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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, 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 | 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, 2022, there were 141,022,462 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
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| Condensed Consolidated Statements of Net Income for the three and nine months ended September 30, 2022 and October 3, 2021 | |
| Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and October 3, 2021 | |
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| Condensed Consolidated Balance Sheets at September 30, 2022 and December 31, 2021 | |
| Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and October 3, 2021 | |
| Condensed Consolidated Statements of Changes in Redeemable Noncontrolling Interests and Equity for the three and nine months ended September 30, 2022 and October 3, 2021 | |
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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 |
In millions, except per share amounts | | September 30, 2022 | | October 3, 2021 | | September 30, 2022 | | October 3, 2021 |
NET SALES (a) (Note 2) | | $ | 7,333 | | | $ | 5,968 | | | $ | 20,304 | | | $ | 18,171 | |
Cost of sales (Note 3) | | 5,691 | | | 4,554 | | | 15,404 | | | 13,793 | |
GROSS MARGIN | | 1,642 | | | 1,414 | | | 4,900 | | | 4,378 | |
| | | | | | | | |
OPERATING EXPENSES AND INCOME | | | | | | | | |
Selling, general and administrative expenses | | 708 | | | 571 | | | 1,945 | | | 1,745 | |
Research, development and engineering expenses | | 348 | | | 266 | | | 945 | | | 802 | |
Equity, royalty and interest income from investees (Notes 3 and 5) | | 70 | | | 94 | | | 261 | | | 397 | |
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Other operating expense, net (Note 3) | | 30 | | | 5 | | | 144 | | | 17 | |
OPERATING INCOME | | 626 | | | 666 | | | 2,127 | | | 2,211 | |
| | | | | | | | |
| | | | | | | | |
Interest expense | | 61 | | | 28 | | | 112 | | | 85 | |
Other income, net | | 43 | | | 37 | | | 26 | | | 111 | |
INCOME BEFORE INCOME TAXES | | 608 | | | 675 | | | 2,041 | | | 2,237 | |
| | | | | | | | |
Income tax expense (Note 6) | | 199 | | | 134 | | | 502 | | | 473 | |
CONSOLIDATED NET INCOME | | 409 | | | 541 | | | 1,539 | | | 1,764 | |
| | | | | | | | |
Less: Net income attributable to noncontrolling interests | | 9 | | | 7 | | | 19 | | | 27 | |
NET INCOME ATTRIBUTABLE TO CUMMINS INC. | | $ | 400 | | | $ | 534 | | | $ | 1,520 | | | $ | 1,737 | |
| | | | | | | | |
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. | | | | | | | | |
Basic | | $ | 2.83 | | | $ | 3.72 | | | $ | 10.74 | | | $ | 11.96 | |
Diluted | | $ | 2.82 | | | $ | 3.69 | | | $ | 10.68 | | | $ | 11.86 | |
| | | | | | | | |
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | | | | | | | | |
Basic | | 141.1 | | | 143.5 | | | 141.5 | | | 145.2 | |
Dilutive effect of stock compensation awards | | 0.9 | | | 1.2 | | | 0.8 | | | 1.3 | |
Diluted | | 142.0 | | | 144.7 | | | 142.3 | | | 146.5 | |
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| | | | | | | | |
(a) Includes sales to nonconsolidated equity investees of $295 million and $920 million for the three and nine months ended September 30, 2022, compared with $385 million and $1,286 million for the comparable periods in 2021. |
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 | |
| In millions | | September 30, 2022 | | October 3, 2021 | | September 30, 2022 | | October 3, 2021 | |
| CONSOLIDATED NET INCOME | | $ | 409 | | | $ | 541 | | | $ | 1,539 | | | $ | 1,764 | | |
| Other comprehensive income (loss), net of tax (Note 15) | | | | | | | | | |
| Change in pension and other postretirement defined benefit plans | | 6 | | | 17 | | | 28 | | | 63 | | |
| Foreign currency translation adjustments | | (379) | | | — | | | (620) | | | (34) | | |
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| Unrealized gain on derivatives | | 41 | | | 3 | | | 112 | | | 37 | | |
| Total other comprehensive (loss) income, net of tax | | (332) | | | 20 | | | (480) | | | 66 | | |
| COMPREHENSIVE INCOME | | 77 | | | 561 | | | 1,059 | | | 1,830 | | |
| Less: Comprehensive (loss) income attributable to noncontrolling interests | | (6) | | | 9 | | | (19) | | | 22 | | |
| COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC. | | $ | 83 | | | $ | 552 | | | $ | 1,078 | | | $ | 1,808 | | |
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, 2022 | | December 31, 2021 |
ASSETS | | | | |
Current assets | | | | |
Cash and cash equivalents | | $ | 2,499 | | | $ | 2,592 | |
| | | | |
Marketable securities (Note 7) | | 466 | | | 595 | |
Total cash, cash equivalents and marketable securities | | 2,965 | | | 3,187 | |
Accounts and notes receivable, net | | | | |
Trade and other | | 4,450 | | | 3,565 | |
Nonconsolidated equity investees | | 349 | | | 425 | |
Inventories (Note 8) | | 5,543 | | | 4,355 | |
Prepaid expenses and other current assets | | 1,091 | | | 777 | |
Total current assets | | 14,398 | | | 12,309 | |
Long-term assets | | | | |
Property, plant and equipment | | 10,231 | | | 9,358 | |
Accumulated depreciation | | (5,030) | | | (4,936) | |
Property, plant and equipment, net | | 5,201 | | | 4,422 | |
Investments and advances related to equity method investees | | 1,826 | | | 1,538 | |
Goodwill (Note 9) | | 2,229 | | | 1,287 | |
Other intangible assets, net (Note 9) | | 2,602 | | | 900 | |
Pension assets (Note 4) | | 1,536 | | | 1,488 | |
Other assets (Note 10) | | 1,977 | | | 1,766 | |
Total assets | | $ | 29,769 | | | $ | 23,710 | |
| | | | |
LIABILITIES | | | | |
Current liabilities | | | | |
Accounts payable (principally trade) | | $ | 4,000 | | | $ | 3,021 | |
Loans payable (Note 11) | | 217 | | | 208 | |
Commercial paper (Note 11) | | 2,393 | | | 313 | |
Accrued compensation, benefits and retirement costs | | 575 | | | 683 | |
Current portion of accrued product warranty (Note 12) | | 801 | | | 755 | |
Current portion of deferred revenue (Note 2) | | 921 | | | 855 | |
| | | | |
Other accrued expenses (Note 10) | | 1,568 | | | 1,190 | |
Current maturities of long-term debt (Note 11) | | 55 | | | 59 | |
Total current liabilities | | 10,530 | | | 7,084 | |
Long-term liabilities | | | | |
Long-term debt (Note 11) | | 5,450 | | | 3,579 | |
Pensions and other postretirement benefits (Note 4) | | 678 | | | 604 | |
Accrued product warranty (Note 12) | | 742 | | | 684 | |
Deferred revenue (Note 2) | | 867 | | | 850 | |
Other liabilities (Note 10) | | 1,892 | | | 1,508 | |
Total liabilities | | $ | 20,159 | | | $ | 14,309 | |
| | | | |
Commitments and contingencies (Note 13) | | | | |
Redeemable noncontrolling interests (Notes 1 and 14) | | $ | 252 | | | $ | 366 | |
| | | | |
EQUITY | | | | |
Cummins Inc. shareholders’ equity | | | | |
Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.5 shares issued | | $ | 2,214 | | | $ | 2,099 | |
Retained earnings | | 17,628 | | | 16,741 | |
Treasury stock, at cost, 81.5 and 80.0 shares | | (9,449) | | | (9,123) | |
| | | | |
Accumulated other comprehensive loss (Note 15) | | (2,013) | | | (1,571) | |
| | | | |
| | | | |
| | | | |
Total Cummins Inc. shareholders’ equity | | 8,380 | | | 8,146 | |
Noncontrolling interests | | 978 | | | 889 | |
Total equity | | $ | 9,358 | | | $ | 9,035 | |
Total liabilities, redeemable noncontrolling interests and equity | | $ | 29,769 | | | $ | 23,710 | |
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 |
In millions | | September 30, 2022 | | October 3, 2021 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | |
Consolidated net income | | $ | 1,539 | | | $ | 1,764 | |
Adjustments to reconcile consolidated net income to net cash provided by operating activities | | | | |
Depreciation and amortization | | 544 | | | 497 | |
| | | | |
| | | | |
| | | | |
Deferred income taxes | | (194) | | | 44 | |
Equity in income of investees, net of dividends | | (30) | | | (150) | |
Pension and OPEB expense (Note 4) | | 23 | | | 62 | |
Pension contributions and OPEB payments (Note 4) | | (71) | | | (86) | |
Share-based compensation expense | | 24 | | | 25 | |
| | | | |
| | | | |
| | | | |
| | | | |
Russian suspension costs, net of recoveries (Note 3) | | 112 | | | — | |
Asset impairments and other charges | | 36 | | | — | |
Loss on corporate owned life insurance | | 114 | | | 11 | |
| | | | |
Foreign currency remeasurement and transaction exposure | | (136) | | | 27 | |
Changes in current assets and liabilities, net of acquisitions | | | | |
Accounts and notes receivable | | (333) | | | (353) | |
Inventories | | (597) | | | (919) | |
Other current assets | | (18) | | | (45) | |
Accounts payable | | 353 | | | 416 | |
Accrued expenses | | (124) | | | 435 | |
Changes in other liabilities | | (41) | | | (59) | |
| | | | |
Other, net | | (56) | | | (145) | |
Net cash provided by operating activities | | 1,145 | | | 1,524 | |
| | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | |
Capital expenditures | | (453) | | | (362) | |
Investments in internal use software | | (44) | | | (36) | |
| | | | |
Proceeds from sale of land | | — | | | 20 | |
Investments in and net advances from (to) equity investees | | (50) | | | 3 | |
Acquisitions of businesses, net of cash acquired (Note 16) | | (3,008) | | | — | |
| | | | |
Investments in marketable securities—acquisitions | | (738) | | | (569) | |
Investments in marketable securities—liquidations (Note 7) | | 819 | | | 602 | |
| | | | |
| | | | |
Cash flows from derivatives not designated as hedges | | (29) | | | 19 | |
Other, net | | 7 | | | 45 | |
Net cash used in investing activities | | (3,496) | | | (278) | |
| | | | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | |
Proceeds from borrowings (Notes 11 and 16) | | 2,076 | | | 35 | |
Net borrowings (payments) of commercial paper | | 2,080 | | | (123) | |
Payments on borrowings and finance lease obligations | | (1,070) | | | (57) | |
Net borrowings (payments) under short-term credit agreements | | 21 | | | (93) | |
Distributions to noncontrolling interests | | (38) | | | (28) | |
Dividend payments on common stock | | (633) | | | (601) | |
Repurchases of common stock | | (370) | | | (1,228) | |
Proceeds from issuing common stock | | 36 | | | 27 | |
| | | | |
Other, net | | 9 | | | (11) | |
Net cash provided by (used in) financing activities | | 2,111 | | | (2,079) | |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | | 147 | | | 20 | |
Net decrease in cash and cash equivalents | | (93) | | | (813) | |
Cash and cash equivalents at beginning of year | | 2,592 | | | 3,401 | |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | | $ | 2,499 | | | $ | 2,588 | |
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, 2022 | | $ | 226 | | | $ | 556 | | | $ | 1,668 | | | $ | 17,450 | | | $ | (9,439) | | | | | $ | (1,696) | | | $ | 8,539 | | | $ | 890 | | | $ | 9,429 | |
| | | | | | | | | | | | | | | | | | | | |
Net income | | (7) | | | | | | | 400 | | | | | | | | | 400 | | | 16 | | | 416 | |
Other comprehensive loss, net of tax (Note 15) | | | | | | | | | | | | | | (317) | | | (317) | | | (15) | | | (332) | |
Issuance of common stock | | | | | | 7 | | | | | | | | | | | 7 | | | — | | | 7 | |
| | | | | | | | | | | | | | | | | | | | |
Repurchases of common stock | | | | | | | | | | (23) | | | | | | | (23) | | | — | | | (23) | |
Cash dividends on common stock, $1.57 per share | | | | | | | | (222) | | | | | | | | | (222) | | | — | | | (222) | |
Distributions to noncontrolling interests | | | | | | | | | | | | | | | | — | | | (24) | | | (24) | |
Share-based awards | | | | | | 4 | | | | | 13 | | | | | | | 17 | | | — | | | 17 | |
Acquisition of business | | | | | | | | | | | | | | | | — | | | 111 | | | 111 | |
Fair value adjustment of redeemable noncontrolling interests | | 33 | | | | | (33) | | | | | | | | | | | (33) | | | — | | | (33) | |
Other shareholder transactions | | | | | | 12 | | | | | | | | | | | 12 | | | — | | | 12 | |
BALANCE AT SEPTEMBER 30, 2022 | | $ | 252 | | | $ | 556 | | | $ | 1,658 | | | $ | 17,628 | | | $ | (9,449) | | | | | $ | (2,013) | | | $ | 8,380 | | | $ | 978 | | | $ | 9,358 | |
| | | | | | | | | | | | | | | | | | | | |
BALANCE AT JULY 4, 2021 | | $ | 346 | | | $ | 556 | | | $ | 1,548 | | | $ | 16,228 | | | $ | (8,838) | | | | | $ | (1,929) | | | $ | 7,565 | | | $ | 882 | | | $ | 8,447 | |
| | | | | | | | | | | | | | | | | | | | |
Net income | | (3) | | | | | | | 534 | | | | | | | | | 534 | | | 10 | | | 544 | |
Other comprehensive income, net of tax (Note 15) | | | | | | | | | | | | | | 18 | | | 18 | | | 2 | | | 20 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Repurchases of common stock | | | | | | | | | | (138) | | | | | | | (138) | | | — | | | (138) | |
Cash dividends on common stock, $1.45 per share | | | | | | | | (207) | | | | | | | | | (207) | | | — | | | (207) | |
Distributions to noncontrolling interests | | | | | | | | | | | | | | | | — | | | (15) | | | (15) | |
Share-based awards | | | | | | | | | | 1 | | | | | | | 1 | | | — | | | 1 | |
| | | | | | | | | | | | | | | | | | | | |
Fair value adjustment of redeemable noncontrolling interests | | (42) | | | | | 42 | | | | | | | | | | | 42 | | | — | | | 42 | |
Other shareholder transactions | | | | | | 7 | | | | | 1 | | | | | | | 8 | | | — | | | 8 | |
BALANCE AT OCTOBER 3, 2021 | | $ | 301 | | | $ | 556 | | | $ | 1,597 | | | $ | 16,555 | | | $ | (8,974) | | | | | $ | (1,911) | | | $ | 7,823 | | | $ | 879 | | | $ | 8,702 | |
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)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | 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, 2021 | | $ | 366 | | | $ | 556 | | | $ | 1,543 | | | $ | 16,741 | | | $ | (9,123) | | | | | $ | (1,571) | | | $ | 8,146 | | | $ | 889 | | | $ | 9,035 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net income | | (18) | | | | | | | 1,520 | | | | | | | | | 1,520 | | | 37 | | | 1,557 | |
| Other comprehensive loss, net of tax (Note 15) | | | | | | | | | | | | | | (442) | | | (442) | | | (38) | | | (480) | |
| Issuance of common stock | | | | | | 8 | | | | | | | | | | | 8 | | | — | | | 8 | |
| | | | | | | | | | | | | | | | | | | | | |
| Repurchases of common stock | | | | | | | | | | (370) | | | | | | | (370) | | | — | | | (370) | |
| Cash dividends on common stock, $4.47 per share | | | | | | | | (633) | | | | | | | | | (633) | | | — | | | (633) | |
| Distributions to noncontrolling interests | | | | | | | | | | | | | | | | — | | | (38) | | | (38) | |
| Share-based awards | | | | | | (3) | | | | | 39 | | | | | | | 36 | | | — | | | 36 | |
| Acquisition of business | | | | | | | | | | | | | | | | — | | | 111 | | | 111 | |
| Fair value adjustment of redeemable noncontrolling interests | | (96) | | | | | 96 | | | | | | | | | | | 96 | | | — | | | 96 | |
| Other shareholder transactions | | | | | | 14 | | | | | 5 | | | | | | | 19 | | | 17 | | | 36 | |
| BALANCE AT SEPTEMBER 30, 2022 | | $ | 252 | | | $ | 556 | | | $ | 1,658 | | | $ | 17,628 | | | $ | (9,449) | | | | | $ | (2,013) | | | $ | 8,380 | | | $ | 978 | | | $ | 9,358 | |
| | | | | | | | | | | | | | | | | | | | | |
| BALANCE AT DECEMBER 31, 2020 | | $ | 282 | | | $ | 556 | | | $ | 1,617 | | | $ | 15,419 | | | $ | (7,779) | | | | | $ | (1,982) | | | $ | 7,831 | | | $ | 876 | | | $ | 8,707 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net income | | (9) | | | | | | | 1,737 | | | | | | | | | 1,737 | | | 36 | | | 1,773 | |
| Other comprehensive income (loss), net of tax (Note 15) | | | | | | | | | | | | | | 71 | | | 71 | | | (5) | | | 66 | |
| Issuance of common stock | | | | | | 1 | | | | | | | | | | | 1 | | | — | | | 1 | |
| | | | | | | | | | | | | | | | | | | | | |
| Repurchases of common stock | | | | | | | | | | (1,228) | | | | | | | (1,228) | | | — | | | (1,228) | |
| Cash dividends on common stock, $4.15 per share | | | | | | | | (601) | | | | | | | | | (601) | | | — | | | (601) | |
| Distributions to noncontrolling interests | | | | | | | | | | | | | | | | — | | | (28) | | | (28) | |
| Share-based awards | | | | | | (4) | | | | | 31 | | | | | | | 27 | | | — | | | 27 | |
| | | | | | | | | | | | | | | | | | | | | |
| Fair value adjustment of redeemable noncontrolling interests | | 28 | | | | | (28) | | | | | | | | | | | (28) | | | — | | | (28) | |
| Other shareholder transactions | | | | | | 11 | | | | | 2 | | | | | | | 13 | | | — | | | 13 | |
| BALANCE AT OCTOBER 3, 2021 | | $ | 301 | | | $ | 556 | | | $ | 1,597 | | | $ | 16,555 | | | $ | (8,974) | | | | | $ | (1,911) | | | $ | 7,823 | | | $ | 879 | | | $ | 8,702 | |
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 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, axles, drivelines, brakes, suspension systems, electric power generation systems, batteries, electrified power systems, electric powertrains, 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.
Meritor Acquisition
On August 3, 2022, we completed the acquisition of Meritor, Inc. (Meritor) with a purchase price of $2.9 billion (including debt repaid concurrent with the acquisition). Our consolidated results and segment results include Meritor's activity since the date of acquisition. The results are included in our Components segment in the axles and brakes business while the electric powertrain portion is included in our New Power segment. See NOTE 16, "ACQUISITIONS," for additional information.
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 third quarters of 2022 and 2021 ended on September 30 and October 3, 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 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.
Revisions
During the third quarter of 2022, we determined that a put right held by a minority shareholder in one of our subsidiaries, which became exercisable in September 2022, was incorrectly classified as noncontrolling interests (NCI) as opposed to mezzanine equity in our Condensed Consolidated Balance Sheets. Because the put right was exercisable at fair value (as defined in the governing documents of the subsidiary), the NCI should have also been reflected at fair value at each balance sheet date with an offset to additional paid-in-capital (APIC). As a result, we have revised our historical financial statements to reflect the NCI at its estimated fair value as redeemable noncontrolling interests in our Condensed Consolidated Balance Sheets with a corresponding offset in NCI and APIC. This error did not impact our Condensed Consolidated Statements of Net Income, Condensed Consolidated Statements of Comprehensive Income or Condensed Consolidated Statements of Cash Flows for any period. The amount reclassified from NCI and APIC was as follows:
| | | | | | | | | | | | | | | | | | | | |
In millions | | Noncontrolling Interests | | Additional Paid-in Capital | | Total Correction to Mezzanine Equity |
December 31, 2019 | | $ | 58 | | | $ | — | | | $ | 58 | |
|