Mark Smith
Chief Financial Officer at Cummins
Thank you, Jen, and good morning, everyone. I will acknowledge I have heavy cold this morning, so if I sound more dour than usual and a little rougher, please take that into consideration. We delivered solid operational results in the fourth quarter, exceeding our expectations for revenue and delivering EBITDA margins in line with our guidance. Compared to 2022, our full year sales grew 21% and our operating cash flow more than doubled to a record $4 billion, reflecting the strong focus of our employees on meeting customer demand and improving working capital.
Now let me go into more details on the fourth quarter and full year performance. Q4 revenues were $8.5 billion and EBITDA was a net loss of $878 million, or negative 10.3% of sales. For the full year, we reported revenues of a record $34.1 billion and EBITDA was $3 billion, or 8.9% of sales. As Jen mentioned, we recorded a onetime charge of $2.04 billion in Q4 to settle the previously disclosed U.S. regulatory claims. Fourth quarter results also included $42 million of costs associated with the voluntary retirement and separation programs. Costs associated with the planned separation of Atmus were $33 million in the fourth quarter and $100 million for the full year, compares to $19 million in the fourth quarter of 2022 and a total of $81 million in the previous year.
Full year 2022 results also included $111 million of costs related to the indefinite suspension of our operations in Russia. To provide clarity on the fourth quarter and 2023 full year operational performance of our business, I am now excluding the costs associated with the regulatory settlement, voluntary retirement separation programs, planned separation of Atmus, and the indefinite suspension of our operations in Russia in my following comments. Q4 revenues were $8.5 billion, an increase of 10% from a year ago. Sales in North America increased 8%, driven by improved pricing across multiple end markets and stronger demand for power generation products. International revenues increased 13%, driven by strong global power gen demand, particularly for data centers. EBITDA was $1.2 billion, or 14.4% of sales for the quarter, compared to $1.1 billion, or 14.5% of sales a year ago. Improved pricing was offset by higher compensation costs, increased investment in development and capabilities in our Accelera segment. Higher variable compensation costs were driven primarily by stronger operating cash flow, which exceeded our expectations for the quarter and the full year.
Now I'll go into each line item with a little bit more detail. Gross margin was $2 billion, or 23.7% of sales, an increase of $201 million, or 30 basis points from the prior year. The improved margins were driven by favorable pricing and higher volumes, partially offset by higher product coverage costs and compensation expenses. Selling, admin, and research expenses increased by $154 million, or 15% as we continue to invest in the development of new products that will drive future growth and also due to higher variable compensation costs. Joint venture income increased $25 million due to slowly recovering demand in China from a low base in 2022. Other income was $50 million, an increase of $17 million from a year ago, primarily due to the recovery of technology fees from customers in the fourth quarter.
Interest expense was $92 million, an increase of $5 million from the prior year, driven by higher interest rates on the floating rate portion of our debt. The all-in effective tax rate in the fourth quarter was negative 13.3%, principally due to nondeductible costs associated with the regulatory settlement. All-in net loss for the quarter was $1.4 billion, or negative $10.01 per diluted share, which includes $2.4 billion, or $13.76 per diluted share of costs associated with the regulatory settlement, $42 million, or $0.22 per diluted share, of costs associated with the voluntary retirement and separation programs, and $33 million, or $0.17 per diluted share, of costs associated with the planned separation of Atmus.
Operating cash flow was an inflow of $1.5 billion, $642 million higher than the fourth quarter last year, driven by strong earnings and a lower expansion of our working capital across the business. For the full year 2023, revenues were a record $34.1 billion, up 21%, or $6 billion from a year ago, driven by the inclusion of a full year of Meritor results and strong organic growth. Sales in North America increased 22% and international sales increased 20%. Within those numbers, organic sales growth was 12%, driven by improved pricing, strong global demand for power generation products, continued strength in the North American truck market, and slowly improving economic conditions in China. EBITDA for the year was $5.2 billion, or 15.3% of sales for 2023, an increase of $1.2 billion, or 110 basis points from the prior year. The increase in EBITDA percent was driven by higher volumes, favorable pricing, and logistics costs, and a modest and favorable mark-to-market impact from investments that underpin our company-owned life insurance plans, all of that partially offset by higher compensation expenses.
All-in net earnings were $735 million, or $5.15 per diluted share, compared to $2.2 billion, or $15.12 per diluted share, a year ago. 2023 net earnings include $2.04 billion, or $13.78 per diluted share of costs related to the regulatory settlement, $100 million, or $0.54 per diluted share of costs related to the separation of Atmus, $42 million, or $0.22 per diluted share of costs related to the voluntary separation programs that we implemented during the fourth quarter. Full year cash from operations was a record inflow of $4 billion, doubling from a year ago as a result of higher operating income and much lower expansion of working capital across the company. Capital expenditures in 2023 were $1.2 billion, in line with our forecast and an increase of $297 million from 2022 as we continued to invest in the new products and capabilities to drive growth, particularly related to the fuel-agnostic platforms within our core business.
Our long-term goal is to deliver at least 50% of operating cash flow to shareholders, and over the past five years we've returned 56% of operating cash flow in the form of share repurchases and dividends. Hang on, I've jumped one page too many. Sorry about that. I've gone the wrong way. That can happen sometimes. In 2023, we focused our capital allocation on organic investments and dividend growth, returning $921 million to shareholders via the dividend and debt reduction following the acquisition of Meritor. We currently expect that our priorities for cash deployment in 2024 will mirror those of last year.
I'll now summarize the 2023 results for the operating segments and provide guidance for 2024. If I need to say it again, I will, that the results that I'm going to discuss going forwards exclude the costs related to the separation of Atmus, the costs associated with the voluntary retirement and separation, and the costs associated with the indefinite suspension of our operations in Russia in 2022. Component segment revenues were a record $13.4 billion, 38% higher than the prior year. EBITDA was 14.4% of sales compared to 14.2%, an increase of $540 million, or 40%. For 2024, we expect total revenue for the Components business to decrease 2% to 7%, and EBITDA margins to be in the range of 13.9% to 14.9%.
For the Engine segment, 2023 revenues increased 7% to a record $11.7 billion and EBITDA was 14.1% of sales compared to 14.3% a year ago. In dollar terms, EBITDA increased $74 million, or 5%. In 2024, we project revenues for the Engine business will decrease 2% to 7% due to expected moderation in the North American heavy-duty truck market, most prominently in the second half of the year. 2024 EBITDA is projected to be in the range of 12.5% to 13.5%.
In the Distribution segment, revenues increased 15% from a year ago to a record $10.2 billion and EBITDA increased by 28% and improved as a% of sales to 11.8% compared to 10.6% a year ago. We expect Distribution revenues to be down between down 3% and up 2% and EBITDA margins to be in the range of 11.4% to 12.4% for the full year.
In the Power Systems segment, revenues were also a record of $5.7 billion, or 13% higher than last year. EBITDA was 14.7% or 250 basis points higher than 2022 driven by favorable pricing, strong volume, and certain cost reduction actions. In 2024, we expect Power Systems revenues to be down 3% to up 2% and EBITDA in the range of 15.2% to 16.2%.
Accelera revenues increased to $354 million in 2023, with a net loss at the EBITDA level of $443 million. In 2024, we anticipate that Accelera revenues will increase in the range of $450 million to $500 million and net losses to reduce to between $400 million and $430 million as we continue to make targeted investments in future technologies whilst improving the operating performance of our current products. We currently project 2024 company revenues to be down 2% to 5% and company EBITDA margins in the range of 14.4% to 15.4%. Our effective tax rate is expected to be approximately 24% in '24, excluding any discrete items. Capital investments will likely be in the range of as we continue to make critical investments to support future growth.
To summarize, we delivered record sales and strong operating profits in 2023. Cash generation has been and will continue to be a strong focus as we enter 2024, enabling us to continue investing in new products even during times of economic uncertainty, returning cash to shareholders, and maintaining a strong balance sheet. As Jen indicated, we do expect moderation in several of our key markets in 2024, especially in the U.S. truck market, as reflected in our guidance. We've already taken actions to reduce costs in the business and are in a good situation to navigate the economic cycle, improve our cycle-over-cycle performance in 2024.
Subject to our mark-to-market conditions, our intention is to split off the remaining ownership in Atmus through an exchange offer as our next step in the separation as we seek to reposition our portfolio for the future. As per part of the proposed exchange offer, Cummins shareholders will have the choice to exchange all, some, or none of their shares of common stock for shares of Atmus common stock subject to the terms of the offer. The exact timing of our decision to launch an exchange offer will, as stated earlier, depend on market conditions, but the launch of the tender could occur as early as in the coming days. Our guidance for Cummins for this year assumes the inclusion of Atmus now consolidated results for the entirety of 2024 and excludes any costs or benefits of the separation. The benefits to Cummins are expected to include a lower number of shares outstanding upon completion of the exchange. We will update our guidance as and when the separation is completed.
Thank you for your interest today. Now let me turn it back over to Chris.
