummins increased its cash dividend for the 12th straight year and returned a total of $2.2 billion to shareholders in the form of dividends and share repurchases. The Board of Directors authorized the repurchase of up to $2 billion in shares of common stock upon completion of the company’s 2019 $2 billion share repurchase program, reinforcing the company’s commitment to deliver strong returns to shareholders and confidence in long-term performance.

• Cummins announced that it will bring to market a 15-liter natural gas engine for heavy-duty trucks. The 15-liter natural gas engine is an important part of Destination Zero, Cummins strategy for the best way to decarbonize our industry, focusing on reducing carbon from the technologies that are widely available today, while investing in the infrastructure capabilities and technologies with the potential to reach zero. The strategy focuses on new powertrains including advanced diesel, natural gas, hydrogen engines, hybrids, battery electric, and fuel cells along with an increased use of low carbon fuels and renewable electricity. The expanding product lineup will help achieve Cummins’ PLANET 2050 environmental goals which include lowering emissions from newly sold products by 30% by 2030 and a goal of carbon neutrality by 2050, aligned with the Paris Climate Accord targets.

• Cummins and Sinopec announced the formation of a 50:50 joint venture, Cummins Enze, to accelerate the affordability and availability of green hydrogen in China. The joint venture will invest in an electrolyzer plant with annual capacity starting at 500 megawatts in 2023, and scalable to one gigawatt within 5 years after completion. Cummins Enze will also provide a variety of hydrogen generation system solutions to meet diversified application requirements for both small and large scale hydrogen production.

• In August, the company announced its exploration of strategic alternatives for its Filtration business unit. The company believes the separation will create value for both companies by enabling enhanced focus on key strategic initiatives, continued innovation in core and new technologies for Cummins, and greater focus and operating flexibility for the Filtration business. The method and timing of the separation are under evaluation.

• In response to the COVID-19 pandemic, the company launched an aggressive global effort to acquire vaccines and provide them onsite or near-site to our employees, their families and other stakeholders. By partnering with governments and health care providers, we facilitated the delivery of over 45,000 doses of approved vaccines to employees. This includes over 5,000 shots in the U.S., over 30,000 shots in India and over 10,000 shots in Mexico.

• In October 2021, Cummins was named to the S&P Dow Jones World and North American Sustainability Indexes. It was the 16th consecutive time the company was named to the North American index and the first time on the world index since 2013. The prestigious indices rate companies on their environmental, social and governance performance.

¹ Generally Accepted Accounting Principles in the U.S.

Fourth quarter 2021 detail (all comparisons to same period in 2020):

Engine Segment

• Sales - $2.4 billion, up 4 percent
• Segment EBITDA - $264 million, or 10.9 percent of sales, compared to $338 million or 14.5 percent of sales
• On-highway revenues increased 5 percent and off-highway revenues increased 2 percent
• Sales in North America decreased 4 percent while international sales increased 26 percent driven by demand across Australia, Europe, and Latin America

Distribution Segment

• Sales - $2.1 billion, up 3 percent
• Segment EBITDA - $178 million, or 8.6 percent of sales, compared to $165 million or 8.3 percent of sales
• Revenues in North America were down 1 percent while international sales increased by 10 percent driven by strong demand in Russia
• Increased engine and aftermarket demand offset a decline in power generation

Components Segment

• Sales - $1.7 billion, down 6 percent
• Segment EBITDA - $205 million, or 11.9 percent of sales, compared to $280 million or 15.3 percent of sales
• Revenues in North America increased 1 percent and international sales decreased 12 percent due to lower demand in China

Power Systems Segment

• Sales - $1.1 billion, up 10 percent
• Segment EBITDA - $97 million, or 8.9 percent of sales, compared to $74 million, or 7.5 percent of sales
• Power generation revenues decreased by 6 percent while industrial revenues increased 37 percent driven by strong mining demand

New Power Segment

• Sales - $34 million, flat with the same quarter last year
• Segment EBITDA loss - $54 million
• Continued investment in the development of fuel cells and electrolyzers as well as products to support battery electric vehicles is expected to support strong growth in 2022 and beyond and is contributing to current 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; policy changes in international trade; any adverse effects of the U.S. government's COVID-19 vaccine mandates; the U.K.'s exit from the European Union; 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; supply shortages and supplier financial risk, particularly from any of our single-sourced suppliers, including suppliers that may be impacted by the COVID-19 pandemic; market slowdown due to the impacts from the COVID-19 pandemic, other public health crises, epidemics or pandemics; impacts to manufacturing and supply chain abilities from an extended shutdown or disruption of our operations due to the COVID-19 pandemic; aligning our capacity and production with our demand, including impacts of COVID-19; large truck manufacturers' and original equipment manufacturers' customers discontinuing outsourcing their engine supply needs or experiencing financial distress, particularly related to the COVID-19 pandemic, bankruptcy or change in control; a slowdown in infrastructure development and/or depressed commodity prices; failure to realize expected results from our investment in Eaton Cummins Automated Transmission Technologies joint venture; the actions of, and income from, joint ventures and other investees that we do not directly control; product recalls; 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; variability in material and commodity costs; product liability claims; our sales mix of products; protection and validity of our patent and other intellectual property rights; disruptions in global credit and financial markets as the result of the COVID-19 pandemic; labor relations or work stoppages; reliance on our executive leadership team and other key personnel; climate change and global warming; our plan to reposition our portfolio of product offerings through exploration of strategic acquisitions and divestitures and related uncertainties of entering such transactions; exposure to potential security breaches or other disruptions to our information technology systems and data security; political, economic and other risks from operations in numerous countries; competitor activity; increasing competition, including increased global competition among our customers in emerging markets; foreign currency exchange rate changes; the performance of our pension plan assets and volatility of discount rates, particularly those related to the sustained slowdown of the global economy due to the COVID-19 pandemic; the price and availability of energy; the outcome of pending and future litigation and governmental proceedings; continued availability of financing, financial instruments and financial resources in the amounts, at the times and on the terms required to support our future business; and other risks detailed from time to time in our SEC filings, including particularly in the Risk Factors section of our 2020 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this press release and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available at http://www.sec.gov or at http://www.cummins.com in the Investor Relations section of our website.

Presentation of Non-GAAP Financial Information

EBITDA is a non-GAAP measure used in this release and is defined and reconciled to what management believes to be the most comparable GAAP measure in a schedule attached to this release. Cummins presents this information as it believes it is useful to understanding the Company's operating performance, and because EBITDA is a measure used internally to assess the performance of the operating units.

Webcast information

Cummins management will host a teleconference to discuss these results today at 10 a.m. EST. This teleconference will be webcast and available on the Investor Relations section of the Cummins website at www.cummins.com. Participants wishing to view the visuals available with the audio are encouraged to sign-in a few minutes prior to the start of the teleconference.

We believe EBITDA is a useful measure of our operating performance as it assists investors and debt holders in comparing our performance on a consistent basis without regard to financing methods, capital structure, income taxes or depreciation and amortization methods, which can vary significantly depending upon many factors.

EBITDA is not in accordance with, or an alternative for, accounting principles generally accepted in the United States (GAAP) and may not be consistent with measures used by other companies. It should be considered supplemental data; however, the amounts included in the EBITDA calculation are derived from amounts included in the Condensed Consolidated Statements of Net Income. Above is a reconciliation of EBITDA to “Net income attributable to Cummins Inc.” for each of the applicable periods.

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 rates for the three months and year ended December 31, 2021, were 22.2 percent and 21.3 percent, respectively.

The three months ended December 31, 2021, contained unfavorable discrete tax items of $17 million, or $0.12 per share, primarily due to $11 million of unfavorable changes in U.S. research and development tax reserve and $6 million of net unfavorable other discrete tax items.

The year ended December 31, 2021, contained unfavorable net discrete tax items of $9 million, or $0.06 per share, primarily due to $12 million of unfavorable provision to return adjustments related to the 2020 filed tax returns, partially offset by $3 million of favorable other discrete tax 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:

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