• 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

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.

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: