CUMMINS REPORTS STRONG FOURTH QUARTER AND FULL YEAR 2022 RESULTS

CUMMINS REPORTS STRONG FOURTH QUARTER AND FULL YEAR 2022 RESULTS

Net income attributable to Cummins in the fourth quarter was $631 million, or $4.43 per diluted share. The tax rate in the fourth quarter was 17.2 percent including $52 million, or $0.36 per diluted share, of favorable discrete tax items. Excluding the Meritor business and related integration costs, net income for the quarter was $644 million, or $4.52 per diluted share, compared to $394 million, or $2.73 per diluted share, in 2021. Fourth quarter results also include $0.11 per diluted share of costs related to the separation of the Filtration business.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the fourth quarter was $1.1 billion, or 14.2 percent of sales. Excluding the Meritor business and related integration costs, as well as $19 million of costs related to the separation of the Filtration business, EBITDA was 16.1 percent of sales, compared to 12.1 percent of sales a year ago.

Fourth quarter results for the company included a full three months of Meritor. Meritor results within the quarter include $1.2 billion in revenue and EBITDA of $60 million. Fourth quarter results also include $27 million of integration related costs. EBITDA for Meritor operations, excluding the integration costs, was $87 million in the quarter, or 7.5 percent of sales.

“In 2022, Cummins continued to advance its Destination Zero growth strategy through the acquisitions of Jacobs Vehicles Systems, Meritor and the Siemens Commercial Vehicles business. The innovative talent, technology and capabilities these acquisitions bring will position Cummins for success as the industry decarbonizes,” said President and CEO Jennifer Rumsey. “We delivered strong profitability in the fourth quarter and achieved record full year revenues, EBITDA and EPS last year. I want to thank all our employees for helping us navigate a difficult supply chain environment and making 2022 a successful year.”

Revenues for the full year were $28.1 billion. Excluding Meritor, revenues were $26.2 billion, 9 percent higher than 2021. Sales in North America increased 18 percent and international revenues decreased 2 percent compared to 2021, as strong demand across all global markets was partially offset by a market slowdown in China, as well as Russia, where operations have been suspended indefinitely.

Net income attributable to Cummins for the full year was $2.2 billion, or $15.12 per diluted share. The tax rate in 2022 was 22.6 percent with a net zero impact from discrete tax items. Excluding the Meritor business and related acquisition costs, integration costs and purchase accounting impacts, net income for 2022 was $15.67 per diluted share, compared to $14.61 per diluted share in 2021. Full year results also include $0.72 per diluted share of costs related to the indefinite suspension of operations in Russia and $0.45 per diluted share for the separation of the Filtration business.

EBITDA in 2022 was $3.8 billion, or 13.5 percent of sales. Excluding the Meritor business and related acquisition costs, integration costs and purchase accounting impacts, as well as $111 million of costs related to the Russia suspension of operations and $81 million of costs for the separation of the Filtration business, EBITDA was $4.0 billion, or 15.1 percent of sales, compared to $3.5 billion, or 14.7 percent of sales, a year ago.

Full year results for the company included five months of operations following the acquisition of Meritor. Meritor results within 2022 include $1.9 billion in revenue and EBITDA of $26 million. Results of Meritor include an inventory valuation adjustment as required by purchase accounting, which resulted in a negative impact of $32 million. 2022 results also include $83 million of acquisition and integration related costs, which consist of consulting and banker fees, and employee separation and retention payments. EBITDA for Meritor operations, excluding the purchase accounting and acquisition and integration costs, was $141 million in the year, or 7.4 percent of sales.

2023 Outlook:

Based on its current forecast, Cummins projects full year 2023 revenues to be up 12 to 17 percent, and EBITDA to be in the range of 14.5 and 15.2 percent of sales.

The outlook above includes the projected results of the Meritor business for 2023, but excludes any costs or benefits associated with the planned separation of the Filtration business. Within the Components Segment, Cummins expects revenues of the Meritor business for 2023 to be between $4.5 billion to $4.7 billion, and EBITDA to be in the range of 10.3 to 11.0 percent of sales. The electric powertrain portion of the Meritor business has been integrated within the New Power portfolio with projected EBITDA losses of $55 million included in the overall guidance for that segment.

The company plans to continue to generate strong operating cash flow and returns for shareholders and is committed to our long-term strategic goal of returning 50 percent of operating cash flow back to shareholders. In the near term, we will focus on dividends and reducing the debt related to the Meritor acquisition, while continuing to deliver profitable growth to our shareholders.

“In 2023, we anticipate that demand will remain strong in most of our key regions and markets, especially in the first half of the year. We will continue monitoring global economic indicators closely and ensure we are prepared should economic momentum slow further,” said Rumsey. “We expect revenue growth and margin expansion in our core business and strong growth in our New Power segment in 2023.”