CUMMINS INC

Previous wording

On March 18, 2024, we completed the divestiture of our remaining 80.5 percent ownership of Atmus Filtration Technologies Inc. (Atmus) common stock through a tax-free split-off. The exchange resulted in a reduction of shares of our common stock outstanding by 5.6 million shares. See NOTE 14, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," to the Condensed Consolidated Financial Statements for additional information.

Current wording

On March 18, 2024, we completed the divestiture of our remaining 80.5 percent ownership of Atmus Filtration Technologies Inc. (Atmus) common stock through a tax-free split-off. The exchange resulted in a reduction of shares of our common stock outstanding by 5.6 million shares and a gain of approximately $1.3 billion. See NOTE 14, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," to the Condensed Consolidated Financial Statements for additional information.

Previous wording

2024 Second Quarter and Year-to-Date Results

Current wording

2024 Third Quarter and Year-to-Date Results

Previous wording

Worldwide revenues increased by 2 percent in the three months ended June 30, 2024, compared to the same period in 2023, due to increased power generation demand and higher demand in North American on-highway truck markets, partially offset by decreased sales due to the divestiture of Atmus. Net sales in the U.S. and Canada improved 4 percent primarily due to higher demand in on-highway truck markets and power generation markets, partially offset by lower sales due to the divestiture of Atmus. International demand (excludes the U.S. and Canada) declined 2 percent primarily due to lower sales in Europe and China, partially offset with higher sales in Asia Pacific and Latin America. The slight decrease in international sales was primarily due to decreased sales resulting from the divestiture of Atmus, mostly offset with higher demand across most Distribution product lines and increased demand for power generation products (especially in China). Unfavorable foreign currency fluctuations impacted international sales by 2 percent (primarily the Chinese renminbi and South African rand).

Current wording

Worldwide revenues were relatively flat in the three months ended September 30, 2024, compared to the same period in 2023, as increased power generation demand (primarily data center markets) was mostly offset by the divestiture of Atmus. International sales (excludes the U.S. and Canada) improved 2 percent primarily due to higher sales in India and Asia Pacific, partially offset by lower sales in Latin America. The increase in international sales was primarily due to higher demand for power generation products (especially in China and India), partially offset by the divestiture of Atmus. Net sales in the U.S. and Canada declined 1 percent primarily due to the divestiture of Atmus, partially offset by higher demand in power generation markets. Unfavorable foreign currency fluctuations impacted international sales by 2 percent (primarily the Brazilian real).

Previous wording

Worldwide revenues increased by 1 percent in the six months ended June 30, 2024, compared to the same period in 2023, due to increased power generation demand and higher demand in North American on-highway truck markets, partially offset by decreased sales due to the divestiture of Atmus as well as weaker demand in global construction markets. Net sales in the U.S. and Canada improved 2 percent primarily due to higher demand in on-highway truck markets and power generation markets, partially offset by lower sales due to the divestiture of Atmus. International demand (excludes the U.S. and Canada) declined 2 percent primarily due to lower sales in Europe and China, partially offset with higher sales Latin America. The decrease in international sales was primarily due to decreased sales due to the divestiture of Atmus and lower demand in construction markets (especially in China and Western

Current wording

Worldwide revenues increased by 1 percent in the nine months ended September 30, 2024, compared to the same period in 2023, due to increased power generation demand (mostly data center markets) and higher demand in North American medium-duty truck and bus markets, partially offset by the divestiture of Atmus, lower emission solutions demand (mainly in China) and weaker demand in global construction markets. Net sales in the U.S. and Canada improved 1 percent primarily due to higher demand in power generation markets and medium-duty truck and bus markets, partially offset by the divestiture of Atmus. International sales (excludes the U.S. and Canada) were relatively flat as lower sales in Europe and China were mostly offset with higher sales in Latin America and India. The decrease in international sales was primarily due to the divestiture of Atmus and lower emission solutions demand (mainly in China), largely offset by increased demand in power generation markets (mainly Europe, Asia Pacific, China and India). Unfavorable foreign currency fluctuations impacted international sales by 1 percent (primarily the Chinese renminbi, Brazilian real and Indian rupee).

Previous wording

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 six months ended June 30, 2024 and 2023. See NOTE 16, "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.

Current wording

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 ended September 30, 2024 and 2023. See NOTE 16, "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.

Previous wording

Net income attributable to Cummins Inc. was $726 million, or $5.26 per diluted share, on sales of $8.8 billion for the three months ended June 30, 2024, versus the comparable prior year period net income attributable to Cummins Inc. of $720 million, or $5.05 per diluted share, on sales of $8.6 billion. The increases in net income attributable to Cummins Inc. and earnings per diluted share were driven by lower expenses resulting from the divestiture of Atmus and improved gross margin, partially offset by lower equity, royalty and interest income from investees and unfavorable foreign currency fluctuations (primarily in the Chinese renminbi and Mexican peso). The increase in gross margin was primarily due to favorable pricing and higher volumes, partially offset by the divestiture of Atmus, higher compensation expenses and increased product coverage.

Current wording

Net income attributable to Cummins Inc. was $809 million, or$5.86 per diluted share, on sales of $8.5 billion for the three months ended September 30, 2024, versus the comparable prior year period net income attributable to Cummins Inc. of $656 million, or $4.59 per diluted share, on sales of $8.4 billion. The increases in net income attributable to Cummins Inc. and earnings per diluted share were driven by improved gross margin and favorable changes in corporate owned life insurance. The increase in gross margin was primarily due to favorable pricing and higher volumes, partially offset by the divestiture of Atmus and higher compensation expenses.

Previous wording

Net income attributable to Cummins Inc. was $2.7 billion, or $19.42 per diluted share, on sales of $17.2 billion for the six months ended June 30, 2024, versus the comparable prior year period net income attributable to Cummins Inc. of $1.5 billion, or $10.60 per diluted share, on sales of $17.1 billion. The increases in net income attributable to Cummins Inc. and earnings per diluted share were driven by the gain recognized on the divestiture of Atmus, partially offset by higher compensation and consulting expenses. The increase in gross margin was primarily due to favorable pricing and lower material costs, partially offset by higher compensation expenses, the divestiture of Atmus and increased product coverage. Diluted earnings per common share for the six months ended June 30, 2024, benefited $0.45 from fewer weighted-average shares outstanding due to treasury shares reacquired in the Atmus divestiture.

Current wording

Net income attributable to Cummins Inc. was $3.5 billion, or $25.31 per diluted share, on sales of $25.7 billion for the nine months ended September 30, 2024, versus the comparable prior year period net income attributable to Cummins Inc. of $2.2 billion, or $15.19 per diluted share, on sales of $25.5 billion. The increases in net income attributable to Cummins Inc. and earnings per diluted share were driven by the gain recognized on the divestiture of Atmus. Diluted earnings per common share for the nine months ended September 30, 2024, benefited $0.71 from fewer weighted-average shares outstanding due to treasury shares reacquired in the Atmus divestiture.

Previous wording

We used $575 million in cash from operations for the six months ended June 30, 2024, compared to generating $978 million for the comparable period in 2023. See the section titled "Cash Flows" in the "LIQUIDITY AND CAPITAL RESOURCES" section for a discussion of items impacting cash flows.

Current wording

We generated $65 million of cash from operations for the nine months ended September 30, 2024, compared to generating $2.5 billion for the comparable period in 2023. See the section titled "Cash Flows" in the "LIQUIDITY AND CAPITAL RESOURCES" section for a discussion of items impacting cash flows.

Previous wording

Our debt to capital ratio (total capital defined as debt plus equity) at June 30, 2024, was 41.5 percent, compared to 40.3 percent at December 31, 2023. The increase was primarily due to higher debt balances at June 30, 2024. At June 30, 2024, we had $2.2 billion in cash and marketable securities on hand and access to our $4.0 billion credit facilities (net of $1.6 billion of commercial paper outstanding), if necessary, to meet working capital, investment, acquisition and funding needs.

Current wording

Our debt to capital ratio (total capital defined as debt plus equity) at September 30, 2024, was 40.1 percent, compared to 40.3 percent at December 31, 2023. The decrease was primarily due to the increased equity balance from strong earnings since December 31, 2023, partially offset by higher debt balances at September 30, 2024. At September 30, 2024, we had $2.3 billion in cash and marketable securities on hand and access to our $4.0 billion credit facilities (net of $1.6 billion of commercial paper outstanding), if necessary, to meet working capital, investment, acquisition and funding needs.

Previous wording

In July 2024, we settled the remaining $100 million of interest rate swaps and repaid the outstanding $100 million of our related term loan due in 2025.

Current wording

In July 2024, we settled the remaining $100 million of interest rate swaps and repaid the outstanding $100 million of our related term loan due in 2025. See NOTE 9, “DEBT,” and NOTE 13, "DERIVATIVES," to our Condensed Consolidated Financial Statementsfor additional information.

Previous wording

In July 2024, the Board authorized an increase to our quarterly dividend of approximately 8 percent from $1.68 per share to $1.82 per share.

Current wording

In July 2024, the Board of Directors (Board) authorized an increase to our quarterly dividend of approximately 8 percent from $1.68 per share to $1.82 per share.

Previous wording

In May 2024, we entered into an accounts receivable factoring agreement with Wells Fargo Bank, N.A., to sell certain accounts receivable up to $500 million. See NOTE 1, "NATURE OF OPERATIONS AND BASIS OF PRESENTATION," to our Condensed Consolidated Financial Statementsfor additional information.

Current wording

In May 2024, we entered into an accounts receivable sales agreement with Wells Fargo Bank, N.A., to sell certain accounts receivable up to $500 million. See NOTE 1, "NATURE OF OPERATIONS AND BASIS OF PRESENTATION," to our Condensed Consolidated Financial Statementsfor additional information.

Previous wording

In the first six months of 2024, the investment gain on our U.S. pension trusts was 2.0 percent, while our U.K. pension trusts' loss was 4.3 percent. We anticipate making additional defined benefit pension contributions during the remainder of 2024 of $22 million for our U.S. and U.K. qualified and non-qualified pension plans. We expect our 2024 annual net periodic pension cost to approximate $34 million.

Current wording

In the first nine months of 2024, the investment gain on our U.S. pension trusts was 6.3 percent, while our U.K. pension trusts' loss was 3.3 percent. We anticipate making additional defined benefit pension contributions during the remainder of 2024 of $14 million for our U.S. and U.K. qualified and non-qualified pension plans. We expect our 2024 annual net periodic pension cost to approximate $34 million.

Previous wording

Net sales for the three months ended June 30, 2024, increased by $158 million versus the comparable period in 2023. The primary drivers were as follows:

Current wording

Net sales for the three months ended September 30, 2024, increased by $25 million versus the comparable period in 2023. The primary drivers were as follows:

Previous wording

•Distribution segment sales increased 9 percent principally due to higher demand in power generation markets, especially in North America and Europe.

Current wording

•Distribution segment sales increased 16 percent principally due to higher demand in power generation markets, especially in North America and Europe.

Previous wording

These increases were partially offset by a Components segment sales decrease of 10 percent mainly due to the divestiture of Atmus on March 18, 2024.

Current wording

•Components segment sales decreased 16 percent mainly due to the divestiture of Atmus on March 18, 2024.

Previous wording

Net sales for the six months ended June 30, 2024, increased $108 million versus the comparable period in 2023. The primary drivers were as follows:

Current wording

Net sales for the nine months ended September 30, 2024, increased $133 million versus the comparable period in 2023. The primary drivers were as follows:

Previous wording

•Engine segment sales increased 2 percent largely due to stronger demand in North American medium-duty truck markets, partially offset by lower demand in global construction markets.

Current wording

•Engine segment sales increased 1 percent largely due to stronger demand in North American medium-duty truck markets, partially offset by lower demand in global construction markets and North American heavy-duty and light-duty automotive truck markets.

Previous wording

These increases were partially offset by a Components segment sales decrease of 13 percent mainly due to the divestiture of Atmus on March 18, 2024.

Current wording

These increases were partially offset by decreased Components segment sales of 12 percent mainly due to the divestiture of Atmus on March 18, 2024.

Previous wording

Sales to international markets (excluding the U.S. and Canada), based on location of customers, for the three and six months ended June 30, 2024, were 37 percent and 38 percent of total net sales compared with 39 percent and 39 percent of total net sales for the comparable periods in 2023. A more detailed discussion of sales by segment is presented in the “OPERATING SEGMENT RESULTS” section.

Current wording

Sales to international markets (excludes the U.S. and Canada), based on location of customers, for the three and nine months ended September 30, 2024, were 39 percent and 38 percent of total net sales compared with 38 percent and 39 percent of total net sales for the comparable periods in 2023. A more detailed discussion of sales by segment is presented in the “OPERATING SEGMENT RESULTS” section.

Previous wording

Gross margin increased $45 million for the three months ended June 30, 2024, and remained flat as a percentage of net sales versus the comparable period in 2023. The increase in gross margin was primarily due to favorable pricing and higher volumes, partially offset by the divestiture of Atmus, higher compensation expenses and increased product coverage. Compensation and related expenses included salaries, fringe benefits and variable compensation.

Current wording

Gross margin increased $100 million for the three months ended September 30, 2024, and increased 1.1 points as a percentage of net sales versus the comparable period in 2023. The increases in gross margin and gross margin as a percentage of sales were primarily due to favorable pricing and higher volumes, partially offset by the divestiture of Atmus and higher compensation expenses. Compensation and related expenses included salaries, fringe benefits and variable compensation.

Previous wording

Gross margin increased $57 million for the six months ended June 30, 2024, and increased 0.2 points as a percentage of sales versus the comparable period in 2023. The increase in gross margin and gross margin as a percentage of sales was primarily due to favorable pricing and lower material costs, partially offset by higher compensation expenses, the divestiture of Atmus and increased product coverage.

Current wording

Gross margin increased $157 million for the nine months ended September 30, 2024, and increased 0.5 points as a percentage of sales versus the comparable period in 2023. The increases in gross margin and gross margin as a percentage of sales were primarily due to favorable pricing, lower material costs and higher volumes, partially offset by higher compensation expenses, the divestiture of Atmus and increased product coverage.

Previous wording

The provision for base warranties issued as a percent of sales for the three and six months ended June 30, 2024, was 1.9 percent and 1.9 percent, respectively, compared to 1.8 percent and 1.8 percent for the comparable periods in 2023.

Current wording

The provision for base warranties issued as a percent of sales for the three and nine months ended September 30, 2024, was 1.9 percent and 1.9 percent, respectively, compared to 1.9 percent and 1.8 percent for the comparable periods in 2023.

Previous wording

Selling, general and administrative expenses increased $41 million for the six months ended June 30, 2024, versus the comparable period in 2023, primarily due to higher consulting and compensation expenses. Compensation and related expenses included salaries, fringe benefits and variable compensation. Overall, selling, general and administrative expenses as a percentage of sales increased to 9.7 percent in the six months ended June 30, 2024, from 9.5 percent in the comparable period in 2023.

Current wording

Selling, general and administrative expenses decreased $24 million for the three months ended September 30, 2024, versus the comparable period in 2023, primarily due to lower consulting expenses. Selling, general and administrative expenses increased $17 million for the nine months ended September 30, 2024, versus the comparable period in 2023, primarily due to higher compensation expenses. Compensation and related expenses included salaries, fringe benefits and variable compensation.

Previous wording

Equity, royalty and interest income from investees decreased $30 million and $26 million for the three and six months ended June 30, 2024, versus the comparable periods in 2023, primarily due to lower royalty and interest income from investees, losses at NPROXX and lower earnings from Komatsu Cummins Chile, Ltda., partially offset by higher earnings at Chongqing Cummins Engine Co., Ltd.

Current wording

Equity, royalty and interest income from investees decreased $19 million for the three months ended September 30, 2024, versus the comparable period in 2023, primarily due to lower royalty and interest income from investees and start-up costs at Amplify Cell Technologies LLC, partially offset by higher earnings at Chongqing Cummins Engine Co., Ltd. See NOTE 4, "EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES," to the Condensed Consolidated Financial Statements for additional information.

Previous wording

Other operating (expense) income, net was as follows:

Current wording

Other operating expense, net was as follows:

Previous wording

Interest expense was $109 million and $198 million for the three and six months ended June 30, 2024, versus $99 million and $186 million for the comparable periods in 2023. Interest expense increased $10 million and $12 million, respectively, primarily due to higher weighted-average interest rates, partially offset by lower weighted-average debt balances.

Current wording

Interest expense was $83 million and $281 million for the three and nine months ended September 30, 2024, versus $97 million and $283 million for the comparable periods in 2023. Interest expense decreased $14 million for the three months ended September 30, 2024, primarily due to lower weighted-average interest rates on borrowings. Interest expense decreased $2 million for the nine months ended September 30, 2024, primarily due to lower average debt balances, partially offset by higher weighted-average interest rates.

Previous wording

Our effective tax rate for 2024 is expected to approximate 24.0 percent, excluding any discrete items that may arise.

Current wording

Our effective tax rate for 2024, excluding discrete items, is expected to approximate 23.5 percent.

Previous wording

Our effective tax rates for the three and six months ended June 30, 2024, were 23.0 percent and 13.1 percent, respectively. Our effective tax rates for the three and six months ended June 30, 2023, were 22.3 percent and 22.0 percent, respectively.

Current wording

Our effective tax rates for the three and nine months ended September 30, 2024, were 19.2 percent and 14.6 percent, respectively. Our effective tax rates for the three and nine months ended September 30, 2023, were 21.4 percent and 21.8 percent, respectively.

Previous wording

The six months ended June 30, 2024, contained favorable discrete tax items primarily due to the $1.3 billion non-taxable gain on the Atmus split-off. Other discrete tax items were $30 million favorable primarily due to adjustments related to audit settlements and share-based compensation benefits.

Current wording

The nine months ended September 30, 2024, contained net favorable discrete tax items primarily due to the $1.3 billion non-taxable gain on the Atmus split-off. Other discrete tax items were net favorable by $66 million, primarily due to $21 million of favorable adjustments related to audit settlements, $20 million of favorable adjustments from tax return amendments, $18 million of favorable return to provision adjustments and $17 million of favorable share-based compensation tax benefits, partially offset by $7 million of unfavorable adjustments for uncertain tax positions and $3 million of other unfavorable adjustments.

Previous wording

Noncontrolling interests eliminate the income or loss attributable to non-Cummins ownership interests in our consolidated entities. Noncontrolling interests in income of consolidated subsidiaries for the three and six months ended June 30, 2024, increased $9 million and $28 million versus the comparable periods in 2023. The increase for the three months ended June 30, 2024, was primarily due to the absence of losses at Hydrogenics Corporation resulting from the June 2023 acquisition, partially offset by lower earnings at Eaton Cummins Joint Venture. The increase for the six months ended June 30, 2024, was primarily due to the absence of losses at Hydrogenics Corporation and higher earnings at Cummins India Limited, partially offset by lower earnings at Eaton Cummins Joint Venture.

Current wording

Noncontrolling interests eliminate the income or loss attributable to non-Cummins ownership interests in our consolidated entities. Noncontrolling interests in income of consolidated subsidiaries for the three and nine months ended September 30, 2024, was flat and increased $28 million versus the comparable periods in 2023. For the three months ended September 30, 2024, higher earnings at Cummins India Limited were offset by the divestiture of Atmus. The increase for the nine months ended September 30, 2024, was primarily due to higher earnings at Cummins India Limited and the absence of losses at Hydrogenics Corporation resulting from the June 2023 acquisition, partially offset by lower earnings at Eaton Cummins Joint Venture and the divestiture of Atmus.

Previous wording

The foreign currency translation adjustment was a net loss of $83 million and $143 million, for the three and six months ended June 30, 2024, respectively, compared to a net loss of $110 million and $28 million, for the three and six months ended June 30, 2023, respectively, driven by the following:

Current wording

The foreign currency translation adjustment was a net gain of $165 million and $22 million, for the three and nine months ended September 30, 2024, respectively, compared to a net loss of $163 million and $191 million, for the three and nine months ended September 30, 2023, respectively, driven by the following:

Previous wording

On March 18, 2024, we completed the divestiture of our remaining 80.5 percent ownership of Atmus common stock through a tax-free split-off. See NOTE 14, "ATMUS IPO AND DIVESTITURE," to the Condensed Consolidated Financial Statements for additional information.

Current wording

On March 18, 2024, we completed the divestiture of our remaining 80.5 percent ownership of Atmus common stock through a tax-free split-off. See NOTE 14, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," to the Condensed Consolidated Financial Statements for additional information.

Previous wording

Beginning in the second quarter of 2024, we realigned certain businesses within our Components segment to be consistent with how our segment manager now monitors performance. We reorganized the businesses to combine the engine components and software and electronics businesses into the newly formed components and software business. In addition, we rebranded our axles and brakes business as drivetrain and braking systems. We began reporting results for these changes within our Components segment effective April 1, 2024, and reflected these changes in the historical periods presented. The change had no impact on our consolidated results.

Current wording

As previous announced, beginning in the second quarter of 2024, we realigned certain businesses within our Components segment to be consistent with how our segment manager now monitors performance. We reorganized the businesses to combine the engine components and software and electronics businesses into the newly formed components and software business. In addition, we rebranded our axles and brakes business as drivetrain and braking systems. We began reporting results for these changes within our Components segment effective April 1, 2024, and reflected these changes in the historical periods presented. The change had no impact on our consolidated results.

Previous wording

•Sales decreased $417 million due to the Atmus divestiture on March 18, 2024.

Current wording

•Sales decreased $396 million due to the Atmus divestiture on March 18, 2024.

Previous wording

•Sales decreased $481 million due to the Atmus divestiture on March 18, 2024.

Current wording

•Sales decreased $877 million due to the Atmus divestiture on March 18, 2024.

Previous wording

•Emission solutions sales decreased $108 million principally due to lower demand in China and North America, partially offset by higher demand in Mexico.

Current wording

•Emission solutions sales decreased $137 million principally due to lower demand in China.

Previous wording

Components segment EBITDA for the three and six months ended June 30, 2024, decreased $80 million and $114 million, respectively, versus the comparable periods in 2023, mainly due to the divestiture of Atmus.

Current wording

Components segment EBITDA for the three months ended September 30, 2024, decreased $90 million versus the comparable period in 2023, mainly due to the divestiture of Atmus and lower volumes.

Previous wording

Engine segment sales for the six months ended June 30, 2024, increased $105 million versus the comparable period in 2023. The primary driver by market was an increase in medium-duty truck and bus sales of $224 million principally due to higher truck demand, especially in North America with shipments up 16 percent, and favorable pricing. The increase was partially offset by decreased off-highway sales of $146 million mainly due to lower demand in global construction markets, especially in China and Western Europe.

Current wording

Engine segment sales for the nine months ended September 30, 2024, increased $87 million versus the comparable period in 2023. The primary driver by market was an increase in medium-duty truck and bus sales of $366 million principally due to higher medium-duty truck demand, especially in North America with shipments up 15 percent, and favorable pricing.

Previous wording

Engine segment EBITDA for the three months ended June 30, 2024, increased $20 million versus the comparable period in 2023, primarily due to favorable pricing, partially offset by higher compensation expenses, lower equity, royalty and interest income from investees and unfavorable mix.

Current wording

Engine segment EBITDA for the three months ended September 30, 2024, increased $32 million versus the comparable period in 2023, primarily due to favorable pricing, partially offset by lower volumes, increased product coverage costs, higher compensation expenses and lower equity, royalty and interest income from investees.