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;
•changes in international, national and regional trade laws, regulations and policies;
•any adverse effects of the
•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
•any adverse effects of the conflict between
•failure to successfully execute or integrate the acquisition of Meritor, Inc.;
•failure to realize all of the anticipated benefits from our announced acquisition of Meritor, Inc.;
•raw material, transportation and labor price fluctuations and supply shortages;
•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, bankruptcy or change in control;
PRODUCTS AND TECHNOLOGY
•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; 25
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GENERAL
•failure to complete, adverse results from or failure to realize the expected benefits of the separation of our filtration business;
•our plan to reposition our portfolio of product offerings through exploration of strategic acquisitions and divestitures and related uncertainties of entering such transactions;
•challenging markets for talent and ability to attract, develop and retain key personnel;
•climate change and global warming;
•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;
•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 risk factors described in Part II, Item 1A in this quarterly report and our 202 1 Form 10-K, Part I, Item 1A , both 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.
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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 2021 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,
Our reportable operating segments consist of Engine, Distribution, Components,
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, stoppages and supply chain challenges. 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 geopolitical risks (such
as the conflict between
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On
March 31, In millions 2022 Inventory write-downs$ 59 Accounts receivable reserves 43 Impairment and other joint venture costs 31 Other 25 Total$ 158 Supply Chain Disruptions
We continue to experience supply chain disruptions and related financial impacts reflected as increased cost of sales. 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 and slowing production. Should the supply chain issues continue for an extended period of time or worsen, the impact on our production and supply chain could have a material adverse effect on our results of operations, financial condition and cash flows. Our Board of Directors (the Board) continues to monitor and evaluate all of these factors and the related impacts on our business and operations, and we are diligently working to minimize the supply chain impacts to our business and to our customers.
First Quarter 2022 Results
A summary of our results is as follows:
Three months ended March 31, April 4, In millions, except per share amounts 2022 2021 Net sales$ 6,385 $ 6,092 Net income attributable toCummins Inc. 418 603
Earnings per common share attributable to
Basic$ 2.94 $ 4.10 Diluted 2.92 4.07
Worldwide revenues increased 5 percent in the three months ended
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The following table contains 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 months ended
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