Cummins Reports Strong Third Quarter Operating Results, Records Non-Cash Charges Related to its Electrolyzer Business

Cummins Inc. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited) (a)

Three months ended

September 30,

In millions, except per share amounts

2025

2024

NET SALES

$

8,317

$

8,456

Cost of sales

6,188

6,285

GROSS MARGIN

2,129

2,171

OPERATING EXPENSES AND INCOME

Selling, general and administrative expenses

789

807

Research, development and engineering expenses

345

359

Equity, royalty and interest income from investees

104

99

Other operating expense, net

247

54

OPERATING INCOME

852

1,050

Interest expense

83

83

Other income, net

61

76

INCOME BEFORE INCOME TAXES

830

1,043

Income tax expense

271

200

CONSOLIDATED NET INCOME

559

843

Less: Net income attributable to noncontrolling interests

23

34

NET INCOME ATTRIBUTABLE TO Cummins Inc.

$

536

$

809

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO Cummins Inc.

Basic

$

3.88

$

5.90

Diluted

$

3.86

$

5.86

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING

Basic

138.0

137.2

Diluted

138.8

138.1

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

Nine months ended

September 30,

In millions, except per share amounts

2025

2024

NET SALES

$

25,134

$

25,655

Cost of sales

18,569

19,250

GROSS MARGIN

6,565

6,405

OPERATING EXPENSES AND INCOME

Selling, general and administrative expenses

2,339

2,474

Research, development and engineering expenses

1,046

1,107

Equity, royalty and interest income from investees

353

325

Other operating expense, net

321

131

OPERATING INCOME

3,212

3,018

Interest expense

247

281

Other income, net

207

1,504

INCOME BEFORE INCOME TAXES

3,172

4,241

Income tax expense

835

618

CONSOLIDATED NET INCOME

2,337

3,623

Less: Net income attributable to noncontrolling interests

87

95

NET INCOME ATTRIBUTABLE TO Cummins Inc.

$

2,250

$

3,528

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO Cummins Inc.

Basic

$

16.33

$

25.47

Diluted

$

16.23

$

25.31

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING

Basic

137.8

138.5

Diluted

138.6

139.4

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

Cummins Inc. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (a)

In millions, except par value

September 30,
2025

December 31,
2024

ASSETS

Current assets

Cash and cash equivalents

$

2,566

$

1,671

Marketable securities

593

593

Total cash, cash equivalents and marketable securities

3,159

2,264

Accounts and notes receivable, net

5,640

5,181

Inventories

6,256

5,742

Prepaid expenses and other current assets

1,665

1,565

Total current assets

16,720

14,752

Long-term assets

Property, plant and equipment, net

6,658

6,356

Investments and advances related to equity method investees

1,972

1,889

Goodwill

2,222

2,370

Other intangible assets, net

2,345

2,351

Pension assets

1,157

1,189

Other assets

2,564

2,633

Total assets

$

33,638

$

31,540

LIABILITIES

Current liabilities

Accounts payable (principally trade)

$

3,819

$

3,951

Loans payable

315

356

Commercial paper

353

1,259

Current maturities of long-term debt

122

660

Accrued compensation, benefits and retirement costs

770

1,084

Current portion of accrued product warranty

660

679

Current portion of deferred revenue

1,600

1,347

Other accrued expenses

1,815

1,898

Total current liabilities

9,454

11,234

Long-term liabilities

Long-term debt

6,824

4,784

Deferred revenue

1,119

1,065

Other liabilities

3,143

3,149

Total liabilities

$

20,540

$

20,232

EQUITY

Cummins Inc. shareholders' equity

Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.5 shares issued

$

2,651

$

2,636

Retained earnings

22,300

20,828

Treasury stock, at cost, 84.5 and 85.1 shares

(10,676

)

(10,748

)

Accumulated other comprehensive loss

(2,211

)

(2,445

)

Total Cummins Inc. shareholders' equity

12,064

10,271

Noncontrolling interests

1,034

1,037

Total equity

$

13,098

$

11,308

Total liabilities and equity

$

33,638

$

31,540

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

Cummins Inc. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (a)

Three months ended

September 30,

In millions

2025

2024

CASH FLOWS FROM OPERATING ACTIVITIES

Consolidated net income

$

559

$

843

Adjustments to reconcile consolidated net income to net cash provided by operating activities

Depreciation and amortization

277

266

Deferred income taxes

206

(7

)

Equity in income of investees, net of dividends

50

12

Pension and OPEB expense

21

9

Pension contributions and OPEB payments

(12

)

(13

)

Changes in current assets and liabilities, net of acquisitions

Accounts and notes receivable

177

270

Inventories

(10

)

(257

)

Other current assets

26

(219

)

Accounts payable

(295

)

(236

)

Accrued expenses

43

(67

)

Other, net

263

39

Net cash provided by operating activities

1,305

640

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures

(298

)

(259

)

Investments in and net advances to equity investees

(9

)

(78

)

Investments in marketable securities—acquisitions

(350

)

(349

)

Investments in marketable securities—liquidations

495

428

Other, net

(69

)

(5

)

Net cash used in investing activities

(231

)

(263

)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from borrowings

86

141

Net borrowings of commercial paper

—

55

Payments on borrowings and finance lease obligations

(617

)

(163

)

Dividend payments on common stock

(276

)

(250

)

Other, net

(20

)

(26

)

Net cash used in financing activities

(827

)

(243

)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

—

9

Net increase in cash and cash equivalents

247

143

Cash and cash equivalents at beginning of period

2,319

1,590

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

2,566

$

1,733

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

Nine months ended

September 30,

In millions

2025

2024

CASH FLOWS FROM OPERATING ACTIVITIES

Consolidated net income

$

2,337

$

3,623

Adjustments to reconcile consolidated net income to net cash provided by operating activities

Gain related to divestiture of Atmus

—

(1,333

)

Depreciation and amortization

825

794

Deferred income taxes

68

(106

)

Equity in income of investees, net of dividends

(38

)

(74

)

Pension and OPEB expense

60

28

Pension contributions and OPEB payments

(38

)

(72

)

Changes in current assets and liabilities, net of acquisitions and divestiture

Accounts and notes receivable

(466

)

109

Inventories

(446

)

(726

)

Other current assets

(146

)

(370

)

Accounts payable

(147

)

27

Accrued expenses

(201

)

(2,000

)

Other, net

279

165

Net cash provided by operating activities

2,087

65

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures

(691

)

(668

)

Investments in and net advances to equity investees

(63

)

(133

)

Acquisition of businesses, net of cash acquired

(12

)

(58

)

Investments in marketable securities—acquisitions

(1,133

)

(1,062

)

Investments in marketable securities—liquidations

1,131

1,113

Cash associated with Atmus divestiture

—

(174

)

Other, net

(78

)

(87

)

Net cash used in investing activities

(846

)

(1,069

)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from borrowings

2,232

2,623

Net (payments) borrowings of commercial paper

(906

)

140

Payments on borrowings and finance lease obligations

(827

)

(1,386

)

Dividend payments on common stock

(778

)

(719

)

Payments for purchase of redeemable noncontrolling interests

(55

)

—

Other, net

(69

)

(94

)

Net cash (used in) provided by financing activities

(403

)

564

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

57

(6

)

Net increase (decrease) in cash and cash equivalents

895

(446

)

Cash and cash equivalents at beginning of year

1,671

2,179

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

2,566

$

1,733

^(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

Three months ended September 30, 2025

External sales

$

1,922

$

1,986

$

3,170

$

1,126

$

113

$

8,317

$

—

$

8,317

Intersegment sales

683

343

2

870

8

1,906

(1,906

)

—

Total sales

2,605

2,329

3,172

1,996

121

10,223

(1,906

)

8,317

Research, development and engineering expenses

159

70

14

62

40

345

—

345

Equity, royalty and interest income (loss) from investees

54

7

23

26

(6

)

104

—

104

Interest income

11

8

6

4

—

29

—

29

EBITDA ⁽²⁾

261

292

492

457

(336

)

⁽³⁾

1,166

21

1,187

Depreciation and amortization ⁽⁴⁾

71

122

32

36

13

274

—

274

EBITDA as a percentage of segment sales

10.0

%

12.5

%

15.5

%

22.9

%

NM

11.4

%

14.3

%

Three months ended September 30, 2024

External sales

$

2,215

$

2,287

$

2,942

$

912

$

100

$

8,456

$

—

$

8,456

Intersegment sales

698

437

10

775

10

1,930

(1,930

)

—

Total sales

2,913

2,724

2,952

1,687

110

10,386

(1,930

)

8,456

Research, development and engineering expenses

147

85

13

57

57

359

—

359

Equity, royalty and interest income (loss) from investees

53

12

25

20

(11

)

99

—

99

Interest income

2

4

7

1

—

14

—

14

EBITDA ⁽²⁾

427

351

370

328

(115

)

1,361

28

1,389

Depreciation and amortization ⁽⁴⁾

62

121

31

33

16

263

—

263

EBITDA as a percentage of segment sales

14.7

%

12.9

%

12.5

%

19.4

%

NM

13.1

%

16.4

%

"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 September 30, 2025 and 2024.

⁽²⁾

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.

⁽³⁾

Included a $210 million goodwill impairment charge and a $30 million inventory write-down for three months ended September 30, 2025.

⁽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.

Engine

Components

Distribution

Power Systems

Accelera

Total Segments

Intersegment Eliminations ⁽¹⁾

Total

Nine months ended September 30, 2025

External sales

$

6,124

$

6,551

$

9,106

$

3,052

$

301

$

25,134

$

—

$

25,134

Intersegment sales

2,151

1,153

14

2,482

28

5,828

(5,828

)

—

Total sales

8,275

7,704

9,120

5,534

329

30,962

(5,828

)

25,134

Research, development and engineering expenses

465

222

42

188

129

1,046

—

1,046

Equity, royalty and interest income (loss) from investees

187

24

77

82

(17

)

353

—

353

Interest income

29

25

18

12

1

85

—

85

EBITDA ⁽²⁾

1,119

1,071

1,313

1,276

(522

)

⁽³⁾

4,257

(23

)

4,234

Depreciation and amortization ⁽⁴⁾

206

371

96

104

38

815

—

815

EBITDA as a percentage of total sales

13.5

%

13.9

%

14.4

%

23.1

%

NM

13.7

%

16.8

%

Nine months ended September 30, 2024

External sales

$

6,923

$

7,647

$

8,292

$

2,508

$

285

$

25,655

$

—

$

25,655

Intersegment sales

2,069

1,391

24

2,157

29

5,670

(5,670

)

—

Total sales

8,992

9,038

8,316

4,665

314

31,325

(5,670

)

25,655

Research, development and engineering expenses

468

250

41

180

166

1,105

2

1,107

Equity, royalty and interest income (loss) from investees

158

51

73

65

(22

)

325

—

325

Interest income

16

21

29

7

—

73

—

73

EBITDA ⁽²⁾

1,286

1,230

⁽⁵⁾

978

866

(333

)

4,027

1,279

5,306

Depreciation and amortization ⁽⁴⁾

181

367

92

99

45

784

—

784

EBITDA as a percentage of total sales

14.3

%

13.6

%

11.8

%

18.6

%

NM

12.9

%

20.7

%

"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 nine months ended September 30, 2025. The nine months ended September 30, 2024, included a $1.3 billion gain related to the divestiture of Atmus Filtration Technologies Inc. (Atmus) and $14 million of costs associated with the divestiture of Atmus.

⁽²⁾

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.

⁽³⁾

Included a $210 million goodwill impairment charge and a $30 million inventory write-down for nine months ended September 30, 2025.

⁽⁴⁾

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 $10 million and $10 million for the nine months ended September 30, 2025 and 2024, respectively. A portion of depreciation expense is included in research, development and engineering expenses.

⁽⁵⁾

Included $21 million of costs associated with the divestiture of Atmus for the nine months ended September 30, 2024.

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

Nine months ended

September 30,

September 30,

In millions

2025

2024

2025

2024

Manufacturing entities

Chongqing Cummins Engine Company, Ltd.

$

23

$

15

$

68

$

51

Beijing Foton Cummins Engine Co., Ltd.

17

6

47

29

Dongfeng Cummins Engine Company, Ltd.

13

14

52

51

Tata Cummins, Ltd.

6

6

23

22

All other manufacturers

6

7

27

41

Distribution entities

Komatsu Cummins Chile, Ltda.

12

15

41

42

All other distributors

5

3

17

10

Cummins share of net income

82

66

275

246

Royalty and interest income

22

33

78

79

Equity, royalty and interest income from investees

$

104

$

99

$

353

$

325

GOODWILL IMPAIRMENT AND INVENTORY WRITE-DOWN

During the third quarter of 2025, in our Accelera segment, we observed rapidly deteriorating conditions in our electrolyzer markets and overall hydrogen markets, along with significant uncertainty in the alternative power markets resulting from reductions in government incentives. As a result, we determined that a triggering event occurred for our electrolyzer reporting unit, warranting an interim impairment test of goodwill and the related asset group. We also re-evaluated the recoverability of certain inventory in this business due to the declining customer demand, resulting in a $30 million, or $0.22 per diluted share, excess and obsolete inventory write-down recorded in cost of sales. We concluded that the undiscounted cash flows exceeded the carrying value of the related asset group and thus an impairment did not exist for the related long-lived assets. However, we determined that on a fair value basis our goodwill was fully impaired and recorded a charge of $210 million, or $1.51 per diluted share, in other operating expense, net. The fair value of this reporting unit was determined using primarily a discounted cash flow model (a form of the income approach). This model incorporated a number of assumptions and judgements surrounding current market and economic conditions, internal forecasts of future business performance including short and long-term growth rates, earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests (EBITDA) margins and discount rates. The $240 million of charges were non-deductible for income taxes purposes. These non-cash charges were reflected in net cash provided by operating activities as a change in inventory of $30 million and other, net of $210 million.

INCOME TAXES

On July 4, 2025, the One Big Beautiful Bill Act (The Act) was signed into law, enacting significant changes to U.S. federal income tax rules affecting corporations, such as the ability to immediately deduct domestic research and development costs, restoration of elective 100 percent bonus depreciation for qualified property and changes to the international tax provisions. Implementation of The Act resulted in an increase to tax expense of $36 million, or $0.26 per diluted share, in the third quarter of 2025, primarily due to a reduction in the foreign income deduction and changes to the research and development tax credit.

Our effective tax rate for 2025 is expected to approximate 26.5 percent, excluding any discrete items that may arise, which is a 2 percent increase over our prior estimates. This increase is attributable to the impacts of The Act and the non-deductible goodwill impairment and inventory write-down.

Our effective tax rates for the three and nine months ended September 30, 2025, were 32.7 percent and 26.3 percent, respectively. Our effective tax rates for the three and nine months ended September 30, 2024, were 19.2 percent and 14.6 percent, respectively.

The three months ended September 30, 2025, contained net unfavorable discrete tax items of $4 million, $0.03 per diluted share, primarily due to $32 million of unfavorable return to provision adjustments and net $1 million of other unfavorable tax items, partially offset by $25 million of favorable adjustments for uncertain tax positions and $4 million of favorable adjustments for share-based compensation.

The nine months ended September 30, 2025, contained net favorable discrete tax items of $6 million, $0.04 per diluted share, primarily due to $30 million of favorable adjustments for uncertain tax positions and $12 million of favorable adjustments for share-based compensation, partially offset by $32 million of unfavorable return to provision adjustments and net $4 million of other unfavorable tax items.

The three months ended September 30, 2024, contained net favorable discrete tax items of $36 million, or $0.26 per share, primarily due to $20 million of favorable adjustments from tax return amendments, $15 million of favorable return to provision adjustments and $2 million of favorable share-based compensation tax benefits, partially offset by $1 million of other unfavorable tax items.

The nine months ended September 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 net favorable by $66 million, or $0.47 per share, 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.

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, as noted in the table below, is a useful measure of our operating performance. 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 our 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:

Three months ended

Nine months ended

September 30,

September 30,

In millions

2025

2024

2025

2024

Net income attributable to Cummins Inc.

$

536

$

809

$

2,250

$

3,528

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

6.4

%

9.6

%

9.0

%

13.8

%

Add:

Net income attributable to noncontrolling interests

23

34

87

95

Consolidated net income

559

843

2,337

3,623

Add:

Interest expense

83

83

247

281

Income tax expense

271

200

835

618

Depreciation and amortization

274

263

815

784

EBITDA

$

1,187

$

1,389

$

4,234

$

5,306

EBITDA, as a percentage of net sales

14.3

%

16.4

%

16.8

%

20.7

%

Special items:

Accelera goodwill impairment

210

—

210

—

Accelera inventory write-down

30

—

30