UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~April 4, 2021~~March 31, 2022

Commission File Number 1-4949

CUMMINS INC.

(Exact name of registrant as specified in its charter)


Indiana						35-0257090
(State of Incorporation)						(IRS Employer Identification No.)

500 Jackson Street

Box 3005

Columbus, Indiana 47202-3005

(Address of principal executive offices)

Telephone (812) 377-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common stock, $2.50 par value

CMI

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit such files). Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of ~~April 4, 2021,~~March 31, 2022, there were ~~146,202,578~~141,097,817 shares of common stock outstanding with a par value of $2.50 per share.

Table of Contents

CUMMINS INC. AND SUBSIDIARIES

TABLE OF CONTENTS

QUARTERLY REPORT ON FORM 10-Q


		Page
	PART I. FINANCIAL INFORMATION
ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Statements of Net Income for the three months ended March 31, 2022 and April 4, 2021 ~~and March 29, 2020~~	3
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and April 4, 2021 ~~and March 29, 2020~~	4

	Condensed Consolidated Balance Sheets at ~~April 4, 2021~~March 31, 2022 and December 31, ~~2020~~2021	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and April 4, 2021 ~~and March 29, 2020~~	6
	Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 2022 and April 4, 2021 ~~and March 29, 2020~~	7
	Notes to Condensed Consolidated Financial Statements	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2325
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	4246
ITEM 4.	Controls and Procedures	4246
	PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	4346
ITEM 1A.	Risk Factors	4346
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4348
ITEM 3.	Defaults Upon Senior Securities	4348
ITEM 4.	Mine Safety Disclosures	4348
ITEM 5.	Other Information	4448
ITEM 6.	Exhibits	4449
	Signatures	4550

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited)


		Three months ended				Three months ended
In millions, except per share amounts	In millions, except per share amounts	April 4, 2021		March 29, 2020			In millions, except per share amounts	March 31, 2022		April 4, 2021
NET SALES (a) (Note 2)	NET SALES (a) (Note 2)	$	6,092	$	5,011		NET SALES (a) (Note 2)	$	6,385	$	6,092
Cost of sales		4,606		3,717
Cost of sales (Note 3)							Cost of sales (Note 3)	4,853		4,606
GROSS MARGIN	GROSS MARGIN	1,486		1,294			GROSS MARGIN	1,532		1,486

OPERATING EXPENSES AND INCOME	OPERATING EXPENSES AND INCOME						OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses	Selling, general and administrative expenses	574		546			Selling, general and administrative expenses	615		574
Research, development and engineering expenses	Research, development and engineering expenses	260		238			Research, development and engineering expenses	298		260
Equity, royalty and interest income from investees (Note 4)		166		129
Equity, royalty and interest income from investees (Notes 3 and 5)							Equity, royalty and interest income from investees (Notes 3 and 5)	96		166

Other operating expense, net		(8)		(5)
Other operating expense, net (Note 3)							Other operating expense, net (Note 3)	111		8
OPERATING INCOME	OPERATING INCOME	810		634			OPERATING INCOME	604		810

Interest expense	Interest expense	28		23			Interest expense	17		28
Other income, net		1		44
Other (expense) income, net							Other (expense) income, net	(9)		1
INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	783		655			INCOME BEFORE INCOME TAXES	578		783

Income tax expense		172		127
Income tax expense (Note 6)							Income tax expense (Note 6)	155		172
CONSOLIDATED NET INCOME	CONSOLIDATED NET INCOME	611		528			CONSOLIDATED NET INCOME	423		611

Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	8		17			Less: Net income attributable to noncontrolling interests	5		8
NET INCOME ATTRIBUTABLE TO CUMMINS INC.	NET INCOME ATTRIBUTABLE TO CUMMINS INC.	$	603	$	511		NET INCOME ATTRIBUTABLE TO CUMMINS INC.	$	418	$	603

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.	EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.						EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic	Basic	$	4.10	$	3.42		Basic	$	2.94	$	4.10
Diluted	Diluted	$	4.07	$	3.41		Diluted	$	2.92	$	4.07

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING	WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING						WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
Basic	Basic	147.0		149.3			Basic	142.2		147.0
Dilutive effect of stock compensation awards	Dilutive effect of stock compensation awards	1.3		0.4			Dilutive effect of stock compensation awards	0.9		1.3
Diluted	Diluted	148.3		149.7			Diluted	143.1		148.3

(a) Includes sales to nonconsolidated equity investees of $478 million for the three months ended April 4, 2021, compared with $257 million for the comparable period in 2020.
(a) Includes sales to nonconsolidated equity investees of $344 million for the three months ended March 31, 2022, compared with $478 million for the comparable period in 2021.							(a) Includes sales to nonconsolidated equity investees of $344 million for the three months ended March 31, 2022, compared with $478 million for the comparable period in 2021.

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

Table of Contents

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Three months ended
In millions April 4,
2021 March 29,
2020
CONSOLIDATED NET INCOME $ 611 $ 528
Other comprehensive income (loss), net of tax (Note 11)
Change in pension and other postretirement defined benefit plans 29 2
Foreign currency translation adjustments (56) (162)
Unrealized gain (loss) on derivatives 72 (79)
Total other comprehensive income (loss), net of tax 45 (239)
COMPREHENSIVE INCOME 656 289
Less: Comprehensive income attributable to noncontrolling interests 8 0
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC. $ 648 $ 289



	Three months ended
In millions	March 31, 2022		April 4, 2021
CONSOLIDATED NET INCOME	$	423	$	611
Other comprehensive income (loss), net of tax (Note 13)
Change in pension and other postretirement defined benefit plans	16		29
Foreign currency translation adjustments	4		(56)

Unrealized gain on derivatives	28		72
Total other comprehensive income, net of tax	48		45
COMPREHENSIVE INCOME	471		656
Less: Comprehensive (loss) income attributable to noncontrolling interests	(3)		8
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC.	$	474	$	648

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

Table of Contents

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


In millions, except par value	In millions, except par value	April 4, 2021		December 31, 2020		In millions, except par value	March 31, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	2,958	$	3,401	Cash and cash equivalents	$	2,276	$	2,592

Marketable securities (Note 5)		397		461
Marketable securities (Note 7)						Marketable securities (Note 7)	527		595
Total cash, cash equivalents and marketable securities	Total cash, cash equivalents and marketable securities	3,355		3,862		Total cash, cash equivalents and marketable securities	2,803		3,187
Accounts and notes receivable, net	Accounts and notes receivable, net					Accounts and notes receivable, net
Trade and other	Trade and other	3,698		3,440		Trade and other	3,969		3,565
Nonconsolidated equity investees	Nonconsolidated equity investees	511		380		Nonconsolidated equity investees	399		425
Inventories (Note 6)		3,753		3,425
Inventories (Note 8)						Inventories (Note 8)	4,586		4,355
Prepaid expenses and other current assets	Prepaid expenses and other current assets	805		790		Prepaid expenses and other current assets	839		777
Total current assets	Total current assets	12,122		11,897		Total current assets	12,596		12,309
Long-term assets	Long-term assets					Long-term assets
Property, plant and equipment	Property, plant and equipment	9,044		9,011		Property, plant and equipment	9,333		9,358
Accumulated depreciation	Accumulated depreciation	(4,848)		(4,756)		Accumulated depreciation	(4,952)		(4,936)
Property, plant and equipment, net	Property, plant and equipment, net	4,196		4,255		Property, plant and equipment, net	4,381		4,422
Investments and advances related to equity method investees	Investments and advances related to equity method investees	1,592		1,441		Investments and advances related to equity method investees	1,592		1,538
Goodwill	Goodwill	1,290		1,293		Goodwill	1,286		1,287
Other intangible assets, net	Other intangible assets, net	964		963		Other intangible assets, net	917		900
Pension assets		1,085		1,042
Other assets (Note 7)		1,713		1,733
Pension assets (Note 4)						Pension assets (Note 4)	1,506		1,488
Other assets (Note 9)						Other assets (Note 9)	1,844		1,766
Total assets	Total assets	$	22,962	$	22,624	Total assets	$	24,122	$	23,710

LIABILITIES	LIABILITIES					LIABILITIES
Current liabilities	Current liabilities					Current liabilities
Accounts payable (principally trade)	Accounts payable (principally trade)	$	3,279	$	2,820	Accounts payable (principally trade)	$	3,497	$	3,021
Loans payable (Note 8)		93		169
Commercial paper (Note 8)		317		323
Loans payable (Note 10)						Loans payable (Note 10)	243		208
Commercial paper (Note 10)						Commercial paper (Note 10)	311		313
Accrued compensation, benefits and retirement costs	Accrued compensation, benefits and retirement costs	393		484		Accrued compensation, benefits and retirement costs	411		683
Current portion of accrued product warranty (Note 9)		623		674
Current portion of accrued product warranty (Note 11)						Current portion of accrued product warranty (Note 11)	798		755
Current portion of deferred revenue (Note 2)	Current portion of deferred revenue (Note 2)	773		691		Current portion of deferred revenue (Note 2)	883		855

Other accrued expenses (Note 7)		1,121		1,112
Current maturities of long-term debt (Note 8)		61		62
Other accrued expenses (Note 9)						Other accrued expenses (Note 9)	1,300		1,190
Current maturities of long-term debt (Note 10)						Current maturities of long-term debt (Note 10)	69		59
Total current liabilities	Total current liabilities	6,660		6,335		Total current liabilities	7,512		7,084
Long-term liabilities	Long-term liabilities					Long-term liabilities
Long-term debt (Note 8)		3,620		3,610
Pensions and other postretirement benefits		621		630
Accrued product warranty (Note 9)		692		672
Long-term debt (Note 10)						Long-term debt (Note 10)	3,502		3,579
Pensions and other postretirement benefits (Note 4)						Pensions and other postretirement benefits (Note 4)	593		604
Accrued product warranty (Note 11)						Accrued product warranty (Note 11)	709		684
Deferred revenue (Note 2)	Deferred revenue (Note 2)	828		840		Deferred revenue (Note 2)	877		850
Other liabilities (Note 7)		1,510		1,548
Other liabilities (Note 9)						Other liabilities (Note 9)	1,566		1,508
Total liabilities	Total liabilities	$	13,931	$	13,635	Total liabilities	$	14,759	$	14,309

Commitments and contingencies (Note 10)		0		0
Commitments and contingencies (Note 12)						Commitments and contingencies (Note 12)	0		0

EQUITY	EQUITY					EQUITY
Cummins Inc. shareholders’ equity	Cummins Inc. shareholders’ equity					Cummins Inc. shareholders’ equity
Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.4 shares issued		$	2,393	$	2,404
Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.5 shares issued						Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.5 shares issued	$	2,411	$	2,427
Retained earnings	Retained earnings	15,825		15,419		Retained earnings	16,952		16,741
Treasury stock, at cost, 76.2 and 74.8 shares		(8,172)		(7,779)
Treasury stock, at cost, 81.4 and 80.0 shares						Treasury stock, at cost, 81.4 and 80.0 shares	(9,412)		(9,123)

Accumulated other comprehensive loss (Note 11)		(1,937)		(1,982)
Accumulated other comprehensive loss (Note 13)						Accumulated other comprehensive loss (Note 13)	(1,515)		(1,571)

Total Cummins Inc. shareholders’ equity	Total Cummins Inc. shareholders’ equity	8,109		8,062		Total Cummins Inc. shareholders’ equity	8,436		8,474
Noncontrolling interests	Noncontrolling interests	922		927		Noncontrolling interests	927		927
Total equity	Total equity	$	9,031	$	8,989	Total equity	$	9,363	$	9,401
Total liabilities and equity	Total liabilities and equity	$	22,962	$	22,624	Total liabilities and equity	$	24,122	$	23,710

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

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CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Three months ended					Three months ended
In millions	In millions	April 4, 2021		March 29, 2020		In millions	March 31, 2022		April 4, 2021
CASH FLOWS FROM OPERATING ACTIVITIES	CASH FLOWS FROM OPERATING ACTIVITIES					CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income	Consolidated net income	$	611	$	528	Consolidated net income	$	423	$	611
Adjustments to reconcile consolidated net income to net cash provided by operating activities	Adjustments to reconcile consolidated net income to net cash provided by operating activities					Adjustments to reconcile consolidated net income to net cash provided by operating activities
Depreciation and amortization	Depreciation and amortization	170		168		Depreciation and amortization	161		170

Deferred income taxes	Deferred income taxes	8		(11)		Deferred income taxes	(66)		8
Equity in income of investees, net of dividends	Equity in income of investees, net of dividends	(136)		(78)		Equity in income of investees, net of dividends	(76)		(136)
Pension and OPEB expense (Note 3)		20		27
Pension contributions and OPEB payments (Note 3)		(51)		(60)
Pension and OPEB expense (Note 4)						Pension and OPEB expense (Note 4)	9		20
Pension contributions and OPEB payments (Note 4)						Pension contributions and OPEB payments (Note 4)	(43)		(51)
Share-based compensation expense	Share-based compensation expense	8		4		Share-based compensation expense	5		8

Restructuring payments		0		(48)

Loss (gain) on corporate owned life insurance		32		(17)

Russian suspension costs (Note 3)						Russian suspension costs (Note 3)	158		—
Asset impairments and other charges						Asset impairments and other charges	36		—
Loss on corporate owned life insurance						Loss on corporate owned life insurance	37		32

Foreign currency remeasurement and transaction exposure	Foreign currency remeasurement and transaction exposure	1		3		Foreign currency remeasurement and transaction exposure	(7)		1
Changes in current assets and liabilities
Changes in current assets and liabilities, net of acquisitions						Changes in current assets and liabilities, net of acquisitions
Accounts and notes receivable	Accounts and notes receivable	(374)		107		Accounts and notes receivable	(417)		(374)
Inventories	Inventories	(336)		(171)		Inventories	(289)		(336)
Other current assets	Other current assets	(24)		79		Other current assets	(57)		(24)
Accounts payable	Accounts payable	465		171		Accounts payable	484		465
Accrued expenses	Accrued expenses	(24)		(321)		Accrued expenses	(251)		(24)
Changes in other liabilities	Changes in other liabilities	0		28		Changes in other liabilities	70		—

Other, net	Other, net	(31)		(30)		Other, net	(13)		(31)
Net cash provided by operating activities	Net cash provided by operating activities	339		379		Net cash provided by operating activities	164		339

CASH FLOWS FROM INVESTING ACTIVITIES	CASH FLOWS FROM INVESTING ACTIVITIES					CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	Capital expenditures	(87)		(75)		Capital expenditures	(104)		(87)
Investments in internal use software	Investments in internal use software	(11)		(8)		Investments in internal use software	(11)		(11)

Investments in and advances to equity investees	Investments in and advances to equity investees	(24)		(7)		Investments in and advances to equity investees	(32)		(24)

Acquisition of a business, net of cash acquired (Note 14)						Acquisition of a business, net of cash acquired (Note 14)	83		—

Investments in marketable securities—acquisitions	Investments in marketable securities—acquisitions	(143)		(116)		Investments in marketable securities—acquisitions	(197)		(143)
Investments in marketable securities—liquidations (Note 5)		207		95
Investments in marketable securities—liquidations (Note 7)						Investments in marketable securities—liquidations (Note 7)	254		207

Cash flows from derivatives not designated as hedges	Cash flows from derivatives not designated as hedges	14		6		Cash flows from derivatives not designated as hedges	(2)		14
Other, net	Other, net	19		6		Other, net	(1)		19
Net cash used in investing activities	Net cash used in investing activities	(25)		(99)		Net cash used in investing activities	(10)		(25)

CASH FLOWS FROM FINANCING ACTIVITIES	CASH FLOWS FROM FINANCING ACTIVITIES					CASH FLOWS FROM FINANCING ACTIVITIES

Net (payments) borrowings of commercial paper		(6)		957
Net payments of commercial paper						Net payments of commercial paper	(2)		(6)
Payments on borrowings and finance lease obligations	Payments on borrowings and finance lease obligations	(16)		(10)		Payments on borrowings and finance lease obligations	(24)		(16)
Net (payments) borrowings under short-term credit agreements		(102)		25
Net borrowings (payments) under short-term credit agreements						Net borrowings (payments) under short-term credit agreements	29		(102)
Distributions to noncontrolling interests	Distributions to noncontrolling interests	(13)		(13)		Distributions to noncontrolling interests	(14)		(13)
Dividend payments on common stock	Dividend payments on common stock	(197)		(195)		Dividend payments on common stock	(207)		(197)
Repurchases of common stock	Repurchases of common stock	(418)		(550)		Repurchases of common stock	(311)		(418)
Proceeds from issuing common stock	Proceeds from issuing common stock	18		13		Proceeds from issuing common stock	9		18

Other, net	Other, net	(11)		7		Other, net	23		(11)
Net cash (used in) provided by financing activities		(745)		234
Net cash used in financing activities						Net cash used in financing activities	(497)		(745)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	(12)		48		EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	27		(12)
Net (decrease) increase in cash and cash equivalents		(443)		562
Net decrease in cash and cash equivalents						Net decrease in cash and cash equivalents	(316)		(443)
Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	3,401		1,129		Cash and cash equivalents at beginning of year	2,592		3,401
CASH AND CASH EQUIVALENTS AT END OF PERIOD	CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	2,958	$	1,691	CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	2,276	$	2,958

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

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CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

Three months ended
In millions, except per share amounts Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Common Stock Held in Trust Accumulated Other Comprehensive Loss Total Cummins Inc. Shareholders’ Equity Noncontrolling Interests Total Equity
BALANCE AT DECEMBER 31, 2020 $ 556 $ 1,848 $ 15,419 $ (7,779) $ 0 $ (1,982) $ 8,062 $ 927 $ 8,989
Net income 603 603 8 611
Other comprehensive income, net of tax (Note 11) 0 45 45 — 45
Repurchases of common stock 0 (418) 0 (418) — (418)
Cash dividends on common stock, $1.35 per share (197) (197) — (197)
Distributions to noncontrolling interests — (13) (13)
Share-based awards (6) 24 0 18 — 18
Other shareholder transactions (5) 1 (4) 0 (4)
BALANCE AT APRIL 4, 2021 $ 556 $ 1,837 $ 15,825 $ (8,172) $ 0 $ (1,937) $ 8,109 $ 922 $ 9,031
BALANCE AT DECEMBER 31, 2019 $ 556 $ 1,790 $ 14,416 $ (7,225) $ (2) $ (2,028) $ 7,507 $ 958 $ 8,465
Adoption of new accounting standards (4) (4) — (4)
Net income 511 511 17 528
Other comprehensive loss, net of tax (Note 11) 0 (222) (222) (17) (239)
Issuance of common stock 9 9 — 9
Employee benefits trust activity 17 0 1 18 — 18
Repurchases of common stock 0 (550) 0 (550) — (550)
Cash dividends on common stock, $1.311 per share (195) (195) — (195)
Distributions to noncontrolling interests — (13) (13)
Share-based awards (18) 31 0 13 — 13
Other shareholder transactions (19) (19) 5 (14)
BALANCE AT MARCH 29, 2020 $ 556 $ 1,779 $ 14,728 $ (7,744) $ (1) $ (2,250) $ 7,068 $ 950 $ 8,018


	Three months ended
In millions, except per share amounts	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Cummins Inc. Shareholders’ Equity		Noncontrolling Interests		Total Equity
BALANCE AT DECEMBER 31, 2021	$	556	$	1,871	$	16,741	$	(9,123)	$	(1,571)	$	8,474	$	927	$	9,401

Net income					418						418		5		423
Other comprehensive income (loss), net of tax (Note 13)									56		56		(8)		48


Repurchases of common stock			0				(311)		0		(311)		—		(311)
Cash dividends on common stock, $1.45 per share					(207)						(207)		—		(207)
Distributions to noncontrolling interests											—		(14)		(14)
Share-based awards			(9)				18		0		9		—		9

Other shareholder transactions			(7)				4				(3)		17		14
BALANCE AT MARCH 31, 2022	$	556	$	1,855	$	16,952	$	(9,412)	$	(1,515)	$	8,436	$	927	$	9,363

BALANCE AT DECEMBER 31, 2020	$	556	$	1,848	$	15,419	$	(7,779)	$	(1,982)	$	8,062	$	927	$	8,989

Net income					603						603		8		611
Other comprehensive income, net of tax (Note 13)									45		45		—		45


Repurchases of common stock			0				(418)		0		(418)		—		(418)
Cash dividends on common stock, $1.35 per share					(197)						(197)		—		(197)
Distributions to noncontrolling interests											—		(13)		(13)
Share-based awards			(6)				24		0		18		—		18

Other shareholder transactions			(5)				1				(4)		—		(4)
BALANCE AT APRIL 4, 2021	$	556	$	1,837	$	15,825	$	(8,172)	$	(1,937)	$	8,109	$	922	$	9,031

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

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CUMMINS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Overview

Cummins Inc. (“Cummins,” “we,” “our” or “us”) was founded in 1919 as Cummins Engine Company, a corporation in Columbus, Indiana, and one of the first diesel engine manufacturers. In 2001, we changed our name to Cummins Inc. We are a global power leader that designs, manufactures, distributes and services diesel, natural gas, electric and hybrid powertrains and powertrain-related components including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems, automated transmissions, electric power generation systems, batteries, electrified power systems, hydrogen production and fuel cell products. We sell our products to original equipment manufacturers (OEMs), distributors, dealers and other customers worldwide. We serve our customers through a service network of ~~over~~approximately 500 wholly-owned, joint venture and independent distributor locations and ~~over 9,000~~more than 10,000 Cummins certified dealer locations ~~with service to~~in approximately 190 countries and territories.

Reporting Period

Beginning in 2022, we transitioned to a Gregorian calendar with our reporting period ending on the last day of the quarterly calendar period. In 2021 and prior, our reporting period ended on the Sunday closest to the last day of the quarterly calendar period. The first quarters of 2022 and 2021 ended on March 31 and April 4, respectively. Our fiscal year ends on December 31, regardless of the day of the week on which December 31 falls.

Interim Condensed Financial Statements

The unaudited Condensed Consolidated Financial Statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of operations, financial position and cash flows. All such adjustments are of a normal recurring nature. The Condensed Consolidated Financial Statements were prepared in accordance with accounting principles in the United States of America (GAAP) pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Certain information and footnote disclosures normally included in annual financial statements were condensed or omitted as permitted by such rules and regulations.

These interim condensed financial statements should be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021. Our interim period financial results for the three month periods presented are not necessarily indicative of results to be expected for any other interim period or for the entire year. The year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements but does not include all required annual disclosures.

Reclassifications

Certain amounts for prior year periods were reclassified to conform to the current year presentation.

Use of Estimates in Preparation of Financial Statements

Preparation of financial statements requires management to make estimates and assumptions that affect reported amounts presented and disclosed in our Condensed Consolidated Financial Statements. Significant estimates and assumptions in these Condensed Consolidated Financial Statements require the exercise of judgment. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates.

~~Reporting Period~~

Our reporting period usually ends on the Sunday closest to the last day of the quarterly calendar period. The first quarters of 2021 and 2020 ended on April 4 and March 29, respectively. Our fiscal year ends on December 31, regardless of the day of the week on which December 31 falls.

Weighted-Average Diluted Shares Outstanding

The weighted-average diluted common shares outstanding exclude the anti-dilutive effect of certain stock options. The options excluded from diluted earnings per share were as follows:

Three months ended
April 4,
2021 March 29,
2020
Options excluded 2,780 1,234,188

Three months ended

March 31,
2022

April 4,
2021

Options excluded

20,463

2,780

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NOTE 2. REVENUE FROM CONTRACTS WITH CUSTOMERS

Long-term Contracts

The majority of our contracts are for a period of less than one year. We have certain long-term maintenance agreements, construction contracts and extended warranty coverage arrangements that span a period in excess of one year. The aggregate amount of the transaction price for long-term maintenance agreements and construction contracts allocated to performance obligations that were not satisfied as of ~~April 4, 2021,~~March 31, 2022, was ~~$847~~$736 million. We expect to recognize the related revenue of ~~$152~~$112 million over the next 12 months and ~~$695~~$624 million over periods up to 10 years. See Note 9,11, "PRODUCT WARRANTY LIABILITY," for additional disclosures on extended warranty coverage arrangements. Our other contracts generally are for a duration of less than one year, include payment terms that correspond to the timing of costs incurred when providing goods and services to our customers or represent sales-based royalties.

Deferred and Unbilled Revenue

The following is a summary of our unbilled and deferred revenue and related activity:


In millions	In millions	April 4, 2021		December 31, 2020		In millions	March 31, 2022		December 31, 2021
Unbilled revenue	Unbilled revenue	$	153	$	114	Unbilled revenue	$	138	$	100
Deferred revenue, primarily extended warranty	Deferred revenue, primarily extended warranty	1,601		1,531		Deferred revenue, primarily extended warranty	1,760		1,705

We recognized revenue of ~~$154~~$240 million for the three months ended ~~April 4, 2021,~~March 31, 2022, compared with ~~$112~~$169 million for the comparable period in ~~2020,~~2021, that was included in the deferred revenue balance at the beginning of each year. We did not record any impairment losses on our unbilled revenues during the three months ended March 31, 2022 or April 4, ~~2021 or March 29, 2020.~~2021.

Disaggregation of Revenue

Consolidated Revenue

The table below presents our consolidated sales by geographic area. Net sales attributed to geographic areas were based on the location of the customer.


		Three months ended				Three months ended
In millions	In millions	April 4, 2021		March 29, 2020			In millions	March 31, 2022		April 4, 2021
United States	United States	$	3,060	$	2,852		United States	$	3,457	$	3,060

China	China	957		522			China	653		957

India	India	330		170			India	309		330

Other international	Other international	1,745		1,467			Other international	1,966		1,745
Total net sales	Total net sales	$	6,092	$	5,011		Total net sales	$	6,385	$	6,092

Segment Revenue

Engine segment external sales by market were as follows:


		Three months ended				Three months ended
In millions	In millions	April 4, 2021		March 29, 2020			In millions	March 31, 2022		April 4, 2021
Heavy-duty truck	Heavy-duty truck	$	613	$	519		Heavy-duty truck	$	684	$	613
Medium-duty truck and bus	Medium-duty truck and bus	483		490			Medium-duty truck and bus	591		483
Light-duty automotive	Light-duty automotive	474		327			Light-duty automotive	487		474
Total on-highway	Total on-highway	1,570		1,336			Total on-highway	1,762		1,570
Off-highway	Off-highway	325		243			Off-highway	287		325
Total sales	Total sales	$	1,895	$	1,579		Total sales	$	2,049	$	1,895

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Distribution segment external sales by region were as follows:


		Three months ended				Three months ended
In millions	In millions	April 4, 2021		March 29, 2020			In millions	March 31, 2022		April 4, 2021
North America	North America	$	1,166	$	1,245		North America	$	1,371	$	1,166
Asia Pacific	Asia Pacific	213		192			Asia Pacific	244		213
Europe	Europe	163		135			Europe	143		163
Russia							Russia	136		57
China	China	85		68			China	82		85
Russia		57		41
India							India	48		49
Africa and Middle East	Africa and Middle East	54		51			Africa and Middle East	46		54
India		49		36
Latin America	Latin America	40		39			Latin America	41		40
Total sales	Total sales	$	1,827	$	1,807		Total sales	$	2,111	$	1,827

Distribution segment external sales by product line were as follows:


		Three months ended				Three months ended
In millions	In millions	April 4, 2021		March 29, 2020			In millions	March 31, 2022		April 4, 2021
Parts	Parts	$	754	$	783		Parts	$	926	$	754
Engines							Engines	438		333
Power generation	Power generation	416		375			Power generation	398		416
Engines		333		322
Service	Service	324		327			Service	349		324
Total sales	Total sales	$	1,827	$	1,807		Total sales	$	2,111	$	1,827

Components segment external sales by business were as follows:


		Three months ended				Three months ended
In millions	In millions	April 4, 2021		March 29, 2020			In millions	March 31, 2022		April 4, 2021
Emission solutions	Emission solutions	$	966	$	570		Emission solutions	$	808	$	966
Filtration	Filtration	301		249			Filtration	308		301
Turbo technologies	Turbo technologies	225		158			Turbo technologies	197		225
Automated transmissions							Automated transmissions	134		115
Electronics and fuel systems	Electronics and fuel systems	117		56			Electronics and fuel systems	70		117
Automated transmissions		115		82
Total sales	Total sales	$	1,724	$	1,115		Total sales	$	1,517	$	1,724

Power Systems segment external sales by product line were as follows:


		Three months ended				Three months ended
In millions	In millions	April 4, 2021		March 29, 2020			In millions	March 31, 2022		April 4, 2021
Power generation	Power generation	$	351	$	269		Power generation	$	399	$	351
Industrial	Industrial	179		165			Industrial	188		179
Generator technologies	Generator technologies	82		66			Generator technologies	96		82
Total sales	Total sales	$	612	$	500		Total sales	$	683	$	612

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NOTE 3. RUSSIAN OPERATIONS

On March 17, 2022, the Board of Directors (the Board) decided to indefinitely suspend our operations in Russia due to the ongoing conflict in Ukraine. At the time of suspension, our Russian operations included a wholly-owned distributor in Russia, an unconsolidated joint venture and direct sales into Russia from our other business units. As a result of the suspension of operations, we evaluated the recoverability of assets in Russia and assessed other liabilities that may have been incurred. We have experienced and expect to continue to experience, an inability to collect customer receivables and may be the subject of litigation in connection with our suspension of commercial operations in Russia. We will continue to evaluate the situation as conditions evolve and may take additional actions as deemed necessary in future periods. The following summarizes the costs associated with the suspension of our Russian operations in our first quarter results on our Condensed Consolidated Statements of Net Income:

In millions

March 31,
2022

Statement of Net Income Location

Inventory write-downs

Cost of sales

Accounts receivable reserves

Other operating expense, net

Impairment and other joint venture costs

Equity, royalty and interest income from investees

Other

Other operating expense, net

Total

158

NOTE 3.4. PENSIONS AND OTHER POSTRETIREMENT BENEFITS

We sponsor funded and unfunded domestic and foreign defined benefit pension and other postretirement benefit (OPEB) plans. Contributions to these plans were as follows:


		Three months ended				Three months ended
In millions	In millions	April 4, 2021		March 29, 2020			In millions	March 31, 2022		April 4, 2021

Defined benefit pension contributions	Defined benefit pension contributions	$	42	$	56		Defined benefit pension contributions	$	33	$	42

OPEB payments, net	OPEB payments, net	9		4			OPEB payments, net	10		9

Defined contribution pension plans	Defined contribution pension plans	35		34			Defined contribution pension plans	36		35

~~During the remainder of 2021, we~~We anticipate making ~~$17 million in~~ additional defined benefit pension contributions induring the ~~U.K. and $12~~remainder of 2022 of $17 million ~~in contributions to~~for our U.S. and U.K. qualified and non-qualified ~~benefit~~pension plans. These contributions may be made from trusts or company funds either to increase pension assets or to make direct benefit payments to plan participants. We expect our ~~2021~~2022 annual net periodic pension cost to approximate ~~$79~~$31 million.

The components of net periodic pension and OPEB costs under our plans were as follows:


		Pension													Pension
		U.S. Plans				U.K. Plans				OPEB					U.S. Plans				U.K. Plans				OPEB
		Three months ended													Three months ended
In millions	In millions	April 4, 2021		March 29, 2020		April 4, 2021		March 29, 2020		April 4, 2021		March 29, 2020		In millions	March 31, 2022		April 4, 2021		March 31, 2022		April 4, 2021		March 31, 2022		April 4, 2021
Service cost	Service cost	$	35	$	34	$	8	$	7	$	0	$	0	Service cost	$	34	$	35	$	8	$	8	$	—	$	—
Interest cost	Interest cost	19		24		8		9		1		2		Interest cost	22		19		9		8		1		1
Expected return on plan assets	Expected return on plan assets	(50)		(49)		(21)		(19)		0		0		Expected return on plan assets	(52)		(50)		(20)		(21)		—		—
Amortization of prior service cost		0		0		0		1		0		0

Recognized net actuarial loss	Recognized net actuarial loss	12		10		8		8		0		0		Recognized net actuarial loss	6		12		1		8		—		—
Net periodic benefit cost		$	16	$	19	$	3	$	6	$	1	$	2
Net periodic benefit cost (credit)														Net periodic benefit cost (credit)	$	10	$	16	$	(2)	$	3	$	1	$	1

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NOTE 4.5. 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 period was as follows:


		Three months ended					Three months ended
In millions	In millions	April 4, 2021		March 29, 2020				In millions	March 31, 2022			April 4, 2021
Manufacturing entities	Manufacturing entities							Manufacturing entities
Dongfeng Cummins Engine Company, Ltd.								Dongfeng Cummins Engine Company, Ltd.	$	16		$	31
Beijing Foton Cummins Engine Co., Ltd.	Beijing Foton Cummins Engine Co., Ltd.	$	39	$	17			Beijing Foton Cummins Engine Co., Ltd.	14			39
Dongfeng Cummins Engine Company, Ltd.		31		8
Tata Cummins, Ltd.								Tata Cummins, Ltd.	9			6
Chongqing Cummins Engine Company, Ltd.	Chongqing Cummins Engine Company, Ltd.	10		9				Chongqing Cummins Engine Company, Ltd.	9			10
All other manufacturers	All other manufacturers	61		55		(1)		All other manufacturers	(10)		(1)	55

Distribution entities	Distribution entities							Distribution entities
Komatsu Cummins Chile, Ltda.	Komatsu Cummins Chile, Ltda.	6		10				Komatsu Cummins Chile, Ltda.	7			6
All other distributors	All other distributors	3		0				All other distributors	2			3

Cummins share of net income	Cummins share of net income	150		99				Cummins share of net income	47			150
Royalty and interest income	Royalty and interest income	16		30				Royalty and interest income	49			16
Equity, royalty and interest income from investees	Equity, royalty and interest income from investees	$	166	$	129			Equity, royalty and interest income from investees	$	96		$	166

(1) Includes a $28 million impairment of our joint venture with KAMAZ and $3 million of royalty charges as part of our costs associated with the suspension of our Russian operations. In addition, on February 7, 2022, we purchased Westport Fuel System Inc.'s stake in Cummins Westport Joint Venture. See NOTE 3, "RUSSIAN OPERATIONS" and NOTE 14, "ACQUISITIONS" to our Condensed Consolidated Financial Statements for additional information.								(1) Includes a $28 million impairment of our joint venture with KAMAZ and $3 million of royalty charges as part of our costs associated with the suspension of our Russian operations. In addition, on February 7, 2022, we purchased Westport Fuel System Inc.'s stake in Cummins Westport Joint Venture. See NOTE 3, "RUSSIAN OPERATIONS" and NOTE 14, "ACQUISITIONS" to our Condensed Consolidated Financial Statements for additional information.

(1) Includes $37 million in favorable adjustments related to tax changes within India's 2020-2021 Union Budget of India (India Tax Law Change) passed in March 2020.

NOTE 6. INCOME TAXES

Our effective tax rates for the three months ended March 31, 2022 and April 4, 2021, were 26.8 percent and 22.0 percent, respectively.

The three months ended March 31, 2022, contained unfavorable discrete tax items of $31 million, primarily due to $18 million of unfavorable changes associated with uncertainty in our Russian operations, $9 million of unfavorable changes in tax reserves and $4 million of net unfavorable other discrete tax items.

The three months ended April 4, 2021, contained favorable discrete items of $4 million.

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NOTE 5.7. MARKETABLE SECURITIES

A summary of marketable securities, all of which were classified as current, was as follows:


		April 4, 2021						December 31, 2020							March 31, 2022						December 31, 2021
In millions	In millions	Cost		Gross unrealized gains/(losses)(1)		Estimated fair value		Cost		Gross unrealized gains/(losses)(1)		Estimated fair value		In millions	Cost		Gross unrealized gains/(losses)(1)		Estimated fair value		Cost		Gross unrealized gains/(losses)(1)		Estimated fair value

Equity securities	Equity securities													Equity securities

Debt mutual funds		$	188	$	3	$	191	$	267	$	5	$	272
Certificates of deposit	Certificates of deposit	179		0		179		164		0		164		Certificates of deposit	$	284	$	—	$	284	$	299	$	—	$	299

Debt mutual funds														Debt mutual funds	205		(2)		203		254		2		256
Equity mutual funds	Equity mutual funds	20		6		26		19		5		24		Equity mutual funds	31		9		40		29		10		39

Debt securities	Debt securities	1		0		1		1		0		1		Debt securities	—		—		—		1		—		1

Total marketable securities	Total marketable securities	$	388	$	9	$	397	$	451	$	10	$	461	Total marketable securities	$	520	$	7	$	527	$	583	$	12	$	595

(1) Unrealized gains and losses for debt securities are recorded in other comprehensive income while unrealized gains and losses for equity securities are recorded in "Other income, net" in our Condensed Consolidated Statements of Net Income.
(1) Unrealized gains and losses for debt securities are recorded in other comprehensive income while unrealized gains and losses for equity securities are recorded in other income, net in our Condensed Consolidated Statements of Net Income.														(1) Unrealized gains and losses for debt securities are recorded in other comprehensive income while unrealized gains and losses for equity securities are recorded in other income, net in our Condensed Consolidated Statements of Net Income.

All debt securities are classified as available-for-sale. All marketable securities presented use a Level 2 fair value measure. The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 securities, and there were no transfers between Level 2 or 3 during the three months ended ~~April 4, 2021~~March 31, 2022, or the year ended December 31, ~~2020.~~2021.

A description of the valuation techniques and inputs used for our Level 2 fair value measures is as follows:

•~~Debt mutual funds~~ — The fair value measures for the vast majority of these investments are the daily net asset values published on a regulated governmental website. Daily quoted prices are available from the issuing brokerage and are used on a test basis to corroborate this Level 2 input measure.

•Certificates of deposit — These investments provide us with a contractual rate of return and generally range in maturity from three months to five years. The counterparties to these investments are reputable financial institutions with investment grade credit ratings. Since these instruments are not tradable and must be settled directly by us with the respective financial institution, our fair value measure is the financial institution's month-end statement.

•Debt mutual funds — The fair value measures for the vast majority of these investments are the daily net asset values published on a regulated governmental website. Daily quoted prices are available from the issuing brokerage and are used on a test basis to corroborate this Level 2 input measure.

•Equity mutual funds — The fair value measures for these investments are the net asset values published by the issuing brokerage. Daily quoted prices are available from reputable third-party pricing services and are used on a test basis to corroborate this Level 2 input measure.

•Debt securities — The fair value measures for these securities are broker quotes received from reputable firms. These securities are infrequently traded on a national exchange and these values are used on a test basis to corroborate our Level 2 input measure.

The proceeds from sales and maturities of marketable securities were as follows:


		Three months ended						Three months ended
In millions	In millions		April 4, 2021		March 29, 2020		In millions		March 31, 2022		April 4, 2021
Proceeds from sales of marketable securities	Proceeds from sales of marketable securities		$	163	$	53	Proceeds from sales of marketable securities		$	195	$	163
Proceeds from maturities of marketable securities	Proceeds from maturities of marketable securities		44		42		Proceeds from maturities of marketable securities		59		44
Investments in marketable securities - liquidations	Investments in marketable securities - liquidations		$	207	$	95	Investments in marketable securities - liquidations		$	254	$	207

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NOTE 6.8. INVENTORIES

Inventories are stated at the lower of cost or net realizable value. Inventories included the following:

In millions April 4,
2021 December 31,
2020
Finished products $ 2,320 $ 2,216
Work-in-process and raw materials 1,585 1,346
Inventories at FIFO cost 3,905 3,562
Excess of FIFO over LIFO (152) (137)
Total inventories $ 3,753 $ 3,425


In millions	March 31, 2022		December 31, 2021
Finished products	$	2,767	$	2,538
Work-in-process and raw materials	2,028		2,009
Inventories at FIFO cost	4,795		4,547
Excess of FIFO over LIFO	(209)		(192)
Total inventories	$	4,586	$	4,355

NOTE 7.9. SUPPLEMENTAL BALANCE SHEET DATA

Other assets included the following:

In millions April 4,
2021 December 31, 2020
Operating lease assets $ 466 $ 438
Corporate owned life insurance 462 508
Deferred income taxes 439 479
Mark-to-market valuation on interest rate locks 38 0
Other 308 308
Other assets $ 1,713 $ 1,733



In millions	March 31, 2022		December 31, 2021
Deferred income taxes	$	494	$	428
Corporate owned life insurance	455		492
Operating lease assets	440		444

Other	455		402
Other assets	$	1,844	$	1,766

Other accrued expenses included the following:


In millions	In millions	April 4, 2021		December 31, 2020		In millions	March 31, 2022		December 31, 2021
Marketing accruals	Marketing accruals	$	279	$	242	Marketing accruals	$	304	$	303
Income taxes payable						Income taxes payable	229		107
Other taxes payable	Other taxes payable	242		256		Other taxes payable	208		234
Current portion of operating lease liabilities	Current portion of operating lease liabilities	125		128		Current portion of operating lease liabilities	127		128
Income taxes payable		94		82
Other	Other	381		404		Other	432		418
Other accrued expenses	Other accrued expenses	$	1,121	$	1,112	Other accrued expenses	$	1,300	$	1,190

Other liabilities included the following:


In millions	In millions	April 4, 2021		December 31, 2020		In millions	March 31, 2022		December 31, 2021

Deferred income taxes						Deferred income taxes	$	385	$	403
Operating lease liabilities	Operating lease liabilities	$	343	$	325	Operating lease liabilities	326		326
Deferred income taxes		322		325
One-time transition tax		289		289
Long-term income taxes						Long-term income taxes	263		263
Accrued compensation	Accrued compensation	192		203		Accrued compensation	160		177
Mark-to-market valuation on interest rate locks		0		41
Mark-to-market valuation on interest rate derivatives						Mark-to-market valuation on interest rate derivatives	75		19
Other long-term liabilities	Other long-term liabilities	364		365		Other long-term liabilities	357		320
Other liabilities	Other liabilities	$	1,510	$	1,548	Other liabilities	$	1,566	$	1,508

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NOTE 8.10. DEBT

Loans Payable and Commercial Paper

Loans payable, commercial paper and the related weighted-average interest rates were as follows:


In millions	In millions	April 4, 2021			December 31, 2020			In millions	March 31, 2022			December 31, 2021

Loans payable (1)	Loans payable (1)	$	93		$	169		Loans payable (1)	$	243		$	208

Commercial paper	Commercial paper	317		(2)	323		(3)	Commercial paper	311		(2)	313		(3)

(1) Loans payable consist primarily of notes payable to various domestic and international financial institutions. It is not practicable to aggregate these notes and calculate a quarterly weighted-average interest rate.	(1) Loans payable consist primarily of notes payable to various domestic and international financial institutions. It is not practicable to aggregate these notes and calculate a quarterly weighted-average interest rate.						(1) Loans payable consist primarily of notes payable to various domestic and international financial institutions. It is not practicable to aggregate these notes and calculate a quarterly weighted-average interest rate.
(2) The weighted-average interest rate, inclusive of all brokerage fees, was negative 0.03 percent at April 4, 2021 and included $117 million of borrowings under the EUR program that were negative 0.35 percent and $200 million of borrowings under the U.S. program at 0.16 percent.
(3) The weighted-average interest rate, inclusive of all brokerage fees, was negative 0.01 percent at December 31, 2020 and included $123 million of borrowings under the EUR program that were negative 0.34 percent and $200 million of borrowings under the U.S. program at 0.19 percent.
(2) The weighted-average interest rate, inclusive of all brokerage fees, was 0.33 percent at March 31, 2022. This included $111 million of borrowings under the Europe program that were at a negative weighted-average interest rate of 0.22 percent and $200 million of borrowings under the U.S. program at a weighted-average interest rate of 0.63 percent.								(2) The weighted-average interest rate, inclusive of all brokerage fees, was 0.33 percent at March 31, 2022. This included $111 million of borrowings under the Europe program that were at a negative weighted-average interest rate of 0.22 percent and $200 million of borrowings under the U.S. program at a weighted-average interest rate of 0.63 percent.
(3) The weighted-average interest rate, inclusive of all brokerage fees, was negative 0.01 percent at December 31, 2021. This included $113 million of borrowings under the Europe program that were at a negative weighted-average interest rate of 0.39 percent and $200 million of borrowings under the U.S. program at a weighted-average interest rate of 0.21 percent.								(3) The weighted-average interest rate, inclusive of all brokerage fees, was negative 0.01 percent at December 31, 2021. This included $113 million of borrowings under the Europe program that were at a negative weighted-average interest rate of 0.39 percent and $200 million of borrowings under the U.S. program at a weighted-average interest rate of 0.21 percent.

Revolving Credit Facilities

We have access to committed credit facilities ~~that total~~totaling $3.5 billion, including the $1.5 billion 364-day facility that expires August ~~18, 2021~~17, 2022 and our $2.0 billion five-year facility that expires on August ~~22, 2023.~~18, 2026. We intend to maintain credit facilities at the current or higher aggregate amounts by renewing or replacing these facilities at or before expiration. These revolving credit facilities are maintained primarily to provide backup liquidity for our commercial paper borrowings and ~~for~~ general corporate purposes. There were no outstanding borrowings under these facilities at ~~April 4, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

At ~~April 4, 2021,~~March 31, 2022, the ~~$317~~$311 million of outstanding commercial paper effectively reduced the $3.5 billion of revolving credit capacity to $3.2 billion.

At ~~April 4, 2021,~~March 31, 2022, we also had an additional ~~$249~~$253 million available for borrowings under our international and other domestic credit facilities.

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Long-term Debt

A summary of long-term debt was as follows:


In millions	In millions	Interest Rate	April 4, 2021		December 31, 2020		In millions	Interest Rate	March 31, 2022		December 31, 2021
Long-term debt	Long-term debt						Long-term debt
Senior notes, due 2023	Senior notes, due 2023	3.65%	$	500	$	500	Senior notes, due 2023	3.65%	$	500	$	500
Senior notes, due 2025(1)	Senior notes, due 2025(1)	0.75%	500		500		Senior notes, due 2025(1)	0.75%	500		500
Debentures, due 2027	Debentures, due 2027	6.75%	58		58		Debentures, due 2027	6.75%	58		58
Debentures, due 2028	Debentures, due 2028	7.125%	250		250		Debentures, due 2028	7.125%	250		250
Senior notes, due 2030(1)	Senior notes, due 2030(1)	1.50%	850		850		Senior notes, due 2030(1)	1.50%	850		850
Senior notes, due 2043	Senior notes, due 2043	4.875%	500		500		Senior notes, due 2043	4.875%	500		500
Senior notes, due 2050	Senior notes, due 2050	2.60%	650		650		Senior notes, due 2050	2.60%	650		650
Debentures, due 2098~~(1)~~(2)	Debentures, due 2098~~(1)~~(2)	5.65%	165		165		Debentures, due 2098~~(1)~~(2)	5.65%	165		165

Other debt	Other debt		146		132		Other debt		126		110

Unamortized discount and deferred issuance costs	Unamortized discount and deferred issuance costs		(71)		(72)		Unamortized discount and deferred issuance costs		(66)		(68)
Fair value adjustments due to hedge on indebtedness	Fair value adjustments due to hedge on indebtedness		44		48		Fair value adjustments due to hedge on indebtedness		(49)		34
Finance leases	Finance leases		89		91		Finance leases		87		89
Total long-term debt	Total long-term debt		3,681		3,672		Total long-term debt		3,571		3,638
Less: Current maturities of long-term debt	Less: Current maturities of long-term debt		61		62		Less: Current maturities of long-term debt		69		59
Long-term debt	Long-term debt		$	3,620	$	3,610	Long-term debt		$	3,502	$	3,579

(1) In 2021, we entered into a series of interest rate swaps to effectively convert from a fixed rate to floating rate. See "Interest Rate Risk" below for additional information.							(1) In 2021, we entered into a series of interest rate swaps to effectively convert from a fixed rate to floating rate. See "Interest Rate Risk" below for additional information.
(2) The effective interest rate is 7.48 percent.							(2) The effective interest rate is 7.48 percent.

(1) The effective interest rate is 7.48%.

Principal payments required on long-term debt during the next five years are as follows:


In millions	In millions	2021		2022		2023		2024		2025		In millions	2022		2023		2024		2025		2026
Principal payments	Principal payments	$	51	$	57	$	534	$	30	$	506	Principal payments	$	62	$	548	$	32	$	507	$	24

Interest Rate Risk

Beginning in the second half of 2021, we entered into a series of interest rate swaps to effectively convert our $500 million senior notes, due in 2025, from a fixed rate of 0.75 percent to a floating rate equal to the three-month LIBOR plus a spread, and we also entered into a series of interest rate swaps to effectively convert $765 million of our $850 million senior notes, due in 2030, from a fixed rate of 1.50 percent to a floating rate equal to the three-month LIBOR plus a spread. The loss on the interest rate swaps was $72 million and the offsetting gain on borrowings was $80 million for the three months ended March 31, 2022.

We have interest rate lock agreements to reduce the variability of the cash flows of the interest payments on a total of $500 million of fixed rate debt forecast to be issued in 2023 to replace our senior notes at maturity. ~~We recorded a~~The following table summarizes the gains, net ~~gain~~ of ~~$61 million and net loss~~tax, recognized in other comprehensive income:


In millions	Three months ended
Type of Swap	March 31, 2022		April 4, 2021
Interest rate locks	$	39	$	61

Table of ~~$79 million in "Other comprehensive income" for the three months ended April 4, 2021 and March 29, 2020, respectively.~~Contents

Fair Value of Debt

Based on borrowing rates currently available to us for bank loans with similar terms and average maturities, considering our risk premium, the fair values and carrying values of total debt, including current maturities, were as follows:

In millions April 4,
2021 December 31,
2020
Fair value of total debt (1)
$ 4,338 $ 4,665
Carrying value of total debt 4,091 4,164
(1) The fair value of debt is derived from Level 2 inputs.


In millions	March 31, 2022		December 31, 2021
Fair value of total debt (1)	$	4,060	$	4,461
Carrying value of total debt	4,125		4,159

(1) The fair value of debt is derived from Level 2 input measures.

Shelf Registration

As a well-known seasoned issuer, we filed an automatic shelf registration of an undetermined amount of debt and equity with the SEC on February 8, 2022. Under this shelf registration we may offer, from time to time, debt securities, common stock, preferred and preference stock, depositary shares, warrants, stock purchase contracts and stock purchase units.

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NOTE 9.11. PRODUCT WARRANTY LIABILITY

A tabular reconciliation of the product warranty liability, including the deferred revenue related to our extended warranty coverage and accrued product campaigns, was as follows:


		Three months ended					Three months ended
In millions	In millions	April 4, 2021		March 29, 2020		In millions	March 31, 2022			April 4, 2021
Balance, beginning of year	Balance, beginning of year	$	2,307	$	2,389	Balance, beginning of year	$	2,425		$	2,307
Provision for base warranties issued	Provision for base warranties issued	157		97		Provision for base warranties issued	123			157
Deferred revenue on extended warranty contracts sold	Deferred revenue on extended warranty contracts sold	65		66		Deferred revenue on extended warranty contracts sold	70			65
Provision for product campaigns issued	Provision for product campaigns issued	3		2		Provision for product campaigns issued	42			3
Payments made during period	Payments made during period	(146)		(138)		Payments made during period	(132)			(146)

Amortization of deferred revenue on extended warranty contracts	Amortization of deferred revenue on extended warranty contracts	(61)		(57)		Amortization of deferred revenue on extended warranty contracts	(73)			(61)
Changes in estimates for pre-existing product warranties	Changes in estimates for pre-existing product warranties	(44)		(15)		Changes in estimates for pre-existing product warranties	(26)			(44)
Foreign currency translation and other	Foreign currency translation and other	(6)		(12)		Foreign currency translation and other	94		(1)	(6)

Balance, end of period	Balance, end of period	$	2,275	$	2,332	Balance, end of period	$	2,523		$	2,275

(1) Includes $95 million of product warranty liability related to the acquisition of Cummins Westport Joint Venture. See Note 14, "ACQUISITIONS" to our Condensed Consolidated Financial Statements for additional information.						(1) Includes $95 million of product warranty liability related to the acquisition of Cummins Westport Joint Venture. See Note 14, "ACQUISITIONS" to our Condensed Consolidated Financial Statements for additional information.

We recognized supplier recoveries of ~~$4 million and $9~~$13 million for the three months ended ~~April 4, 2021 and~~ March ~~29, 2020, respectively.~~31, 2022, compared with $4 million for the comparable period in 2021.

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Warranty related deferred revenues and warranty liabilities on our Condensed Consolidated Balance Sheets were as follows:


In millions	In millions	April 4, 2021		December 31, 2020		Balance Sheet Location	In millions	March 31, 2022		December 31, 2021		Balance Sheet Location
Deferred revenue related to extended coverage programs	Deferred revenue related to extended coverage programs						Deferred revenue related to extended coverage programs
Current portion	Current portion	$	270	$	261	Current portion of deferred revenue	Current portion	$	292	$	286	Current portion of deferred revenue
Long-term portion	Long-term portion	690		700		Deferred revenue	Long-term portion	724		700		Deferred revenue
Total	Total	$	960	$	961		Total	$	1,016	$	986

Product warranty	Product warranty						Product warranty
Current portion	Current portion	$	623	$	674	Current portion of accrued product warranty	Current portion	$	798	$	755	Current portion of accrued product warranty
Long-term portion	Long-term portion	692		672		Accrued product warranty	Long-term portion	709		684		Accrued product warranty
Total	Total	$	1,315	$	1,346		Total	$	1,507	$	1,439

Total warranty accrual	Total warranty accrual	$	2,275	$	2,307		Total warranty accrual	$	2,523	$	2,425

Engine System Campaign Accrual

During 2017, the California Air Resources Board (CARB) and the U.S. Environmental Protection Agency (EPA) selected certain of our pre-2013 model year engine systems for additional emissions testing. Some of these engine systems failed CARB and EPA tests as a result of degradation of an aftertreatment component. In the second quarter of 2018, we reached agreement with the CARB and EPA regarding our plans to address the affected populations. From the fourth quarter of 2017 through the second quarter of 2018, we recorded charges for the expected costs of field campaigns to repair these engine systems.

The campaigns launched in the third quarter of 2018 are being completed in phases across the affected population. The total engine system campaign charge, excluding supplier recoveries, was $410 million. In the fourth quarter of 2020, we recorded an additional $20 million charge related to this campaign, as a change in estimate, to bring the total campaign, excluding supplier recoveries, to $430 million. At ~~April 4, 2021,~~March 31, 2022, the remaining accrual balance was ~~$129~~$72 million.

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NOTE ~~10.~~12. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

We are subject to numerous lawsuits and claims arising out of the ordinary course of our business, including actions related to product liability; personal injury; the use and performance of our products; warranty matters; product recalls; patent, trademark or other intellectual property infringement; contractual liability; the conduct of our business; tax reporting in foreign jurisdictions; distributor termination; workplace safety; and environmental matters. We also have been identified as a potentially responsible party at multiple waste disposal sites under U.S. federal and related state environmental statutes and regulations and may have joint and several liability for any investigation and remediation costs incurred with respect to such sites. We have denied liability with respect to many of these lawsuits, claims and proceedings and are vigorously defending such lawsuits, claims and proceedings. We carry various forms of commercial, property and casualty, product liability and other forms of insurance; however, such insurance may not be applicable or adequate to cover the costs associated with a judgment against us with respect to these lawsuits, claims and proceedings. We do not believe that these lawsuits are material individually or in the aggregate. While we believe we have also established adequate accruals for our expected future liability with respect to pending lawsuits, claims and proceedings, where the nature and extent of any such liability can be reasonably estimated based upon then presently available information, there can be no assurance that the final resolution of any existing or future lawsuits, claims or proceedings will not have a material adverse effect on our business, results of operations, financial condition or cash flows.

We conduct significant business operations in Brazil that are subject to the Brazilian federal, state and local labor, social security, tax and customs laws. While we believe we comply with such laws, they are complex, subject to varying interpretations and we are often engaged in litigation regarding the application of these laws to particular circumstances.

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On April 29, 2019, we announced that we were conducting a formal internal review of our emissions certification process and compliance with emission standards for our pick-up truck applications, following conversations with the EPA and CARB regarding certification of our engines in model year 2019 RAM 2500 and 3500 trucks. This review is being conducted with external advisors as we strive to ensure the certification and compliance processes for all of our pick-up truck applications are consistent with our internal policies, engineering standards and applicable laws. In addition, we voluntarily disclosed our formal internal review to the regulators and to other government agencies, the Department of Justice (DOJ) and the SEC, and worked cooperatively with them to ensure a complete and thorough review. We fully cooperated with the DOJ's and the SEC's information requests and inquiries and, based on recent communications with these agencies, we do not expect further inquiries. During conversations with the EPA and CARB about the effectiveness of our pick-up truck applications, the regulators raised concerns that certain aspects of our emissions systems may reduce the effectiveness of our emissions control systems and thereby act as defeat devices. As a result, our internal review focuses, in part, on the regulators’ concerns. We are working closely with the regulators to enhance our emissions systems to improve the effectiveness of all of our pick-up truck applications and to fully address the regulators’ requirements. Based on discussions with the regulators, we have developed a new calibration for the engines in model year 2019 RAM 2500 and 3500 trucks that has been included in all engines shipped since September 2019. During our ongoing discussions, the regulators ~~have asked us~~turned their attention to ~~look at~~ other model years and other ~~engines.~~engines, most notably our pick-up truck applications for RAM 2500 and 3500 trucks for model years 2013 through 2018. In connection with these and other ongoing discussions with the EPA and CARB, we are developing a new software calibration and will recall model years 2013 through 2018 RAM 2500 and 3500 trucks. We accrued $30 million for the recall during the first quarter of 2022, an amount that reflects our current estimate of the cost of the recall.

We will continue to work together closely with the relevant regulators to develop and implement recommendations for improvement and seek to reach further resolutions as part of our ongoing commitment to compliance. Due to ~~the continuing nature of our formal review, our ongoing cooperation with our regulators and~~ the presence of many unknown facts and circumstances, we ~~cannot predict~~are not yet able to estimate any further financial impact of these matters. It is possible that the ~~final outcome~~consequences of ~~this~~any remediation plans resulting from our formal review and these regulatory processes ~~and we cannot provide assurance that the matter will not~~could have a ~~materially~~material adverse impact on our results of operations and cash flows.

Guarantees and Commitments

Periodically, we enter into guarantee arrangements, including guarantees of non-U.S. distributor financings, residual value guarantees on equipment under operating leases and other miscellaneous guarantees of joint ventures or third-party obligations. At ~~April 4, 2021,~~March 31, 2022, the maximum potential loss related to these guarantees was ~~$31~~$39 million.

We have arrangements with certain suppliers that require us to purchase minimum volumes or be subject to monetary penalties. At ~~April 4, 2021,~~March 31, 2022, if we were to stop purchasing from each of these suppliers, the aggregate amount of the penalty would be approximately ~~$74~~$136 million. These arrangements enable us to secure supplies of critical components and IT services. We do not currently anticipate paying any penalties under these contracts.

We enter into physical forward contracts with suppliers of platinum and palladium to purchase certain volumes of the commodities at contractually stated prices for various periods, which generally fall within two years. At ~~April 4, 2021,~~March 31, 2022, the total commitments under these contracts were ~~$39~~$64 million. These arrangements enable us to guarantee the prices of these commodities, which otherwise are subject to market volatility.

We have guarantees with certain customers that require us to satisfactorily honor contractual or regulatory obligations, or compensate for monetary losses related to nonperformance. These performance bonds and other performance-related guarantees were ~~$100~~$104 million at ~~April 4, 2021.~~

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March 31, 2022.

Indemnifications

Periodically, we enter into various contractual arrangements where we agree to indemnify a third-party against certain types of losses. Common types of indemnities include:

•product liability and license, patent or trademark indemnifications;

•asset sale agreements where we agree to indemnify the purchaser against future environmental exposures related to the asset sold; and

•any contractual agreement where we agree to indemnify the counterparty for losses suffered as a result of a misrepresentation in the contract.

We regularly evaluate the probability of having to incur costs associated with these indemnities and accrue for expected losses that are probable. Because the indemnifications are not related to specified known liabilities and due to their uncertain nature, we are unable to estimate the maximum amount of the potential loss associated with these indemnifications.

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NOTE ~~11.~~13. ACCUMULATED OTHER COMPREHENSIVE LOSS

Following are the changes in accumulated other comprehensive income (loss) by component for the three months ended:

In millions Change in
pensions and
other
postretirement
defined benefit
plans Foreign
currency
translation
adjustment Unrealized gain
(loss) on
derivatives Total
attributable to
Cummins Inc. Noncontrolling
interests Total
Balance at December 31, 2020 $ (735) $ (1,204) $ (43) $ (1,982)
Other comprehensive income before reclassifications
Before-tax amount 15 (60) 93 48 $ 0 $ 48
Tax (expense) benefit (3) 4 (22) (21) 0 (21)
After-tax amount 12 (56) 71 27 0 27
Amounts reclassified from accumulated other comprehensive income(1)
17 0 1 18 0 18
Net current period other comprehensive income (loss) 29 (56) 72 (2) 45 $ 0 $ 45
Balance at April 4, 2021 $ (706) $ (1,260) $ 29 $ (1,937)
Balance at December 31, 2019 $ (734) $ (1,285) $ (9) $ (2,028)
Other comprehensive income before reclassifications
Before-tax amount (19) (148) (95) (262) $ (17) $ (279)
Tax benefit 5 3 18 26 0 26
After-tax amount (14) (145) (77) (236) (17) (253)
Amounts reclassified from accumulated other comprehensive income (loss)(1)
16 0 (2) 14 0 14
Net current period other comprehensive income (loss) 2 (145) (79) (2) (222) $ (17) $ (239)
Balance at March 29, 2020 $ (732) $ (1,430) $ (88) $ (2,250)
(1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure.
(2) Primarily related to interest rate lock activity. See the Interest Rate Risk section in NOTE 8 "DEBT" for additional information.



In millions	Change in pensions and other postretirement defined benefit plans		Foreign currency translation adjustment		Unrealized gain (loss) on derivatives			Total attributable to Cummins Inc.		Noncontrolling interests		Total
Balance at December 31, 2021	$	(346)	$	(1,208)	$	(17)		$	(1,571)
Other comprehensive income before reclassifications
Before-tax amount	14		11		36			61		$	(8)	$	53
Tax (expense) income	(4)		1		(7)			(10)		—		(10)
After-tax amount	10		12		29			51		(8)		43
Amounts reclassified from accumulated other comprehensive income(1)	6		—		(1)			5		—		5

Net current period other comprehensive income (loss)	16		12		28		(2)	56		$	(8)	$	48
Balance at March 31, 2022	$	(330)	$	(1,196)	$	11		$	(1,515)

Balance at December 31, 2020	$	(735)	$	(1,204)	$	(43)		$	(1,982)
Other comprehensive income before reclassifications
Before-tax amount	15		(60)		93			48		$	—	$	48
Tax (expense) benefit	(3)		4		(22)			(21)		—		(21)
After-tax amount	12		(56)		71			27		—		27
Amounts reclassified from accumulated other comprehensive income(1)	17		—		1			18		—		18
Net current period other comprehensive income (loss)	29		(56)		72		(2)	45		$	—	$	45
Balance at April 4, 2021	$	(706)	$	(1,260)	$	29		$	(1,937)

(1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive income and the related tax effects are immaterial for separate disclosure.
(2) Primarily related to interest rate lock activity. See the Interest Rate Risk section in NOTE 10, "DEBT" for additional information.

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NOTE 14. ACQUISITIONS

Completed Acquisitions

On February 7, 2022, we purchased Westport Fuel System Inc.'s stake in the Cummins Westport Joint Venture. We will continue to operate the business as the sole owner. The purchase price was $42 million and was allocated primarily to cash, warranty and deferred revenue related to extended coverage contracts. The results of the business were reported in our Engine segment. Pro forma financial information for the acquisition was not presented as the effects are not material to our Condensed Consolidated Financial Statements.

Pending Acquisitions

On February 9, 2022, we reached an agreement with Altra Industrial Motion Corp to acquire its Jacobs Vehicle Systems business and closed the transaction in April 2022. Sales of this business were $194 million in 2021. The purchase price was $346 million in cash, subject to typical adjustments related to closing working capital and other amounts and does not contain any contingent consideration. At this time, we have not completed the purchase price allocation, but expect to record approximately $270 million to $300 million of goodwill and intangibles. This acquisition will be reported in our Components segment.

On February 21, 2022, we entered into an Agreement and Plan of Merger (the Merger Agreement) with Meritor, Inc. (Meritor) and Rose NewCo Inc. (Merger Sub) pursuant to which we agreed to acquire Meritor, a global leader of drivetrain, mobility, braking, aftermarket and electric powertrain solutions for commercial vehicle and industrial markets. At closing, Merger Sub will merge into Meritor with Meritor as the surviving entity and becoming our wholly owned subsidiary. This acquisition will be reported in our Components and New Power segments. Pursuant to the terms of the Merger Agreement, we will pay $36.50 in cash per share of Meritor common stock, for a total transaction value of approximately $3.7 billion, including assumed debt and net of acquired cash. We plan to fund this acquisition with a combination of cash, commercial paper and long-term debt.

The Board of Directors of Meritor recommended that Meritor shareholders vote in favor of the transaction at a Special Meeting of Shareholders to be held on May 26, 2022. The transaction is expected to close by the end of 2022 subject to customary closing conditions and receipt of applicable regulatory approvals. The Merger Agreement contains certain customary termination rights, subject to certain limitations, that could result in either us or Meritor having to pay a termination fee to the other party. Should the Merger Agreement be terminated under such specified circumstances, Meritor could be required to pay us approximately a $74 million termination fee, and we could be required to pay Meritor a $160 million termination fee.

NOTE ~~12.~~15. OPERATING SEGMENTS

Operating segments under GAAP are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (CODM), or decision-making group, in deciding how to allocate resources and in assessing performance. Our CODM is the President and Chief Operating Officer.

Our reportable operating segments consist of Engine, Distribution, Components, Power Systems and New Power. This reporting structure is organized according to the products and markets each segment serves. The Engine segment produces engines (15 liters and smaller) and associated parts for sale to customers in on-highway and various off-highway markets. Our engines are used in trucks of all sizes, buses and recreational vehicles, as well as in various industrial applications, including construction, agriculture, power generation systems and other off-highway applications. The Distribution segment includes wholly-owned and partially-owned distributorships engaged in wholesaling engines, generator sets and service parts, as well as performing service and repair activities on our products and maintaining relationships with various OEMs throughout the world. The Components segment sells filtration products, aftertreatment systems, turbochargers, electronics, fuel systems and automated transmissions. The Power Systems segment is an integrated power provider, which designs, manufactures and sells engines (16 liters and larger) for industrial applications (including mining, oil and gas, marine and rail), standby and prime power generator sets, alternators and other power components. The New Power segment designs, manufactures, sells and supports hydrogen production solutions as well as electrified power systems ranging from fully electric to hybrid along with innovative components and subsystems, including battery and fuel cell technologies. The New Power segment is currently in the development phase with a primary focus on research and development activities for our power systems, components and subsystems. We continue to serve all our markets as they adopt electrification and alternative power technologies, meeting the needs of our OEM partners and end customers.

We use segment earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests (EBITDA) as the primary basis for the CODM to evaluate the performance of each of our reportable operating segments. 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. Segment amounts exclude certain expenses not specifically identifiable to segments.

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The accounting policies of our operating segments are the same as those applied in our Condensed Consolidated Financial Statements. We prepared the financial results of our operating segments on a basis that is consistent with the manner in which we internally disaggregate financial information to assist in making internal operating decisions. We allocate certain common costs and expenses, primarily corporate functions, among segments differently than we would for stand-alone financial information prepared in accordance with GAAP. These include certain costs and expenses of shared services, such as information technology, human resources, legal, finance and supply chain management. We do not allocate gains or losses of corporate owned life insurance to individual segments. EBITDA may not be consistent with measures used by other companies.

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Summarized financial information regarding our reportable operating segments for the three months ended is shown in the table below:

In millions Engine Distribution Components Power Systems New Power Total Segments
Intersegment Eliminations (1)
Total
Three months ended April 4, 2021
Segment sales $ 2,459 $ 1,835 $ 2,152 $ 1,022 $ 35 $ 7,503 $ (1,411) $ 6,092
Less: Intersegment sales 564 8 428 410 1 1,411 (1,411) —
External sales 1,895 1,827 1,724 612 34 6,092 — 6,092
Research, development and engineering expenses 92 13 75 57 23 260 — 260
Equity, royalty and interest income from investees 113 17 19 12 5 166 — 166
Interest income 3 1 1 1 0 6 — 6
EBITDA 354 160 421 126 (51) 1,010 (30) 980
Depreciation and amortization (2)
51 30 48 35 5 169 — 169
Three months ended March 29, 2020
Segment sales $ 2,158 $ 1,814 $ 1,502 $ 884 $ 10 $ 6,368 $ (1,357) $ 5,011
Less: Intersegment sales 579 7 387 384 0 1,357 (1,357) —
External sales 1,579 1,807 1,115 500 10 5,011 — 5,011
Research, development and engineering expenses 80 7 68 54 29 238 — 238
Equity, royalty and interest income from investees 78 21 21 9 0 129 — 129
Interest income 4 1 1 1 0 7 — 7
EBITDA 365 158 279 77 (43) 836 10 846
Depreciation and amortization (2)
53 31 48 32 4 168 — 168
(1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended April 4, 2021 and March 29, 2020.
(2) Depreciation and amortization, as shown on a segment basis, excludes 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 $1 million and less than $1 million for the three months ended April 4, 2021 and March 29, 2020, respectively. A portion of depreciation expense is included in "Research, development and engineering expenses."


In millions	Engine			Distribution		Components		Power Systems		New Power		Total Segments
Three months ended March 31, 2022
External sales	$	2,049		$	2,111	$	1,517	$	683	$	25	$	6,385
Intersegment sales	704			6		471		477		6		1,664
Total sales	2,753			2,117		1,988		1,160		31		8,049



Research, development and engineering expenses	109			13		76		64		36		298
Equity, royalty and interest income (loss) from investees	44		(1)	16		28		11		(3)		96

Interest income	4			2		1		1		—		8

Russian suspension costs(2)	32		(3)	100		6		20		—		158

Segment EBITDA	392			110		320		90		(67)		845
Depreciation and amortization(4)	51			28		43		31		7		160



Three months ended April 4, 2021
External sales	$	1,895		$	1,827	$	1,724	$	612	$	34	$	6,092
Intersegment sales	564			8		428		410		1		1,411
Total sales	2,459			1,835		2,152		1,022		35		7,503



Research, development and engineering expenses	92			13		75		57		23		260
Equity, royalty and interest income from investees	113			17		19		12		5		166

Interest income	3			1		1		1		—		6
Segment EBITDA	354			160		421		126		(51)		1,010
Depreciation and amortization(4)	51			30		48		35		5		169






(1) Includes a $28 million impairment of our joint venture with KAMAZ and $3 million of royalty charges as part of our costs associated with the suspension of our Russian operations. See Note 3, "RUSSIAN OPERATIONS" to our Condensed Consolidated Financial Statements for additional information.
(2) See Note 3, "RUSSIAN OPERATIONS" to our Condensed Consolidated Financial Statements for additional information.
(3) Includes $31 million of Russian suspension costs reflected in the Equity, royalty and interest income (loss) from investees line above.
(4) Depreciation and amortization, as shown on a segment basis, excludes 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 $1 million and $1 million for the three months ended March 31, 2022 and April 4, 2021, respectively. A portion of depreciation expense is included in Research, development and engineering expenses.

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A reconciliation of our total segment sales to total net sales in the Condensed Consolidated Statements of Net Income was as follows:


	Three months ended
In millions	March 31, 2022		April 4, 2021
Total segment sales	$	8,049	$	7,503
Elimination of intersegment sales	(1,664)		(1,411)
Total net sales	$	6,385	$	6,092

A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Net Income is shown in the table below:


		Three months ended				Three months ended
In millions	In millions	April 4, 2021		March 29, 2020			In millions	March 31, 2022		April 4, 2021
TOTAL SEGMENT EBITDA	TOTAL SEGMENT EBITDA	$	1,010	$	836		TOTAL SEGMENT EBITDA	$	845	$	1,010
Add:
Intersegment elimination		(30)		10
TOTAL EBITDA		980		846

Intersegment eliminations and other (1)							Intersegment eliminations and other (1)	(90)		(30)

Less:	Less:						Less:
Interest expense	Interest expense	28		23			Interest expense	17		28
Depreciation and amortization	Depreciation and amortization	169		168			Depreciation and amortization	160		169
INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	783		655			INCOME BEFORE INCOME TAXES	578		783
Less: Income tax expense	Less: Income tax expense	172		127			Less: Income tax expense	155		172
CONSOLIDATED NET INCOME	CONSOLIDATED NET INCOME	611		528			CONSOLIDATED NET INCOME	423		611
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	8		17			Less: Net income attributable to noncontrolling interests	5		8
NET INCOME ATTRIBUTABLE TO CUMMINS INC.	NET INCOME ATTRIBUTABLE TO CUMMINS INC.	$	603	$	511		NET INCOME ATTRIBUTABLE TO CUMMINS INC.	$	418	$	603

(1)Intersegment eliminations and other for the three months ended March 31, 2022, included $17 million of costs associated with the planned separation of our Filtration business.							(1)Intersegment eliminations and other for the three months ended March 31, 2022, included $17 million of costs associated with the planned separation of our Filtration business.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cummins Inc. and its consolidated subsidiaries are hereinafter sometimes referred to as “Cummins,” “we,” “our” or “us.”

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

Certain parts of this quarterly report contain forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those that are based on current expectations, estimates and projections about the industries in which we operate and management’s beliefs and assumptions. Forward-looking statements are generally accompanied by words such as "anticipates," "expects," "forecasts," "intends," "plans," "believes," "seeks," "estimates," "could," "should," "may" or words of similar meaning. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which we refer to as "future factors," which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some future factors that could cause our results to differ materially from the results discussed in such forward-looking statements are discussed below and shareholders, potential investors and other readers are urged to consider these future factors carefully in evaluating forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Future factors that could affect the outcome of forward-looking statements include the following:

GOVERNMENT REGULATION

•any adverse results of our internal review into our emissions certification process and compliance with emission standards;

•increased scrutiny from regulatory agencies, as well as unpredictability in the adoption, implementation and enforcement of emission standards around the world;

•~~policy~~ changes in international, ~~trade;~~national and regional trade laws, regulations and policies;

•any adverse effects of the ~~U.K.'s exit from the European Union;~~U.S. government's COVID-19 vaccine mandates;

•changes in taxation;

•global legal and ethical compliance costs and risks;

•increasingly stringent environmental laws and regulations;

•future bans or limitations on the use of diesel-powered products;

~~BUSINESS~~BUSINESS CONDITIONS / DISRUPTIONS

•~~supply shortages and supplier financial risk, particularly from any of our single-sourced suppliers, including suppliers that may be impacted by the COVID-19 pandemic;~~

•~~market slowdown due to~~any adverse effects of the ~~impacts from~~conflict between Russia and Ukraine and the ~~COVID-19 pandemic, other public health crises, epidemics~~global response (including government bans or ~~pandemics;~~restrictions on doing business in Russia);

•~~impacts~~failure to ~~manufacturing~~successfully execute or integrate the acquisition of Meritor, Inc.;

•failure to realize all of the anticipated benefits from our announced acquisition of Meritor, Inc.;

•raw material, transportation and labor price fluctuations and supply ~~chain abilities from an extended shutdown or disruption of our operations due to the COVID-19 pandemic;~~shortages;

•aligning our capacity and production with our ~~demand, including impacts of COVID-19;~~

•large truck manufacturers and original equipment manufacturers customers discontinuing outsourcing their engine supply needs or experiencing financial distress, particularly related to the COVID-19 pandemic, bankruptcy or change in control;

•~~a slowdown in infrastructure development and/or depressed commodity prices;~~

•~~failure to realize expected results from our investment in Eaton Cummins Automated Transmission Technologies joint venture;~~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, bankruptcy or change in control;

PRODUCTS AND TECHNOLOGY

•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;

~~Table of Contents~~

•~~variability in material and commodity costs;~~

•product liability claims;

•our sales mix of products;

•~~protection and validity~~Table of ~~our patent and other intellectual property rights;~~Contents

GENERAL

•~~disruptions in global credit and financial markets as~~failure to complete, adverse results from or failure to realize the ~~result~~expected benefits of the ~~COVID-19 pandemic;~~

•~~labor relations or work stoppages;~~

•~~reliance on~~separation of our ~~executive leadership team and other key personnel;~~

•~~climate change and global warming;~~filtration business;

•our plan to reposition our portfolio of product offerings through exploration of strategic acquisitions and divestitures and related uncertainties of entering such transactions;

•challenging markets for talent and ability to attract, develop and retain key personnel;

•climate change and global warming;

•exposure to potential security breaches or other disruptions to our information technology ~~systems~~environment and data security;

•political, economic and other risks from operations in numerous ~~countries;~~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;

•labor relations or work stoppages;

•foreign currency exchange rate changes;

•the performance of our pension plan assets and volatility of discount ~~rates, particularly those related to the sustained slowdown of the global economy due to the COVID-19 pandemic;~~rates;

•the price and availability of energy;

•~~the outcome of pending and future litigation and governmental proceedings;~~

•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 risk factors described in Part II, Item 1A in this quarterly report and our ~~2020~~202 1 Form 10-K,, Part I, Item 1A., both under the caption "Risk Factors."

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 quarterly report and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

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ORGANIZATION OF INFORMATION

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) was prepared to provide the reader with a view and perspective of our business through the eyes of management and should be read in conjunction with our Management's Discussion and Analysis of Financial Condition and Results of Operations section of our ~~2020~~2021 Form 10-K. Our MD&A is presented in the following sections:

•EXECUTIVE SUMMARY AND FINANCIAL HIGHLIGHTS

•RESULTS OF OPERATIONS

•OPERATING SEGMENT RESULTS

•OUTLOOK

•LIQUIDITY AND CAPITAL RESOURCES

•APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

EXECUTIVE SUMMARY AND FINANCIAL HIGHLIGHTS

Overview

We are a global power leader that designs, manufactures, distributes and services diesel, natural gas, electric and hybrid powertrains and powertrain-related components including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems, automated transmissions, electric power generation systems, batteries, electrified power systems, hydrogen production and fuel cell products. We sell our products to original equipment manufacturers (OEMs), distributors, dealers and other customers worldwide. We have long-standing relationships with many of the leading manufacturers in the markets we serve, including PACCAR Inc, Navistar International Corporation, Daimler Trucks North America and Stellantis N.V. We serve our customers through a service network of ~~over~~approximately 500 wholly-owned, joint venture and independent distributor locations and ~~over 9,000~~more than 10,000 Cummins certified dealer locations ~~with service to~~in approximately 190 countries and territories.

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 ~~stoppages.~~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, political, economic, 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 high levels of these risks such as China, Brazil, India, Mexico, Russia 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 or customer or the economy of any single country on our consolidated results.

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Russian Operations



In millions	March 31, 2022
Inventory write-downs	$	59
Accounts receivable reserves	43
Impairment and other joint venture costs	31

Other	25
Total	$	158

Supply Chain Disruptions

We continue to experience supply chain disruptions and related financial impacts reflected as increased cost of sales. Our industry continues 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 and slowing production. 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. Our 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.

First Quarter ~~2021~~2022 Results

A summary of our results is as follows:

Three months ended
In millions, except per share amounts April 4,
2021 March 29,
2020
Net sales $ 6,092 $ 5,011
Net income attributable to Cummins Inc. 603 511
Earnings per common share attributable to Cummins Inc.
Basic $ 4.10 $ 3.42
Diluted 4.07 3.41


	Three months ended
In millions, except per share amounts	March 31, 2022		April 4, 2021
Net sales	$	6,385	$	6,092
Net income attributable to Cummins Inc.	418		603
Earnings per common share attributable to Cummins Inc.
Basic	$	2.94	$	4.10
Diluted	2.92		4.07

Worldwide revenues increased 225 percent in the three months ended ~~April 4, 2021,~~March 31, 2022, compared to the same period in ~~2020,~~2021, due to higher demand in ~~all~~most operating segments and most geographic regions of the world. International demand (excludes the U.S. and Canada) improved 45 percent primarily due to higher sales in most geographic regions. The increase in international sales was principally due to higher demand in all components businesses (primarily in China and India), stronger demand in China due to an improved COVID-19 environment over the comparable period in 2020, higher off-highway demand (mainly construction markets in China), higher demand for power generation equipment and favorable foreign currency impacts of 3 percent of international sales (primarily the Chinese renminbi and Euro, partially offset by the Brazilian real).except China. Net sales in the U.S. and Canada improved 712 percent, primarily due to increased demand and favorable pricing in North American on-highway markets, which ~~also~~ positively impacted all ~~of our~~ components businesses, and all distribution product lines. International demand (excludes the U.S. and Canada) declined 3 percent, with lower sales in China, partially offset by ~~reduced~~higher sales in ~~our~~Asia Pacific, Russia, Latin America and Europe. The decrease in international sales was principally due to lower demand in most components businesses in China, partially offset by higher demand in industrial markets (especially mining), power generation equipment (especially in China) and most distribution product lines ~~resulting from~~in Russia. Unfavorable foreign currency fluctuations impacted international sales by 2 percent (primarily the Euro and Australian dollar). Our industry's sales continue to be unfavorably impacted by supply chain ~~constraints.~~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 slowing production.

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The following table contains sales and EBITDA (defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests) by operating segment for the three months ended March 31, 2022 and April 4, ~~2021 and March 29, 2020.~~2021. See Note ~~12,~~15, "OPERATING SEGMENTS," to the Condensed Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Condensed Consolidated Statements of Net Income.


		Three months ended																	Three months ended
Operating Segments	Operating Segments	April 4, 2021						March 29, 2020						Percent change				Operating Segments	March 31, 2022							April 4, 2021						Percent change
				Percent						Percent				2021 vs. 2020							Percent							Percent				2022 vs. 2021
In millions	In millions	Sales		of Total		EBITDA		Sales		of Total		EBITDA		Sales		EBITDA		In millions	Sales		of Total		EBITDA			Sales		of Total		EBITDA		Sales		EBITDA
Engine	Engine	$	2,459	40	%	$	354	$	2,158	43	%	$	365	14	%	(3)	%	Engine	$	2,753	43	%	$	392		$	2,459	40	%	$	354	12	%	11	%
Distribution	Distribution	1,835		30	%	160		1,814		36	%	158		1	%	1	%	Distribution	2,117		33	%	110			1,835		30	%	160		15	%	(31)	%
Components	Components	2,152		35	%	421		1,502		30	%	279		43	%	51	%	Components	1,988		31	%	320			2,152		35	%	421		(8)	%	(24)	%
Power Systems	Power Systems	1,022		17	%	126		884		18	%	77		16	%	64	%	Power Systems	1,160		18	%	90			1,022		17	%	126		14	%	(29)	%
New Power	New Power	35		1	%	(51)		10		—	%	(43)		NM		(19)	%	New Power	31		1	%	(67)			35		1	%	(51)		(11)	%	(31)	%
Intersegment eliminations	Intersegment eliminations	(1,411)		(23)	%	(30)		(1,357)		(27)	%	10		4	%	NM		Intersegment eliminations	(1,664)		(26)	%	(90)			(1,411)		(23)	%	(30)		18	%	NM

Total	Total	$	6,092	100	%	$	980	$	5,011	100	%	$	846	22	%	16	%	Total	$	6,385	100	%	$	755	(1)	$	6,092	100	%	$	980	5	%	(23)	%

"NM" - not meaningful information	"NM" - not meaningful information																	"NM" - not meaningful information
(1) EBITDA includes $158 million of costs associated with the suspension of our Russian operations and $17 million of costs associated with the planned separation of our Filtration business.																		(1) EBITDA includes $158 million of costs associated with the suspension of our Russian operations and $17 million of costs associated with the planned separation of our Filtration business.

Net income attributable to Cummins Inc. was $418 million, or $2.92 per diluted share, on sales of $6.4 billion for the three months ended March 31, 2022, versus the comparable prior year period net income attributable to Cummins Inc. of $603 million, or $4.07 per diluted share, on sales of $6.1 ~~billion for the three months ended April 4, 2021, versus the comparable prior year period~~billion. The decreases in net income attributable to Cummins ~~of $511 million, or $3.41 per diluted share, on sales of $5.0 billion. The increases in net income~~Inc. and earnings per diluted share were driven by ~~higher net sales,~~costs associated with the suspension of our Russian operations, increased ~~gross margin~~consulting expenses driven by acquisitions and ~~higher~~the work towards separation of the filtration business, lower equity, royalty and interest income from investees ~~primarily~~(primarily in ~~China (due~~China), costs related to ~~stronger demand for trucks~~asset impairments and ~~construction equipment resulting from an improved COVID-19 environment over the comparable period in 2020),~~other charges and higher unfavorable discrete tax items, partially offset by higher ~~variable compensation expenses, incremental costs associated with supply chain constraints, mark-to-market losses on corporate owned life insurance~~net sales and ~~a higher effective tax rate due~~increased gross margin. See Note 3, "RUSSIAN OPERATIONS" to ~~the absence of favorable adjustments related to India Tax Law Changes in March 2020.~~our Condensed Consolidated Financial Statements for additional information. The increase in gross margin was primarily due to ~~higher volumes and improved~~favorable pricing, partially offset by higher material costs, losses related to inventory write-downs in our Russian operations and increased ~~compensation expenses (especially variable compensation) and higher premium~~ freight ~~costs. The decrease in gross margin as a percentage of sales was primarily~~costs due to ~~higher compensation expenses, increased premium freight costs and manufacturing inefficiencies.~~supply chain constraints. Diluted earnings per common share for the three months ended ~~April 4, 2021,~~March 31, 2022, benefited ~~$0.03~~$0.01 from fewer weighted-average shares outstanding due to the stock repurchase program.

~~Table of Contents~~

We generated ~~$339~~$164 million of cash from operations for the three months ended ~~April 4, 2021,~~March 31, 2022, compared to ~~$379~~$339 million for the comparable period in ~~2020. Refer to~~2021. See the section titled "Cash Flows" in the "LIQUIDITY AND CAPITAL RESOURCES" section for a discussion of items impacting cash flows.

Our debt to capital ratio (total capital defined as debt plus equity) at ~~April 4, 2021,~~March 31, 2022, was ~~31.2~~30.6 percent, compared to ~~31.7~~30.7 percent at December 31, ~~2020.~~2021. The decrease was primarily due to ~~$73 million of~~ lower debt balances since December 31, ~~2020.~~2021. At ~~April 4, 2021,~~March 31, 2022, we had ~~$3.4~~$2.8 billion in cash and marketable securities on hand and access to our $3.5 billion credit facilities, if necessary, to meet currently anticipated working capital, investment and funding needs.

In the first three months of ~~2021,~~2022, we purchased ~~$418~~$311 million, or ~~1.7~~1.6 million shares, of our common stock.

On April 20, 2022, we filed a confidential registration statement announcing our intent to separate the filtration business into a stand-alone company.

On February 21, 2022, we entered into an agreement and plan of merger with Meritor, Inc. (Meritor) and Rose NewCo Inc. pursuant to which we agreed to acquire Meritor, a global leader of drivetrain, mobility, braking, aftermarket and electric powertrain solutions for commercial vehicle and industrial markets. We will pay $36.50 in cash per share of Meritor common stock, for a total transaction value of approximately $3.7 billion, including assumed debt and net of acquired cash.

On February 9, 2022, we reached an agreement with Altra Industrial Motion Corp to acquire its Jacobs Vehicle Systems business and closed the transaction in April 2022 with a purchase price of $346 million.

As a well-known seasoned issuer, we filed an automatic shelf registration of an undetermined amount of debt and equity with the Securities and Exchange Commission (SEC) on February 8, 2022.

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On February 7, 2022, we purchased Westport Fuel System Inc.'s stake in the Cummins Westport Joint Venture for $42 million.

In the first three months of ~~2021,~~2022, the investment ~~gain~~loss on our U.S. pension trust was ~~1.1~~2.7 percent while our U.K. pension trust loss was ~~6.1~~5.8 percent. ~~During the remainder of 2021, we~~We anticipate making ~~$17 million in~~ additional defined benefit pension contributions induring the ~~U.K. and $12~~remainder of 2022 of $17 million ~~in contributions to~~for our U.S. and U.K. qualified and non-qualified ~~benefit~~pension plans. We expect our ~~2021~~2022 annual net periodic pension cost to approximate ~~$79~~$31 million.

As of the date of this filing, our credit ratings and outlooks from the credit rating agencies remain unchanged.

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RESULTS OF OPERATIONS

Three months ended Favorable/
April 4,
2021 March 29,
2020 (Unfavorable)
In millions, except per share amounts Amount Percent
NET SALES $ 6,092 $ 5,011 $ 1,081 22 %
Cost of sales 4,606 3,717 (889) (24) %
GROSS MARGIN 1,486 1,294 192 15 %
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses 574 546 (28) (5) %
Research, development and engineering expenses 260 238 (22) (9) %
Equity, royalty and interest income from investees 166 129 37 29 %
Other operating expense, net (8) (5) (3) (60) %
OPERATING INCOME 810 634 176 28 %
Interest expense 28 23 (5) (22) %
Other income, net 1 44 (43) (98) %
INCOME BEFORE INCOME TAXES 783 655 128 20 %
Income tax expense 172 127 (45) (35) %
CONSOLIDATED NET INCOME 611 528 83 16 %
Less: Net income attributable to noncontrolling interests 8 17 9 53 %
NET INCOME ATTRIBUTABLE TO CUMMINS INC. $ 603 $ 511 $ 92 18 %
Diluted Earnings Per Common Share Attributable to Cummins Inc. $ 4.07 $ 3.41 $ 0.66 19 %



	Three months ended				Favorable/
	March 31, 2022		April 4, 2021		(Unfavorable)
In millions, except per share amounts					Amount		Percent
NET SALES	$	6,385	$	6,092	$	293	5	%
Cost of sales	4,853		4,606		(247)		(5)	%
GROSS MARGIN	1,532		1,486		46		3	%
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses	615		574		(41)		(7)	%
Research, development and engineering expenses	298		260		(38)		(15)	%
Equity, royalty and interest income from investees	96		166		(70)		(42)	%

Other operating expense, net	111		8		(103)		NM
OPERATING INCOME	604		810		(206)		(25)	%

Interest expense	17		28		11		39	%
Other (expense) income, net	(9)		1		(10)		NM
INCOME BEFORE INCOME TAXES	578		783		(205)		(26)	%
Income tax expense	155		172		17		10	%
CONSOLIDATED NET INCOME	423		611		(188)		(31)	%
Less: Net income attributable to noncontrolling interests	5		8		3		38	%
NET INCOME ATTRIBUTABLE TO CUMMINS INC.	$	418	$	603	$	(185)	(31)	%
Diluted Earnings Per Common Share Attributable to Cummins Inc.	$	2.92	$	4.07	$	(1.15)	(28)	%

"NM" - not meaningful information


		Three months ended								Favorable/ (Unfavorable)				Three months ended								Favorable/ (Unfavorable)
		April 4, 2021				March 29, 2020										March 31, 2022			April 4, 2021					Favorable/ (Unfavorable)
Percent of sales	Percent of sales							Percentage Points				Percent of sales	March 31, 2022	April 4, 2021			Percentage Points
Gross margin	Gross margin			24.4	%			25.8	%		(1.4)								24.4		%					(0.4)
Selling, general and administrative expenses	Selling, general and administrative expenses	9.4	%			10.9	%			1.5						Selling, general and administrative expenses		9.6		%			9.4		%		(0.2)
Research, development and engineering expenses	Research, development and engineering expenses	4.3	%			4.7	%			0.4					Research, development and engineering expenses		4.7	%				4.3	%			(0.4)

Net Sales

Net sales for the three months ended ~~April 4, 2021,~~March 31, 2022, increased by ~~$1,081~~$293 million versus the comparable period in ~~2020.~~2021. The primary drivers were as follows:

•~~Components~~Engine segment sales increased 4312 percent ~~largely~~ due to ~~higher emission solutions demand~~favorable pricing and increased aftermarket sales in ~~China, India and~~ North America.

•~~Engine~~Distribution segment sales increased 1415 percent principally due to ~~increased volumes~~higher demand across all product lines in ~~the~~ North ~~American pick-up truck and heavy-duty truck markets.~~America.

•Power Systems segment sales increased 1614 percent primarily due to higher demand in global mining markets and power generation markets in China.

These increases were partially offset by the following drivers:

•Components segment sales decreased 8 percent largely due to lower demand in most businesses in China, partially offset by higher demand North ~~America, China, Middle East and Asia Pacific.~~America.

•~~Favorable~~Unfavorable foreign currency fluctuations of 1 percent of total sales, primarily in the ~~Chinese renminbi~~Euro and ~~Euro, partially offset by the Brazilian real.~~Australian dollar.

Sales to international markets (excluding the U.S. and Canada), based on location of customers, for the three months ended ~~April 4, 2021,~~March 31, 2022, were 4642 percent of total net sales compared with 3846 percent of total net sales for the comparable period in ~~2020.~~2021. A more detailed discussion of sales by segment is presented in the “OPERATING SEGMENT RESULTS” section.

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Cost of Sales

The types of expenses included in cost of sales are the following: parts and material consumption, including direct and indirect materials; salaries, wages and benefits; depreciation on production equipment and facilities and amortization of technology intangibles; estimated costs of warranty programs and campaigns; production utilities; production-related purchasing; warehousing, including receiving and inspection; freight costs; engineering support costs; repairs and maintenance; production and warehousing facility property insurance; rent for production facilities and other production overhead.

Gross Margin

Gross margin increased ~~$192~~$46 million for the three months ended ~~April 4, 2021~~March 31, 2022 and decreased ~~1.4~~0.4 points as a percentage of net sales, versus the comparable period in ~~2020.~~2021. The increase in gross margin was primarily due to ~~higher volumes and improved~~favorable pricing, partially offset by higher material costs, losses related to inventory write-downs in our Russian operations and increased ~~compensation expenses (especially variable compensation) and higher premium~~ freight ~~costs.~~costs due to supply chain constraints. The 0.4 decrease in gross margin as a percentage of net sales was ~~primarily~~principally due to losses related to higher ~~compensation expenses,~~material costs, inventory write-downs in our Russian operations and increased ~~premium~~ freight costs ~~and manufacturing inefficiencies.~~due to supply chain constraints which increased at a faster rate than increased sales.

The provision for base warranties issued as a percent of sales for the three months ended ~~April 4, 2021,~~March 31, 2022, was ~~2.6~~1.9 percent compared to ~~1.9~~2.6 percent for the comparable period in ~~2020. A detailed discussion of gross margin by segment is presented in the “OPERATING SEGMENT RESULTS” section.~~2021.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased ~~$28~~$41 million for the three months ended ~~April 4, 2021,~~March 31, 2022, versus the comparable period in ~~2020,~~2021, primarily due to ~~increased variable compensation~~higher consulting expenses driven by acquisitions and the work towards separation of the filtration business, partially offset by lower ~~consulting expenses and reduced travel costs.~~variable compensation expenses. Overall, selling, general and administrative expenses as a percentage of net sales ~~decreased~~increased to ~~9.4~~9.6 percent in the three months ended ~~April 4, 2021,~~March 31, 2022, from ~~10.9~~9.4 percent in the comparable period in ~~2020.~~2021. The ~~decrease~~increase in selling, general and administrative expenses as a percentage of net sales was mainly due to ~~sales increasing faster than~~higher selling, general and administrative expenses ~~despite higher variable compensation expenses.~~which increased at a faster rate than the increase in net sales.

Research, Development and Engineering Expenses

Research, development and engineering expenses increased ~~$22~~$38 million for the three months ended ~~April 4, 2021,~~March 31, 2022, versus the comparable period in ~~2020~~2021 primarily due to higher spending on prototypes and increased ~~compensation expenses, especially variable compensation expenses, partially offset by decreased travel costs.~~consulting expenses. Overall, research, development and engineering expenses as a percentage of net sales ~~decreased~~increased to ~~4.3~~4.7 percent in the three months ended ~~April 4, 2021,~~March 31, 2022, from ~~4.7~~4.3 percent in the comparable period in ~~2020.~~2021. The increase in research, development and engineering expenses as a percentage of net sales was mainly due to higher research, development and engineering expenses which increased at a faster rate than the increase in net sales. Research activities continue to focus on development of new products to meet future emission standards around the world, improvements in fuel economy performance of diesel and natural gas powered engines and related components as well as development activities around fully electric, hybrid and hydrogen powertrain solutions.

Equity, Royalty and Interest Income from Investees

Equity, royalty and interest income from investees ~~increased $37~~decreased $70 million for the three months ended ~~April 4, 2021,~~March 31, 2022, versus the comparable period in ~~2020,~~2021, primarily due to ~~increased~~the $28 million impairment of our Russian joint venture with KAMAZ, decreased earnings at ~~Dongfeng Cummins Engine Co., Ltd.,~~ Beijing Foton Cummins Engine Co., Ltd.~~, Tata Cummins Ltd. (excluding the absence of 2020 benefits noted below), Guangxi Cummins Industrial Power Co., Loop Energy Inc.~~ and Dongfeng Cummins ~~Emission Solutions~~Engine Co., Ltd.~~, partially offset by~~ and the ~~absence~~February 7, 2022, purchase of ~~a $37 million favorable adjustment as the result of tax changes within India's 2020-2021 Union Budget of India (India Tax Law Changes) passed~~Westport Fuel System Inc.'s stake in ~~March 2020~~Cummins Westport Joint Venture. See NOTE 3, "RUSSIAN OPERATIONS" and ~~$18 million of technology fee revenue both recorded in the first quarter of 2020 in Tata Cummins Ltd. The increased earnings in~~NOTE 14 "ACQUISITIONS" to our ~~China joint ventures were primarily due to an improved COVID-19 environment over the comparable period in 2020. See~~ ~~Note 4, "INCOME TAXES," of the Notes to the~~Condensed Consolidated Financial Statements ~~of our 2020 Form 10-K~~ for additional ~~information on India Tax Law Changes.~~information.

2932

Table of Contents

Other Operating Expense, Net

Other operating ~~expense,~~(expense) income, net was as follows:


		Three months ended				Three months ended
In millions	In millions	April 4, 2021		March 29, 2020			In millions	March 31, 2022			April 4, 2021
Russian suspension costs							Russian suspension costs	$	(68)	(1)	$	—
Asset impairments and other charges							Asset impairments and other charges	(36)			—
Amortization of intangible assets	Amortization of intangible assets	$	(6)	$	(5)		Amortization of intangible assets	(5)			(6)
Loss on write-off of assets	Loss on write-off of assets	(4)		(2)			Loss on write-off of assets	(5)			(4)
Gain (loss) on sale of assets, net		1		(1)
Gain on sale of assets, net							Gain on sale of assets, net	1			1
Royalty income, net	Royalty income, net	2		2			Royalty income, net	2			2
Other, net	Other, net	(1)		1			Other, net	—			(1)
Total other operating expense, net		$	(8)	$	(5)
Total other operating expenses, net							Total other operating expenses, net	$	(111)		$	(8)

(1) See Note 3, "RUSSIAN OPERATIONS" to our Condensed Consolidated Financial Statements for additional information.							(1) See Note 3, "RUSSIAN OPERATIONS" to our Condensed Consolidated Financial Statements for additional information.

Interest Expense

Interest expense ~~increased $5~~decreased $11 million for the three months ended ~~April 4, 2021,~~March 31, 2022, versus the comparable period in ~~2020,~~2021, primarily due to ~~higher borrowings related~~the performance on the fixed to floating swaps placed in 2021 for our ~~$2 billion senior unsecured notes issued in August of 2020.~~2030 and 2050 debt maturities.

Other (Expense) Income, Net

Other (expense) income, net was as follows:


		Three months ended				Three months ended
In millions	In millions	April 4, 2021		March 29, 2020			In millions	March 31, 2022		April 4, 2021
Loss on corporate owned life insurance							Loss on corporate owned life insurance	$	(37)	$	(32)
Foreign currency loss, net							Foreign currency loss, net	(12)		(5)

Interest income							Interest income	8		6
Non-service pension and OPEB credit	Non-service pension and OPEB credit	$	24	$	16		Non-service pension and OPEB credit	33		24
Interest income		6		7
Rental income		2		2
Loss on marketable securities, net		—		(3)
Bank charges		(3)		(3)
Foreign currency loss, net		(5)		(1)
(Loss) gain on corporate owned life insurance		(32)		17

Other, net	Other, net	9		9			Other, net	(1)		8
Total other income, net		$	1	$	44
Total other (expense) income, net							Total other (expense) income, net	$	(9)	$	1

Income Tax Expense

Our effective tax rate for ~~2021~~2022 is expected to approximate ~~22.5~~21.5 percent, excluding any discrete items that may arise.

Our effective tax rate for the three months ended March 31, 2022, was 26.8 percent and contained unfavorable discrete tax items of $31 million, primarily due to $18 million of unfavorable changes associated with uncertainty in our Russian operations, $9 million of unfavorable changes in tax reserves and $4 million of net unfavorable other discrete tax items.

Our effective tax rate for the three months ended April 4, 2021, was 22.0 percent and contained favorable discrete items of $4 ~~million or $0.03 per share.~~

Our effective tax rate for the three months ended March 29, 2020, was 19.4 percent and contained $18 million of favorable net discrete tax items, primarily due to the India Tax Law Change passed in March of 2020. The India Tax Law Change eliminated the dividend distribution tax and replaced it with a lower rate withholding tax as the burden shifted from the dividend payor to the dividend recipient for a net favorable income statement impact of $35 million, or $0.23 per share in the first quarter of 2020. See ~~Note 4, "INCOME TAXES," of the Notes to the Consolidated Financial Statements of our 2020 Form 10-K~~ ~~for additional information on India Tax Law Changes.~~million.

Noncontrolling Interests

Noncontrolling interests eliminate the income or loss attributable to non-Cummins ownership interests in our consolidated entities. Noncontrolling interests in income of consolidated subsidiaries for the three months ended ~~April 4, 2021,~~March 31, 2022, decreased $9$3 million versus the comparable period in ~~2020.~~2021. The decrease for the three months ended ~~April 4, 2021, is~~March 31, 2022, was primarily due to ~~the absence of a $19 million unfavorable adjustment as the results of India Tax Law Changes passed in March 2020, partially offset by higher~~lower earnings at ~~Eaton~~ Cummins ~~Joint Venture. See~~ ~~Note 4, "INCOME TAXES," of the Notes to the Consolidated Financial Statements of our 2020 Form 10-K~~ ~~for additional information on~~ India ~~Tax Law Changes.~~Limited.

3033

Table of Contents

Net Income Attributable to Cummins Inc. and Diluted Earnings Per Common Share Attributable to Cummins Inc.

Net income and diluted earnings per common share attributable to Cummins Inc. for the three months ended ~~April 4, 2021, increased $92~~March 31, 2022, decreased $185 million and ~~$0.66~~$1.15 per diluted share versus the comparable period in ~~2020,~~2021, primarily due to ~~higher net sales,~~costs associated with the suspension of our Russian operations, increased ~~gross margin~~consulting expenses driven by acquisitions and ~~higher~~the work towards separation of the filtration business, lower equity, royalty and interest income from investees ~~primarily~~(primarily in ~~China (due~~China), costs related to ~~stronger demand for trucks~~asset impairments and ~~construction equipment resulting from an improved COVID-19 environment over the comparable period in 2020),~~other charges and higher unfavorable discrete tax items, partially offset by higher ~~variable compensation expenses, incremental costs associated with supply chain constraints, mark-to-market losses on corporate owned life insurance~~net sales and ~~a higher effective tax rate due~~increased gross margin. See Note 3, "RUSSIAN OPERATIONS" to ~~the absence of favorable adjustments related to India Tax Law Changes in March 2020.~~our Condensed Consolidated Financial Statements for additional information. Diluted earnings per common share for the three months ended ~~April 4, 2021,~~March 31, 2022, benefited ~~$0.03~~$0.01 from fewer weighted-average shares outstanding due to the stock repurchase program.

Comprehensive Income - Foreign Currency Translation Adjustment

The foreign currency translation adjustment was a net gain of $4 million for the three months ended March 31, 2022, compared to a net loss of $56 million for the three months ended April 4, 2021, ~~compared to a net loss of $162 million for the three months ended March 29, 2020 and was~~ driven by the following:

Three months ended

April 4, 2021

March 29, 2020

March 31,
2022

April 4,
2021

In millions

Translation adjustment

Primary currency driver vs. U.S. dollar

Translation adjustment

Primary currency driver vs. U.S. dollar

In millions

Translation adjustment

Primary currency driver vs. U.S. dollar

Translation adjustment

Primary currency driver vs. U.S. dollar

Wholly-owned subsidiaries

(48)

Brazilian real, British pound, Chinese renminbi

(124)

Brazilian real, Indian rupee, Chinese renminbi, British pound

Wholly-owned subsidiaries

Brazilian real, partially offset by Indian rupee, British pound, Euro

(48)

Brazilian real, British pound, Chinese renminbi

Equity method investments

(8)

Chinese renminbi

(21)

Chinese renminbi, Indian rupee

Equity method investments

(4)

Indian rupee

(8)

Chinese renminbi

Consolidated subsidiaries with a noncontrolling interest

—

(17)

Indian rupee

Consolidated subsidiaries with a noncontrolling interest

(8)

Indian rupee

—

Total

(56)

(162)

Total

(56)

3134

Table of Contents

OPERATING SEGMENT RESULTS

Our reportable operating segments consist of the Engine, Distribution, Components, Power Systems and New Power segments. This reporting structure is organized according to the products and markets each segment serves. We use segment EBITDA as a primary basis for the Chief Operating Decision Maker to evaluate the performance of each of our reportable operating segments. 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. Segment amounts exclude certain expenses not specifically identifiable to segments. See Note ~~12,~~15, "OPERATING SEGMENTS," to the Condensed Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Condensed Consolidated Statements of Net Income.

Following is a discussion of results for each of our operating segments.

Engine Segment Results

Financial data for the Engine segment was as follows:


		Three months ended						Favorable/				Three months ended			Favorable/
		April 4,			March 29,			(Unfavorable)					March 31,		April 4,				(Unfavorable)
In millions	In millions	2021			2020			Amount		Percent				In millions	2022				2021			Amount		Percent
External sales	External sales	$	1,895		$	1,579		$	316	20	%			External sales	$	2,049			$	1,895		$	154	8	%
Intersegment sales	Intersegment sales	564			579			(15)		(3)	%			Intersegment sales	704				564			140		25	%
Total sales	Total sales	2,459			2,158			301		14	%			Total sales	2,753				2,459			294		12	%

Research, development and engineering expenses	Research, development and engineering expenses	92			80			(12)		(15)	%			Research, development and engineering expenses	109				92			(17)		(18)	%
Equity, royalty and interest income from investees	Equity, royalty and interest income from investees	113			78			35		45	%			Equity, royalty and interest income from investees	44			(1)	113			(69)		(61)	%

Interest income	Interest income	3			4			(1)		(25)	%			Interest income	4				3			1		33	%

Russian suspension costs														Russian suspension costs	32			(2)	—			(32)		NM

Segment EBITDA	Segment EBITDA	354			365			(11)		(3)	%			Segment EBITDA	392				354			38		11	%

								Percentage Points											Percentage Points
Segment EBITDA as a percentage of total sales	Segment EBITDA as a percentage of total sales	14.4		%	16.9		%			(2.5)				Segment EBITDA as a percentage of total sales	14.2		%		14.4		%			(0.2)

"NM" - not meaningful information														"NM" - not meaningful information

(1) Includes a $28 million impairment of our joint venture with KAMAZ and $3 million of royalty charges as part of our costs associated with the suspension of our Russian operations. In addition, on February 7, 2022, we purchased Westport Fuel System Inc.'s stake in Cummins Westport Joint Venture. See NOTE 3, "RUSSIAN OPERATIONS" and NOTE 14, "ACQUISITIONS" to our Condensed Consolidated Financial Statements for additional information.														(1) Includes a $28 million impairment of our joint venture with KAMAZ and $3 million of royalty charges as part of our costs associated with the suspension of our Russian operations. In addition, on February 7, 2022, we purchased Westport Fuel System Inc.'s stake in Cummins Westport Joint Venture. See NOTE 3, "RUSSIAN OPERATIONS" and NOTE 14, "ACQUISITIONS" to our Condensed Consolidated Financial Statements for additional information.
(2) Includes $31 million of Russian suspension costs reflected in the Equity, royalty and interest income from investees line above.														(2) Includes $31 million of Russian suspension costs reflected in the Equity, royalty and interest income from investees line above.

Table of Contents

Sales for our Engine segment by market were as follows:

Three months ended Favorable/
April 4, March 29, (Unfavorable)
In millions 2021 2020 Amount Percent
Heavy-duty truck $ 827 $ 750 $ 77 10 %
Medium-duty truck and bus 674 618 56 9 %
Light-duty automotive 481 353 128 36 %
Total on-highway 1,982 1,721 261 15 %
Off-highway 477 437 40 9 %
Total sales $ 2,459 $ 2,158 $ 301 14 %
Percentage Points
On-highway sales as percentage of total sales 81 % 80 % 1

~~Table of Contents~~


	Three months ended						Favorable/
	March 31,			April 4,			(Unfavorable)
In millions	2022			2021			Amount		Percent
Heavy-duty truck	$	908		$	827		$	81	10	%
Medium-duty truck and bus	848			674			174		26	%
Light-duty automotive	498			481			17		4	%
Total on-highway	2,254			1,982			272		14	%
Off-highway	499			477			22		5	%
Total sales	$	2,753		$	2,459		$	294	12	%

							Percentage Points
On-highway sales as percentage of total sales	82		%	81		%			1

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


		Three months ended		Favorable/			Three months ended			Favorable/
		April 4,	March 29,	(Unfavorable)				March 31,		April 4,	(Unfavorable)
		2021	2020	Amount	Percent					2022	2021	Amount	Percent
Heavy-duty	Heavy-duty	30,700	25,800	4,900	19	%			Heavy-duty	28,600	30,700	(2,100)	(7)	%
Medium-duty	Medium-duty	73,100	61,200	11,900	19	%			Medium-duty	72,600	73,100	(500)	(1)	%
Light-duty	Light-duty	68,500	49,400	19,100	39	%			Light-duty	66,500	68,500	(2,000)	(3)	%
Total unit shipments	Total unit shipments	172,300	136,400	35,900	26	%			Total unit shipments	167,700	172,300	(4,600)	(3)	%

Sales

Engine segment sales for the three months ended ~~April 4, 2021,~~March 31, 2022, increased ~~$301~~$294 million versus the comparable period in ~~2020.~~2021. The following were the primary drivers by market:

•~~Light-duty automotive~~Medium-duty truck and bus sales increased ~~$128~~$174 million ~~primarily~~mainly due to ~~pick-up truck sales~~favorable pricing and higher demand, especially in North America ~~with shipments up 49 percent.~~and Brazil.

•Heavy-duty truck sales increased ~~$77~~$81 million principally due to ~~increased volumes~~favorable pricing in North America, ~~with shipments up 28 percent.~~

•~~Medium-duty truck and bus sales increased $56 million mainly due to higher medium-duty demand,~~ partially offset by lower ~~bus sales, especially in North America.~~

•~~Off-highway sales increased $40 million primarily due to higher~~ demand ~~in construction markets~~ in China.

Segment EBITDA

Engine segment EBITDA for the three months ended ~~April 4, 2021, decreased $11~~March 31, 2022, increased $38 million versus the comparable period in ~~2020,~~2021, primarily due to ~~lower gross margin, increased research, development~~favorable pricing, higher volumes (including aftermarket parts) and engineering expenses and higher selling, general and administrative expenses, partially offset by increased equity, royalty and interest income from investees. The decrease in gross margin and gross margin as a percentage of sales was mainly due to increased premium freight, unfavorablefavorable mix, ~~unfavorable foreign currency fluctuations (primarily in the Brazilian real) and increased variable compensation expenses,~~ partially offset by higher ~~volumes. The increase in selling, general and administrative expenses was due to increased variable compensation expenses, partially offset by~~material costs, lower consulting expenses and reduced travel costs. The increase in research, development and engineering expenses was due to higher compensation expenses, especially variable compensation expenses. The increase in equity, royalty and interest income from investees ~~was principally due to increased earnings at Dongfeng Cummins Engine Co., Ltd.,~~(principally Beijing Foton Cummins Engine Co., Ltd.~~, Tata~~ and Dongfeng Cummins ~~Ltd. (excluding the absence of 2020 benefits noted below) and Guangxi Cummins Industrial Power~~Engine Co., ~~partially offset by the absence of an $18 million favorable adjustment~~Ltd.), costs related to ~~India Tax Law Changes passed in March 2020~~asset impairments and ~~$18~~other charges and costs associated with the suspension of our Russian operations including a $28 million impairment of ~~technology fee revenue both recorded in the first quarter of 2020 in Tata Cummins Ltd. The increased earnings in~~ our ~~China~~ joint ~~ventures were primarily due~~venture with KAMAZ. See Note 3, "RUSSIAN OPERATIONS" to ~~an improved COVID-19 environment over the comparable period in 2020. See~~our ~~Note 4, "INCOME TAXES," of the Notes to the~~Condensed Consolidated Financial Statements ~~of our 2020 Form 10-K~~ for additional ~~information on India Tax Law Changes.~~information.

3336

Table of Contents

Distribution Segment Results

Financial data for the Distribution segment was as follows:


		Three months ended						Favorable/				Three months ended			Favorable/
		April 4,			March 29,			(Unfavorable)					March 31,		April 4,			(Unfavorable)
In millions	In millions	2021			2020			Amount		Percent				In millions	2022			2021			Amount		Percent
External sales	External sales	$	1,827		$	1,807		$	20	1	%			External sales	$	2,111		$	1,827		$	284	16	%
Intersegment sales	Intersegment sales	8			7			1		14	%			Intersegment sales	6			8			(2)		(25)	%
Total sales	Total sales	1,835			1,814			21		1	%			Total sales	2,117			1,835			282		15	%

Research, development and engineering expenses	Research, development and engineering expenses	13			7			(6)		(86)	%			Research, development and engineering expenses	13			13			—		—	%
Equity, royalty and interest income from investees	Equity, royalty and interest income from investees	17			21			(4)		(19)	%			Equity, royalty and interest income from investees	16			17			(1)		(6)	%
Interest income	Interest income	1			1			—		—	%			Interest income	2			1			1		100	%

Russian suspension costs(1)														Russian suspension costs(1)	100			—			(100)		NM
Segment EBITDA	Segment EBITDA	160			158			2		1	%			Segment EBITDA	110			160			(50)		(31)	%

								Percentage Points										Percentage Points
Segment EBITDA as a percentage of total sales	Segment EBITDA as a percentage of total sales	8.7		%	8.7		%			—				Segment EBITDA as a percentage of total sales	5.2		%	8.7		%			(3.5)

"NM" - not meaningful information														"NM" - not meaningful information

(1) See Note 3, "RUSSIAN OPERATIONS" to our Condensed Consolidated Financial Statements for additional information.														(1) See Note 3, "RUSSIAN OPERATIONS" to our Condensed Consolidated Financial Statements for additional information.

Sales for our Distribution segment by region were as follows:


		Three months ended				Favorable/				Three months ended			Favorable/
		April 4,		March 29,		(Unfavorable)					March 31,		April 4,		(Unfavorable)
In millions	In millions	2021		2020		Amount		Percent				In millions	2022		2021		Amount		Percent
North America	North America	$	1,171	$	1,246	$	(75)	(6)	%			North America	$	1,367	$	1,171	$	196	17	%
Asia Pacific	Asia Pacific	214		196		18		9	%			Asia Pacific	246		214		32		15	%
Europe	Europe	163		136		27		20	%			Europe	149		163		(14)		(9)	%
Russia												Russia	136		57		79		NM
China	China	87		68		19		28	%			China	83		87		(4)		(5)	%
Russia		57		42		15		36	%
India												India	49		49		—		—	%
Africa and Middle East	Africa and Middle East	54		51		3		6	%			Africa and Middle East	46		54		(8)		(15)	%
India		49		36		13		36	%
Latin America	Latin America	40		39		1		3	%			Latin America	41		40		1		3	%
Total sales	Total sales	$	1,835	$	1,814	$	21	1	%			Total sales	$	2,117	$	1,835	$	282	15	%

"NM" - not meaningful information												"NM" - not meaningful information

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


		Three months ended				Favorable/				Three months ended			Favorable/
		April 4,		March 29,		(Unfavorable)					March 31,		April 4,		(Unfavorable)
In millions	In millions	2021		2020		Amount		Percent				In millions	2022		2021		Amount		Percent
Parts	Parts	$	757	$	787	$	(30)	(4)	%			Parts	$	924	$	757	$	167	22	%
Engines												Engines	441		334		107		32	%
Power generation	Power generation	418		376		42		11	%			Power generation	401		418		(17)		(4)	%
Engines		334		323		11		3	%
Service	Service	326		328		(2)		(1)	%			Service	351		326		25		8	%
Total sales	Total sales	$	1,835	$	1,814	$	21	1	%			Total sales	$	2,117	$	1,835	$	282	15	%

Table of Contents

Sales

Distribution segment sales for the three months ended ~~April 4, 2021,~~March 31, 2022, increased ~~$21~~$282 million versus the comparable period in ~~2020.~~2021. The following were the primary drivers by region:

•~~Improved~~North American sales increased $196 million, representing 70 percent of the total change in Distribution segment sales, mainly due to higher demand ~~in Europe, China, Asia Pacific, Russia~~for parts and ~~India.~~vocational engines.

•~~Favorable~~Russian sales increased $79 million as a result of increased demand for engines and parts.

These increases were partially offset by unfavorable foreign currency fluctuations, primarily in the Australian dollar and Euro.

~~The increases were partially offset by reduced parts sales in North America resulting from supply chain constraints.~~

~~Table of Contents~~

Segment EBITDA

Distribution segment EBITDA for the three months ended ~~April 4, 2021, increased $2~~March 31, 2022, decreased $50 million versus the comparable period in ~~2020,~~2021, primarily due to ~~increased other income~~costs associated with the suspension of our Russian operations and higher gross margin, partially offset by higher research, development and engineering expenses, increased selling, general and administrative expenses and lower equity, royalty and interest income from investees. The increase in gross margin and gross margin as a percentage of sales was mainly due to decreased compensation expenses, improved pricing, higher volumes and favorableunfavorable foreign currency fluctuations ~~(primarily~~(principally in the Russian ruble and Australian dollar), partially offset by higher ~~variable compensation expenses. The increase in selling, general~~volumes and ~~administrative expenses was due~~favorable pricing. See Note 3, "RUSSIAN OPERATIONS" to increased variable compensation expenses, partially offset by decreased consulting expenses and lower travel costs. The increase in research, development and engineering expenses was due to increased variable compensation expenses and higher consulting expenses. The decrease in equity, royalty and interest income from investees was principally due to the absence of a $5 million favorable adjustment related to India Tax Law Changes passed in March 2020. Seeour ~~Note 4, "INCOME TAXES," of the Notes to the~~Condensed Consolidated Financial Statements ~~of our 2020 Form 10-K~~ for additional ~~information on India Tax Law Changes.~~information.

Components Segment Results

Financial data for the Components segment was as follows:


		Three months ended						Favorable/				Three months ended			Favorable/
		April 4,			March 29,			(Unfavorable)					March 31,		April 4,			(Unfavorable)
In millions	In millions	2021			2020			Amount		Percent				In millions	2022			2021			Amount		Percent
External sales	External sales	$	1,724		$	1,115		$	609	55	%			External sales	$	1,517		$	1,724		$	(207)	(12)	%
Intersegment sales	Intersegment sales	428			387			41		11	%			Intersegment sales	471			428			43		10	%
Total sales	Total sales	2,152			1,502			650		43	%			Total sales	1,988			2,152			(164)		(8)	%

Research, development and engineering expenses	Research, development and engineering expenses	75			68			(7)		(10)	%			Research, development and engineering expenses	76			75			(1)		(1)	%
Equity, royalty and interest income from investees	Equity, royalty and interest income from investees	19			21			(2)		(10)	%			Equity, royalty and interest income from investees	28			19			9		47	%
Interest income	Interest income	1			1			—		—	%			Interest income	1			1			—		—	%

Russian suspension costs(1)														Russian suspension costs(1)	6			—			(6)		NM
Segment EBITDA	Segment EBITDA	421			279			142		51	%			Segment EBITDA	320			421			(101)		(24)	%

								Percentage Points										Percentage Points
Segment EBITDA as a percentage of total sales	Segment EBITDA as a percentage of total sales	19.6		%	18.6		%			1.0				Segment EBITDA as a percentage of total sales	16.1		%	19.6		%			(3.5)

"NM" - not meaningful information														"NM" - not meaningful information

(1) See Note 3, "RUSSIAN OPERATIONS" to our Condensed Consolidated Financial Statements for additional information.														(1) See Note 3, "RUSSIAN OPERATIONS" to our Condensed Consolidated Financial Statements for additional information.

Sales for our Components segment by business were as follows:

Three months ended Favorable/
April 4, March 29, (Unfavorable)
In millions 2021 2020 Amount Percent
Emission solutions $ 1,035 $ 664 $ 371 56 %
Filtration 372 312 60 19 %
Turbo technologies 367 270 97 36 %
Electronics and fuel systems 263 174 89 51 %
Automated transmissions 115 82 33 40 %
Total sales $ 2,152 $ 1,502 $ 650 43 %


	Three months ended				Favorable/
	March 31,		April 4,		(Unfavorable)
In millions	2022		2021		Amount		Percent
Emission solutions	$	910	$	1,035	$	(125)	(12)	%
Filtration	382		372		10		3	%
Turbo technologies	346		367		(21)		(6)	%
Electronics and fuel systems	216		263		(47)		(18)	%
Automated transmissions	134		115		19		17	%
Total sales	$	1,988	$	2,152	$	(164)	(8)	%

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Sales

Components segment sales for the three months ended ~~April 4, 2021, increased $650~~March 31, 2022, decreased $164 million versus the comparable period in ~~2020.~~2021. The following were the primary drivers by business:

•Emission solutions sales ~~increased $371~~decreased $125 million primarily due to ~~strong~~lower demand in China, ~~India and North America.~~

•~~Turbo technologies sales increased $97 million principally due to increased~~partially offset by stronger demand in ~~China, Western Europe and~~ North America.

•Electronics and fuel systems sales ~~increased $89~~decreased by $47 million ~~mostly~~principally due to ~~higher~~weaker demand in ~~China, India and North America.~~China.

•~~Filtration~~These decreases were partially offset by increased sales ~~increased $60~~of $19 million in the automated transmission business mainly due to stronger demand in ~~China,~~ North America and ~~Europe.~~

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•~~Favorable foreign currency fluctuations, primarily in the Chinese renminbi and Euro, partially offset by the Brazilian real.~~China.

Segment EBITDA

Components segment EBITDA for the three months ended ~~April 4, 2021, increased $142~~March 31, 2022, decreased $101 million versus the comparable period in ~~2020,~~2021, mainly due to ~~higher gross margin, partially offset by higher selling, general and administrative expenses, increased research, development and engineering costs and~~ lower ~~equity, royalty and interest income from investees. The increase in gross margin and gross margin as a percentage of sales was mainly due to higher~~ volumes and ~~favorable mix, partially offset by~~ increased compensation expenses. Selling, general and administrative expenses increased due to higher variable compensation expenses. Research, development and engineering expenses increased due to higher compensation expenses, especially variable compensation expenses. The decrease in equity, royalty and interest income from investees was principally due to the absence of a $14 million favorable adjustment related to India Tax Law Changes passed in March 2020 in Fleetguard Filters Private Ltd., partially offset by higher earnings at Fleetguard Filters Private Ltd. (excluding the absence of 2020 tax benefit noted above), Dongfeng Cummins Emission Solutions Co., Ltd. and Shanghai Fleetguard Filter Co. See ~~Note 4, "INCOME TAXES," of the Notes to the Consolidated Financial Statements of our 2020 Form 10-K~~ ~~for additional information on India Tax Law Changes.~~material costs.

Power Systems Segment Results

Financial data for the Power Systems segment was as follows:


		Three months ended						Favorable/				Three months ended			Favorable/
		April 4,			March 29,			(Unfavorable)					March 31,		April 4,			(Unfavorable)
In millions	In millions	2021			2020			Amount		Percent				In millions	2022			2021			Amount		Percent
External sales	External sales	$	612		$	500		$	112	22	%			External sales	$	683		$	612		$	71	12	%
Intersegment sales	Intersegment sales	410			384			26		7	%			Intersegment sales	477			410			67		16	%
Total sales	Total sales	1,022			884			138		16	%			Total sales	1,160			1,022			138		14	%

Research, development and engineering expenses	Research, development and engineering expenses	57			54			(3)		(6)	%			Research, development and engineering expenses	64			57			(7)		(12)	%
Equity, royalty and interest income from investees	Equity, royalty and interest income from investees	12			9			3		33	%			Equity, royalty and interest income from investees	11			12			(1)		(8)	%
Interest income	Interest income	1			1			—		—	%			Interest income	1			1			—		—	%

Russian suspension costs(1)														Russian suspension costs(1)	20			—			(20)		NM
Segment EBITDA	Segment EBITDA	126			77			49		64	%			Segment EBITDA	90			126			(36)		(29)	%

								Percentage Points										Percentage Points
Segment EBITDA as a percentage of total sales	Segment EBITDA as a percentage of total sales	12.3		%	8.7		%			3.6				Segment EBITDA as a percentage of total sales	7.8		%	12.3		%			(4.5)

"NM" - not meaningful information														"NM" - not meaningful information

(1) See Note 3, "RUSSIAN OPERATIONS" to our Condensed Consolidated Financial Statements for additional information.														(1) See Note 3, "RUSSIAN OPERATIONS" to our Condensed Consolidated Financial Statements for additional information.

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


		Three months ended				Favorable/				Three months ended			Favorable/
		April 4,		March 29,		(Unfavorable)					March 31,		April 4,		(Unfavorable)
In millions	In millions	2021		2020		Amount		Percent				In millions	2022		2021		Amount		Percent
Power generation	Power generation	$	611	$	519	$	92	18	%			Power generation	$	664	$	611	$	53	9	%
Industrial	Industrial	324		296		28		9	%			Industrial	393		324		69		21	%
Generator technologies	Generator technologies	87		69		18		26	%			Generator technologies	103		87		16		18	%
Total sales	Total sales	$	1,022	$	884	$	138	16	%			Total sales	$	1,160	$	1,022	$	138	14	%

Sales

Power Systems segment sales for the three months ended ~~April 4, 2021,~~March 31, 2022, increased $138 million versus the comparable period in ~~2020.~~2021. The following were the primary drivers by product line:

•Industrial sales increased $69 million due to stronger demand in global mining markets and oil and gas markets in China and North America.

•Power generation sales increased ~~$92~~$53 million due to higher demand in ~~North America,~~ China, ~~Middle East and Asia Pacific.~~

•~~Industrial sales increased $28 million due to increased demand in global mining markets,~~ partially offset by ~~decreased~~weaker demand in ~~oil and gas markets in China.~~

•~~Favorable foreign currency fluctuations, primarily in the Chinese renminbi and British pound.~~North America.

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Segment EBITDA

Power Systems segment EBITDA for the three months ended ~~April 4, 2021, increased $49~~March 31, 2022, decreased $36 million versus the comparable period in ~~2020, primarily~~2021, mainly due to costs associated with the suspension of our Russian operations, increased freight costs due to supply chain constraints and higher ~~gross margin and favorable foreign currency fluctuations (especially in the Chinese renminbi and British pound),~~material costs, partially offset by ~~increased selling, general and administrative expenses. The increase in gross margin and gross margin as a percentage of sales was mainly due~~higher volumes. See Note 3, "RUSSIAN OPERATIONS" to higher volumes and improved pricing, partially offset by increased compensation expenses and unfavorable mix. Selling, general and administrative expenses increased primarily due to increased variable compensation expenses, partially offset by lower travel costs.our Condensed Consolidated Financial Statements for additional information.

New Power Segment Results

The New Power segment designs, manufactures, sells and supports hydrogen production solutions as well as electrified power systems ranging from fully electric to hybrid along with innovative components and subsystems, including battery and fuel cell technologies. The New Power segment is currently in the development phase with a primary focus on research and development activities for our power systems, components and subsystems. Financial data for the New Power segment was as follows:


		Three months ended				Favorable/				Three months ended			Favorable/
		April 4,		March 29,		(Unfavorable)					March 31,		April 4,		(Unfavorable)
In millions	In millions	2021		2020		Amount		Percent				In millions	2022		2021		Amount		Percent
External sales	External sales	$	34	$	10	$	24	NM				External sales	$	25	$	34	$	(9)	(26)	%
Intersegment sales	Intersegment sales	1		—		1		NM				Intersegment sales	6		1		5		NM
Total sales	Total sales	35		10		25		NM				Total sales	31		35		(4)		(11)	%

Research, development and engineering expenses	Research, development and engineering expenses	23		29		6		21	%			Research, development and engineering expenses	36		23		(13)		(57)	%
Equity, royalty and interest income from investees		5		—		5		NM
Equity, royalty and interest (loss) income from investees												Equity, royalty and interest (loss) income from investees	(3)		5		(8)		NM

Segment EBITDA	Segment EBITDA	(51)		(43)		(8)		(19)	%			Segment EBITDA	(67)		(51)		(16)		(31)	%

"NM" - not meaningful information	"NM" - not meaningful information											"NM" - not meaningful information

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OUTLOOK

~~COVID-19 Impact~~Supply Chain Disruptions

The acceleration of the COVID-19 vaccine distribution in the U.S. is helping curb the spread of the virus and will hopefully allow the majority of our manufacturing facilities to remain open to meet increasing customer demand. While the vaccination effort will allow a return to more normal operations in the U.S., many international markets are still dealing with rising cases, new COVID variants and slower vaccination rollout. We continue to ~~take necessary precautions at all our facilities both in the U.S.~~experience supply chain disruptions and ~~abroad~~related financial impacts reflected as increased cost of sales. Our industry continues to mitigate the spread of the disease and prioritize the health and safety of our employees. While we are optimistic that continued vaccination distribution globally will minimize the impacts of the virus in the second half of the year, there is still a risk of increased cases or new virus variants resulting in lower customer demand, additional facility shutdowns orbe unfavorably impacted by supply chain constraints inleading 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 and slowing production. Should the ~~future.~~

~~We anticipate lower demand in~~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. Our Board of Directors (the Board) continues to monitor and evaluate all ~~end markets in India for~~of these factors and the ~~second quarter due to new lockdowns as a result of an increase in COVID-19 cases~~related impacts on our business and ~~are monitoring the events on the ground closely. Given the rapid increase in COVID cases in India,~~operations, and we are ~~very concerned about~~diligently working to minimize the ~~health and safety of our employees and those of our suppliers and partners. We are continuing to operate all our manufacturing facilities but with robust safety measures in place.~~

~~In March, we gained approval as a COVID-19 vaccine administrator at several U.S. sites and began offering the vaccine~~supply chain impacts to our ~~employees~~business and ~~their families at certain facilities in the U.S. We continue~~ to collaborate with health officials around the world to provide employees with access to COVID-19 vaccines. That work differs geographically due to the variability in vaccine accessibility and distribution. Our global network of medical professionals is always focused on efforts to ensure the safety of all Cummins employees, their families and our ~~communities.~~customers.

Business Outlook

Our outlook reflects the following positive trends and challenges to our business that could impact our revenue and earnings potential for the remainder of ~~2021.~~2022.

Positive Trends

•We expect demand for pick-up trucks in North America to remain strong.

•We ~~estimate~~expect North American medium-duty and heavy-duty truck demand will ~~continue to improve from 2020 levels.~~remain strong.

•We believe market demand for trucks in India will ~~improve~~continue the improvement trend from ~~2020 levels.~~the second half of 2021.

•We anticipate our aftermarket business will continue to improve, driven primarily by increased truck utilization in North ~~America.~~America and improved demand in our Power Systems business.

•Our liquidity of ~~$6.5~~$6.0 billion in cash, marketable securities and available credit facilities ~~strengthens our~~puts us in a strong position to deal with any uncertainties that may arise in the remainder of ~~2021.~~2022.

Challenges

•Supply constraints driven by strong demand in multiple end markets and regions may lead to increased costs, including higher ~~premium freight.~~freight and conversion costs.

•~~The shortage~~Continued increases in material and commodity costs could negatively impact earnings.

•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 slowing production.

•Resurgence of ~~key components such as semiconductor chips may lead~~COVID-19 in China led to ~~manufacturing delays, increased costs~~lockdowns in several cities that negatively impacted the economy and our end markets. These lockdowns will also contribute to further disruptions in the ~~loss of sales.~~global supply chain, negatively impacting both our revenues and profitability.

•We expect market demand in truck and construction markets in China to decline from ~~record levels~~2021 full year levels.

•The indefinite suspension of our operations in ~~2020.~~Russia is expected to impact our revenue and profitability. The 2021 sales through our wholly-owned distributor in Russia and direct sales into Russia were 2.7 percent of net sales.

•We ~~may close or restructure certain manufacturing~~expect to incur incremental expenses as a result of the expected completion of the Meritor, Inc. acquisition and ~~distribution facilities as we evaluate the appropriate size and structure of~~its integration into our ~~manufacturing and distribution capacity, which could result in additional charges.~~business.

•~~Uncertainty~~Planned separation of our filtration business into a stand-alone company is expected to result in ~~the U.K. surrounding its ability to negotiate trade agreements as a sovereign country could have material negative impacts on our European operations in the long-term.~~incremental expenses.

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LIQUIDITY AND CAPITAL RESOURCES

Key Working Capital and Balance Sheet Data

We fund our working capital with cash from operations and short-term borrowings, including commercial paper, when necessary. Various assets and liabilities, including short-term debt, can fluctuate significantly from month to month depending on short-term liquidity needs. As a result, working capital is a prime focus of management's attention. Working capital and balance sheet measures are provided in the following table:


Dollars in millions	Dollars in millions	April 4, 2021			December 31, 2020			Dollars in millions	March 31, 2022			December 31, 2021
Working capital (1)	Working capital (1)	$	5,462		$	5,562		Working capital (1)	$	5,084		$	5,225
Current ratio	Current ratio	1.82			1.88			Current ratio	1.68			1.74
Accounts and notes receivable, net	Accounts and notes receivable, net	$	4,209		$	3,820		Accounts and notes receivable, net	$	4,368		$	3,990
Days' sales in receivables	Days' sales in receivables	60			69			Days' sales in receivables	60			59
Inventories	Inventories	$	3,753		$	3,425		Inventories	$	4,586		$	4,355
Inventory turnover	Inventory turnover	5.0			4.2			Inventory turnover	4.2			4.6
Accounts payable (principally trade)	Accounts payable (principally trade)	$	3,279		$	2,820		Accounts payable (principally trade)	$	3,497		$	3,021
Days' payable outstanding	Days' payable outstanding	58			68			Days' payable outstanding	60			57
Total debt	Total debt	$	4,091		$	4,164		Total debt	$	4,125		$	4,159
Total debt as a percent of total capital	Total debt as a percent of total capital	31.2		%	31.7		%	Total debt as a percent of total capital	30.6		%	30.7		%

(1) Working capital includes cash and cash equivalents.	(1) Working capital includes cash and cash equivalents.							(1) Working capital includes cash and cash equivalents.

Cash Flows

Cash and cash equivalents were impacted as follows:


		Three months ended							Three months ended
In millions	In millions	April 4, 2021		March 29, 2020		Change		In millions	March 31, 2022		April 4, 2021		Change
Net cash provided by operating activities	Net cash provided by operating activities	$	339	$	379	$	(40)	Net cash provided by operating activities	$	164	$	339	$	(175)
Net cash used in investing activities	Net cash used in investing activities	(25)		(99)		74		Net cash used in investing activities	(10)		(25)		15
Net cash (used in) provided by financing activities		(745)		234		(979)
Net cash used in financing activities								Net cash used in financing activities	(497)		(745)		248
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(12)		48		(60)		Effect of exchange rate changes on cash and cash equivalents	27		(12)		39
Net (decrease) increase in cash and cash equivalents		$	(443)	$	562	$	(1,005)
Net decrease in cash and cash equivalents								Net decrease in cash and cash equivalents	$	(316)	$	(443)	$	127

Net cash provided by operating activities decreased ~~$40~~$175 million for the three months ended ~~April 4, 2021,~~March 31, 2022, versus the comparable period in ~~2020,~~2021, primarily due to higher working capital requirements of ~~$158~~$237 million and lower consolidated net income of $188 million, partially offset by ~~higher consolidated net income~~Russian suspension costs of ~~$83~~$158 million, favorable changes in other liabilities of $70 million and ~~the absence~~lower equity earnings, net of ~~prior year restructuring payments~~dividends of ~~$48~~$60 million. During the first three months of ~~2021,~~2022, the higher working capital requirements resulted in a cash outflow of ~~$293~~$530 million compared to a cash outflow of ~~$135~~$293 million in the comparable period in ~~2020,~~2021, mainly due to higher ~~accounts and notes receivable, inventories and other current assets,~~variable compensation payouts in accrued expenses, partially offset by ~~higher accrued expenses and accounts payable.~~favorable changes in inventories.

Net cash used in investing activities decreased ~~$74~~$15 million for the three months ended ~~April 4, 2021,~~March 31, 2022, versus the comparable period in ~~2020,~~2021, primarily due to ~~higher~~$83 million of cash acquired from the acquisition of Cummins Westport Joint Venture, net ~~liquidations~~ of ~~marketable securities of $85 million,~~the purchase price, partially offset by higher capital expenditures of $17 million, unfavorable changes in cash flows from derivatives not designated as hedges of $16 million, higher investments in and advances to equity investees of ~~$17~~$8 million and lower net liquidations of marketable securities of $7 million.

Net cash used in financing activities ~~increased $979~~decreased $248 million for the three months ended ~~April 4, 2021,~~March 31, 2022, versus the comparable period in ~~2020,~~2021, primarily due to ~~lower~~higher net borrowings ~~of commercial paper of $963 million and higher net payments~~ under short-term credit agreements of ~~$127~~$131 million ~~partially offset by~~and lower repurchases of common stock of ~~$132~~$107 million.

The effect of exchange rate changes on cash and cash equivalents for the three months ended ~~April 4, 2021,~~March 31, 2022, versus the comparable period in ~~2020, decreased $60~~2021, increased $39 million primarily due to ~~unfavorable~~favorable fluctuations in the British pound of ~~$69 million, partially offset by favorable fluctuations in the Chinese renminbi and Indian rupee.~~$36 million.

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Sources of Liquidity

We generate significant ongoing cash flow. Cash provided by operations is ~~typically~~ our principal source of liquidity with ~~$339~~$164 million generated in the three months ended ~~April 4, 2021.~~March 31, 2022. Our sources of liquidity include:


		April 4, 2021								March 31, 2022
In millions	In millions	Total		U.S.		International		Primary location of international balances	In millions	Total		U.S.		International		Primary location of international balances
Cash and cash equivalents	Cash and cash equivalents	$	2,958	$	1,536	$	1,422	China, Singapore, Belgium, Mexico, Australia, Canada	Cash and cash equivalents	$	2,276	$	821	$	1,455	China, Singapore, Belgium, Australia, Mexico, India

Marketable securities (1)	Marketable securities (1)	397		91		306		India	Marketable securities (1)	527		106		421		India
Total	Total	$	3,355	$	1,627	$	1,728		Total	$	2,803	$	927	$	1,876
Available credit capacity	Available credit capacity								Available credit capacity
Revolving credit facilities (2)	Revolving credit facilities (2)	$	3,183						Revolving credit facilities (2)	$	3,189
International and other uncommitted domestic credit facilities	International and other uncommitted domestic credit facilities	$	249						International and other uncommitted domestic credit facilities	$	253

(1) The majority of marketable securities could be liquidated into cash within a few days.	(1) The majority of marketable securities could be liquidated into cash within a few days.								(1) The majority of marketable securities could be liquidated into cash within a few days.
(2) The five-year credit facility for $2.0 billion and the 364-day credit facility for $1.5 billion, maturing August 2023 and August 2021, respectively, are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes. At April 4, 2021, we had $317 million of commercial paper outstanding, which effectively reduced the available capacity under our revolving credit facilities to $3.2 billion.
(2) The five-year credit facility for $2.0 billion and the 364-day credit facility for $1.5 billion, maturing August 2026 and August 2022, respectively, are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes. At March 31, 2022, we had $311 million of commercial paper outstanding, which effectively reduced the available capacity under our revolving credit facilities to $3.2 billion.									(2) The five-year credit facility for $2.0 billion and the 364-day credit facility for $1.5 billion, maturing August 2026 and August 2022, respectively, are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes. At March 31, 2022, we had $311 million of commercial paper outstanding, which effectively reduced the available capacity under our revolving credit facilities to $3.2 billion.

Cash, Cash Equivalents and Marketable Securities

A significant portion of our cash flow is generated outside the U.S. We manage our worldwide cash requirements considering available funds among the many subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed. As a result, we do not anticipate any local liquidity restrictions to preclude us from funding our operating needs with local resources.

If we distribute our foreign cash balances to the U.S. or to other foreign subsidiaries, we could be required to accrue and pay withholding taxes, for example, if we repatriated cash from certain foreign subsidiaries whose earnings we ~~have~~ asserted are completely or partially permanently ~~reinvested outside of the U.S.~~reinvested. Foreign earnings for which we assert permanent reinvestment outside the U.S. consist primarily of earnings of our China, India and Netherlands domiciled subsidiaries. At present, we do not foresee a need to repatriate any earnings ~~from these subsidiaries~~ for which we ~~have~~ asserted permanent reinvestment. However, to help fund cash needs of the U.S. or other international subsidiaries as they arise, we repatriate available cash from certain foreign subsidiaries whose earnings are not permanently reinvested when it is cost effective to do so.

Debt Facilities and Other Sources of Liquidity

We can issue up to $3.5 billion of unsecured, short-term promissory notes (commercial paper) pursuant to the Board ~~of Directors (the Board)~~ authorized commercial paper programs. ~~The~~These programs facilitate the private placement of unsecured short-term debt through third-party brokers. We intend to use the net proceeds from the commercial paper borrowings for acquisitions and general corporate purposes. The total combined borrowing capacity under the revolving credit facilities and commercial programs should not exceed $3.5 billion. See Note 8,10, "DEBT," to our Condensed Consolidated Financial Statements for additional information.

At ~~April 4, 2021,~~March 31, 2022, we had ~~$317~~$311 million of commercial paper outstanding, which effectively reduced the available capacity under our revolving credit facilities to $3.2 billion.

In July 2017, the U.K.'s Financial Conduct Authority, which regulates the London Interbank Offered Rate (LIBOR), announced it intends to phase out LIBOR by the end of 2021. The cessation date for submission and publication of rates for certain tenors of LIBOR has since been extended until mid-2023. Various central bank committees and working groups continue to discuss replacement

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of benchmark rates, the process for amending existing LIBOR-based contracts and the potential economic impacts of different alternatives. The Alternative Reference Rates Committee has identified the Secured Overnight Financing Rate (SOFR) as its preferred alternative rate for U.S. dollar LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. We have evaluated the potential impact of the replacement of the LIBOR benchmark interest rate including risk management, internal operational readiness and monitoring the Financial Accounting Standards Board standard-setting process to address financial reporting issues that might arise in connection with transition from LIBOR to a new benchmark rate. While we do not believe the change will materially impact us due to our operational and system readiness coupled with relevant contractual fallback language, we continue to evaluate all eventual transition risks. In anticipation of LIBOR's phase out, our most recent revolving credit agreements include a well-documented transition mechanism for selecting a benchmark replacement rate for LIBOR, subject to our agreement. Additionally, with respect to our $1.3 billion in LIBOR-based fixed to variable rate swaps maturing in 2025 and 2030, we reviewed and believe our adherence to the 2020 LIBOR fallback protocol will allow for a smooth transition to the designated replacement rate when that transition occurs.

Supply Chain Financing

We currently have supply chain financing programs with financial intermediaries, which provide certain vendors the option to be paid by financial intermediaries earlier than the due date on the applicable invoice. When a vendor utilizes the program and receives an early payment from a financial intermediary, they take a discount on the invoice. We then pay the financial intermediary the face amount of the invoice on the regularly scheduled due date. The maximum amount that we may have outstanding under the program is $361 million. We do not reimburse vendors for any costs they incur for participation in

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the program and their participation is completely voluntary. As a result, all amounts owed to the financial intermediaries are presented as "Accounts payable" in our Condensed Consolidated Balance Sheets. Amounts due to the financial intermediaries reflected in accounts payable at March 31, 2022, were $295 million.

Uses of Cash

Stock Repurchases

In December 2021, the Board authorized the acquisition of up to $2.0 billion of additional common stock upon completion of the 2019 repurchase plan. In December 2019, the Board authorized the acquisition of up to $2.0 billion of additional common stock upon completion of the 2018 repurchase plan. In the first three months of ~~2021,~~2022, we made the following purchases under the 2019 stock repurchase program:

In millions, except per share amounts Shares
Purchased Average Cost
Per Share Total Cost of
Repurchases
Remaining
Authorized
Capacity (1)
April 4 1.7 $ 247.35 $ 418 $ 1,576
(1) The remaining authorized capacity under these plans was calculated based on the cost to purchase the shares but excludes commission expenses in accordance with the authorized plan.


In millions, except per share amounts	Shares Purchased	Average Cost Per Share		Total Cost of Repurchases		Remaining Authorized Capacity (1)

March 31	1.6	$	199.27	$	311	$	2,281





(1) The remaining $281 million authorized capacity under the 2019 plan was calculated based on the cost to purchase the shares, but excludes commission expenses in accordance with the authorized plan.

We intend to repurchase outstanding shares from time to time during ~~2021~~2022 to enhance shareholder value.

Dividends

We paid dividends of ~~$197~~$207 million during the three months ended ~~April 4, 2021.~~March 31, 2022.

Capital Expenditures

Capital expenditures, including spending on internal use software, for the three months ended ~~April 4, 2021,~~March 31, 2022, were ~~$98~~$115 million versus ~~$83~~$98 million in the comparable period in ~~2020.~~2021. We plan to spend an estimated ~~$725~~$850 million to ~~$775~~$900 million in ~~2021~~2022 on capital expenditures, excluding internal use software, with over 5060 percent of these expenditures expected to be invested in North America. In addition, we plan to spend an estimated ~~$60~~$70 million to ~~$70~~$80 million on internal use software in ~~2021.~~2022.

Current Maturities of Short and Long-Term Debt

We had ~~$317~~$311 million of commercial paper outstanding at ~~April 4, 2021,~~March 31, 2022, that matures in less than one year. The maturity schedule of our existing long-term debt does not require significant cash outflows until 2023 when our ~~3.65%~~3.65 percent senior notes and 2025 when our 0.75 percent senior notes are due. Required annual long-term debt principal payments range from ~~$30~~$24 million to ~~$534~~$548 million over the next five years (including the remainder of ~~2021)~~2022). See Note 8,10, "DEBT," to the Condensed Consolidated Financial Statements for additional information.

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Pensions

Our global pension plans, including our unfunded and non-qualified plans, were ~~112~~121 percent funded at December 31, ~~2020.~~2021. Our U.S. defined benefit plan, which represented approximately 52 percent of the worldwide pension obligation, was ~~128~~138 percent funded, and our U.K. defined benefit plan was ~~114~~127 percent funded at December 31, ~~2020.~~2021. The funded status of our pension plans is dependent upon a variety of variables and assumptions including return on invested assets, market interest rates and levels of voluntary contributions to the plans. In the first three months of ~~2021,~~2022, the investment ~~gain~~loss on our U.S. pension trust was ~~1.1~~2.7 percent while our U.K. pension trust loss was ~~6.1~~5.8 percent. Approximately 7167 percent of our pension plan assets are held in highly liquid investments such as fixed income and equity securities. The remaining 2933 percent of our plan assets are held in less liquid, but market valued investments, including real estate, private equity, venture capital, opportunistic credit and insurance contracts. ~~During the remainder of 2021, we~~We anticipate making ~~$17 million in~~ additional defined benefit pension contributions induring the ~~U.K. and $12~~remainder of 2022 of $17 million ~~in contributions to~~for our U.S. and U.K. qualified and non-qualified ~~benefit~~pension plans. These contributions may be made from trusts or company funds either to increase pension assets or to make direct benefit payments to plan participants. We expect our ~~2021~~2022 annual net periodic pension cost to approximate ~~$79~~$31 million.

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Credit Ratings

Our rating and outlook from each of the credit rating agencies as of the date of filing are shown in the table ~~below.~~below:

Long-Term

Short-Term

Credit Rating Agency (1)

Senior Debt Rating

Debt Rating

Outlook

Standard and Poor’s Rating Services

A+

Stable

Moody’s Investors Service, Inc.

Stable

(1) Credit ratings are not recommendations to buy, are subject to change, and each rating should be evaluated independently of any other rating. In addition, we undertake no obligation to update disclosures concerning our credit ratings, whether as a result of new information, future events or otherwise.

Management's Assessment of Liquidity

Our financial condition and liquidity remain strong. Our solid balance sheet and credit ratings enable us to have ready access to credit and the capital markets. We assess our liquidity in terms of our ability to generate adequate cash to fund our operating, investing and financing activities. We believe our existing cash and marketable securities, operating cash flow and revolving credit facilities provide us with the financial flexibility needed to fund common stock repurchases, dividend payments, targeted capital expenditures, projected pension obligations, acquisitions, working capital and debt service obligations through ~~2021~~2022 and beyond. We continue to generate significant cash from operations and maintain access to our ~~expanded~~ revolving credit facilities and commercial paper programs as noted above.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

A summary of our significant accounting policies is included in Note 1, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,” of the Notes to the Consolidated Financial Statements of our ~~2020~~2021 Form 10-K, which discusses accounting policies that we have selected from acceptable alternatives.

Our Condensed Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles that often require management to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts presented and disclosed in the financial statements. Management reviews these estimates and assumptions based on historical experience, changes in business conditions ~~including the impacts of COVID-19~~ and other relevant factors they believe to be reasonable under the circumstances. In any given reporting period, our actual results may differ from the estimates and assumptions used in preparing our Condensed Consolidated Financial Statements.

Critical accounting estimates are defined as follows: the estimate requires management to make assumptions about matters that were highly uncertain at the time the estimate was made; different estimates reasonably could have been used; or if changes in the estimate are reasonably likely to occur from period to period and the change would have a material impact on our financial condition or results of operations. Our senior management has discussed the development and selection of our accounting policies, related accounting estimates and the disclosures set forth below with the Audit Committee of the Board. Our critical accounting estimates disclosed in the Form 10-K address estimating liabilities for warranty programs, assessing goodwill impairment, accounting for income taxes and pension benefits.

A discussion of our critical accounting estimates may be found in the “Management’s Discussion and Analysis” section of our ~~2020~~2021 Form 10-K under the caption “APPLICATION OF CRITICAL ACCOUNTING ESTIMATES.” Within the context of these critical accounting estimates, we are not currently aware of any reasonably likely events or circumstances that would result in different policies or estimates being reported in the first three months of ~~2021.~~2022.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

A discussion of quantitative and qualitative disclosures about market risk may be found in Item 7A of our ~~2020~~2021 Form 10-K. There have been no material changes in this information since the filing of our ~~2020~~2021 Form 10-K.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, our CEO and our CFO concluded that our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of

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1934 is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) accumulated and communicated to management, including our CEO and CFO, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended ~~April 4, 2021,~~March 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

The matters described under "Legal Proceedings" in Note ~~10,~~12, "COMMITMENTS AND CONTINGENCIES," to the Condensed Consolidated Financial Statements are incorporated herein by reference.

ITEM 1A. Risk Factors

In addition to other information set forth in this report and the risk factors noted below, you should consider other risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20 202021, which could materially affect our business, financial condition or future results. ~~The~~Other than noted below, there have been no material changes to our risks described in our 20 20 2021 Annual Report on Form 10-K or the "CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION" in this Quarterly report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently judge to be immaterial also may materially adversely affect our business, financial condition or operating results.

GOVERNMENT REGULATION

We are conducting a formal internal review of our emission certification process and compliance with emission standards with respect to our pick-up truck applications and are working with the EPA and CARB to address their questions about these applications. Due to the continuing nature of our formal internal review and on-going discussions with the EPA and CARB, we cannot predict the final results of this formal review and these regulatory processes, nor whether, or the extent to which, they could have a material adverse impact on our results of operations and cash flows.

We previously announced that we are conducting a formal internal review of our emissions certification process and compliance with emission standards with respect to all of our pick-up truck applications, following conversations with the EPA and CARB regarding certification of our engines for model year 2019 RAM 2500 and 3500 trucks. During conversations with the EPA and CARB about the effectiveness of our pick-up truck applications, the regulators raised concerns that certain aspects of our emissions systems may reduce the effectiveness of our emissions control systems and thereby act as defeat devices. As a result, our internal review focuses, in part, on the regulators’ concerns. We are working closely with the regulators to enhance our emissions systems to improve the effectiveness of all of our pick-up truck applications and to fully address the regulators’ requirements. Based on discussions with the regulators, we have developed a new calibration for the engines in model year 2019 RAM 2500 and 3500 trucks that has been included in all engines shipped since September 2019. During our discussions, the regulators turned their attention to other model years and other engines, most notably our pick-up truck applications for RAM 2500 and 3500 trucks for model years 2013 through 2018. In connection with these and other ongoing discussions with the EPA and CARB, we are developing a new software calibration and will recall model years 2013 through 2018 RAM 2500 and 3500 trucks. We accrued $30 million for the recall during the first quarter of 2022, an amount that reflects our current estimate of the cost of the recall.

We will continue to work together closely with the relevant regulators to develop and implement recommendations for improvement

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and seek to reach further resolutions as part of our ongoing commitment to compliance. Due to the presence of many unknown facts and circumstances, we are not yet able to estimate any further financial impact of these matters. It is possible that the consequences of any remediation plans resulting from our formal review and these regulatory processes could have a material adverse impact on our results of operations and cash flows.

BUSINESS CONDITIONS / DISRUPTIONS

The ongoing conflict between Russia and Ukraine, and the global response (including government bans or restrictions on doing business in Russia), could have a material adverse impact on our results of operations, financial condition and cash flows.

Given the nature of our business and our global operations, political, economic, and other conditions in foreign countries and regions, including geopolitical risks such as the current conflict between Russia and Ukraine, may adversely affect our results of operations, financial condition and cash flows. We have suspended our commercial operations in Russia indefinitely, which resulted in a $158 million charge in the first quarter of 2022. We may incur additional charges as conditions continue to evolve. In addition, we have experienced, and expect to continue to experience, an inability to collect customer receivables and may be the subject of litigation in connection with our suspension of commercial operations in Russia. The broader consequences of this conflict, which may include further sanctions, embargoes, regional instability, and geopolitical shifts; potential retaliatory action by the Russian government against companies, including possible nationalization of foreign businesses in Russia; increased tensions between the United States and countries in which we operate; and the extent of the conflict’s effect on our business and results of operations as well as the global economy, cannot be predicted. To the extent the current conflict between Russia and Ukraine adversely affects our business, it may also have the effect of heightening many other risks disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, any of which could materially and adversely affect our business and results of operations. Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including inflation, particularly with regard to raw material, transportation and labor price fluctuations; disruptions to our information technology environment, including through cyberattack, ransom attack, or cyber-intrusion; adverse changes in international trade policies and relations; disruptions in global supply chains; and our exposure to foreign currency exchange rate changes.

Failure to successfully execute or integrate the acquisition of Meritor, Inc. (Meritor) could have a material adverse impact on our results of operations, financial condition and cash flows.

The completion of the acquisition of Meritor is subject to a number of conditions including shareholder and regulatory approval as well as other conditions in the merger agreement. Failure to satisfy all of the required conditions could delay the completion of the acquisition for a significant period of time or prevent it from occurring at all. Under certain limited conditions, we and/or Meritor may elect to terminate the merger agreement, which could materially and adversely affect our business and reputation. Furthermore, if completed, the acquisition of Meritor will involve the integration of Meritor’s operations with our existing operations, and there are uncertainties inherent in such an integration. We will be required to devote significant management attention and resources to integrating Meritor’s operations. A delay in completing the acquisition or integration of Meritor could cause us to fail to realize some or all of the anticipated benefits within a reasonable period of time or at all, which could result in additional transaction costs or in other negative effects associated with uncertainty about the completion of the acquisition.

We may fail to fully realize all of the anticipated benefits, including enhanced revenue, earnings, and cash flow from our announced acquisition of Meritor.

Our ability to fully realize all of the anticipated benefits, including enhanced revenue, earnings, and cash flow, from our announced acquisition of Meritor will depend, in substantial part, on our ability to successfully integrate the products into our segments, launch the Meritor products around the world and achieve our projected market penetration. While we believe we will ultimately achieve these objectives, it is possible that we will be unable to achieve all of these objectives within our anticipated time frame or in the anticipated amounts. If we are not able to successfully complete the integration of the Meritor business or implement our Meritor strategy, we may not fully realize the anticipated benefits, including enhanced revenue, earnings, and cash flows, from this acquisition or such anticipated benefits may take longer to realize than expected.

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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following information is provided pursuant to Item 703 of Regulation S-K:


		Issuer Purchases of Equity Securities							Issuer Purchases of Equity Securities
Period	Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (2)		Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (2)
January 1 - February 7		647,390	$	237.88	647,390	$	1,840
February 8 - March 7		654,074	246.15		654,074	1,679
March 8 - April 4		388,437	265.17		388,437	1,576
January 1 - January 31								January 1 - January 31	50,064	$	218.55	50,064	$	2,581
February 1 - February 28								February 1 - February 28	—	—		—	2,581
March 1 - March 31								March 1 - March 31	1,510,316	198.63		1,510,316	2,281
Total	Total	1,689,901	247.35		1,689,901			Total	1,560,380	199.27		1,560,380

(1) Shares purchased represent shares under the Board authorized share repurchase program.	(1) Shares purchased represent shares under the Board authorized share repurchase program.							(1) Shares purchased represent shares under the Board authorized share repurchase program.
(2) Shares repurchased under our Key Employee Stock Investment Plan only occur in the event of a participant default, which cannot be predicted, and were excluded from this column.	(2) Shares repurchased under our Key Employee Stock Investment Plan only occur in the event of a participant default, which cannot be predicted, and were excluded from this column.							(2) Shares repurchased under our Key Employee Stock Investment Plan only occur in the event of a participant default, which cannot be predicted, and were excluded from this column.

In December 2021, the Board authorized the acquisition of up to $2.0 billion of additional common stock upon completion of the 2019 repurchase plan. In December 2019, the Board authorized the acquisition of up to $2.0 billion of additional common stock upon completion of the 2018 repurchase plan. During the three months ended ~~April 4, 2021,~~March 31, 2022, we repurchased ~~$418~~$311 million of common stock under the 2019 authorization. The dollar value remaining available for future purchases under the 2019 program at ~~April 4, 2021,~~March 31, 2022, was ~~$1,576~~$281 million.

Our Key Employee Stock Investment Plan allows certain employees, other than officers, to purchase shares of common stock on an installment basis up to an established credit limit. We hold participants’ shares as security for the loans and would, in effect, repurchase shares only if the participant defaulted in repayment of the loan. Shares associated with participants' sales are sold as open-market transactions via a third-party broker.

ITEM 3. Defaults Upon Senior Securities

Not applicable.

ITEM 4. Mine Safety Disclosures

Not applicable.

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ITEM 5. Other Information

Not applicable.

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ITEM 6. Exhibits

The exhibits listed in the following Exhibit Index are filed as part of this Quarterly Report on Form 10-Q.

CUMMINS INC.

EXHIBIT INDEX


Exhibit No.						Description of Exhibit





~~10(a)~~10 (a)						~~Deferred Compensation~~Agreement and Plan ~~as amended~~of Merger, dated F ebruary 21, 2022, by and ~~restated~~among Meritor, Inc., Cummins Inc. and Rose NewCo Inc.(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Cummins Inc. with the Securities and Exchange Commission on February ~~15, 2021.~~24, 202 2 (File No. 001-04949)).
~~10(b)~~						~~Deferred Compensation Plan for Non-Employee Directors, as amended and restated February 15, 2021.~~






31(a)						Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b)						Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32						Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*						Inline XBRL Taxonomy Extension Schema Document.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed with this quarterly report on Form 10-Q are the following documents formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Net Income for the three months ended March 31, 2022 and April 4, 2021, ~~and March 29, 2020,~~ (ii) the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and April 4, 2021, ~~and March 29, 2020,~~ (iii) the Condensed Consolidated Balance Sheets at ~~April 4, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, (iv) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and April 4, 2021, ~~and March 29, 2020,~~ (v) the Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 2022 and April 4, 2021 ~~and March 29, 2020~~ and (vi) Notes to Condensed Consolidated Financial Statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Cummins Inc.

Date:

May ~~4, 2021~~3, 2022

By:

/s/ MARK A. SMITH

By:

/s/ ~~CHRISTOPHER C. CLULOW~~LUTHER E. PETERS

Mark A. Smith

~~Christopher C. Clulow~~Luther E. Peters

Vice President and Chief Financial Officer

Vice ~~President-Corporate Controller~~President-Controller

(Principal Financial Officer)

(Principal Accounting Officer)

4550



In millions	Change in pensions and other postretirement defined benefit plans		Foreign currency translation adjustment		Unrealized gain (loss) on derivatives			Total attributable to Cummins Inc.		Noncontrolling interests		Total
Balance at December 31, 2020	$	(735)	$	(1,204)	$	(43)		$	(1,982)
Other comprehensive income before reclassifications
Before-tax amount	15		(60)		93			48		$	0	$	48
Tax (expense) benefit	(3)		4		(22)			(21)		0		(21)
After-tax amount	12		(56)		71			27		0		27
Amounts reclassified from accumulated other comprehensive income(1)	17		0		1			18		0		18

Net current period other comprehensive income (loss)	29		(56)		72		(2)	45		$	0	$	45
Balance at April 4, 2021	$	(706)	$	(1,260)	$	29		$	(1,937)

Balance at December 31, 2019	$	(734)	$	(1,285)	$	(9)		$	(2,028)
Other comprehensive income before reclassifications
Before-tax amount	(19)		(148)		(95)			(262)		$	(17)	$	(279)
Tax benefit	5		3		18			26		0		26
After-tax amount	(14)		(145)		(77)			(236)		(17)		(253)
Amounts reclassified from accumulated other comprehensive income (loss)(1)	16		0		(2)			14		0		14
Net current period other comprehensive income (loss)	2		(145)		(79)		(2)	(222)		$	(17)	$	(239)
Balance at March 29, 2020	$	(732)	$	(1,430)	$	(88)		$	(2,250)

(1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure.
(2) Primarily related to interest rate lock activity. See the Interest Rate Risk section in NOTE 8 "DEBT" for additional information.