Cummins Reports Second Quarter 2020 Results
Second quarter revenues of $3.9 billion; GAAP1 Net Income of $276 million
Second quarter EBITDA of 14.3 percent; Diluted EPS of $1.86
The company ended the quarter with cash, cash equivalents and marketable securities of $2.1 billion and committed borrowing capacity of $3.5 billion
The company’s long-term credit ratings remain unchanged at A+ from Standard & Poor’s and A2 from Moody’s with stable outlooks
Cummins Inc. (NYSE: CMI) today reported results for the second quarter of 2020.
Second quarter revenues of $3.9 billion decreased 38 percent from the same quarter in 2019. COVID-19 related customer shutdowns and weak economic activity led to lower demand in most end markets and regions except China. Sales in North America declined by 48 percent while international revenues decreased 22 percent. Currency negatively impacted revenues by 2 percent primarily due to a stronger US dollar.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter were $549 million (14.3 percent of sales), compared to $1.1 billion (17.0 percent of sales) a year ago.
Net income attributable to Cummins in the second quarter was $276 million ($1.86 per diluted share) compared to $675 million ($4.27 per diluted share) in 2019. The tax rate in the second quarter was 25.7 percent and was negatively impacted by $14 million ($0.09 per diluted share) of discrete tax items.
2020 Outlook:
The company currently expects third quarter revenues to improve from second quarter levels, however, there remains significant uncertainty around how COVID-19 will impact end market demand as well as customer and supplier operations. Due to this uncertainty the company is not providing full year revenue or profitability guidance for 2020.
Chairman and CEO Tom Linebarger
“I want to thank our employees all over the globe for their dedication to our company and to our customers. They continue to work safely and effectively through an incredibly challenging period, with unprecedented disruptions to global demand and supply, to their work processes, and to their daily lives. In the face of the most severe decline in quarterly sales in our history, we delivered solid profitability while meeting commitments to our customers who provide products critical to the functioning of the global economy.”
“Our people demonstrated remarkable flexibility as did our operations and supply chain. A pronounced example of our organization’s agility in this challenging period was our ramp up in China, where many of our facilities went from complete shut down in February and March to producing record volumes in the second quarter.”
“While customer demand did improve in some regions as the quarter progressed, significant uncertainty around the pace of recovery in our markets remains, requiring a continued strong focus on managing expenses and cash flow. Our strong financial position will enable us to continue to prioritize our investments in technology and new products including advanced diesel engines, battery electric powertrains, fuel cells, and hydrogen electrolyzers that will help drive future profitable growth."
Second Quarter 2020 Highlights:
- Announced an external-facing approach to complement the company’s internal diversity and inclusion activities, including the creation of the Cummins Against Racial Injustice Management Review Group to focus on police reform, criminal justice, social justice, and economic empowerment of Black people in the United States.
- Manufactured more than 14 tons of its filtration media which has been used to produce more than eight million N95 and surgical masks globally.
- Cummins announced a joint venture with NPROXX, a leader in hydrogen storage and transportation, for hydrogen storage tanks. The transaction is expected to close by the end of the first quarter 2021.
- Published the Cummins Work Playbook, a one-stop resource highlighting our health and wellness protocols that ensure the safety of our employees, customers, suppliers and communities during the global COVID-19 pandemic.
- Paid a $1.311 dividend to shareholders. Cummins has paid a dividend for over 70 years.
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; evolving environmental and climate change legislation and regulatory initiatives; changes in international, national and regional trade laws, regulations and policies; changes in taxation; global legal and ethical compliance costs and risks; 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. (Meritor); 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, 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 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 separation; climate change, global warming, more stringent climate change regulations, accords, mitigation efforts, greenhouse gas regulations or other legislation designed to address climate change; 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; 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 2023 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.
Cummins Inc., a global power solutions leader, comprises five business segments – Components, Engine, Distribution, Power Systems and Accelera by Cummins – supported by our global manufacturing and extensive service and support network, skilled workforce and vast technological expertise. Cummins is committed to its Destination Zero strategy, which is grounded in the company’s commitment to sustainability and helping its customers successfully navigate the energy transition with its broad portfolio of products. The products range from advanced diesel, natural gas, electric and hybrid powertrains and powertrain-related components including filtration, aftertreatment, turbochargers, fuel systems, valvetrain technologies, controls systems, air handling systems, automated transmissions, axles, drivelines, brakes, suspension systems, electric power generation systems, batteries, electrified power systems, hydrogen production technologies and fuel cell products. Headquartered in Columbus, Indiana (U.S.), since its founding in 1919, Cummins employs approximately 75,500 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 $735 million on sales of $34.1 billion in 2023.
