cmi-20220331

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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 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 March 31, 2022, there were 141,097,817 shares of common stock outstanding with a par value of $2.50 per share.

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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	3
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and April 4, 2021	4

	Condensed Consolidated Balance Sheets at March 31, 2022 and December 31, 2021	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and April 4, 2021	6
	Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 2022 and April 4, 2021	7
	Notes to Condensed Consolidated Financial Statements	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	46
ITEM 4.	Controls and Procedures	46
	PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	46
ITEM 1A.	Risk Factors	46
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
ITEM 3.	Defaults Upon Senior Securities	48
ITEM 4.	Mine Safety Disclosures	48
ITEM 5.	Other Information	48
ITEM 6.	Exhibits	49
	Signatures	50

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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
In millions, except per share amounts	March 31, 2022		April 4, 2021
NET SALES (a) (Note 2)	$	6,385	$	6,092
Cost of sales (Note 3)	4,853		4,606
GROSS MARGIN	1,532		1,486

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



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


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

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

Less: Net income attributable to noncontrolling interests	5		8
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

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



(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.

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CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	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.

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CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


In millions, except par value	March 31, 2022		December 31, 2021
ASSETS
Current assets
Cash and cash equivalents	$	2,276	$	2,592

Marketable securities (Note 7)	527		595
Total cash, cash equivalents and marketable securities	2,803		3,187
Accounts and notes receivable, net
Trade and other	3,969		3,565
Nonconsolidated equity investees	399		425
Inventories (Note 8)	4,586		4,355
Prepaid expenses and other current assets	839		777
Total current assets	12,596		12,309
Long-term assets
Property, plant and equipment	9,333		9,358
Accumulated depreciation	(4,952)		(4,936)
Property, plant and equipment, net	4,381		4,422
Investments and advances related to equity method investees	1,592		1,538
Goodwill	1,286		1,287
Other intangible assets, net	917		900
Pension assets (Note 4)	1,506		1,488
Other assets (Note 9)	1,844		1,766
Total assets	$	24,122	$	23,710

LIABILITIES
Current liabilities
Accounts payable (principally trade)	$	3,497	$	3,021
Loans payable (Note 10)	243		208
Commercial paper (Note 10)	311		313
Accrued compensation, benefits and retirement costs	411		683
Current portion of accrued product warranty (Note 11)	798		755
Current portion of deferred revenue (Note 2)	883		855

Other accrued expenses (Note 9)	1,300		1,190
Current maturities of long-term debt (Note 10)	69		59
Total current liabilities	7,512		7,084
Long-term liabilities
Long-term debt (Note 10)	3,502		3,579
Pensions and other postretirement benefits (Note 4)	593		604
Accrued product warranty (Note 11)	709		684
Deferred revenue (Note 2)	877		850
Other liabilities (Note 9)	1,566		1,508
Total liabilities	$	14,759	$	14,309

Commitments and contingencies (Note 12)

EQUITY
Cummins Inc. shareholders’ equity
Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.5 shares issued	$	2,411	$	2,427
Retained earnings	16,952		16,741
Treasury stock, at cost, 81.4 and 80.0 shares	(9,412)		(9,123)

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



Total Cummins Inc. shareholders’ equity	8,436		8,474
Noncontrolling interests	927		927
Total equity	$	9,363	$	9,401
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
In millions	March 31, 2022		April 4, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income	$	423	$	611
Adjustments to reconcile consolidated net income to net cash provided by operating activities
Depreciation and amortization	161		170



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




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

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

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

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


Investments in and advances to equity investees	(32)		(24)
Acquisition of a business, net of cash acquired (Note 14)	83		—

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


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

CASH FLOWS FROM FINANCING ACTIVITIES

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

Other, net	23		(11)
Net cash used in financing activities	(497)		(745)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	27		(12)
Net decrease in cash and cash equivalents	(316)		(443)
Cash and cash equivalents at beginning of year	2,592		3,401
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		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							(311)				(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				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							(418)				(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				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 approximately 500 wholly-owned, joint venture and independent distributor locations and more than 10,000 Cummins certified dealer locations 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, 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.

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

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 March 31, 2022, was $736 million. We expect to recognize the related revenue of $112 million over the next 12 months and $624 million over periods up to 10 years. See Note 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	March 31, 2022		December 31, 2021
Unbilled revenue	$	138	$	100
Deferred revenue, primarily extended warranty	1,760		1,705

We recognized revenue of $240 million for the three months ended March 31, 2022, compared with $169 million for the comparable period in 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.

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
In millions	March 31, 2022		April 4, 2021
United States	$	3,457	$	3,060

China	653		957


India	309		330

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

Segment Revenue

Engine segment external sales by market were as follows:


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

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Distribution segment external sales by region were as follows:


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

Distribution segment external sales by product line were as follows:


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

Components segment external sales by business were as follows:


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

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


	Three months ended
In millions	March 31, 2022		April 4, 2021
Power generation	$	399	$	351
Industrial	188		179
Generator technologies	96		82
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 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
In millions	March 31, 2022		April 4, 2021



Defined benefit pension contributions	$	33	$	42


OPEB payments, net	10		9


Defined contribution pension plans	36		35

We anticipate making additional defined benefit pension contributions during the remainder of 2022 of $17 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 2022 annual net periodic pension cost to approximate $31 million.

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


	Pension
	U.S. Plans				U.K. Plans				OPEB
	Three months ended
In millions	March 31, 2022		April 4, 2021		March 31, 2022		April 4, 2021		March 31, 2022		April 4, 2021
Service cost	$	34	$	35	$	8	$	8	$	—	$	—
Interest cost	22		19		9		8		1		1
Expected return on plan assets	(52)		(50)		(20)		(21)		—		—

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

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


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


Cummins share of net income	47			150
Royalty and interest income	49			16
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.

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 7. MARKETABLE SECURITIES

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


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

Equity securities





Certificates of deposit	$	284	$	—	$	284	$	299	$	—	$	299

Debt mutual funds	205		(2)		203		254		2		256
Equity mutual funds	31		9		40		29		10		39

Debt securities	—		—		—		1		—		1







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.

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 March 31, 2022, or the year ended December 31, 2021.

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

•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
In millions		March 31, 2022		April 4, 2021
Proceeds from sales of marketable securities		$	195	$	163
Proceeds from maturities of marketable securities		59		44
Investments in marketable securities - liquidations		$	254	$	207

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NOTE 8. INVENTORIES

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


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 9. SUPPLEMENTAL BALANCE SHEET DATA

Other assets included the following:



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	March 31, 2022		December 31, 2021
Marketing accruals	$	304	$	303
Income taxes payable	229		107
Other taxes payable	208		234
Current portion of operating lease liabilities	127		128
Other	432		418
Other accrued expenses	$	1,300	$	1,190

Other liabilities included the following:



In millions	March 31, 2022		December 31, 2021

Deferred income taxes	$	385	$	403
Operating lease liabilities	326		326
Long-term income taxes	263		263
Accrued compensation	160		177
Mark-to-market valuation on interest rate derivatives	75		19
Other long-term liabilities	357		320