CUMMINS INC. Cummins Inc. and its consolidated subsidiaries are hereinafter sometimes referred to as "Cummins ," "we," "our" or "us." CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION Certain parts of this quarterly report contain forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those that are based on current expectations, estimates and projections about the industries in which we operate and management's beliefs and assumptions. Forward-looking statements are generally accompanied by words such as "anticipates," "expects," "forecasts," "intends," "plans," "believes," "seeks," "estimates," "could," "should," "may" or words of similar meaning. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which we refer to as "future factors," which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some future factors that could cause our results to differ materially from the results discussed in such forward-looking statements are discussed below and shareholders, potential investors and other readers are urged to consider these future factors carefully in evaluating forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Future factors that could affect the outcome of forward-looking statements include the following: GOVERNMENT REGULATION •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 theU.S. government's COVID-19 vaccine mandates; •theU.K.'s exit from theEuropean 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; BUSINESS CONDITIONS / DISRUPTIONS •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 inEaton Cummins Automated Transmission Technologies joint venture; •the actions of, and income from, joint ventures and other investees that we do not directly control; PRODUCTS AND TECHNOLOGY •product recalls; •the development of new technologies that reduce demand for our current products and services; 27 -------------------------------------------------------------------------------- Table of Contents •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; GENERAL •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 risk factors described in our 2020 Form 10-K, Part I, Item 1A . under the caption "Risk Factors." 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 quarterly report and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. 28 -------------------------------------------------------------------------------- Table of Contents ORGANIZATION OF INFORMATION The following Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) was prepared to provide the reader with a view and perspective of our business through the eyes of management and should be read in conjunction with our Management's Discussion and Analysis of Financial Condition and Results of Operations section of our 2020 Form 10-K . Our MD&A is presented in the following sections: •EXECUTIVE SUMMARY AND FINANCIAL HIGHLIGHTS •RESULTS OF OPERATIONS •OPERATING SEGMENT RESULTS •OUTLOOK •LIQUIDITY AND CAPITAL RESOURCES •APPLICATION OF CRITICAL ACCOUNTING ESTIMATES EXECUTIVE SUMMARY AND FINANCIAL HIGHLIGHTS Overview We are a global power leader that designs, manufactures, distributes and services 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 production and fuel cell products. We sell our products to original equipment manufacturers (OEMs), distributors, dealers and other customers worldwide. We have long-standing relationships with many of the leading manufacturers in the markets we serve, including PACCAR Inc, Navistar International Corporation,Daimler Trucks North America and Stellantis N.V. We serve our customers through a network of over 500 wholly-owned, joint venture and independent distributor locations and over 9,000Cummins certified dealer locations with service to approximately 190 countries and territories. Our reportable operating segments consist of Engine, Distribution, Components,Power Systems andNew Power . This reporting structure is organized according to the products and markets each segment serves. The Engine segment produces engines (15 liters and smaller) and associated parts for sale to customers in on-highway and various off-highway markets. Our engines are used in trucks of all sizes, buses and recreational vehicles, as well as in various industrial applications, including construction, agriculture, power generation systems and other off-highway applications. The Distribution segment includes wholly-owned and partially-owned distributorships engaged in wholesaling engines, generator sets and service parts, as well as performing service and repair activities on our products and maintaining relationships with various OEMs throughout the world. The Components segment sells filtration products, aftertreatment systems, turbochargers, electronics, fuel systems and automated transmissions. The Power Systems segment is an integrated power provider, which designs, manufactures and sells engines (16 liters and larger) for industrial applications (including mining, oil and gas, marine and rail), standby and prime power generator sets, alternators and other power components.The New Power segment designs, manufactures, sells and supports hydrogen production solutions as well as electrified power systems ranging from fully electric to hybrid along with innovative components and subsystems, including battery and fuel cell technologies. We continue to serve all our markets as they adopt electrification and alternative power technologies, meeting the needs of our OEM partners and end customers. Our financial performance depends, in large part, on varying conditions in the markets we serve, particularly the on-highway, construction and general industrial markets. Demand in these markets tends to fluctuate in response to overall economic conditions. Our sales may also be impacted by OEM inventory levels, production schedules and stoppages. Economic downturns in markets we serve generally result in reduced sales of our products and can result in price reductions in certain products and/or markets. As a worldwide business, our operations are also affected by currency, political, economic, public health crises, epidemics or pandemics and regulatory matters, including adoption and enforcement of environmental and emission standards, in the countries we serve. As part of our growth strategy, we invest in businesses in certain countries that carry high levels of these risks such asChina ,Brazil ,India ,Mexico ,Russia and countries in theMiddle East andAfrica . At the same time, our geographic diversity and broad product and service offerings have helped limit the impact from a drop in demand in any one industry or customer or the economy of any single country on our consolidated results. 29 -------------------------------------------------------------------------------- Table of Contents 2021 Quarter-to-Date and Year-to-Date Results A summary of our results is as follows: Three months ended Nine months ended October 3, September 27, October 3, September 27, In millions, except per share amounts 2021 2020 2021 2020 Net sales$ 5,968
534 501 1,737 1,288
Earnings per common share attributable to
Cummins Inc.
Basic $ 3.72 $ 3.39 $ 11.96 $ 8.69
Diluted 3.69 3.36 11.86 8.65
Our nine months ended results for 2020 were significantly impacted by COVID-19
and other related targeted shut-downs, which began in late March 2020 in
response to both customer plant closures and government actions to slow the
spread of the virus. Plants closed in China during the first quarter of 2020
were reopened in late March 2020 ; however, additional plants and distribution
locations around the world were shut down or working at reduced capacities early
in the second quarter of 2020. Although these actions did not have a material
effect on our results of operations in the first quarter, these actions
materially impacted our second quarter and continued to affect third quarter
results in 2020.
Worldwide revenues increased 17 percent in the three months ended October 3,
2021 , compared to the same period in 2020, due to higher demand in all operating
segments and most geographic regions due to an improved economic environment and
fewer effects from the COVID-19 pandemic. International demand (excludes the
U.S. and Canada ) improved 22 percent, with higher sales in all geographic
regions except China . The increase in international sales was principally due to
higher demand in industrial (especially mining) and power generation equipment,
all distribution product lines, off-highway markets (mainly construction markets
in Asia Pacific and Europe ) and all components businesses (primarily in Europe ,
India and Latin America , partially offset by China ). Favorable foreign currency
fluctuations impacted international sales by 3 percent (primarily the Chinese
renminbi, British pound and Australian dollar). Net sales in the U.S. and Canada
improved 13 percent, primarily due to increased demand in North American
on-highway markets, which positively impacted all components businesses, and
most distribution product lines. Our industry continues to be unfavorably
impacted by supply chain constraints leading to shortages across multiple
components categories and limiting our collective ability to meet end-user
demand. Our customers are also experiencing other supply chain issues slowing
production.
Worldwide revenues increased 30 percent in the nine months ended October 3,
2021 , compared to the same period in 2020, as we experienced higher demand in
all operating segments and all geographic regions due to an improved economic
environment and fewer effects from the COVID-19 pandemic. International demand
(excludes the U.S. and Canada ) improved by 36 percent, with higher sales in all
geographic regions. The increase in international sales was principally due to
higher demand in all components businesses (primarily emission solutions in
India , China and Western Europe ), industrial (especially mining) and power
generation equipment (mainly in India and China ), all distribution product lines
and off-highway markets (principally construction markets in China , Europe and
Asia Pacific ). Favorable foreign currency fluctuations impacted international
sales by 4 percent (primarily the Chinese renminbi, Euro, Australian dollar and
British pound). Net sales in the U.S. and Canada improved 26 percent, primarily
due to increased demand in North American on-highway markets, which positively
impacted all components businesses, and all distribution product lines. Our
industry continues to be unfavorably impacted by supply chain constraints
leading to shortages across multiple components categories and limiting our
collective ability to meet end-user demand. Our customers are also experiencing
other supply chain issues slowing production.
30--------------------------------------------------------------------------------
Table of Contents The following tables contain sales and EBITDA (defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests) by operating segment for the three and nine months endedOctober 3, 2021 andSeptember 27, 2020 . See Note 13, "OPERATING SEGMENTS," to the Condensed Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Condensed Consolidated Statements of Net Income.
© Edgar Online, source
