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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 September 30, 2024
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 | x | | 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 September 30, 2024, there were 137,181,852 shares of common stock outstanding with a par value of $2.50 per share.
CUMMINS INC. AND SUBSIDIARIES
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q
| | | | | | | | |
| | | Page |
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| | Condensed Consolidated Statements of Net Income for the three and nine months ended September 30, 2024 and 2023 | |
| | Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2024 and 2023 | |
| | |
| | Condensed Consolidated Balance Sheets at September 30, 2024 and December 31, 2023 | |
| | Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 | |
| | Condensed Consolidated Statements of Changes in Redeemable Noncontrolling Interests and Equity for the three and nine months ended September 30, 2024 and 2023 | |
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PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Three months ended | | Nine months ended |
| | | September 30, | | September 30, |
| In millions, except per share amounts | | 2024 | | 2023 | | 2024 | | 2023 |
NET SALES (Notes 1 and 2) | | $ | 8,456 | | | $ | 8,431 | | | $ | 25,655 | | | $ | 25,522 | |
| Cost of sales | | 6,285 | | | 6,360 | | | 19,250 | | | 19,274 | |
| GROSS MARGIN | | 2,171 | | | 2,071 | | | 6,405 | | | 6,248 | |
| | | | | | | | |
| OPERATING EXPENSES AND INCOME | | | | | | | | |
| Selling, general and administrative expenses | | 807 | | | 831 | | | 2,474 | | | 2,457 | |
| Research, development and engineering expenses | | 359 | | | 376 | | | 1,107 | | | 1,110 | |
| Equity, royalty and interest income from investees (Note 4) | | 99 | | | 118 | | | 325 | | | 370 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Other operating expense, net | | 54 | | | 32 | | | 131 | | | 78 | |
| OPERATING INCOME | | 1,050 | | | 950 | | | 3,018 | | | 2,973 | |
| | | | | | | | |
| | | | | | | | |
| Interest expense | | 83 | | | 97 | | | 281 | | | 283 | |
| Other income, net (Note 14) | | 76 | | | 25 | | | 1,504 | | | 166 | |
| INCOME BEFORE INCOME TAXES | | 1,043 | | | 878 | | | 4,241 | | | 2,856 | |
| | | | | | | | |
| Income tax expense (Note 5) | | 200 | | | 188 | | | 618 | | | 623 | |
| CONSOLIDATED NET INCOME | | 843 | | | 690 | | | 3,623 | | | 2,233 | |
| | | | | | | | |
| Less: Net income attributable to noncontrolling interests | | 34 | | | 34 | | | 95 | | | 67 | |
| NET INCOME ATTRIBUTABLE TO CUMMINS INC. | | $ | 809 | | | $ | 656 | | | $ | 3,528 | | | $ | 2,166 | |
| | | | | | | | | |
| EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. | | | | | | | | |
| Basic | | $ | 5.90 | | | $ | 4.63 | | | $ | 25.47 | | | $ | 15.29 | |
| Diluted | | $ | 5.86 | | | $ | 4.59 | | | $ | 25.31 | | | $ | 15.19 | |
| | | | | | | | | |
| WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | | | | | | | | |
| Basic | | 137.2 | | | 141.8 | | | 138.5 | | | 141.7 | |
| Dilutive effect of stock compensation awards | | 0.9 | | | 1.0 | | | 0.9 | | | 0.9 | |
| Diluted | | 138.1 | | | 142.8 | | | 139.4 | | | 142.6 | |
| | | | | | | | |
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|
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | Three months ended | | Nine months ended |
| | | September 30, | | September 30, |
| In millions | | 2024 | | 2023 | | 2024 | | 2023 |
| CONSOLIDATED NET INCOME | | $ | 843 | | | $ | 690 | | | $ | 3,623 | | | $ | 2,233 | |
| Other comprehensive income (loss), net of tax (Note 12) | | | | | | | | |
| Change in pension and other postretirement defined benefit plans | | 5 | | | 3 | | | 5 | | | (4) | |
| Foreign currency translation adjustments | | 165 | | | (163) | | | 22 | | | (191) | |
| | | | | | | | | |
| Unrealized (loss) gain on derivatives | | (7) | | | 19 | | | 2 | | | 28 | |
| Total other comprehensive income (loss), net of tax | | 163 | | | (141) | | | 29 | | | (167) | |
| COMPREHENSIVE INCOME | | 1,006 | | | 549 | | | 3,652 | | | 2,066 | |
| Less: Comprehensive income attributable to noncontrolling interests | | 36 | | | 27 | | | 92 | | | 61 | |
| COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC. | | $ | 970 | | | $ | 522 | | | $ | 3,560 | | | $ | 2,005 | |
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | | | | | | | | | | | | | |
| In millions, except par value | | September 30,
2024 | | December 31,
2023 |
| ASSETS | | | | |
| Current assets | | | | |
| Cash and cash equivalents | | $ | 1,733 | | | $ | 2,179 | |
| | | | |
| Marketable securities (Note 6) | | 518 | | | 562 | |
| Total cash, cash equivalents and marketable securities | | 2,251 | | | 2,741 | |
| Accounts and notes receivable, net | | 5,387 | | | 5,583 | |
| | | | |
| | | | |
| Inventories (Note 7) | | 6,134 | | | 5,677 | |
| Prepaid expenses and other current assets | | 1,544 | | | 1,197 | |
| Total current assets | | 15,316 | | | 15,198 | |
| Long-term assets | | | | |
| Property, plant and equipment | | 11,603 | | | 11,674 | |
| Accumulated depreciation | | (5,427) | | | (5,425) | |
| Property, plant and equipment, net | | 6,176 | | | 6,249 | |
| Investments and advances related to equity method investees | | 1,922 | | | 1,800 | |
| Goodwill | | 2,412 | | | 2,499 | |
| Other intangible assets, net | | 2,462 | | | 2,519 | |
| Pension assets (Note 3) | | 1,208 | | | 1,197 | |
| Other assets (Note 8) | | 2,556 | | | 2,543 | |
| Total assets | | $ | 32,052 | | | $ | 32,005 | |
| | | | |
| LIABILITIES | | | | |
| Current liabilities | | | | |
| Accounts payable (principally trade) | | $ | 4,206 | | | $ | 4,260 | |
| Loans payable (Note 9) | | 441 | | | 280 | |
| Commercial paper (Note 9) | | 1,636 | | | 1,496 | |
| Current maturities of long-term debt (Note 9) | | 654 | | | 118 | |
| Accrued compensation, benefits and retirement costs | | 1,011 | | | 1,108 | |
| Current portion of accrued product warranty (Note 10) | | 685 | | | 667 | |
| Current portion of deferred revenue (Note 2) | | 1,225 | | | 1,220 | |
| | | | |
| Other accrued expenses (Note 8) | | 1,745 | | | 3,754 | |
| Total current liabilities | | 11,603 | | | 12,903 | |
| Long-term liabilities | | | | |
| Long-term debt (Note 9) | | 4,856 | | | 4,802 | |
| | | | |
| | | | |
| Deferred revenue (Note 2) | | 1,090 | | | 966 | |
| Other liabilities (Note 8) | | 3,162 | | | 3,430 | |
| Total liabilities | | $ | 20,711 | | | $ | 22,101 | |
| | | | |
| Commitments and contingencies (Note 11) | | | | |
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| EQUITY | | | | |
| Cummins Inc. shareholders’ equity | | | | |
Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.5 shares issued | | $ | 2,612 | | | $ | 2,564 | |
| Retained earnings | | 20,660 | | | 17,851 | |
Treasury stock, at cost, 85.4 and 80.7 shares | | (10,783) | | | (9,359) | |
| | | | |
| Accumulated other comprehensive loss (Note 12) | | (2,174) | | | (2,206) | |
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| | | | |
| | | | |
| Total Cummins Inc. shareholders’ equity | | 10,315 | | | 8,850 | |
| Noncontrolling interests | | 1,026 | | | 1,054 | |
| Total equity | | $ | 11,341 | | | $ | 9,904 | |
| Total liabilities and equity | | $ | 32,052 | | | $ | 32,005 | |
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | | | | |
| | Nine months ended |
| | | September 30, |
| In millions | | 2024 | | 2023 |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | |
| Consolidated net income | | $ | 3,623 | | | $ | 2,233 | |
| Adjustments to reconcile consolidated net income to net cash provided by operating activities | | | | |
| Gain related to divestiture of Atmus (Note 14) | | (1,333) | | | — | |
| Depreciation and amortization | | 794 | | | 760 | |
| | | | |
| | | | |
| | | | |
| Deferred income taxes | | (106) | | | (238) | |
| Equity in income of investees, net of dividends | | (74) | | | (100) | |
| Pension and OPEB expense (Note 3) | | 28 | | | 4 | |
| Pension contributions and OPEB payments (Note 3) | | (72) | | | (115) | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Changes in current assets and liabilities, net of acquisitions and divestiture | | | | |
| Accounts and notes receivable | | 109 | | | (447) | |
| Inventories | | (726) | | | (318) | |
| Other current assets | | (370) | | | (191) | |
| Accounts payable | | 27 | | | 43 | |
| Accrued expenses (Notes 1 and 11) | | (2,000) | | | 543 | |
| | | | |
| | | | |
| Other, net | | 165 | | | 333 | |
| Net cash provided by operating activities | | 65 | | | 2,507 | |
| | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | |
| Capital expenditures | | (668) | | | (694) | |
| | | | |
| | | | |
| | | | |
| | | | |
| Acquisition of businesses, net of cash acquired (Note 15) | | (58) | | | (127) | |
| | | | |
| Investments in marketable securities—acquisitions | | (1,062) | | | (976) | |
| Investments in marketable securities—liquidations (Note 6) | | 1,113 | | | 1,002 | |
| | | | |
| Cash associated with Atmus divestiture | | (174) | | | — | |
| | | | |
| Other, net | | (220) | | | (65) | |
| Net cash used in investing activities | | (1,069) | | | (860) | |
| | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | |
| Proceeds from borrowings | | 2,623 | | | 779 | |
| Net borrowings (payments) of commercial paper | | 140 | | | (566) | |
| Payments on borrowings and finance lease obligations | | (1,386) | | | (391) | |
| | | | |
| | | | |
| Dividend payments on common stock | | (719) | | | (683) | |
| | | | |
| | | | |
| | | | |
| | | | |
| Payments for purchase of redeemable noncontrolling interests (Note 15) | | — | | | (175) | |
| Other, net | | (94) | | | (33) | |
| Net cash provided by (used in) financing activities | | 564 | | | (1,069) | |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | | (6) | | | (67) | |
| Net (decrease) increase in cash and cash equivalents | | (446) | | | 511 | |
| Cash and cash equivalents at beginning of year | | 2,179 | | | 2,101 | |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | | $ | 1,733 | | | $ | 2,612 | |
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended |
| In millions, except per share amounts | | Redeemable Noncontrolling Interests | | 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 JUNE 30, 2024 | | $ | — | | | $ | 556 | | | $ | 2,026 | | | $ | 20,101 | | | $ | (10,797) | | | | | $ | (2,335) | | | $ | 9,551 | | | $ | 1,025 | | | $ | 10,576 | |
| | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | 809 | | | | | | | | | 809 | | | 34 | | | 843 | |
| Other comprehensive income, net of tax (Note 12) | | | | | | | | | | | | | | 161 | | | 161 | | | 2 | | | 163 | |
| Issuance of common stock | | | | | | 7 | | | | | | | | | | | 7 | | | — | | | 7 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Cash dividends on common stock, $1.82 per share | | | | | | | | (250) | | | | | | | | | (250) | | | — | | | (250) | |
| | | | | | | | | | | | | | | | | | | | |
| Distributions to noncontrolling interests | | | | | | | | | | | | | | | | — | | | (35) | | | (35) | |
| Share-based awards | | | | | | 2 | | | | | 13 | | | | | | | 15 | | | — | | | 15 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Other shareholder transactions | | | | | | 21 | | | | | 1 | | | | | | | 22 | | | — | | | 22 | |
| BALANCE AT SEPTEMBER 30, 2024 | | $ | — | | | $ | 556 | | | $ | 2,056 | | | $ | 20,660 | | | $ | (10,783) | | | | | $ | (2,174) | | | $ | 10,315 | | | $ | 1,026 | | | $ | 11,341 | |
| | | | | | | | | | | | | | | | | | | | |
| BALANCE AT JUNE 30, 2023 | | $ | — | | | $ | 556 | | | $ | 1,976 | | | $ | 19,102 | | | $ | (9,380) | | | | | $ | (1,917) | | | $ | 10,337 | | | $ | 1,019 | | | $ | 11,356 | |
| | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | 656 | | | | | | | | | 656 | | | 34 | | | 690 | |
| Other comprehensive loss, net of tax (Note 12) | | | | | | | | | | | | | | (134) | | | (134) | | | (7) | | | (141) | |
| Issuance of common stock | | | | | | 1 | | | | | | | | | | | 1 | | | — | | | 1 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Cash dividends on common stock, $1.68 per share | | | | | | | | (238) | | | | | | | | | (238) | | | — | | | (238) | |
| Distributions to noncontrolling interests | | | | | | | | | | | | | | | | — | | | (26) | | | (26) | |
| Share-based awards | | | | | | 3 | | | | | 10 | | | | | | | 13 | | | — | | | 13 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Other shareholder transactions | | | | | | 22 | | | | | 1 | | | | | | | 23 | | | — | | | 23 | |
| BALANCE AT SEPTEMBER 30, 2023 | | $ | — | | | $ | 556 | | | $ | 2,002 | | | $ | 19,520 | | | $ | (9,369) | | | | | $ | (2,051) | | | $ | 10,658 | | | $ | 1,020 | | | $ | 11,678 | |
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine months ended |
| In millions, except per share amounts | | Redeemable Noncontrolling Interests | | 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, 2023 | | $ | — | | | $ | 556 | | | $ | 2,008 | | | $ | 17,851 | | | $ | (9,359) | | | | | $ | (2,206) | | | $ | 8,850 | | | $ | 1,054 | | | $ | 9,904 | |
| | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | 3,528 | | | | | | | | | 3,528 | | | 95 | | | 3,623 | |
| Other comprehensive loss, net of tax (Note 12) | | | | | | | | | | | | | | (29) | | | (29) | | | (3) | | | (32) | |
| Issuance of common stock | | | | | | 8 | | | | | | | | | | | 8 | | | — | | | 8 | |
Cash dividends on common stock, $5.18 per share | | | | | | | | (719) | | | | | | | | | (719) | | | — | | | (719) | |
| Distributions to noncontrolling interests | | | | | | | | | | | | | | | | — | | | (68) | | | (68) | |
| Share-based awards | | | | | | (6) | | | | | 106 | | | | | | | 100 | | | — | | | 100 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Divestiture of Atmus (Note 14) | | | | | | | | | | (1,532) | | | | | 61 | | | (1,471) | | | (19) | | | (1,490) | |
| Other shareholder transactions | | | | | | 46 | | | | | 2 | | | | | | | 48 | | | (33) | | | 15 | |
| BALANCE AT SEPTEMBER 30, 2024 | | $ | — | | | $ | 556 | | | $ | 2,056 | | | $ | 20,660 | | | $ | (10,783) | | | | | $ | (2,174) | | | $ | 10,315 | | | $ | 1,026 | | | $ | 11,341 | |
| | | | | | | | | | | | | | | | | | | | |
| BALANCE AT DECEMBER 31, 2022 | | $ | 258 | | | $ | 556 | | | $ | 1,687 | | | $ | 18,037 | | | $ | (9,415) | | | | | $ | (1,890) | | | $ | 8,975 | | | $ | 992 | | | $ | 9,967 | |
| | | | | | | | | | | | | | | | | | | | |
| Net income | | (20) | | | | | | | 2,166 | | | | | | | | | 2,166 | | | 87 | | | 2,253 | |
| Other comprehensive loss, net of tax (Note 12) | | | | | | | | | | | | | | (161) | | | (161) | | | (6) | | | (167) | |
| Issuance of common stock | | | | | | 3 | | | | | | | | | | | 3 | | | — | | | 3 | |
Cash dividends on common stock, $4.82 per share | | | | | | | | (683) | | | | | | | | | (683) | | | — | | | (683) | |
| Distributions to noncontrolling interests | | | | | | | | | | | | | | | | — | | | (50) | | | (50) | |
| Share-based awards | | | | | | (1) | | | | | 42 | | | | | | | 41 | | | — | | | 41 | |
| Fair value adjustment of redeemable noncontrolling interests | | 33 | | | | | (33) | | | | | | | | | | | (33) | | | — | | | (33) | |
| Acquisition of redeemable noncontrolling interests (Note 15) | | (271) | | | | | | | | | | | | | | | — | | | — | | | — | |
| Sale of Atmus stock (Note 14) | | | | | | 285 | | | | | | | | | | | 285 | | | (3) | | | 282 | |
| Other shareholder transactions | | | | | | 61 | | | | | 4 | | | | | | | 65 | | | — | | | 65 | |
| BALANCE AT SEPTEMBER 30, 2023 | | $ | — | | | $ | 556 | | | $ | 2,002 | | | $ | 19,520 | | | $ | (9,369) | | | | | $ | (2,051) | | | $ | 10,658 | | | $ | 1,020 | | | $ | 11,678 | |
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
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 solutions leader comprised of five business segments - Components, Engine, Distribution, Power Systems and Accelera - supported by our global manufacturing and extensive service and support network, skilled workforce and vast technical expertise. Our products range from advanced diesel, natural gas, electric and hybrid powertrains and powertrain-related components including aftertreatment, turbochargers, fuel systems, valvetrain technologies, controls systems, air handling systems, automated transmissions, axles, drivelines, brakes, suspension systems, electric power generation systems, batteries, electrified power systems, hydrogen production technologies and fuel cell products. We sell our products to original equipment manufacturers (OEMs), distributors, dealers and other customers worldwide. We serve our customers through a service network of approximately 450 wholly-owned, joint venture and independent distributor locations and more than 19,000 Cummins certified dealer locations in approximately 190 countries and territories.
Divestiture of Atmus
On March 18, 2024, we completed the divestiture of our remaining 80.5 percent ownership of Atmus Filtration Technologies Inc. (Atmus) common stock through a tax-free split-off. See NOTE 14, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," for additional information.
Settlement Agreements
In December 2023, we announced that we reached an agreement in principle with the U.S. Environmental Protection Agency (EPA), the California Air Resources Board (CARB), the Environmental and Natural Resources Division of the U.S. Department of Justice and the California Attorney General's Office to resolve certain regulatory civil claims regarding our emissions certification and compliance process for certain engines primarily used in pick-up truck applications in the U.S., which became final and effective in April 2024 (collectively, the Settlement Agreements). In the second quarter of 2024, we made $1.9 billion of payments required by the Settlement Agreements. See NOTE 11, “COMMITMENTS AND CONTINGENCIES,” for additional information.
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 consolidated 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, 2023. Our interim period financial results for the three and nine 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.
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 | | Nine months ended |
| | September 30, | | September 30, |
| | 2024 | | 2023 | | 2024 | | 2023 |
| Options excluded | 767 | | | 7,267 | | | 1,878 | | | 8,770 | |
Related Party Transactions
In accordance with the provisions of various joint venture agreements, we may purchase products and components from our joint ventures, sell products and components to our joint ventures and our joint ventures may sell products and components to unrelated parties.
The following is a summary of sales to and purchases from nonconsolidated equity investees:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | | September 30, | | September 30, |
| In millions | | 2024 | | 2023 | | 2024 | | 2023 |
| Sales to nonconsolidated equity investees | | $ | 351 | | | $ | 315 | | | $ | 1,036 | | | $ | 1,011 | |
| Purchases from nonconsolidated equity investees | | 620 | | | 602 | | | 1,883 | | | 1,993 | |
| | | | | | | | |
The following is a summary of accounts receivable from and accounts payable to nonconsolidated equity investees:
| | | | | | | | | | | | | | | | | | | | |
| In millions | | September 30,
2024 | | December 31,
2023 | | Balance Sheet Location |
| Accounts receivable from nonconsolidated equity investees | | $ | 472 | | | $ | 530 | | | Accounts and notes receivable, net |
| Accounts payable to nonconsolidated equity investees | | 306 | | | 324 | | | Accounts payable (principally trade) |
| | | | | | |
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 original due date, which generally have 60 to 90 day payment terms. The maximum amount that we could have outstanding under these programs was $551 million at September 30, 2024. We do not reimburse vendors for any costs they incur for participation in the program, their participation is completely voluntary and there are no assets pledged as security or other forms of guarantees provided for the committed payment to the finance provider or intermediary. 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 September 30, 2024, and December 31, 2023, were $154 million and $199 million, respectively.
Accounts Receivable Sales Program
In May 2024, we entered into an accounts receivable sales agreement with Wells Fargo Bank, N.A., to sell certain accounts receivable up to the Board of Directors (Board) approved limit of $500 million. We classify proceeds received from the sales of accounts receivable as an operating cash flow in the Condensed Consolidated Statements of Cash Flows, and we record the discount in other income, net in the Condensed Consolidated Statements of Net Income. There was no activity under the program during the nine months ended September 30, 2024.
NOTE 2. REVENUE FROM CONTRACTS WITH CUSTOMERS
Long-term Contracts
We have certain arrangements, primarily long-term maintenance agreements, construction contracts, product sales with associated performance obligations extending beyond a year, product sales with lead times extending beyond one year that are non-cancellable or for which the customer incurs a penalty for cancellation and extended warranty coverage arrangements that span a period in excess of one year. The aggregate amount of the transaction price for these contracts, excluding extended warranty coverage arrangements, as of September 30, 2024, was $3.8 billion. We expect to recognize the related revenue of $2.1 billion over the next 12 months and $1.7 billion over periods up to 10 years. See NOTE 10, "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 | | September 30,
2024 | | December 31,
2023 |
| Unbilled revenue | | $ | 346 | | | $ | 303 | |
| Deferred revenue | | 2,315 | | | 2,186 | |
| | | | |
| | | | |
| | | | |
| | | | |
We recognized revenue of $184 million and $682 million for the three and nine months ended September 30, 2024, compared with $126 million and $510 million for the comparable periods in 2023, 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 and nine months ended September 30, 2024 or 2023.
Disaggregation of Revenue
Consolidated Revenue
The table below presents our consolidated net sales by geographic area based on the location of the customer:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | | September 30, | | September 30, |
| In millions | | 2024 | | 2023 | | 2024 | | 2023 |
| United States | | $ | 4,825 | | | $ | 4,886 | | | $ | 14,729 | | | $ | 14,625 | |
| | | | | | | | |
| China | | 727 | | | 721 | | | 2,197 | | | 2,273 | |
| | | | | | | | |
| | | | | | | | |
| India | | 416 | | | 374 | | | 1,285 | | | 1,198 | |
| | | | | | | | |
| Other international | | 2,488 | | | 2,450 | | | 7,444 | | | 7,426 | |
| Total net sales | | $ | 8,456 | | | $ | 8,431 | | | $ | 25,655 | | | $ | 25,522 | |
| | | | | | | | |
|
Segment Revenue
As previous announced, beginning in the second quarter of 2024, we realigned certain businesses within our Components segment to be consistent with how our segment manager now monitors performance. We reorganized the businesses to combine the engine components and software and electronics businesses into the newly formed components and software business. In addition, we rebranded our axles and brakes business as drivetrain and braking systems. We began reporting results for these changes within our Components segment effective April 1, 2024, and reflected these changes in the historical periods presented. The change had no impact on our consolidated results.
Components segment external sales by business were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | September 30, | | September 30, |
| In millions | | 2024 | | 2023 | | 2024 | | 2023 |
| Drivetrain and braking systems | | $ | 1,131 | | | $ | 1,177 | | | $ | 3,618 | | | $ | 3,698 | |
| Emission solutions | | 759 | | | 803 | | | 2,437 | | | 2,584 | |
| Components and software | | 249 | | | 289 | | | 828 | | | 913 | |
| Automated transmissions | | 148 | | | 187 | | | 475 | | | 545 | |
| Atmus | | — | | | 324 | | | 289 | | (1) | 1,007 | |
| Total sales | | $ | 2,287 | | | $ | 2,780 | | | $ | 7,647 | | | $ | 8,747 | |
| | | | | | | | |
(1) Included sales through the March 18, 2024, divestiture. See NOTE 14, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," for additional information. |
Engine segment external sales by market were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | September 30, | | September 30, |
| In millions | | 2024 | | 2023 | | 2024 | | 2023 |
| Heavy-duty truck | | $ | 781 | | | $ | 885 | | | $ | 2,560 | | | $ | 2,601 | |
| Medium-duty truck and bus | | 806 | | | 656 | | | 2,336 | | | 1,960 | |
| Light-duty automotive | | 400 | | | 451 | | | 1,292 | | | 1,336 | |
| Total on-highway | | 1,987 | | | 1,992 | | | 6,188 | | | 5,897 | |
| Off-highway | | 228 | | | 244 | | | 735 | | | 854 | |
| Total sales | | $ | 2,215 | | | $ | 2,236 | | | $ | 6,923 | | | $ | 6,751 | |
| | | | | | | | |
Distribution segment external sales by region were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | September 30, | | September 30, |
| In millions | | 2024 | | 2023 | | 2024 | | 2023 |
| North America | | $ | 1,947 | | | $ | 1,719 | | | $ | 5,568 | | | $ | 5,195 | |
| Asia Pacific | | 342 | | | 292 | | | 937 | | | 796 | |
| Europe | | 307 | | | 200 | | | 830 | | | 607 | |
| China | | 118 | | | 110 | | | 346 | | | 323 | |
| Africa and Middle East | | 80 | | | 77 | | | 194 | | | 219 | |
| India | | 77 | | | 66 | | | 223 | | | 186 | |
| Latin America | | 71 | | | 55 | | | 194 | | | 168 | |
| | | | | | | | |
| Total sales | | $ | 2,942 | | | $ | 2,519 | | | $ | 8,292 | | | $ | 7,494 | |
| | | |
| | | | | | | | |
|
| | | | | | | | |
Distribution segment external sales by product line were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | September 30, | | September 30, |
| In millions | | 2024 | | 2023 | | 2024 | | 2023 |
| Power generation | | $ | 1,088 | | | $ | 601 | | | $ | 2,743 | | | $ | 1,701 | |
| Parts | | 1,000 | | | 991 | | | 2,985 | | | 3,054 | |
| Service | | 453 | | | 420 | | | 1,305 | | | 1,249 | |
| Engines | | 401 | | | 507 | | | 1,259 | | | 1,490 | |
| Total sales | | $ | 2,942 | | | $ | 2,519 | | | $ | 8,292 | | | $ | 7,494 | |
| | | | | | | | |
Power Systems segment external sales by product line were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | September 30, | | September 30, |
| In millions | | 2024 | | 2023 | | 2024 | | 2023 |
| Power generation | | $ | 499 | | | $ | 420 | | | $ | 1,349 | | | $ | 1,247 | |
| Industrial | | 293 | | | 263 | | | 809 | | | 670 | |
| Generator technologies | | 120 | | | 115 | | | 350 | | | 354 | |
| Total sales | | $ | 912 | | | $ | 798 | | | $ | 2,508 | | | $ | 2,271 | |
| | | | | | | | |
NOTE 3. 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 | | Nine months ended |
| | | September 30, | | September 30, |
| In millions | | 2024 | | 2023 | | 2024 | | 2023 |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Defined benefit pension contributions | | $ | 9 | | | $ | 8 | | | $ | 56 | | | $ | 102 | |
| | | | | | | | |
| | | | | | | | |
| OPEB payments, net | | 4 | | | 4 | | | 16 | | | 13 | |
| | | | | | | | |
| | | | | | | | |
| Defined contribution pension plans | | 27 | | | 29 | | | 101 | | | 102 | |
| | | | | | | | |
We anticipate making additional defined benefit pension contributions during the remainder of 2024 of $14 million for our U.S. and U.K. qualified and non-qualified 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 2024 annual net periodic pension cost to approximate $34 million.
The components of net periodic pension and OPEB expense (income) under our plans were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Pension | | | | |
| | | U.S. Plans | | U.K. Plans | | OPEB |
| | | Three months ended September 30, |
| In millions | | 2024 | | 2023 | | 2024 | | 2023 | | 2024 | | 2023 |
| Service cost | | $ | 35 | | | $ | 29 | | | $ | 4 | | | $ | 4 | | | $ | — | | | $ | — | |
| Interest cost | | 42 | | | 42 | | | 18 | | | 18 | | | 2 | | | 2 | |
| Expected return on plan assets | | (72) | | | (69) | | | (26) | | | (27) | | | — | | | — | |
| Amortization of prior service cost | | — | | | — | | | 1 | | | 1 | | | — | | | — | |
| Recognized net actuarial loss (gain) | | 3 | | | 2 | | | 3 | | | — | | | (1) | | | (1) | |
| Net periodic benefit expense (income) | | $ | 8 | | | $ | 4 | | | $ | — | | | $ | (4) | | | $ | 1 | | | $ | 1 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | Pension | | | | |
| | | U.S. Plans | | U.K. Plans | | OPEB |
| | | Nine months ended September 30, |
| In millions | | 2024 | | 2023 | | 2024 | | 2023 | | 2024 | | 2023 |
| Service cost | | $ | 106 | | | $ | 87 | | | $ | 13 | | | $ | 12 | | | $ | — | | | $ | — | |
| Interest cost | | 125 | | | 126 | | | 53 | | | 53 | | | 5 | | | 6 | |
| Expected return on plan assets | | (217) | | | (207) | | | (76) | | | (79) | | | — | | | — | |
| Amortization of prior service cost | | 1 | | | 1 | | | 1 | | | 1 | | | — | | | — | |
| Recognized net actuarial loss (gain) | | 10 | | | 6 | | | 9 | | | — | | | (2) | | | (2) | |
| Net periodic benefit expense (income) | | $ | 25 | | | $ | 13 | | | $ | — | | | $ | (13) | | | $ | 3 | | | $ | 4 | |
NOTE 4. EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES
Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Net Income for the reporting periods was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended | |
| | | September 30, | | September 30, | |
| In millions | | 2024 | | 2023 | | 2024 | | 2023 | |
| Manufacturing entities | | | | | | | | | |
| Chongqing Cummins Engine Company, Ltd. | | $ | 15 | | | $ | 7 | | | $ | 51 | | | $ | 29 | | |
| Dongfeng Cummins Engine Company, Ltd. | | 14 | | | 15 | | | 51 | | | 52 | | |
| Beijing Foton Cummins Engine Co., Ltd. | | 6 | | | 8 | | | 29 | | | 33 | | |
| Tata Cummins, Ltd. | | 6 | | | 6 | | | 22 | | | 21 | | |
| All other manufacturers | | 7 | | | 18 | | | 41 | | | 69 | | |
| | | | | | | | | |
| | | | | | | | | |
| Distribution entities | | | | | | | | | |
| Komatsu Cummins Chile, Ltda. | | 15 | | | 13 | | | 42 | | | 40 | | |
| All other distributors | | 3 | | | 3 | | | 10 | | | 10 | | |
| | | | | | | | | |
| | | | | | | | | |
| Cummins share of net income | | 66 | | | 70 | | | 246 | | |
