Annual report pursuant to Section 13 and 15(d)

INVESTMENTS IN EQUITY INVESTEES

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INVESTMENTS IN EQUITY INVESTEES
 12 Months Ended
Dec. 31, 2021
Equity Method Investments and Joint Ventures [Abstract]  
INVESTMENTS IN EQUITY INVESTEES
NOTE 3. INVESTMENTS IN EQUITY INVESTEES
Investments and advances related to equity method investees and our ownership percentages were as follows:
  Ownership December 31,
Dollars in millions percentage 2021 2020
Komatsu alliances
20-50%
 $ 275  $ 309 
Beijing Foton Cummins Engine Co., Ltd. 50% 255  255 
Dongfeng Cummins Engine Company, Ltd. 50% 148  134 
Chongqing Cummins Engine Company, Ltd. 50% 144  125 
Cummins-Scania XPI Manufacturing, LLC 50% 125  99 
Tata Cummins, Ltd. 50% 88  78 
Other Various 503  441 
Investments and advances related to equity method investees   $ 1,538  $ 1,441 
We have approximately $965 million in our investment account at December 31, 2021, that represents cumulative undistributed income in our equity investees. Dividends received from our unconsolidated equity investees were $336 million, $271 million and $260 million in 2021, 2020 and 2019, respectively.
Equity, royalty and interest income from investees, net of applicable taxes, was as follows:
  Years ended December 31,
In millions 2021 2020 2019
Manufacturing entities      
Beijing Foton Cummins Engine Co., Ltd. $ 112  $ 113  $ 60 
Dongfeng Cummins Engine Company, Ltd. 82  63  52 
Chongqing Cummins Engine Company, Ltd. 39  35  41 
All other manufacturers 149  134 
(1)(2)
 88 
Distribution entities
Komatsu Cummins Chile, Ltda. 32  31  28 
All other distributors 10  2  2 
Cummins share of net income 424  378  271 
Royalty and interest income 82  74  59 
Equity, royalty and interest income from investees $ 506  $ 452  $ 330 
(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. See NOTE 4, "INCOME TAXES" for additional information on India Tax Law Change.
(2) Includes impairment charges of $13 million and loss on sale of business of $8 million for a joint venture in the Power Systems segment.
Manufacturing Entities
Our manufacturing joint ventures were generally formed with customers and are primarily intended to allow us to increase our market penetration in geographic regions, reduce capital spending, streamline our supply chain management and develop technologies. Our largest manufacturing joint ventures are based in China and are included in the list below. Our engine manufacturing joint ventures are supplied by our Components segment in the same manner as it supplies our wholly-owned Engine segment and Power Systems segment manufacturing facilities. Our Components segment joint ventures and wholly-owned entities provide electronics, fuel systems, filtration, aftertreatment systems, turbocharger products and automated transmissions that are used with our engines as well as some competitors' products. The results and investments in our joint ventures in which we have 50 percent or less ownership interest (except for Eaton Cummins Automated Transmission Technologies joint venture, which is consolidated due to our majority voting interest) are included in “Equity, royalty and interest income from investees” and “Investments and advances related to equity method investees” in our Consolidated Statements of Net Income and Consolidated Balance Sheets, respectively.
•Beijing Foton Cummins Engine Co., Ltd. - Beijing Foton Cummins Engine Co., Ltd. is a joint venture in China with Beiqi Foton Motor Co., Ltd., a commercial vehicle manufacturer, which has two distinct lines of business - a light-duty business and a heavy-duty business. The light-duty business produces our families of ISF 2.5 liter to 4.5 liter high performance light-duty diesel engines in Beijing. These engines are used in light-duty and medium-duty commercial trucks, pick-up trucks, buses, multipurpose and sport utility vehicles with main markets in China, Brazil and Russia. Certain types of small construction equipment and industrial applications are also served by these engine families. The heavy-duty business produces the X11, X12, X13 and X15, ranging from 10.5 liter to 14.5 liter, high performance heavy-duty diesel engines and natural gas engines in Beijing. Certain types of construction equipment and industrial applications are also served by these engine families.
•Dongfeng Cummins Engine Company, Ltd. - Dongfeng Cummins Engine Company, Ltd. (DCEC) is a joint venture in China with Dongfeng Automotive Co. Ltd., a subsidiary of Dongfeng Motor Corporation and one of the largest medium-duty and heavy-duty truck manufacturers in China. DCEC produces 3.9 liter to 14.5 liter diesel engines with a power range from 80 to 760 horsepower, natural gas engines and automated transmissions. On-highway engines are used in multiple applications in light-duty and medium-duty trucks, special purpose vehicles, buses and heavy-duty trucks with a main market in China. Off-highway engines are used in a variety of construction, power generation, marine and agriculture markets in China.
•Chongqing Cummins Engine Company, Ltd. - Chongqing Cummins Engine Company, Ltd. is a joint venture in China with Chongqing Machinery and Electric Co. Ltd. This joint venture manufactures several models of our heavy-duty and high-horsepower diesel engines primarily serving the industrial and stationary power markets in China.
Our joint venture agreement for Cummins Westport, Inc. expired on December 31, 2021, and will not be renewed. Beginning in January 2022, engines previously sold through the joint venture will now be included in our consolidated results.
Distribution Entities
We have an extensive worldwide distributor and dealer network through which we sell and distribute our products and services. Generally, our distributors are divided by geographic region with some of our distributors being wholly-owned by Cummins, some partially-owned and some independently owned. We consolidate all wholly-owned distributors and partially-owned distributors where we are the primary beneficiary and account for other partially-owned distributors using the equity method of accounting.
Komatsu Cummins Chile, Ltda. - Komatsu Cummins Chile, Ltda. is a joint venture with Komatsu America Corporation. The joint venture is a distributor that offers the full range of our products and services to customers and end-users in Chile and Peru.
In certain cases where we own a partial interest in a distributor, we may be obligated to purchase the other equity holders' interests if certain events occur (such as the death or resignation of the distributor principal or a change in control of Cummins Inc.). The purchase consideration of the equity interests may be determined based on the fair value of the distributor's assets. Repurchase obligations and practices vary by geographic region.
All distributors that are partially-owned are considered to be related parties in our Consolidated Financial Statements.
Equity Investee Financial Summary
Summary financial information for our equity investees was as follows:
  Years ended and at December 31,
In millions 2021 2020 2019
Net sales $ 8,934  $ 7,794  $ 7,068 
Gross margin 1,574  1,418  1,274 
Net income 802  696  566 
Cummins share of net income $ 424  $ 378  $ 271 
Royalty and interest income 82  74  59 
Total equity, royalty and interest from investees $ 506  $ 452  $ 330 
Current assets $ 4,587  $ 4,264   
Long-term assets 1,850  1,673   
Current liabilities (3,573) (3,347)  
Long-term liabilities (288) (251)  
Net assets $ 2,576  $ 2,339   
Cummins share of net assets $ 1,490  $ 1,361