Cummins · Earnings release

Cummins Reports Strong Fourth Quarter and Full Year 2024 Results, Incurs Charges Associated with Reorganization of Accelera

•Fourth quarter revenues of $8.4 billion; GAAP1 Net Income of $418 million, or 4.9% of sales

•EBITDA in the fourth quarter was 12.1% of sales; Diluted EPS of $3.02

•Fourth quarter results include $312 million, or $2.14 per diluted share, of Accelera strategic reorganization actions, of which $305 million were non-cash charges

•Full year 2024 revenues of $34.1 billion; GAAP1 Net Income of $3.9 billion, or 11.6% of sales

•G1Full year 2025 revenues expected to range from down 2% to up 3%; G2EBITDA expected to range between 16.2% and 17.2% of sales

COLUMBUS, IND. - Cummins Inc. (NYSE: CMI) today reported fourth quarter and full year 2024 results.

“Cummins delivered strong operational results in the fourth quarter and achieved record full year revenues, net income, EBITDA and EPS, despite a decline in heavy duty truck demand in North America,” said Jennifer Rumsey, Chair and CEO of Cummins. “In the fourth quarter, we recorded charges related to the reorganization of our Accelera by Cummins segment. The charges were the result of a strategic review to streamline operations and focus investments, as the adoption of certain zero-emissions solutions has slowed in some regions around the world.”

“2024 marked a transformative year for Cummins as we made significant progress in advancing our Destination Zero strategy and delivered record results. I am tremendously proud of our employees for delivering innovative technologies for our customers, strengthening our position in key markets and achieving our financial performance targets,” concluded Rumsey.

Fourth quarter 2024 revenues of $8.4 billion decreased 1% from the same quarter in 2023. Sales in North America were flat while international revenues decreased 3%.

Net income attributable to Cummins in the fourth quarter was $418 million, or $3.02 per diluted share, compared to a net loss of $1.4 billion, or $(10.01) per diluted share, in 2023. The current quarter results include Accelera reorganization actions of $312 million, or $2.14 per diluted share, which were primarily non-cash charges. The fourth quarter of 2023 included the recording of a charge related to the Settlement Agreements of $2.0 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 tax rate in the fourth quarter was

1

32.8% due primarily to non-deductible costs related to the Accelera reorganization actions.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the fourth quarter were $1.0 billion, or 12.1% of sales, compared to a loss of $878 million, or negative 10.3% of sales, a year ago. EBITDA for the fourth quarter of 2024 and the fourth quarter of 2023 included the costs noted above.

Full year 2024 revenues of $34.1 billion were flat to 2023. Sales in North America increased 1% and international revenues decreased 1% compared to 2023. 2023 included a full year of Atmus Filtration Technologies revenues, whereas 2024 included Atmus until final separation on March 18.

Net income for the full year 2024 was $3.9 billion, or $28.37 per diluted share, compared to $735 million, or $5.15 per diluted share, in 2023. 2024 results included the gain related to the separation of Atmus, net of transaction costs and other expenses, of $1.3 billion, or $9.28 per diluted share; charges related to Accelera reorganization actions of $312 million, or $2.12 per diluted share; and first quarter restructuring expenses of $29 million, or $0.16 per diluted share. Full year 2023 results included costs related to the Settlement Agreements of $2.0 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. The tax rate in 2024 was 17.0%, primarily due to the non-taxable gain on the separation of Atmus partially offset by non-deductible costs related to the Accelera reorganization actions.

EBITDA in 2024 was $6.3 billion, or 18.6% of sales, compared to $3.0 billion, or 8.9% of sales, a year ago. EBITDA for 2024 and 2023 included the gains and costs noted above.

Based on its current forecast, Cummins projects full year 2025 revenue to be in the range of down 2% to up 3%, and EBITDA to be in the range of 16.2% and 17.2% of sales.

Cummins plans to continue generating strong operating cash flow and returns for shareholders and is committed to our long-term strategic goal of returning 50% of operating cash flow back to shareholders.

“In 2025, we anticipate that demand will be slightly weaker in the North America on-highway truck markets, particularly in the first half of the year, but offset by strength in other key markets. Despite a relatively flat revenue forecast and relative weakness in the key North America truck markets, we expect to improve profitability and cash flow. Cummins remains well-positioned to deliver strong financial performance, invest in future growth and return cash to shareholders,” said Rumsey.

•Cummins increased its common stock cash dividend for the 15th straight year and returned a total of $969 million to shareholders through dividends.

•Cummins finalized the complete separation of Atmus Filtration Technologies Inc. through a share exchange offer which reduced Cummins’ shares outstanding by approximately 5.6 million shares.

•Cummins introduced the Cummins HELM™ engine platforms. Applied across Cummins’ legendary B, X10 and X15-series engine portfolios, the HELM platforms provide customers

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with the option to choose the fuel type – either advanced diesel or alternate fuels like natural gas and hydrogen – that best suits their business needs and offers the power customers expect – while also reducing emissions. In September, Cummins began full production of the X15N™ natural gas engine at the Jamestown Engine Plant in New York, which celebrated its 50th anniversary in 2024.

•Cummins and Isuzu announced the launch of a new 6.7-liter engine designed for use in Isuzu’s new medium-duty truck lineup available in Japan and other global markets. Cummins also announced plans to launch a battery electric powertrain for Isuzu’s F-series in North America. Availability of the medium-duty truck is expected in 2026 and will include Accelera’s next generation lithium iron phosphate (LFP) battery technology.

•Accelera™ by Cummins, Daimler Trucks & Buses, PACCAR and EVE Energy completed the formation of their joint venture, Amplify Cell Technologies, to localize battery cell production and the battery supply chain in the United States. This strategic collaboration will advance zero-emissions technology for electric commercial vehicles and industrial applications. Amplify began construction of a 21-gigawatt hour (GWh) factory in Marshall County, Miss., with potential for further expansion as demand grows. The factory is expected to create more than 2,000 U.S. manufacturing jobs and is targeting the start of production in 2027.

•Cummins Power Generation introduced four new generator sets to the award-winning Centum™ Series, two each powered by Cummins’ QSK50 and QSK78 engines. In response to high market demand, these new models have been engineered specifically for the most critical applications such as data centers, healthcare facilities and wastewater treatment plants. These products build on decades of experience meeting our customers' needs and deliver a step-change improvement in power density, assured reliability, sustainability and low emissions.

•Cummins received several prestigious honors recognizing our focus on our people and our communities. Of note, we were named industry leader in the Commercial Vehicle and Machinery category for America’s Most JUST Companies list and a 2024 Handshake Early Talent Award winner for our role in shaping the workforce of the future. For the third consecutive year, Morgan Stanley Capital International (MSCI) awarded Cummins a rating of AAA – the highest sustainability rating in the industry. Additionally, we were named a Veteran Friendly Employer by U.S. Veterans Magazine, a Top Company for Women to Work in Transportation, and ranked in the top 100 on Glassdoor’s Best Places to work in 2024.

Fourth quarter 2024 detail (all comparisons to same period in 2023):

Engine Segment

•Sales - $2.7 billion, down 2%

•Segment EBITDA - $367 million, or 13.5% of sales, compared to $353 million, or 12.7% of sales, which included $12 million of costs related to the 2023 voluntary retirement and separation programs.

•Revenues decreased 2% in North America and 3% in international markets due to softened demand in global heavy-duty truck markets and lower North America pickup units.

3

Components Segment

•Sales - $2.6 billion, down 17%

•Segment EBITDA - $361 million, or 13.7% of sales compared to $406 million, or 12.7% of sales, which included $28 million of costs related to the separation of Atmus and $9 million of costs related to the 2023 voluntary retirement and separation programs.

•Revenues in North America decreased by 12% and international sales decreased by 24% primarily due to the separation of Atmus and lower demand in heavy-duty truck markets.

Distribution Segment

•Sales - $3.1 billion, up 13%

•Segment EBITDA - $400 million, or 13.0% of sales, compared to $269 million, or 9.9% of sales

•Revenues in North America increased 10% and international sales increased by 19% driven by increased demand for power generation products, particularly for data center applications, and pricing actions.

Power Systems Segment

•Sales - $1.7 billion, up 22%

•Segment EBITDA - $314 million, or 18.0% of sales, compared to $182 million, or 12.7% of sales

•Revenues in North America increased 42% and international sales increased by 12% driven primarily by increased power generation demand, particularly for the data center market.

Accelera Segment

•Segment EBITDA loss - $431 million, which includes $312 million of costs related to strategic reorganization actions.

•Revenues increased due to higher eMobility demand. Beyond the expenses associated with the strategic reorganization actions, 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.

1 Generally Accepted Accounting Principles

About Cummins Inc.

Cummins Inc., a global power solutions leader, is comprised of five business segments – Engine, Components, 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, 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

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thousands of dealer locations worldwide and earned about $735 million on sales of $34.1 billion in 2023. See how Cummins is powering a world that's always on by accessing news releases and more information at https://www.cummins.com/.

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 the Settlement Agreements to resolve regulatory proceedings regarding our emissions certification and compliance process for certain engines primarily used in pick-up truck applications in the U.S. 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 Settlement Agreements, 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.; 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; 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 https://www.sec.gov or at https://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. EDT. This teleconference will be webcast and available on the Investor Relations section of the Cummins website at https://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.

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CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited) (a)

Three months ended

In millions, except per share amounts

NET SALES

$

$

Cost of sales

GROSS MARGIN

OPERATING EXPENSES AND INCOME

Selling, general and administrative expenses

Research, development and engineering expenses

Equity, royalty and interest income from investees

Other operating expense, net

OPERATING INCOME (LOSS)

Interest expense

Other income, net

INCOME (LOSS) BEFORE INCOME TAXES

Income tax expense

CONSOLIDATED NET INCOME (LOSS)

Less: Net income attributable to noncontrolling interests

NET INCOME (LOSS) ATTRIBUTABLE TO CUMMINS INC.

$

$

EARNINGS (LOSS) PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.

Basic

$

$

Diluted

$

$

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING

Basic

Diluted

(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.

6

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited) (a)

Years ended December 31,

In millions, except per share amounts

NET SALES

$

$

Cost of sales

GROSS MARGIN

OPERATING EXPENSES AND INCOME

Selling, general and administrative expenses

Research, development and engineering expenses

Equity, royalty and interest income from investees

Other operating expense, net

OPERATING INCOME

Interest expense

Other income, net

INCOME BEFORE INCOME TAXES

Income tax expense

CONSOLIDATED NET INCOME

Less: Net income attributable to noncontrolling interests

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

$

$

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.

Basic

$

$

Diluted

$

$

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING

Basic

Diluted

(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.

7

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (a)

In millions, except par value

ASSETS

Current assets

Cash and cash equivalents

$

$

Marketable securities

Total cash, cash equivalents and marketable securities

Accounts and notes receivable, net

Inventories

Prepaid expenses and other current assets

Total current assets

Long-term assets

Property, plant and equipment, net

Investments and advances related to equity method investees

Goodwill

Other intangible assets, net

Pension assets

Other assets

Total assets

$

$

LIABILITIES

Current liabilities

Accounts payable (principally trade)

$

$

Loans payable

Commercial paper

Current maturities of long-term debt

Accrued compensation, benefits and retirement costs

Current portion of accrued product warranty

Current portion of deferred revenue

Other accrued expenses

Total current liabilities

Long-term liabilities

Long-term debt

Deferred revenue

Other liabilities

Total liabilities

$

$

EQUITY

Cummins Inc. shareholders’ equity

$

$

Retained earnings

Treasury stock, at cost, 85.1 and 80.7 shares

Accumulated other comprehensive loss

Total Cummins Inc. shareholders’ equity

Noncontrolling interests

Total equity

$

$

Total liabilities and equity

$

$

(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.

8

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (a)

Three months ended

In millions

NET CASH PROVIDED BY OPERATING ACTIVITIES

$

$

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures

Investments in and net advances to equity investees

Acquisition of businesses, net of cash acquired

—

Investments in marketable securities—acquisitions

Investments in marketable securities—liquidations

Other, net

(1)

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from borrowings

Net payments of commercial paper

Payments on borrowings and finance lease obligations

Dividend payments on common stock

Payments for purchase of redeemable noncontrolling interests

—

Other, net

6

Net cash used in financing activities

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

(1)

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

$

(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.

9

Years ended December 31,

In millions

NET CASH PROVIDED BY OPERATING ACTIVITIES

$

$

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures

Investments in and net advances (to) from equity investees

Acquisition of businesses, net of cash acquired

Investments in marketable securities—acquisitions

Investments in marketable securities—liquidations

Cash associated with Atmus divestiture

—

Other, net

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from borrowings

Net payments of commercial paper

Payments on borrowings and finance lease obligations

Dividend payments on common stock

Payments for purchase of redeemable noncontrolling interests

Other, net

Net cash used in financing activities

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

$

(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.

CUMMINS INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

In millions

Engine

Components

Distribution

Power Systems

Accelera

Total Segments

Intersegment Eliminations (1)

Total

External sales

$

$

$

$

$

$

$

—

$

Intersegment sales

8

—

Total sales

Research, development and engineering expenses

(2)

—

Equity, royalty and interest income (loss) from investees

(2)

—

Interest income

1

4

8

—

1

—

EBITDA (3)

(2)

9

Depreciation and amortization (4)

—

EBITDA as a percentage of segment sales

%

%

%

%

NM

%

%

External sales

$

$

$

$

$

$

$

—

$

Intersegment sales

8

4

—

Total sales

Research, development and engineering expenses

2

Equity, royalty and interest income (loss) from investees

(4)

—

Interest income

5

2

1

—

EBITDA (3)

(5)

Depreciation and amortization (4)

—

EBITDA as a percentage of segment sales

%

%

%

%

NM

%

%

"NM" - not meaningful information

(1) Included intersegment sales, intersegment profit in inventory and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended December 31, 2024. The three months ended December 31, 2023, included $2.0 billion related to the Settlement Agreements, $21 million of voluntary separation and retirement program charges related to corporate functions and $5 million of costs associated with divestiture of Atmus Filtration Technologies (Atmus).

(2) Included $2 million of charges in research and development expenses, $17 million of charges in equity, royalty and interest income (loss) from investees and $312 million of charges in EBITDA, all related to Accelera strategic reorganization actions in the fourth quarter of 2024. See footnote below for additional information.

(3) EBITDA is defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests. 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.

(4) Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in our Condensed Consolidated Statements of Net Income as interest expense. A portion of depreciation expense is included in research, development and engineering expenses.

(5) Included $28 million of costs associated with the divestiture of Atmus for the three months ended December 31, 2023.

CUMMINS INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

In millions

Engine

Components

Distribution

Power Systems

Accelera

Total Segments

Intersegment Eliminations (1)

Total

External sales

$

$

$

$

$

$

$

—

$

Intersegment sales

—

Total sales

Research, development and engineering expenses

(2)

2

Equity, royalty and interest income (loss) from investees

(2)

—

Interest income

7

1

—

EBITDA (3)

(4)

(2)

Depreciation and amortization (5)

—

EBITDA as a percentage of total sales

%

%

NM

%

%

External sales

$

$

$

$

$

$

$

—

$

Intersegment sales

—

Total sales

Research, development and engineering expenses

2

Equity, royalty and interest income (loss) from investees

—

Interest income

9

2

—

EBITDA (3)

(4)

Depreciation and amortization (5)

—

EBITDA as a percentage of total sales

%

%

%

%

NM

%

%

"NM" - not meaningful information

(1) Included intersegment sales, intersegment profit in inventory and unallocated corporate expenses. The year ended December 31, 2024, included a $1.3 billion gain related to the divestiture of Atmus and $14 million of costs associated with the divestiture of Atmus. The year ended December 31, 2023, included $2.0 billion related to the Settlement Agreements, $22 million of costs associated with divestiture of Atmus and $21 million of voluntary separation and retirement program charges related to corporate functions.

(2) Included $2 million of charges in research and development expenses, $17 million of charges in equity, royalty and interest income (loss) from investees and $312 million of charges in EBITDA, all related to Accelera strategic reorganization actions in the fourth quarter of 2024. See footnote below for additional information.

(3) EBITDA is defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests. 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.

(4) Included $21 million and $78 million of costs associated with the divestiture of Atmus for the year ended December 31, 2024 and 2023, respectively.

(5) Depreciation and amortization, as shown on a segment basis, excluded the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as interest expense. The amortization of debt discount and deferred costs was $12 million and $8 million for the year ended December 31, 2024 and 2023, respectively. A portion of depreciation expense is included in research, development and engineering expenses.

CUMMINS INC. AND SUBSIDIARIES

SELECT FOOTNOTE DATA

(Unaudited)

EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES

Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Net Income for the reporting periods was as follows:

Three months ended

Years ended December 31,

In millions

Manufacturing entities

Dongfeng Cummins Engine Company, Ltd.

$

$

$

$

Beijing Foton Cummins Engine Co., Ltd.

Chongqing Cummins Engine Company, Ltd.

9

7

Tata Cummins, Ltd.

9

8

All other manufacturers

(1)

(1)

Distribution entities

Komatsu Cummins Chile, Ltda.

All other distributors

7

6

Cummins share of net income

Royalty and interest income

Equity, royalty and interest income from investees

$

$

$

$

(1) Included $17 million of charges in equity, royalty and interest income (loss) from investees related to the Accelera strategic reorganization actions in the fourth quarter of 2024. See footnote below for additional information.

ACCELERA STRATEGIC REORGANIZATION ACTIONS

In the fourth quarter of 2024, our Accelera segment underwent a strategic review to better streamline operations as well as pace and re-focus investments on the most promising paths as the adoption of certain zero emission solutions slows. This review resulted in decisions to consolidate certain manufacturing efforts, focus internal development efforts towards areas of differentiation while continuing to leverage partners and reduce our investments in certain technologies, joint ventures and markets. In addition, declining customer demand in certain key product lines caused us to re-evaluate the recoverability of certain inventory items. As a result of these actions, we recorded several non-cash charges in the fourth quarter related to inventory write-downs, intangible and fixed asset impairments and joint venture impairments. We also recorded severance of approximately $7 million. The following table presents the impact of asset write-downs and impairments on our Condensed Consolidated Statements of Net Income:

Year ended

In millions

Statement of Net Income Location

Inventory write-downs

$

Cost of sales

Impairment of other intangible assets

Other operating expense, net

Impairment of property, plant and equipment

Other operating expense, net

Impairment of investments in equity method investees

Equity, royalty and interest income from investees

Severance

7

Cost of sales and research, development and engineering expenses

Other

Other operating expense, net and selling, general and administrative expenses

Total

$

The majority of the $305 million non-cash charge is reflected in net cash provided by operating activities, as a change in inventory of $107 million and other, net of $171 million. Of the total charges, approximately $243 million occurred in jurisdictions where we receive no tax benefits because of valuation allowances, resulting in a $50 million unfavorable discrete tax item. In addition, these actions were considered a triggering event under GAAP which required us to perform an interim impairment test of our fuel cell and electrolyzer reporting unit. The results of this testing indicated that goodwill of this reporting unit was not impaired.

CUMMINS INC. AND SUBSIDIARIES

SELECT FOOTNOTE DATA

(Unaudited)

INCOME TAXES

Our effective tax rate for 2025, excluding discrete items, is expected to approximate 24.5 percent.

Our effective tax rates for the three and twelve months ended December 31, 2024, were 32.8 percent and 17.0 percent, respectively. Our effective tax rates for the three and twelve months ended December 31, 2023, were negative 13.3 percent and 48.3 percent, respectively.

The three months ended December 31, 2024, contained net unfavorable discrete tax items of $7 million, or $0.05 per diluted share, primarily due to $50 million of unfavorable adjustments related to Accelera strategic reorganization actions, partially offset by $34 million of favorable return to provision adjustments and net $9 million of other favorable adjustments.

The year ended December 31, 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 $59 million, or $0.42 per diluted share, primarily due to $52 million of favorable return to provision adjustments, $22 million of favorable share-based compensation tax benefits, $21 million of favorable adjustments related to audit settlements and $20 million of favorable adjustments from tax return amendments, partially offset by $50 million of unfavorable adjustments related to Accelera strategic reorganization actions and a net $6 million of other unfavorable adjustments.

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 Settlement Agreements and $4 million of net unfavorable other discrete items.

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 Settlement Agreements, $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 benefits.

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 gain recognized and the related costs for the divestiture of Atmus, costs associated with the Accelera strategic reorganization actions, the Settlement Agreements, voluntary retirement and voluntary separation programs and restructuring actions. This statement excludes forward looking measures of EBITDA where a reconciliation to the corresponding accounting principles generally accepted in the United States (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, 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 income attributable to Cummins Inc. to EBITDA for each of the applicable periods:

CUMMINS INC. AND SUBSIDIARIES

FINANCIAL MEASURES THAT SUPPLEMENT GAAP

(Unaudited)

Three months ended December 31,

Years ended December 31,

In millions

Net income (loss) attributable to Cummins Inc.

$

$

$

$

Net income (loss) attributable to Cummins Inc., as a percentage of net sales

%

%

%

%

Add:

Net income attributable to noncontrolling interests

Consolidated net income (loss)

Add:

Interest expense

Income tax expense

Depreciation and amortization

EBITDA

$

$

$

$

EBITDA, as a percentage of net sales

%

%

%

%

Less:

Gain related to the divestiture of Atmus

—

—

—

Add:

Accelera strategic reorganization actions

—

—

Settlement Agreements

—

—

Voluntary retirement and voluntary separation programs

—

—

Atmus divestiture costs

—

Restructuring actions

—

—

—

EBITDA, excluding the impact of the gain recognized and the related costs for the divestiture of Atmus, costs associated with the Accelera strategic reorganization actions, the Settlement Agreements, voluntary retirement and voluntary separation programs and restructuring actions

$

$

$

$

EBITDA, excluding the impact of the gain recognized and the related costs for the divestiture of Atmus, costs associated with the Accelera strategic reorganization actions, the Settlement Agreements, voluntary retirement and voluntary separation programs and restructuring actions, as a percentage of net sales

%

%

%

%

CUMMINS INC. AND SUBSIDIARIES

SEGMENT SALES DATA

(Unaudited)

Engine Segment Sales by Market and Unit Shipments by Engine Classification

Sales for our Engine segment by market were as follows:

In millions

Q1

Q2

Q3

Q4

YTD

Heavy-duty truck

$

$

$

$

$

Medium-duty truck and bus

Light-duty automotive

Off-highway

Total sales

$

$

$

$

$

In millions

Q1

Q2

Q3

Q4

YTD

Heavy-duty truck

$

$

$

$

$

Medium-duty truck and bus

Light-duty automotive

Off-highway

Total sales

$

$

$

$

$

Unit shipments by engine classification (including unit shipments to Power Systems and off-highway engine units included in their respective classification) were as follows:

Units

Q1

Q2

Q3

Q4

YTD

Heavy-duty

Medium-duty

Light-duty

Total units

Units

Q1

Q2

Q3

Q4

YTD

Heavy-duty

Medium-duty

Light-duty

Total units

Components Segment Sales by Business

Sales for our Components segment by business were as follows:

In millions

Q1

Q2

Q3

Q4

YTD

Drivetrain and braking systems

$

$

$

$

$

Emission solutions

Components and software

Atmus (1)

—

—

—

Automated transmissions

Total sales

$

$

$

$

$

(1) Included sales through the March 18, 2024, divestiture.

In millions

Q1

Q2

Q3

Q4

YTD

Drivetrain and braking systems

$

$

$

$

$

Emission solutions

Components and software

Atmus

Automated transmissions

Total sales

$

$

$

$

$

Distribution Segment Sales by Product Line

Sales for our Distribution segment by product line were as follows:

In millions

Q1

Q2

Q3

Q4

YTD

Parts

$

$

$

$

$

Power generation

Engines

Service

Total sales

$

$

$

$

$

In millions

Q1

Q2

Q3

Q4

YTD

Parts

$

$

$

$

$

Power generation

Engines

Service

Total sales

$

$

$

$

$

Power Systems Segment Sales by Product Line and Unit Shipments by Engine Classification

Sales for our Power Systems segment by product line were as follows:

In millions

Q1

Q2

Q3

Q4

YTD

Power generation

$

$

$

$

$

Industrial

Generator technologies

Total sales

$

$

$

$

$

In millions

Q1

Q2

Q3

Q4

YTD

Power generation

$

$

$

$

$

Industrial

Generator technologies

Total sales

$

$

$

$

$

High-horsepower unit shipments by engine classification were as follows:

Units

Q1

Q2

Q3

Q4

YTD

Power generation

Industrial

Total units

Units

Q1

Q2

Q3

Q4

YTD

Power generation

Industrial

Total units