Meritor Acquisition and 2022 Financial Results
Table of Contents
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 Russia and Ukraine), currency
fluctuations, political and economic uncertainty, 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 higher levels of these risks such as
China, Brazil, India, Mexico and countries in the Middle East and Africa. 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, region, the economy of any single country or customer on our consolidated results.
Meritor Acquisition
On August 3, 2022, we completed the acquisition of Meritor, Inc. (Meritor) with a purchase price of $2.9 billion (including debt repaid concurrent with the acquisition). Our
consolidated results and segment results include Meritor's activity since the date of acquisition. Meritor was split into the newly formed axles and brakes business and electric
powertrain. The results for the axles and brakes business are included in our Components segment while the electric powertrain portion is included in our New Power segment.
See NOTE 2, "ACQUISITIONS," to the Consolidated Financial Statements for additional information.
Supply Chain Disruptions
We continue to experience supply chain disruptions, increased price levels and related financial impacts reflected as increased cost of sales and inventory holdings. Our industry
continues to be unfavorably impacted by supply chain constraints leading to shortages and price increases across multiple component categories and limiting our collective
ability to meet end-user demand. Our customers are also experiencing supply chain issues. 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. The 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.
Russian Operations
On March 17, 2022, the Board indefinitely suspended our operations in Russia due to the ongoing conflict in Ukraine, which resulted in reduced sales in Russia and charges of
$111 million in 2022. See NOTE 23, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information.
2022 Results
A summary of our results is as follows:
Years ended December 31,
In millions, except per share amounts
Net sales
2022
2021
2020
$
Net income attributable to Cummins Inc.
28,074
2,151
$
24,021 $
2,131
19,811
1,789
Earnings per common share attributable to Cummins Inc..
Basic
$
Diluted
15.20
15.12
S
14.74 $
14.61
12.07
12.01
Our industry's sales continue 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 limiting full production capabilities.
Worldwide revenues improved 17 percent in 2022 compared to 2021, due to Meritor sales of $1.9 billion since the date of acquisition, favorable pricing and higher demand in all
operating segments and most geographic regions except for China and Russia. Net sales in the U.S. and Canada improved by 24 percent primarily due to favorable pricing and
increased demand in North American heavy-duty and medium-duty on-highway markets, which positively impacted all Components businesses and all Distribution product
lines, as well as incremental sales of axles and brakes in North America since the acquisition of Meritor. International demand (excludes the U.S. and Canada) improved by 8
percent compared to 2021, with lower sales in China (due to a sharp slowdown in construction and truck markets, exacerbated by COVID lockdowns) and Russia (resulting from
the indefinite suspension of our Russian operations)
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