What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-12 compared with 2023-02-14 · 529 added, 504 removed, 1713 unchanged (38% of the section changed)

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 ACQUISITIONS

NOTE 2 AGREEMENT IN PRINCIPLE

NOTE 3 REVENUE FROM CONTRACTS WITH CUSTOMERS

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NOTE 15 COMMITMENTS AND CONTINGENCIES

NOTE 16 REDEEMABLE NONCONTROLLING INTERESTS

NOTE 16 CUMMINS INC.

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NOTE 22 RUSSIAN OPERATIONS

NOTE 23 FORMATION OF ATMUS AND IPO

NOTE 24 ACQUISITIONS

NOTE 25 OPERATING SEGMENTS

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Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of our Consolidated Financial Statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

On August 3, 2022, we completed the acquisition of Meritor.

As part of our ongoing integration of the Meritor business, we are continuing to incorporate our controls and procedures into Meritor and to augment our company-wide controls to reflect the risks inherent in an acquisition of this type.

As permitted by the Securities and Exchange Commission (SEC) staff guidance for newly acquired businesses, management’s assessment of the effectiveness of our internal control over financial reporting for the year ending December 31, 2022, excludes the acquired Meritor business in order for management to have sufficient time to evaluate and implement our internal control structure over the operations of the Meritor business.

Meritor is a wholly-owned subsidiary whose total assets and total net sales represent approximately 12 percent and 7 percent of our consolidated financial statement amounts as of and for the year ended December 31, 2022.

Management assessed the effectiveness of our internal control over financial reporting and concluded it was effective as of December 31, 2023.

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/s/ JENNIFER RUMSEY /s/ MARK A.

President and Chief Executive Officer Vice President and Chief Financial Officer

Chair and Chief Executive Officer Vice President and Chief Financial Officer

Report of Independent Registered Public Accounting Firm

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Meritor, Inc.

(Meritor) from its assessment of internal control over financial reporting as of December 31, 2022 because it was acquired by the Company in a purchase business combination during 2022.

We have also excluded Meritor from our audit of internal control over financial reporting.

Meritor is a wholly-owned subsidiary whose total assets and total net sales excluded from management’s assessment and our audit of internal control over financial reporting represent approximately 12% and 7%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022.

Definition and Limitations of Internal Control over Financial Reporting

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(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding

prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Acquisition of Meritor - Valuation of Customer Relationships

As described in Note 2 to the consolidated financial statements, the Company completed the acquisition of Meritor on August 3, 2022 for the total purchase price of $ 2.9 billion, including debt that was retired on the closing date of $ 248 million.

Of the identifiable intangible assets acquired, management recognized customer relationships of $ 960 million.

Management estimated the fair value of the customer relationships using the multi-period excess earnings method.

Key assumptions used in the multi-period excess earnings method include projections of revenue and earnings or losses before interest expense, income taxes, depreciation and amortization and non-controlling interests (EBITDA), discount rate, customer attrition rates, and customer renewal rates.

The principal considerations for our determination that performing procedures relating to the valuation of the customer relationships acquired in the acquisition of Meritor is a critical audit matter are (i) the significant judgment by management when determining the fair value estimate of the customer relationships acquired;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to projections of EBITDA;

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Annual Goodwill Impairment Tests – Automated Transmissions and Axles and Brakes Reporting Units

As described in Notes 1 and 10 to the consolidated financial statements, the Company’s consolidated goodwill balance was $2,499 million as of December 31, 2023, and as disclosed by management, the goodwill associated with the automated transmissions reporting unit and axles and brakes reporting unit (collectively, the “reporting units”) was $544 million and $764 million, respectively.

Management performs the goodwill impairment tests as of the end of the fiscal third quarter, or on an interim basis in certain circumstances where impairment may be indicated.

Management performs the annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

In estimating the fair value of each reporting unit, management used an income approach using a discounted cash flow model.

The discounted cash flow model requires projections of revenue, gross margin, operating expenses, working capital investment and fixed asset additions for the reporting units over a multi-year period, and a discount rate based upon a weighted-average cost of capital.

The principal considerations for our determination that performing procedures relating to the annual goodwill impairment tests for the reporting units is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the reporting units;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to projections of revenue and gross margin for the reporting units and the discount rate for the axles and brakes reporting unit;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s valuation of the customer relationships acquired, including controls over the determination of the significant assumptions related to projections of EBITDA.

These procedures also included, among others (i) reading the purchase agreement and (ii) testing management’s process for determining the fair value estimate of the customer relationships acquired.

This included evaluating the appropriateness of the multi-period excess earnings method, testing the completeness and accuracy of underlying data used in the multi-period excess earnings method, and evaluating the reasonableness of the significant assumptions used by management related to projections of EBITDA.

Evaluating management’s significant assumptions related to projections of EBITDA involved considering (i) the past performance of Meritor and (ii) the consistency with economic and industry data.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the Company’s multi-period excess earnings method.

Base Product Warranty Liability

As described in Notes 1 and 14 to the consolidated financial statements, management estimates and records a liability for base product warranty programs at the time products are sold.

As of December 31, 2022, the total accrued liability for product warranty programs was $1,470 million.

The estimate for one of the base product warranty programs is based on historical experience and reflects management's best estimates of expected costs at the time products are sold and subsequent adjustment to those expected costs when actual costs differ.

Management’s estimate of the base product warranty liability is generally affected by component failure rates, repair costs, and the point of failure within the product life cycle.

The principal considerations for our determination that performing procedures relating to the base product warranty liability is a critical audit matter are (i) the significant judgment by management when determining the estimate for the base product warranty liability and (ii) a high degree of auditor judgment and effort in performing procedures and evaluating management’s significant assumptions related to component failure rates, repair costs, and the point of failure within the product life cycle.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s estimate for the base product warranty liability, including controls related to the determination of the significant assumptions related to component failure rates, repair costs, and the point of failure within the product life cycle.

These procedures also included, among others, testing management’s process for determining the estimate for the base product warranty liability.

This included evaluating the appropriateness of the method used by management, testing the completeness and accuracy of underlying data used in the warranty

estimate, and evaluating the reasonableness of the significant assumptions used by management related to component failure rates, repair costs, and the point of failure within the product life cycle.

Evaluating management’s significant assumptions related to component failure rates, repair costs, and the point of failure within the product life cycle involved considering the historical product experience of the Company.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment tests, including controls over the valuation of the reporting units.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the reporting units;

(ii) evaluating the appropriateness of the discounted cash flow model used by management;

(iii) testing the completeness and accuracy of underlying data used in the discounted cash flow model;

and (iv) evaluating the reasonableness of significant assumptions used by management related to projections of revenue and gross margin for the reporting units and the discount rate for the axles and brakes reporting unit.

Evaluating management’s assumptions related to projections of revenue and gross margin involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting units;

(ii) the consistency with external market and industry data;

and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow model and (ii) the reasonableness of the discount rate assumption for the axles and brakes reporting unit.

/s/ PricewaterhouseCoopers LLP

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In millions, except per share amounts 2023 2022 2021

NET SALES (Note 3)

NET SALES (Notes 1 and 3)

$ 34,065 $ 28,074 $ 24,021

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Research, development and engineering expenses 1,500 1,278 1,090

Equity, royalty and interest income from investees (Notes 4 and 23) 349 506 452

Equity, royalty and interest income from investees (Note 4) 483 349 506

Other operating expense, net (Note 2) 2,138 174 31

OPERATING INCOME 1,761 2,929 2,706

Interest expense (Note 13) 199 111 100

Interest expense 375 199 111

Other income, net 240 89 156

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CONSOLIDATED NET INCOME $ 840 $ 2,183 $ 2,164

Other comprehensive income (loss), net of tax (Note 18)

Other comprehensive (loss) income, net of tax (Note 17)

Change in pension and other postretirement defined benefit plans ( 421 ) ( 81 ) 389

Foreign currency translation adjustments 92 ( 384 ) ( 9 )

Unrealized gain (loss) on derivatives 106 26 ( 34 )

Unrealized gain on derivatives 10 106 26

Total other comprehensive (loss) income, net of tax ( 319 ) ( 359 ) 406

COMPREHENSIVE INCOME 521 1,824 2,570

Comprehensive (loss) income attributable to noncontrolling interests ( 8 ) 28 12

Comprehensive income (loss) attributable to noncontrolling interests 102 ( 8 ) 28

COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC.

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Accounts and notes receivable, net 5,583 5,202

Trade and other 4,826 3,565

Nonconsolidated equity investees 376 425

Inventories (Note 7) 5,677 5,603

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Commitments and contingencies (Note 15)

Redeemable noncontrolling interests (Notes 1 and 16) $ 258 $ 366

Redeemable noncontrolling interests (Note 24) $ — $ 258

shareholders’ equity (Note 16)

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Russian suspension costs, net of recoveries (Note 22) — 111 —

Restructuring payments — ( 1 ) ( 110 )

Loss (gain) on corporate owned life insurance 102 — ( 57 )

Foreign currency remeasurement and transaction exposure ( 27 ) 37 2

Changes in current assets and liabilities, net of acquisitions

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Accounts payable ( 66 ) 538 217

Accrued expenses ( 170 ) 541 121

Changes in other liabilities ( 1 ) ( 6 ) 189

Accrued expenses (Note 2) 2,934 ( 170 ) 541

Other, net 348 160 ( 116 )

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CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from borrowings (Note 13) 2,103 79 2,014

Net borrowings (payments) of commercial paper (Note 13) 2,261 ( 10 ) ( 337 )

Proceeds from borrowings 861 2,103 79

Net (payments) borrowings of commercial paper ( 779 ) 2,261 ( 10 )

Payments on borrowings and finance lease obligations ( 1,136 ) ( 1,550 ) ( 73 )

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Repurchases of common stock (Note 16) — ( 374 ) ( 1,402 )

Payments for purchase of redeemable noncontrolling interests (Note 24) ( 175 ) — —

Other, net ( 27 ) 84 ( 12 )

Net cash provided by (used in) financing activities 1,669 ( 2,227 ) 280

Net cash (used in) provided by financing activities ( 2,177 ) 1,669 ( 2,227 )

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ( 68 ) 50 35

Net (decrease) increase in cash and cash equivalents ( 491 ) ( 809 ) 2,272

Net increase (decrease) in cash and cash equivalents 78 ( 491 ) ( 809 )

Cash and cash equivalents at beginning of year 2,101 2,592 3,401

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Earnings Treasury

Trust Accumulated

Stock Accumulated

Comprehensive

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BALANCE AT DECEMBER 31, 2020 $ 282 $ 556 $ 1,617 $ 15,419 $ ( 7,779 ) $ ( 1,982 ) $ 7,831 $ 876 $ 8,707

Adoption of new accounting standards ( 4 ) ( 4 ) — ( 4 )

Net income ( 13 ) 2,131 2,131 46 2,177

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Issuance of common stock 1 1 — 1

Employee benefits trust activity 32 2 34 — 34

Repurchases of common stock (Note 16) ( 1,402 ) ( 1,402 ) — ( 1,402 )

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Net income ( 24 ) 2,151 2,151 56 2,207

Other comprehensive income (loss), net of tax (Note 18) 411 411 ( 5 ) 406

Other comprehensive loss, net of tax (Note 17) ( 319 ) ( 319 ) ( 40 ) ( 359 )

Issuance of common stock 8 8 — 8

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Share-based awards 3 77 80 — 80

Acquisition of business (Note 24) — 111 111

Fair value adjustment of redeemable noncontrolling interests ( 104 ) 104 104 — 104

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Issuance of common stock 3 3 — 3

Repurchases of common stock (Note 17) ( 374 ) ( 374 ) — ( 374 )

Cash dividends on common stock (Note 16) ( 921 ) ( 921 ) — ( 921 )

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Share-based awards ( 4 ) 52 48 — 48

Acquisition of business (Note 2) — 111 111

Fair value adjustment of redeemable noncontrolling interests 33 ( 33 ) ( 33 ) — ( 33 )

Acquisition of redeemable noncontrolling interests (Note 24) ( 271 ) — — —

Sale of Atmus stock (Note 23) 285 285 ( 3 ) 282

Other shareholder transactions 70 4 74 — 74

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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 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, 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.

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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).

On August 3, 2022, we completed the acquisition of 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.

Meritor was split into the newly formed axles and brakes business and electric powertrain.

The results for the axles and brakes business are included in our Components segment while the electric powertrain portion is included in our New Power segment.

The results for the axles and brakes business are included in our Components segment while the electric powertrain portion is included in our Accelera segment.

See NOTE 24, "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.

Our fiscal year ends on December 31, regardless of the day of the week on which December 31 falls.

Principles of Consolidation

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In addition, we also consolidate, regardless of our ownership percentage, VIEs or joint ventures for which we are deemed to have a controlling financial interest.

We have variable interests in several businesses accounted for under the equity method of accounting, however most of these VIEs are unconsolidated.

We have variable interests in several businesses accounted for under the equity method of accounting.

For consolidated entities where our ownership interest is less than 100 percent, the noncontrolling ownership interests are reported in our Consolidated Balance Sheets .

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Certain amounts for 2022 and 2021 were reclassified to conform to the current year presentation.

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 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 Consolidated Balance Sheets with a corresponding offset in NCI and APIC.

This error did not impact our Consolidated Statements of Net Income , Consolidated Statements of Comprehensive Income or Consolidated Statements of Cash Flows for any period.

The amounts reclassified from NCI and revisions to APIC were as follows:

In millions Noncontrolling Interests Additional Paid-in Capital Total Correction to Mezzanine Equity

December 31, 2019 $ 58 $ — $ 58

December 31, 2020 51 231 282

December 31, 2021 38 328 366

March 31, 2022 34 358 392

June 30, 2022 27 199 226

See NOTE 16, "REDEEMABLE NONCONTROLLING INTERESTS," for further information regarding the put right.

We have concluded the correction of this error does not have a material impact to our previously issued annual and interim consolidated financial statements.

Investments in Equity Investees

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Preparation of financial statements requires management to make estimates and assumptions that affect reported amounts presented and disclosed in our Consolidated Financial Statements .

Significant estimates and assumptions in these Consolidated Financial Statements require the exercise of judgement and are used for, but not limited to, estimates of future cash flows and other assumptions associated with the valuation of intangible assets and goodwill and long-lived asset impairment tests, useful lives for depreciation and amortization, warranty programs, determination of discount rate and other assumptions for pensions and other postretirement benefit obligations and related costs, income taxes, deferred tax valuation allowances, contingencies and allowances for doubtful accounts.

Significant estimates and assumptions in these Consolidated Financial Statements require the exercise of judgement and are used for, but not limited to, estimates of future cash flows and other assumptions associated with the valuation of intangible assets and goodwill and long-lived asset impairment tests, useful lives for depreciation and amortization, warranty programs, determination of discount rate and other assumptions for pensions and other postretirement benefit obligations (OPEB) and related costs, income taxes, deferred tax valuation allowances, contingencies and allowances for doubtful accounts.

Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates.

Current supply chain disruptions and related future financial impacts cannot be estimated at this time.

This uncertainty could have an impact on certain estimates used in the preparation of our 2022 financial results.

Revenue From Contracts with Customers

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Our long-term arrangements generally do not include committed volumes until underlying purchase orders are issued.

Our performance obligations vary by contract, but may include diesel and natural gas engines and engine-related component products, including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems, automated transmissions, engine braking, cylinder deactivation and start and stop thermal management technologies, drivetrain systems and components including axles, drivelines, braking and suspension systems, electric power generation systems and construction related projects, batteries, electrified power systems, hydrogen production and fuel cell products, parts, maintenance services and extended warranty coverage.

Our performance obligations vary by contract, but may include 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, valvetrain technologies, suspension systems, electric power generation systems and construction related projects, batteries, electrified power systems, electric powertrains, hydrogen production technologies, fuel cell products, parts, maintenance services and extended warranty coverage.

Typically, we recognize revenue on the products we sell at a point in time, generally in accordance with shipping terms, which reflects the transfer of control to the customer.

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We grant credit limits and terms to customers based upon traditional practices and competitive conditions.

Typical terms vary by market, but payments are generally due in 90 days or less from invoicing for most of our product and service sales, while payments on construction and other similar arrangements may be due on an installment basis.

Typical terms vary by market, but payments are generally due in 90 days or less from invoicing for most of our product and service sales, while payments on construction, electrolyzer and certain power generation contracts may be due on an installment basis.

For contracts where the time between cash collection and performance is less than one year, we have elected to use the practical expedient that allows us to ignore the possible existence of a significant financing component within the contract.

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These rebates are typically paid on a quarterly, or more frequent basis.

At the time of the sales, we consider the expected

amount of these rebates when determining the overall transaction price.

At the time of the sales, we consider the expected amount of these rebates when determining the overall transaction price.

Estimates are adjusted at the end of each quarter based on the amounts yet to be paid.

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We record deferred revenue when we are entitled to bill a customer in advance of when we are permitted to recognize revenue.

Deferred revenue may arise in construction and other power generation system contracts, where billings may occur in advance of performance or in accordance with specific milestones.

Deferred revenue may arise in construction and other power generation systems and electrolyzer contracts, where billings may occur in advance of performance or in accordance with specific milestones.

Deferred revenue may also occur in long-term maintenance contracts, where billings are often based on usage of the underlying equipment, which generally follows a predictable pattern that often will result in the accumulation of collections in advance of our performance of the related maintenance services.

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Unbilled revenue relates to our right to consideration for our completed performance under a contract.

Unbilled revenue generally arises from contractual provisions that delay a portion of the billings on genset deliveries until commissioning occurs.

Unbilled revenue generally arises from contractual provisions that delay a portion of the

billings on genset deliveries until commissioning occurs.

Unbilled revenue may also occur when billings trail the provision of service in construction and long-term maintenance contracts.

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Costs to fulfill a contract are generally limited to customer-specific engineering expenses that do not meet the definition of research and development expenses.

a practical expedient, we have elected to recognize these costs of obtaining a contract as an expense when the related contract period is less than one year.

As a practical expedient, we have elected to recognize these costs of obtaining a contract as an expense when the related contract period is less than one year.

When the period exceeds one year, this asset is amortized over the life of the contract.

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dollar is the functional currency, including those operating in highly inflationary economies when applicable, we remeasure non-monetary balances and the related income statement amounts using historical exchange rates.

We include the resulting gains and losses in income, including the effect of derivatives in our Consolidated Statements of Net Income , which combined with transaction gains and losses amounted to a net loss of $ 8 million and a net gain of $ 2 million and $ 4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

We include the resulting gains and losses in income, including the effect of derivatives in our Consolidated Statements of Net Income , which combined with transaction gains and losses amounted to a net loss of $ 30 million and $ 8 million and a net gain of $ 2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Fair Value Measurements

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We make use of derivative instruments in foreign exchange, commodity price and interest rate hedging programs.

Derivatives currently in use are foreign currency forward contracts, commodity swap and interest rate swaps and locks.

Derivatives currently in use are foreign currency forward contracts, commodity swaps and interest rate swaps and locks.

These contracts are used strictly for hedging and not for speculative purposes.

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These derivative instruments are not designated as hedges.

Gains or losses are recorded directly to the Consolidated Statements of Net Income.

We are further exposed to foreign currency exchange risk as many of our subsidiaries are subject to fluctuations as the functional currencies of the underlying entities are not our U.S.

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These audits can involve complex issues, which may require an extended period of time to resolve.

We accrue for the estimated additional tax and interest that may result from tax authorities disputing uncertain tax positions.

We accrue for the

estimated additional tax and interest that may result from tax authorities disputing uncertain tax positions.

We believe we made adequate provisions for income taxes for all years that are subject to audit based upon the latest information available.

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Assumptions and estimates used to estimate cash flows in the evaluation of impairment and the fair values used to determine the impairment are subject to a degree of judgment and complexity.

Any changes to the assumptions and estimates resulting

from changes in actual results or market conditions from those anticipated may affect the carrying value of long-lived assets and could result in a future impairment charge.

Any changes to the assumptions and estimates resulting from changes in actual results or market conditions from those anticipated may affect the carrying value of long-lived assets and could result in a future impairment charge.

We determine if an arrangement contains a lease in whole or in part at the inception of the contract.

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We have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value as a basis for determining whether it is necessary to perform an annual quantitative goodwill impairment test.

We elected this option on certain reporting units.

We have elected this option on certain reporting units.

The quantitative impairment test is only required if an entity determines through this qualitative analysis that it is more likely than not that the fair value of the reporting unit is less than its carrying value.

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Our reporting units are generally defined as one level below an operating segment.

However, there are three situations where we have aggregated two or more reporting units which share similar economic characteristics and thus are aggregated into a single reporting unit for testing purposes.

These three situations are described further below:

• Within our Components segment, our emission solutions and filtration businesses were aggregated into a single reporting unit,

• Within our New Power segment, our fuel cell and electrolyzer businesses were aggregated into a single reporting unit and

However, there are four situations where we have aggregated two or more reporting units which share similar economic characteristics and thus are aggregated into a single reporting unit for testing purposes.

These four situations are described further below:

• Within our Components segment, our emission solutions and Atmus businesses were aggregated into a single reporting unit,

• Within our Accelera segment, our fuel cell and electrolyzer businesses were aggregated into a single reporting unit and our epowertrain and traction systems businesses were aggregated into a single reporting unit and

• Our Distribution segment is considered a single reporting unit as it is managed geographically and all regions share similar economic characteristics and provide similar products and services.

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The discounted cash flows are compared to the carrying value of the reporting unit and, if less than the carrying value, the difference is recorded as a goodwill impairment loss.

In addition, we also perform a sensitivity analysis to determine how much our forecasts can fluctuate before the fair value of a reporting unit would be lower than its carrying amount.

In addition, we also perform sensitivity analyses to determine how much our forecasts can fluctuate before the fair value of a reporting unit would be lower than its carrying amount.

Future changes in the judgments, assumptions and estimates that are used in our goodwill impairment testing, including discount rates or future operating results and related cash flow projections, could result in significantly different estimates of the fair values in the future.

An increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges

that could materially affect our financial statements in any given year.

We perform the required procedures as of the end of our fiscal third quarter.

After considering the results of the recent fair value valuations related to the Meritor acquisition, the capital markets environment, economic conditions, results of operations and other factors, we concluded that the fair value of all of our reporting units exceeded their carrying value as of September 30, 2022.

However, given the recent acquisition of Meritor, when fair value equaled carrying value as of the acquisition date (August 3, 2022), there is a heightened risk of a future impairment to the extent its fair value changes in future periods.

An increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect our financial statements in any given year.

We perform the goodwill impairment assessment as of the end of our fiscal third quarter.

At December 31, 2023, our recorded goodwill was $ 2.5 billion, of which approximately 31 percent resided in the axles and brakes reporting unit, 22 percent in the automated transmissions reporting unit and 19 percent in the aggregated emission solutions and filtration reporting unit.

While none of the reporting units recorded a goodwill impairment in 2023, the estimated fair value of two of these reporting units did not significantly exceed the carrying value in our annual impairment testing.

Our automated transmissions reporting unit had an estimated fair value that exceeded its carrying value by approximately 7 percent and our axles and brakes reporting unit had an estimated fair value that exceeded its carrying value by approximately 12 percent.

Changes in our projections or estimates, a deterioration of our operating results and the related cash flow effect or a significant increase in the discount rate could decrease the estimated fair value of our reporting units and result in a future impairment of goodwill.

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See Extended Warranty policy discussion above and NOTE 14, "PRODUCT WARRANTY LIABILITY," for additional information.

Contingent Liabilities

We record an accrual for contingent liabilities when the amounts are probable and estimable.

As the cash flow associated with most of our contingent liabilities can not be reasonably predicted, we record our estimated obligations on an undiscounted basis.

In addition, our accrual does not include amounts for estimated legal defense costs as those are expensed in the period in which they are incurred.

Research and Development

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Certain joint venture agreements transfer product at cost, some transfer product on a cost-plus basis, and others transfer product at market value.

Sales to nonconsolidated equity investees were $ 1.2 billion, $ 1.7 billion and $ 1.3 billion for the years ended December 31, 2022, 2021 and 2020, respectively.

Related party sales in 2022 were down primarily due to lower sales in China due to COVID shutdowns and the acquisition of Cummins Westport, Inc.

(Westport JV).

Accounts receivable from nonconsolidated equity investees are presented on the face of our Consolidated Balance Sheets .

Purchases from nonconsolidated equity investees were $ 1.8 billion, $ 1.8 billion and $ 1.3 billion for the years ended December 31, 2022, 2021 and 2020, respectively, and accounts payable to nonconsolidated equity investees were $ 292 million and $ 227 million at December 31, 2022, and 2021, respectively.

The following is a summary of sales to and purchases from nonconsolidated equity investees:

Years ended December 31,

In millions 2023 2022 2021

Sales to nonconsolidated equity investees $ 1,548 $ 1,197 $ 1,713

Purchases from nonconsolidated equity investees 2,628 1,838 1,796

The following is a summary of accounts receivable from and accounts payable to nonconsolidated equity investees:

In millions December 31,

2023 December 31,

2022 Balance Sheet Location

Accounts receivable from nonconsolidated equity investees $ 530 $ 376 Accounts and notes receivable, net

Accounts payable to nonconsolidated equity investees 324 292 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 the program was $ 512 million at December 31, 2023.

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 Consolidated Balance Sheets .

Amounts due to the financial intermediaries reflected in accounts payable at December 31, 2023, and 2022, were $ 199 million and $ 331 million, respectively.

The following table summarizes the changes in amounts due to financial intermediaries reflected in accounts payable for the year ended December 31, 2023:

Balance at December 31, 2022 $ 331

Additional invoices presented for payment 1,141

Payments to financial intermediaries ( 1,274 )

Foreign currency translation adjustments and other 1

Balance at December 31, 2023 $ 199

Government Assistance

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We recognize grants for reimbursement of training or other expenses as an offset to the related expense.

For the year ended December 31, 2022, government grants did not have a material impact on our financial statements as a whole and we did not have any individually material grant awards.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In November 2021, the Financial Accounting Standards Board (FASB) issued a standard related to the disclosure of government assistance received by an entity.

Under the new standard, entities are required to disclose (1) the types of assistance received, (2) accounting for the assistance and (3) impact of the assistance in the financial statements.

We adopted the new standard on January 1, 2022, on a prospective basis, and it did not have a material impact on our financial statements.

See Government Assistance above for additional information.

Acquisitions for the year ended December 31, 2022, were as follows.

Entity Acquired (Dollars in millions) Date of Acquisition Additional Percent Interest Acquired Payments to Former Owners Acquisition Related Debt Retirements Total Purchase Consideration (1)

Goodwill Acquired Intangibles Recognized (2)

Siemens Commercial Vehicles Propulsion (Siemens CVP) 11/30/22 100 % $ 187 $ — $ 187 $ 70 $ 106

Meritor, Inc.

08/03/22 100 % 2,613 248 2,861 894 1,610

Jacobs Vehicle Systems 04/08/22 100 % 345 — 345 108 164

Westport JV 02/07/22 50 % 42 — 42 — 20

(1) The newly consolidated entities were accounted for as business combinations.

On the date of acquisition, Meritor, Inc.

was included in the Components and New Power segments, Siemens CVP was included in the New Power segment, Jacobs Vehicle Systems was included in the Components segment and Westport JV was included in the Engine segment.

(2) Intangible assets acquired in the business combination were mostly customer, technology and trade name related.

On November 30, 2022, we acquired Siemens' Commercial Vehicles Propulsion business for approximately $ 187 million, subject to working capital and other customary adjustments.

This business develops, designs and produces electric drive systems including electric motors, inverters, software and related services for the commercial vehicle markets.

This acquisition is included in our New Power segment.

This acquisition added key capabilities in direct drive and transmission-based remote mount electric motors, inverters, software and related services that are critical elements in the next generation of electric powertrain, which will accelerate our ability to offer global customers a wider array of electrified product solutions across commercial vehicle applications.

The preliminary purchase price allocation was as follows:

Inventories $ 21

Property, plant and equipment 3

Intangible assets 106

Deferred revenue ( 3 )

Other, net ( 10 )

Total purchase price $ 187

The estimated fair values (all considered Level 3 measurements) of the identifiable intangible assets acquired, their weighted-average useful lives, the related valuation methodology and key assumptions are as follows:

Fair Value (in millions) Weighted-Average Useful Life (in years) Valuation Methodology Key Assumptions

Customer relationships $ 62 20 Multi-period excess earnings Discount rate, customer renewal rates

Technology 28 11 Relief-from-royalty Royalty rate, rate of return, obsolescence factor

Trade name 16 17 Relief-from-royalty Royalty rate, discount rate

Annual amortization of the intangible assets for the next five years is expected to approximate $ 7 million per year.

Goodwill was determined based on the residual difference between the fair value of consideration transferred and the value assigned to tangible and intangible assets and liabilities.

The majority of the goodwill is deductible for tax purposes.

Among the factors contributing to a purchase price resulting in the recognition of goodwill are the business's expected future customers, new versions of technologies, an acquired workforce and other economic benefits that are anticipated to arise from future product sales and operational synergies from combining the business with Cummins.

Included in our results for the year ended December 31, 2022, were revenues of $ 2 million and loss of $ 4 million related to this business.

The results of this business were reported in our New Power segment.

Pro forma financial information for the acquisition was not presented as the effects are not material to our Consolidated Financial Statements.

Meritor, Inc.

On August 3, 2022, we completed the acquisition of Meritor whereby we paid $ 36.50 per share for each outstanding share of Meritor, a global leader of drivetrain, mobility, braking, aftermarket and electric powertrain solutions for commercial vehicle and industrial markets.

The total purchase price was $ 2.9 billion, including debt that was retired on the closing date of $ 248 million.

In addition, we assumed $ 1.0 billion of additional debt, of which $ 0.9 billion was retired prior to the end of the third quarter.

The acquisition was funded with a combination of $ 2.0 billion in new debt (see NOTE 13, "DEBT" for additional details), cash on hand and additional commercial paper borrowings.

The integration of Meritor’s people, technology and capabilities position us as one of the few companies able to provide integrated powertrain solutions across combustion and electric power applications at a time when demand for decarbonized solutions is continuing to accelerate.

The majority of this business will be included within our Components segment with the exception of the electric powertrain business, which will be included in our New Power segment.

The values assigned to individual assets acquired and liabilities assumed are preliminary based on management’s current best estimate and subject to change as certain matters are finalized.

The primary areas that remain open include, but are not limited to, legal and other contingent liabilities and deferred taxes as we continue to refine our allocation by jurisdiction.

The preliminary purchase price allocation has been updated as follows:

Cash and cash equivalents $ 98

Accounts and notes receivable, net 640

Inventories 750

Property, plant and equipment 846

Intangible assets 1,610

Investments and advances related to equity method investees 382

Pension assets 147

Other current and long-term assets 322

Accounts payable (principally trade) ( 711 )

Net deferred taxes ( 320 )

Other liabilities (pensions and other postretirement benefits) ( 129 )

Long-term debt ( 962 )

Other current and long-term liabilities ( 595 )

Noncontrolling interests ( 111 )

Total purchase price $ 2,861

We made certain measurement period adjustments in the fourth quarter to the balance sheet resulting in an increase in goodwill of $ 44 million.

None of the adjustments were individually material.

There was no income statement impact on prior periods as a result of these changes.

Fair Value (in millions) Weighted-Average Useful Life (in years) Valuation Methodology Key Assumptions

Customer relationships $ 960 12 Multi-period excess earnings Revenue, EBITDA (1) , discount rate, customer renewal rates, customer attrition rates

Technology 345 8 Relief-from-royalty Royalty rate, discount rate, obsolescence factor

Trade name 305 21 Relief-from-royalty Royalty rate, discount rate

(1) E arnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests

Annual amortization of the intangible assets for the next five years is expected to approximate $ 142 million per year.

Goodwill was determined based on the residual difference between the fair value of consideration transferred and the value assigned to tangible and intangible assets and liabilities.

Goodwill was allocated to the Components segment ($ 727 million) and the New Power segment ($ 167 million) based on the relative value of those businesses compared to the assets and liabilities assigned to them.

We do not expect any of the goodwill to be deductible for tax purposes.

Among the factors contributing to a purchase price resulting in the recognition of goodwill are Meritor’s expected future customers, new versions of technologies, an acquired workforce, other economic benefits that are anticipated to arise from future product sales and operational synergies from combining the business with Cummins.

Included in our results for the year ended December 31, 2022, were revenues of $ 1.9 billion and net loss of $ 43 million related to this business.

In addition, in 2022 we incurred acquisition related costs of $ 30 million included in selling, general and administrative expenses in our Consolidated Statements of Net Income .

The following table presents the supplemental consolidated results of the Company for the years ended December 31, 2022 and 2021, on an unaudited pro-forma basis as if the acquisition had been consummated on January 1, 2021.

The primary adjustments reflected in the pro-forma results related to (1) increase in interest expense for debt used to fund the acquisition, (2) removal of acquisition related costs from 2022 (and included in 2021) and (3) changes related to purchase accounting primarily related to amortization of intangibles, fixed assets and joint ventures.

The unaudited pro forma financial information presented below does not purport to represent the actual results of operations that Cummins and Meritor would have achieved had the companies been combined during the periods presented and was not intended to project the future results of operations that the combined company could achieve after the acquisition.

The unaudited pro forma financial information does not reflect any potential cost savings, operating efficiencies, long-term debt pay down estimates, financial synergies or other strategic benefits as a result of the acquisition or any restructuring costs to achieve those benefits.

(Unaudited) Years ended

In millions December 31,

2022 December 31,

Net sales $ 30,841 $ 27,949

Net income 2,196 2,058

The Meritor acquisition increased net assets in the Components segment by $ 3.8 billion and New Power segment by $ 0.3 billion.

Jacobs Vehicle Systems

On April 8, 2022, we completed the acquisition of Jacobs Vehicle Systems business (Jacobs) from Altra Industrial Motion Corp.

The purchase price was $ 345 million in cash, subject to typical adjustments related to closing working capital and other amounts and does not contain any contingent consideration.

Jacobs is a supplier of engine braking, cylinder deactivation and start and stop thermal management technologies.

The acquisition furthers our investment in key technologies and capabilities to drive growth, while securing our supply base.

The final purchase price allocation was as follows:

Cash and cash equivalents $ 18

Accounts and notes receivable, net 24

Inventories 15

Property, plant and equipment 70

Intangible assets 164

Accounts payable (principally trade) ( 21 )

Net deferred taxes ( 27 )

Other, net ( 6 )

Total purchase price $ 345

Fair Value (in millions) Weighted-Average Useful Life (in years) Valuation Methodology Key Assumptions

Customer relationships $ 108 9 Multi-period excess earnings Discount rate, customer renewal rates

Technology 31 7 Relief-from-royalty Royalty rate, rate of return, obsolescence factor

Trade name 25 14 Relief-from-royalty Royalty rate, discount

Annual amortization of the intangible assets for the next five years is expected to approximate $ 18 million per year.

Goodwill was determined based on the residual difference between the fair value of consideration transferred and the value assigned to tangible and intangible assets and liabilities.

Approximately $ 9 million of the goodwill is deductible for tax purposes.

Among the factors contributing to a purchase price resulting in the recognition of goodwill are Jacob’s expected future customers, new versions of technologies, an acquired workforce and other economic benefits that are anticipated to arise from future product sales and operational synergies from combining the business with Cummins.

Included in our results for the year ended December 31, 2022, were revenues of $ 118 million and loss of $ 1 million related to this business.

The results of this business were reported in our Components segment.

Pro forma financial information for the acquisition was not presented as the effects are not material to our Consolidated Financial Statements.

On February 7, 2022, we purchased Westport Fuel System Inc.'s stake in Westport JV.

We will continue to operate the business as the sole owner.

The purchase price was $ 42 million and was allocated primarily to cash, warranty and deferred revenue related to extended coverage contracts.

The results of the business were reported in our Engine segment.

Pro forma financial information for the acquisition was not presented as the effects are not material to our Consolidated Financial Statements.

Pending Acquisition

In October 2022, we signed an agreement to purchase all of the equity ownership interest of Teksid Hierro de Mexico, S.A.

(Teksid MX) and Teksid, Inc.

from Stellantis N.V.

for approximately € 115 million, subject to certain adjustments set forth in the agreement.

Teksid MX operates a cast iron foundry located in Monclova, Mexico, which primarily forges blocks and heads used in our and other manufacturers’ engines.

facilitates the commercialization of Teksid MX products in North America.

The transaction, which is subject to customary closing conditions and receipt of applicable regulatory approvals, is expected to close in early 2023.

Since we are the primary customer of the foundry, the acquisition is not expected to result in material incremental sales to our business.

The acquisition will be included in our Engine segment.

For the years ended December 31, 2023, and 2022, government grants did not have a material impact on our financial statements as a whole, and we did not have any individually material grant awards.

RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Recently Adopted

In September 2022, the Financial Accounting Standards Board (FASB) issued a standard related to the disclosure of additional information about the use of supplier finance programs.

Under the new standard, entities are required to disclose (1) key terms of the programs, (2) the amount outstanding that remains unpaid as of the end of the period, including where amounts are recorded in the balance sheets and (3) an annual rollforward of those obligations, including the amount of obligations confirmed and the amount of obligations subsequently paid.

We adopted the new standard on January 1, 2023, on a retrospective basis other than the rollforward, which we adopted on a prospective basis beginning with our 2023 annual financial statements.

The adoption did not have a material impact on our financial statements.

See "Supply Chain Financing" section above for additional information.

Accounting Pronouncements Issued But Not Yet Effective

In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures," to enhance disclosures for significant segment expenses for all public entities required to report segment information in accordance with ASC 280.

The standard did not change the definition of a segment, the method for determining segments or the criteria for aggregating operating segments into reportable segments.

The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Retrospective adoption is required for all prior periods presented in the financial statements.

We plan to adopt the standard beginning with our 2024 Form 10-K.

The adoption is not expected to have a material impact to our financial statements or disclosures.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740):

Improvements in Income Tax Disclosures" to enhance the transparency and decision usefulness of income tax disclosures.

This amendment requires public companies to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

Additionally, under the amendment entities are required to disclose the amount of income taxes paid disaggregated by federal, state and foreign taxes, as well as disaggregated by material individual jurisdictions.

Finally, the amendment requires entities to disclose income from continuing operations before income tax expense disaggregated between domestic and foreign and income tax expense from continuing operations disaggregated by federal, state and foreign.

The new rules are effective for annual periods beginning after December 15, 2024.

We will adopt this standard on a prospective basis as allowed by the standard.

The adoption of this standard is not expected to have a material impact on our Consolidated Financial Statements.

AGREEMENT IN PRINCIPLE

In December 2023, we announced that we reached an agreement in principle with the Environmental Protection Agency (EPA), the California Air Resources Board (CARB), the Environmental and Natural Resources Division of the U.S.

Department of Justice (DOJ) and the California Attorney General’s Office (CA AG) 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 (collectively, the Agreement in Principle).

As part of the Agreement in Principle, among other things, we agreed to pay civil penalties, complete recall requirements, undertake mitigation projects, provide extended warranties, undertake certain testing, take certain corporate compliance measures and make certain payments.

Failure to comply with the terms and conditions of the Agreement in Principle will subject us to further stipulated penalties.

We recorded a charge of $ 2.036 billion in the fourth quarter of 2023 to resolve the matters addressed by the Agreement in Principle involving approximately one million of our pick-up truck applications in the U.S.

The charge is included in other operating expense, net, in our Consolidated Statements of Net Income .

See NOTE 15, "COMMITMENTS AND CONTINGENCIES," for further information.

The majority of the amount is expected to be paid in 2024 after final regulatory and judicial approvals are obtained.

As a result, $ 1.938 billion is included in other current liabilities in our Consolidated Balance Sheets with the remainder included in other long-

term liabilities.

Of the total charge, $ 1.732 billion (primarily related to penalties) will be non-deductible for U.S.

federal income tax purposes.

The remaining amount, related to emissions mitigation projects and payments, extended warranties and other related compliance expenses is deductible for U.S.

federal income tax purposes.

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 December 31, 2022, was $ 663 million.

We expect to recognize the related revenue of $ 123 million over the next 12 months and $ 540 million over periods up to 10 years.

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 December 31, 2023, was $ 2.1 billion.

We expect to recognize the related revenue of $ 1.0 billion over the next 12 months and $ 1.1 billion over periods up to 10 years.

See NOTE 14,"PRODUCT WARRANTY LIABILITY," for additional disclosures on extended warranty coverage arrangements.

2 unchanged sentences

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

Years ended December 31,

In millions 2023 2022

Unbilled revenue $ 303 $ 257

Deferred revenue, primarily extended warranty 1,848 1,705

Deferred revenue 2,186 1,848

We recognized revenue of $ 733 million and $ 639 million in 2023 and 2022, respectively, that was included in the deferred revenue balance at the beginning of each year.

1 unchanged sentence

Disaggregation of Revenue

Consolidated Revenue

The table below presents our consolidated sales by geographic area.

3 unchanged sentences

United States (1)

$ 19,302 $ 15,833 $ 12,489

China 3,115 2,390 3,169

1 unchanged sentence

Other international (1)

9,970 8,459 7,230

Total net sales $ 34,065 $ 28,074 $ 24,021

(1) We revised $ 281 million from other international to United States for the year ended December 31, 2022.

Segment Revenue

As previously announced, our Components segment reorganized its reporting structure to carve out the electronics business into the newly formed software and electronics business and combined the turbo technologies and fuel systems businesses into the newly formed engine components business.

We started reporting results for the reorganized business in the first quarter of 2023 and reflected these changes for prior periods.

On May 26, 2023, with the Atmus Filtration Technologies Inc.

(Atmus) initial public offering (IPO), we changed the name of our Components' filtration business to Atmus.

See NOTE 23, "FORMATION OF ATMUS AND IPO," for additional information.

Components segment external sales by business were as follows:

Years ended December 31,

In millions 2023 2022 2021

Axles and brakes $ 4,822 $ 1,879 $ —

Emission solutions 3,425 3,086 3,142

Atmus 1,345 1,259 1,171

Engine components 1,119 946 1,019

Automated transmissions 714 593 481

Software and electronics 106 84 119

Total sales $ 11,531 $ 7,847 $ 5,932

Engine segment external sales by market were as follows:

7 unchanged sentences

Total sales $ 8,874 $ 8,199 $ 7,589

Components segment external sales by business were as follows:

Years ended December 31,

In millions 2022 2021 2020

Emission solutions $ 3,086 $ 3,142 $ 2,352

Axles and brakes 1,879 — —

Filtration 1,259 1,171 1,005

Turbo technologies 806 787 673

Automated transmissions 593 481 303

Electronics and fuel systems 224 351 317

Total sales $ 7,847 $ 5,932 $ 4,650

As previously announced, due to the indefinite suspension of operations in Russia, we reorganized the regional management structure of our Distribution segment and moved all Commonwealth of Independent States (CIS) sales into the Europe and Africa and Middle East regions.

The Russian portion of prior period CIS sales moved to the Europe region.

We started to report results for our new regional management structure in the first quarter of 2023 and reflected these changes for historical periods.

Distribution segment external sales by region were as follows:

6 unchanged sentences

Africa and Middle East 294 250 278

Commonwealth of Independent States 232 334 191

India 264 217 194

5 unchanged sentences

Parts $ 4,052 $ 3,809 $ 3,136

Engines 1,770 1,493 1,245

Power generation 2,496 1,767 1,754

Engines 1,987 1,770 1,493

Service 1,664 1,555 1,359

14 unchanged sentences

Sisamex 50 % 149 144

Cummins-Scania XPI Manufacturing, LLC 50 % 130 125

Dongfeng Cummins Engine Company, Ltd.

Automotive Axles Limited 36 % 125 125

Chongqing Cummins Engine Company, Ltd.

Dongfeng Cummins Engine Company, Ltd.

Tata Cummins, Ltd.

Cummins-Scania XPI Manufacturing, LLC 50 % 85 130

Freios Master 49 % 84 86

19 unchanged sentences

Equity, royalty and interest income from investees $ 483 $ 349 $ 506

(1) Includes $ 18 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 5, "INCOME TAXES" for additional information on India Tax Law Change.

(2) 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.

(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 indefinite suspension of our Russian operations.

In addition, on February 7, 2022, we purchased Westport Fuel System Inc.'s stake in Westport JV.

See NOTE 2, "ACQUISITIONS," and NOTE 23, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information.

(3) Includes $ 19 million in favorable adjustments related to India Tax Law Change, impairment charges of $ 13 million and loss on sale of business of $ 8 million for a joint venture in the Power Systems segment.

See NOTE 5, "INCOME TAXES" for additional information on India Tax Law Change.

See NOTE 24, "ACQUISITIONS," and NOTE 22, "RUSSIAN OPERATIONS," for additional information.

Manufacturing Entities

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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, axles, drivelines, braking systems and automated transmissions that are used with our engines as well as some competitors' products.

Our Components segment joint ventures and wholly-owned entities provide axles, drivelines, brakes and suspension systems for commercial diesel and natural gas applications, aftertreatment systems, turbochargers, fuel systems, filtration products, automated transmissions and electronics 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 and Brazil.

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.

5 unchanged sentences

Off-highway engines are used in a variety of construction, power generation, marine and agriculture markets in China.

• 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 and Brazil.

Certain types of small construction equipment and industrial applications are also served by these engine families.

The heavy-duty business produces 8.5 liter to 14.5 liter high performance heavy-duty diesel and natural gas engines in Beijing.

Certain types of construction equipment and industrial applications are also served by these engine families.

• Chongqing Cummins Engine Company, Ltd.

5 unchanged sentences

is a joint venture in India with Tata Motors Ltd., the largest automotive company in India and a member of the Tata group of companies.

This joint venture manufactures Cummins' 3.80 to 8.9 -liter diesel and natural gas engines in India with a power range from 75 to 400 horsepower for use in trucks manufactured by Tata Motors, as well as for various industrial and power generation applications for Cummins.

This joint venture manufactures Cummins' 3.8 to 8.9 liter diesel and natural gas engines in India with a power range from 75 to 400 horsepower for use in trucks and buses manufactured by Tata Motors, as well as for various on-highway, industrial and power generation applications for Cummins.

In September 2023, our Accelera business signed an agreement to form a joint venture with Daimler Trucks and Buses US Holding LLC (Daimler Truck), PACCAR Inc.

(PACCAR) and EVE Energy to accelerate and localize battery cell production and the battery supply chain in the U.S., including building a 21-gigawatt hour battery production facility in Marshall County, Mississippi.

The joint venture will manufacture battery cells for electric commercial vehicles and industrial applications.

Accelera, Daimler Truck and PACCAR will each own 30 percent of the joint venture, while EVE Energy will own 10 percent.

Total investment by the partners is expected to be in the range of $ 2 billion to $ 3 billion for the 21-gigawatt hour facility.

The transaction is subject to closing conditions and receipt of applicable merger control and regulatory approvals including submission of a voluntary notice to the Committee on Foreign Investment in the U.S.

Distribution Entities

29 unchanged sentences

In millions 2023 2022 2021

income $ 1,336 $ 1,251 $ 1,134

(loss) income $ ( 541 ) $ 1,336 $ 1,251

Foreign income 2,167 1,483 1,500

8 unchanged sentences

Foreign 11 ( 45 ) 19

Impact of India tax law changes — — ( 17 )

Total deferred income tax (benefit) expense ( 457 ) ( 274 ) 7

10 unchanged sentences

Foreign derived intangible income ( 4.2 ) ( 2.0 ) ( 1.0 )

Impact of India tax law changes — — ( 0.7 )

Agreement in Principle, federal impact (2)

Agreement in Principle, state impact (2)

Other, net 0.2 1.0 0.7

Effective tax rate 48.3 % 22.6 % 21.3 %

The year ended December 31, 2022, contained discrete tax items that netted to zero, primarily due to $ 31 million of favorable changes in accrued withholding taxes, $ 29 million of favorable changes in tax reserves, $ 15 million of favorable valuation allowance adjustments and $ 9 million of favorable other net discrete items, offset by $ 69 million of unfavorable tax costs associated with internal restructuring ahead of the planned separation of our filtration business and $ 15 million of unfavorable return to provision adjustments related to the 2021 filed tax returns.

(1) Includes the jurisdictional mix of pre-tax income and impact of actual and planned repatriation of earnings back to the U.S.

(2) See NOTE 2, "AGREEMENT IN PRINCIPLE," for additional information.

The year ended December 31, 2023, contained unfavorable net discrete items of $ 397 million, primarily due to $ 398 million in the fourth quarter related to the $ 2.0 billion charge from the Agreement in Principle, $ 22 million of unfavorable adjustments for uncertain tax positions and $ 3 million of net unfavorable other discrete tax items, partially offset by $ 21 million of favorable return to provision adjustments and $ 5 million of favorable share-based compensation tax benefit.

See NOTE 2, "AGREEMENT IN PRINCIPLE," for additional information.

The year ended December 31, 2022, contained discrete tax items that netted to zero, primarily due to $ 31 million of favorable changes in accrued withholding taxes, $ 29 million of favorable changes in tax reserves, $ 15 million of favorable valuation allowance adjustments and $ 9 million of favorable other net discrete items, offset by $ 69 million of unfavorable tax costs associated with internal restructuring ahead of the planned separation of Atmus and $ 15 million of unfavorable return to provision adjustments related to the 2021 filed tax returns.

The year ended December 31, 2021, contained $ 9 million of unfavorable net discrete tax items, primarily due to $ 12 million of unfavorable provision to return adjustments related to the 2020 filed tax returns, partially offset by $ 3 million of favorable other discrete tax items.

The year ended December 31, 2020, contained $ 26 million of unfavorable net discrete tax items, primarily due to $ 33 million of unfavorable changes in tax reserves and $ 10 million of withholding tax adjustments, partially offset by $ 15 million of favorable changes due to the India Tax Law Change.

The India Tax Law Change eliminated the dividend distribution tax and replaced it with a lower rate withholding tax as the burden shifted from the dividend payor to the dividend recipient for a net favorable income statement impact of $ 35 million.

The India Tax Law Change resulted in the following adjustments to the Consolidated Statements of Net Income for the year ended December 31, 2020:

In millions Favorable (Unfavorable)

Equity, royalty and interest income from investees $ 37

Income tax expense (1)

Net income attributable to noncontrolling interests ( 19 )

Net income statement impact $ 35

(1) The adjustment to income tax expense includes $ 15 million of favorable discrete items.

At December 31, 2023, $ 6.0 billion of non-U.S.

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A valuation allowance is recorded to reduce the gross deferred tax assets to an amount we believe is more likely than not to be realized.

The valuation allowance is $ 704 million and increased in 2022 by a net $ 344 million primarily due to the Meritor acquisition.

The valuation allowance is $ 789 million and increased in 2023 by a net $ 85 million.

The valuation allowance is primarily attributable to the uncertainty regarding the realization of a portion of the U.S.

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Equity securities

Certificates of deposit $ 209 $ — $ 209 $ 299 $ — $ 299

Debt mutual funds $ 272 $ — $ 272 $ 238 $ ( 5 ) $ 233

Certificates of deposit 246 — 246 209 — 209

Equity mutual funds 22 6 28 25 3 28

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

• Debt mutual funds — The fair value measures for the vast majority of these investments are the daily net asset values published on a regulated governmental website.

Daily quoted prices are available from the issuing brokerage and are used on a test basis to corroborate this Level 2 input measure.

• Certificates of deposit — These investments provide us with a contractual rate of return and generally range in maturity from three months to five years .

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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.

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Finance leases 5.0 % 4.7 %

Following is a summary of the future minimum lease payments due to finance and operating leases with terms of more than one year at December 31, 2022, together with the net present value of the minimum payments:

Following is a summary of the future minimum lease payments related to finance and operating leases with terms of more than one year at December 31, 2023, together with the net present value of the minimum payments:

In millions Finance Leases Operating Leases

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The following table summarizes the changes in the carrying amount of goodwill for the years ended December 31, 2023 and 2022:

In millions Components New Power Distribution Power Systems Engine Total

In millions Components Accelera Distribution Power Systems Engine Total

Balance at December 31, 2021 $ 934 $ 257 $ 79 $ 11 $ 6 $ 1,287

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It is our policy to make contributions to our various qualified plans in accordance with statutory and contractual funding requirements, and any additional contributions we determine are appropriate.

Prior to the acquisition, Meritor provided a range of benefits to certain employees and retirees, including pension benefits and postretirement healthcare benefits (OPEB).

The Meritor U.S.

defined benefit plans are frozen.

As part of the acquisition, we assumed the assets and liabilities associated with these plans, which are included in the tables below.

Obligations, Assets and Funded Status

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Interest cost 168 101 70 39

Actuarial gain ( 643 ) ( 132 ) ( 702 ) ( 136 )

Actuarial loss (gain) 172 ( 643 ) 47 ( 702 )

Benefits paid from fund ( 223 ) ( 200 ) ( 87 ) ( 70 )

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In addition to the pension plans in the above table, we also maintain less significant defined benefit pension plans in 15 other countries outside of the U.S.

that comprise approximately 4 percent and 5 percent of our pension plan assets and obligations, respectively, at December 31, 2022.

that comprise approximately 5 percent and 6 percent of our pension plan assets and benefit obligations, respectively, at December 31, 2023.

These plans are reflected in other liabilities on our Consolidated Balance Sheets .

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Compensation increase rate 5.35 % 2.71 % 2.72 % 3.75 % 3.75 % 3.75 %

Our investment policies, excluding Meritor, in the U.S.

Our investment policies in the U.S.

provide for the rebalancing of assets to maintain our long-term strategic asset allocation.

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The plan assets for our defined benefit pension plans do not include any of our common stock or corporate bonds.

Meritor’s investment policies in the U.S.

have historically targeted a well-diversified asset allocation strategy to promote asset growth while maintaining an acceptable level of risk over the long-term with a goal of minimizing company contributions.

We are actively reviewing the plan investments and will pursue adjustments to the allocation when appropriate and necessary to align the assets more closely with our management’s strategy and view of prudent and acceptable risk to the company, the plan and its funding goals.

For the Cummins U.S.

qualified pension plan, our assumption for the expected return is greatly influenced by our objective to match assets and liabilities and the increase in bond yields.

qualified pension plans, our assumption for the expected return is greatly influenced by our objective to match assets and liabilities and the increase in bond yields.

Projected returns are based primarily on broad, publicly traded equity and fixed income indices and forward-looking estimates of active portfolio and investment management.

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Based on the historical returns and forward-looking return expectations, we elected an assumption of 7.25 percent in 2024.

For the Meritor U.S.

qualified pension plan, our assumption for the expected return is based upon the primary investment objective to exceed, on a net-of-fees basis, the rate of return on a policy portfolio represented in the following table.

We expect active management and the alternative investments to provide excess return over the long run.

Based upon these objectives, historical returns, yield curve movements and forward-looking expectations, we elected an assumption of 7.00 percent in 2023.

To achieve these objectives, we established the following targets:

Cummins Meritor

Asset Class Plan Target Plan Target

equities 5 % 11 %

equities 1 % 9 %

Asset Class Plan Target

Global equities 5 %

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Opportunistic credit 3 %

Alternative investments — % 39 %

Fixed income 71 %

Total 100 % 100 %

The fixed income component of the Cummins plan is structured to represent a custom bond benchmark that will closely hedge the change in the value of our liabilities.

This component is structured in such a way that its benchmark covers approximately 100 percent of the plan's exposure to changes in its discount rate (AA corporate bond yields).

In order to achieve a hedge on more than the targeted 72 percent of plan assets invested in fixed income securities, our Benefits Policy Committee (BPC) permits the fixed income managers, other managers or the custodian/trustee to utilize derivative securities, as part of a liability driven investment strategy to further reduce the plan's risk of declining interest rates.

The fixed income component of the plans is structured to represent a custom bond benchmark that will closely hedge the change in the value of our liabilities.

This component is structured in such a way that its benchmark covers approximately 100 percent of the plans' exposure to changes in its discount rate (AA corporate bond yields).

In order to achieve a hedge on more than the targeted 71 percent of plan assets invested in fixed income securities, our Benefits Policy Committee (BPC) permits the fixed income managers, other managers or the custodian/trustee to utilize derivative securities, as part of a liability driven investment strategy to further reduce the plans' risk of changes in interest rates.

However, all managers hired to manage assets for the trust are prohibited from using leverage unless approved by the BPC.

Investment strategies for the Meritor plan assets reflect a balance of risk-reducing and return-seeking considerations.

The objective of minimizing the volatility of assets relative to liabilities is addressed primarily through asset diversification.

Assets are broadly diversified across several asset classes to achieve risk-adjusted returns that accomplish this objective.

Meritor plan assets are also allocated to fixed income investments, which seek to minimize interest rate risk volatility relative to pension liabilities.

The fixed income portfolio partially matches the long-dated nature of the pension liabilities reducing interest rate risk.

The methodology used to determine the rate of return on the Cummins and Meritor pension plan assets in the U.K.

The methodology used to determine the rate of return on the pension plan assets in the U.K.

was based on establishing an equity-risk premium over current long-term bond yields adjusted based on target asset allocations.

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To achieve these objectives, we established the following targets:

Cummins Plan Target Meritor Plan Target Range

Asset Class Minimum Maximum

Equities 8 % 15 % 30 %

Private markets/secure income assets 19 % — % — %

Asset Class Plan Target

Property/secure income assets 8 %

Credit/bank loans 5 %

Diversified strategies 1 %

Real estate — % — % 15 %

Private equity 5 %

Fixed income/insurance annuity 78 %

Cash 1 % — % — %

As part of our strategy in the U.K.

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As in the U.S.

plan, derivatives may be used to better match liability duration and are not used in a speculative way.

The fixed income component of the Cummins portfolio, excluding the annuity contract, hedges approximately 15 percent of the plan’s exposure to interest rates and 30 percent of the plan’s exposure to inflation.

The insurance annuity contract covers approximately another 21 percent of exposure to interest rates and 18 percent of inflation.

The fixed income component of the Meritor portfolio, excluding the annuity contract, hedges approximately 100 percent of the plan's exposure to interest rates and 100 percent of the plan's exposure to inflation.

The insurance annuity contract effectively hedges 100 percent of the insured liabilities exposure to interest rates and 100 percent of the insured liabilities to inflation.

plans, derivatives may be used to better match liability duration and are not used in a speculative way.

The fixed income component of our portfolio hedges approximately 79 percent of the plans' exposure to interest rates and 79 percent of the plans' exposure to inflation.

Based on the above discussion, we elected an assumption of 5.00 percent in 2024.

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Net cash equivalents (1)

Diversified strategies 14 — — 14

Private markets and real assets (2)

Net plan assets subject to leveling $ 576 $ 817 $ 604 $ 1,997

Pending trade/purchases/sales ( 16 )

Investments measured at net asset value 1,835

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Corporate debt

Asset/mortgaged backed securities 7 — — 7

Net cash equivalents (1)

Diversified strategies 14 — — 14

Private markets and real assets (2)

Net plan assets subject to leveling $ 681 $ 661 $ 641 $ 1,983

Pending trade/purchases/sales 2

Investments measured at net asset value 1,838

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These funds are valued using NAVs and allow quarterly or more frequent redemptions.

• Diversified Strategies ($ 18 million at December 31, 2022) - These commingled funds invest in commodities, fixed income and equity securities.

• Diversified Strategies ($ 0 million and $ 18 million at December 31, 2023 and 2022, respectively) - These commingled funds invest in commodities, fixed income and equity securities.

They have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

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Purchases, sales and settlements, net ( 12 ) ( 17 ) ( 29 )

Assumption of Meritor's plan assets 94 — 94

Balance at December 31, 2022 559 82 641

2 unchanged sentences

Purchases, sales and settlements, net ( 28 ) ( 2 ) ( 30 )

Assumption of Meritor's plan assets 94 — 94

Balance at December 31, 2023 $ 537 $ 67 $ 604

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$ 13 $ — $ — $ 13

Government debt — 222 — 222

Corporate debt

Net cash equivalents (1)

2 unchanged sentences

Net plan assets subject to leveling $ 49 $ 337 $ 818 $ 1,204

Pending trade/purchases/sales 141

Investments measured at net asset value 323

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Corporate Debt ($ 71 million and $ 77 million at December 31, 2023 and 2022, respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

Equities ($ 0 million and $ 194 million at December 31, 2022 and 2021, respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

• Government Debt ($ 64 million at December 31, 2022) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

• Government Debt ($ 572 million and $ 64 million at December 31, 2023 and 2022, respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

• Asset/Mortgage Backed Securities ($ 117 million and $ 128 million at December 31, 2023 and 2022, respectively) - This asset type represents investments in fixed- and floating-rate loans.

1 unchanged sentence

• Re-insurance ($ 6 million and $ 54 million at December 31, 2023 and 2022, respectively) - This commingled fund has a NAV that is determined on a monthly basis and the investment may be sold at that value.

• Diversified Strategies ($ 0 million and $ 51 million at December 31, 2022 and 2021, respectively) - These commingled funds invest in commodities, fixed income and equity securities.

They have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

The reconciliation of Level 3 assets was as follows:

6 unchanged sentences

Purchases, sales and settlements, net — ( 23 ) ( 13 ) ( 36 )

Assumption of Meritor's plan assets 92 — — 92

Balance at December 31, 2022 428 8 382 818

2 unchanged sentences

Purchases, sales and settlements, net — ( 1 ) ( 251 ) ( 252 )

Assumption of Meritor's plan assets 92 — — 92

Balance at December 31, 2023 $ 436 $ 7 $ 96 $ 539

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Net periodic OPEB cost $ 7 $ 5 $ 5

Other changes in benefit obligations recognized in other comprehensive (income) loss for the years ended December 31 were as follows:

Other changes in benefit obligations recognized in other comprehensive loss (income) for the years ended December 31 were as follows:

Years ended December 31,

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Recognized net actuarial gain $ 2 $ — $ —

Incurred actuarial (gain) loss ( 25 ) ( 8 ) 14

Total recognized in other comprehensive (income) loss $ ( 25 ) $ ( 8 ) $ 15

Total recognized in net periodic OPEB cost and other comprehensive (income) loss $ ( 20 ) $ ( 3 ) $ 21

Incurred actuarial gain ( 2 ) ( 25 ) ( 8 )

Total recognized in other comprehensive loss (income) $ — $ ( 25 ) $ ( 8 )

Total recognized in net periodic OPEB cost and other comprehensive loss (income) $ 7 $ ( 20 ) $ ( 3 )

The table below presents assumptions used in determining the OPEB obligation for each year and reflects weighted-average percentages for our other OPEB plans as follows:

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In millions 2023 2022

Agreement in Principle (1)

Marketing accruals 399 316

4 unchanged sentences

Other accrued expenses $ 3,754 $ 1,465

(1) See NOTE 2, "AGREEMENT IN PRINCIPLE," for additional information.

Other liabilities included the following:

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Accrued product warranty $ 777 $ 744

Deferred income taxes 649 403

Pensions 530 445

Deferred income taxes 530 649

Operating lease liabilities 374 368

Long-term income taxes 192 263

Accrued compensation 213 184

Mark-to-market valuation on interest rate derivatives 151 19

Other postretirement benefits 131 141

Mark-to-market valuation on interest rate derivatives 117 151

Long-term income taxes 111 192

Other long-term liabilities 647 437

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Commercial Paper

We can issue up to $ 4.0 billion of unsecured, short-term promissory notes (commercial paper) pursuant to the Board of Directors (the Board) authorized commercial paper programs.

The programs facilitate the private placement of unsecured short-term debt through third-party brokers.

Our committed credit facilities provide access up to $ 4.0 billion of unsecured, short-term promissory notes (commercial paper) pursuant to the Board of Directors (the Board) authorized commercial paper programs.

These programs facilitate the private placement of unsecured short-term debt through third-party brokers.

We intend to use the net proceeds from the commercial paper borrowings for acquisitions and general corporate purposes.

We had $ 2.6 billion and $ 313 million in outstanding borrowings under our commercial paper programs at December 31, 2022 and 2021, respectively.

We had $ 1.496 billion and $ 2.574 billion in outstanding borrowings under our commercial paper programs at December 31, 2023 and 2022, respectively.

The weighted-average interest rate for commercial paper at December 31 was as follows:

Weighted-average interest rate 5.43 % 4.27 %

( 0.01 ) % (2)

(1) The weighted-average interest rate, inclusive of all brokerage fees, was 4.27 percent at December 31, 2022.

This included $ 107 million of borrowings under the Europe program at a weighted-average interest rate of 1.86 percent and $ 2.5 billion of borrowings under the U.S.

program at a weighted-average interest rate of 4.38 percent.

(2) The weighted-average interest rate, inclusive of all brokerage fees, was negative 0.01 percent at December 31, 2021.

This included $ 113 million of borrowings under the Europe program that were at a negative weighted-average interest rate of 0.39 percent and $ 200 million of borrowings under the U.S.

program at a weighted-average interest rate of 0.21 percent.

Revolving Credit Facilities

On August 17, 2022, we entered into an amended and restated 364 -day credit agreement, which allows us to borrow up to $ 1.5 billion of unsecured funds at any time prior to August 16, 2023.

This credit agreement amended and restated the prior $ 1.5 billion 364 -day credit facility that matured on August 17, 2022.

On August 17, 2022, we also entered into an incremental 364-day credit agreement, which allows us to borrow up to $ 500 million of unsecured funds at any time prior to August 16, 2023.

On June 5, 2023, we entered into an amended and restated 364 -day credit agreement that allows us to borrow up to $ 2.0 billion of unsecured funds at any time prior to June 3, 2024.

This credit agreement amended and restated the prior $ 1.5 billion 364 -day credit facility that was scheduled to mature on August 16, 2023.

In connection with the 364 -day credit agreement, effective June 5, 2023, we terminated our $ 500 million incremental 364-day credit agreement dated August 17, 2022.

On August 18, 2021, we entered into an amended and restated 5 -year revolving credit agreement, which allows us to borrow up to $ 2 billion of unsecured funds at any time prior to August 18, 2026.

2 unchanged sentences

Up to $ 300 million under this credit facility is available for swingline loans.

Based on our current long-term debt ratings, the applicable margin on SOFR rate loans was 0.85 percent per annum including a 0.10 percent LIBOR to SOFR adjustment as of December 31, 2022.

Based on our current long-term debt ratings, the applicable margin on SOFR rate loans was 0.85 percent per annum.

Advances under the facility may be prepaid without premium or penalty, subject to customary breakage costs.

Our credit agreements include various covenants, including, among others, maintaining a net debt to total capital ratio of no more than 0.65 to 1.0.

At December 31, 2022, we were in compliance with the financial debt covenants.

Our committed credit facilities provide access up to $ 4.0 billion, including our $ 2.0 billion 364-day facility that expires June 3, 2024, and our $ 2.0 billion five-year facility that expires on August 18, 2026.

We intend to maintain credit facilities at the current or higher aggregate amounts by renewing or replacing these facilities at or before expiration.

These revolving credit facilities are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes.

There were no outstanding borrowings under these facilities at December 31, 2022.

Our credit agreements include various covenants, including, among others, maintaining a net debt to total capital ratio of no more than 0.65 to 1.0.

At December 31, 2023, we were in compliance with the financial debt covenants.

There were no outstanding borrowings under these facilities at December 31, 2023 and December 31, 2022.

The total combined borrowing capacity under the revolving credit facilities and commercial programs should not exceed $ 4.0 billion.

At December 31, 2023, our $ 1.5 billion of commercial paper outstanding effectively reduced the $ 4.0 billion available capacity under our revolving credit facilities to $ 2.5 billion.

At December 31, 2022, we also had $ 226 million available for borrowings under our international and other domestic credit facilities.

At December 31, 2023, we also had an additional $ 393 million available for borrowings under our international and other domestic credit facilities.

At December 31, 2023, Atmus had no outstanding borrowings under its $ 400 million revolving credit facility.

See "Atmus Credit Agreement" section below for additional details.

Long-term Debt

3 unchanged sentences

Senior notes, due 2023 3.65 % $ — $ 500

3.65 % $ 500 $ 500

Term loan, due 2025 Variable 1,550 —

Hydrogenics promissory notes, due 2024 and 2025 (1)

Term loan, due 2025 (2)(3)

Variable 1,150 1,550

Senior notes, due 2025 (4)

0.75 % 500 500

Atmus term loan, due 2027 (5)

Variable 600 —

Debentures, due 2027 6.75 % 58 58

13 unchanged sentences

Long-term debt $ 4,802 $ 4,498

(1) Senior notes, due 2023, are classified as current maturities of long-term debt at December 31, 2022.

(1) See NOTE 24, "ACQUISITIONS," for additional information.

(2) During 2023, we paid down $ 400 million of the term loan.

(3) In September 2023, we entered into a series of interest rate swaps in order to trade a portion of the floating rate into fixed rate.

See "Interest Rate Risk" in NOTE 21, "DERIVATIVES," for additional information.

(4) In 2021, we entered into a series of interest rate swaps to effectively convert from a fixed rate to floating rate.

See "Interest Rate Risk" section of NOTE 22, "DERIVATIVES," for additional information.

See "Interest Rate Risk" in NOTE 21, "DERIVATIVES," for additional information.

(5) See "Atmus Credit Agreement" section below for additional information.

(6) The effective interest rate is 7.48 percent.

4 unchanged sentences

We drew down the entire $ 2.0 billion balance on August 2, 2022, to help fund the acquisition of Meritor.

During the fourth quarter of 2022, we paid down $ 450 million of the term loan.

The interest rate is based on SOFR for the one-month interest period plus the relevant spread.

The loan will mature on August 1, 2025.

As of December 31, 2023 we repaid $ 850 million of this term loan.

The agreement contains customary events of default and financial and other covenants, including maintaining a net debt to capital ratio of no more than 0.65 to 1.0.

17 unchanged sentences

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

Filtration Contingent Debt Agreement

On September 30, 2022, certain of our subsidiaries entered into a $ 1.0 billion credit agreement (Credit Agreement), consisting of a $ 400 million revolving credit facility and a $ 600 million term loan facility (Facilities), in anticipation of the separation of our filtration business.

Borrowings under the Credit Agreement will not become available under the Credit Agreement unless and until, among other things, there is a sale to the public of shares in our subsidiary that holds the filtration business (Parent Borrower).

The Credit Agreement will automatically terminate if no such public sale of shares of Parent Borrower occurs on or prior to March 30, 2023.

Borrowings under the Credit Agreement would be available to Parent Borrower and one or more of its subsidiaries (Borrower).

If borrowings become available under the Credit Agreement, the Facilities would mature on September 30, 2027.

Borrowings under the Credit Agreement would bear interest at varying rates, depending on the type of loan and, in some cases, the rates of designated benchmarks and the applicable Borrower’s election.

Atmus Credit Agreement

On February 15, 2023, certain of our subsidiaries entered into an amendment to the $ 1.0 billion credit agreement (Credit Agreement), consisting of a $ 400 million revolving credit facility and a $ 600 million term loan facility, in anticipation of the separation of Atmus, extending the Credit Agreement termination date from March 30, 2023, to June 30, 2023.

On May 26, 2023, Atmus drew down the entire $ 600 million term loan facility and borrowed $ 50 million under the revolving credit facility.

Borrowings under the Credit Agreement mature in September 2027 (with quarterly payments on the term loan beginning in September 2024) and bear interest at varying rates, depending on the type of loan and, in some cases, the rates of designated benchmarks and the applicable borrower’s election.

Generally, U.S.

dollar-denominated loans would bear interest at adjusted term SOFR (which includes a 0.10 percent credit spread adjustment to term SOFR) for the applicable interest period plus a rate ranging from 1.125 percent to 1.75 percent depending on Parent Borrower's net leverage ratio.

dollar-denominated loans bear interest at adjusted-term (SOFR) (which includes a 0.10 percent credit spread adjustment to term SOFR) for the applicable interest period plus a rate ranging from 1.125 percent to 1.75 percent.

The Credit Agreement contains customary events of default and financial and other covenants, including maintaining a net leverage ratio of 4.0 to 1.0 and a minimum interest coverage ratio of 3.0 to 1.0.

At December 31, 2023, there were no outstanding borrowings under the revolving credit facility and $ 600 million outstanding under the term loan facility.

See NOTE 23, "FORMATION OF ATMUS AND IPO," for additional information .

PRODUCT WARRANTY LIABILITY

1 unchanged sentence

In millions 2023 2022 2021

Balance, beginning of year $ 2,425 $ 2,307 $ 2,389

Balance at beginning of year $ 2,477 $ 2,425 $ 2,307

Provision for base warranties issued 602 515 503

6 unchanged sentences

Foreign currency translation adjustments and other 8 ( 16 ) ( 1 )

Balance, end of year $ 2,477 $ 2,425 $ 2,307

(1) See NOTE 2, "ACQUISITIONS," to our Consolidated Financial Statements for additional information.

Balance at end of year $ 2,497 $ 2,477 $ 2,425

(1) See NOTE 24, "ACQUISITIONS," for additional information.

We recognized supplier recoveries of $ 36 million, $ 39 million and $ 170 million for the years ended December 31, 2023, 2022 and 2021, respectively.

35 unchanged sentences

On June 28, 2022, KAMAZ Publicly Traded Company (KAMAZ) was designated to the List of Specially Designated Nationals and Blocked Persons by the U.S.

Department of the Treasury’s Office of Foreign Assets Control.

We filed blocked property reports for relevant assets and are seeking relevant authorizations to extricate ourselves from our relationship with KAMAZ and its subsidiaries, including our unconsolidated joint venture with KAMAZ (Unconsolidated JV), in compliance with U.S.

On April 29, 2019, we announced that we were conducting a formal internal review of our emissions certification process and compliance with emission standards for our pick-up truck applications, following conversations with the Environmental Protection Agency (EPA) and California Air Resources Board (CARB) regarding certification of our engines in model year 2019 RAM 2500 and 3500 trucks.

This review is being conducted with external advisors as we strive to ensure the certification and compliance processes for all of our pick-up truck applications are consistent with our internal policies, engineering standards and applicable laws.

During conversations with the EPA and CARB about the effectiveness of our pick-up truck applications, the regulators raised concerns that certain aspects of our emissions systems may reduce the effectiveness of our emissions control systems and thereby act as defeat devices.

As a result, our internal review focuses, in part, on the regulators’ concerns.

We are working closely with the regulators to enhance our emissions systems to improve the effectiveness of all of our pick-up truck applications and to fully address the regulators’ requirements.

Based on discussions with the regulators, we have developed a new calibration for the engines in model year 2019 RAM 2500 and 3500 trucks that has been included in all engines shipped since September 2019.

During our ongoing discussions, the regulators turned their attention to other model years and other engines, most notably our pick-up truck applications for RAM 2500 and 3500 trucks for model years 2013 through 2018 and Titan trucks for model years 2016 through 2019.

We have also been in communication with Environmental and Climate Change Canada regarding similar issues relating to some of these very same platforms.

In connection with these and other ongoing discussions with the EPA and CARB, we are developing a new software calibration and will recall model years 2013 through 2018 RAM 2500 and 3500 trucks.

We accrued $30 million for the RAM recall during the first quarter of 2022, an amount that reflected our current estimate of the cost of that recall.

We are also developing a new software calibration and hardware fix and will recall model years 2016 through 2019 Titan trucks.

We accrued $29 million for the Titan recall during the third quarter of 2022, an amount that reflected our current estimate of the cost of that recall.

We will continue to work together closely with the relevant regulators to develop and implement recommendations for improvement and seek to reach further resolutions as part of our ongoing commitment to compliance.

Due to the presence of many unknown facts and circumstances, we are not yet able to estimate any further financial impact of these matters.

It is possible that the consequences resulting from our formal review and these regulatory processes could have a material adverse impact on our results of operations and cash flows.

Department of the Treasury’s Office of Foreign Assets Control (OFAC).

We filed blocked property reports for relevant assets and sought relevant authorizations to extricate ourselves from our relationship with KAMAZ and its subsidiaries, including our unconsolidated joint venture with KAMAZ, in compliance with U.S.

and other applicable laws.

We received OFAC authorization on May 26, 2023, and from the U.K.

Office of Financial Sanctions Implementation on September 15, 2023, which allowed us to finalize the exit of our unconsolidated joint venture with KAMAZ.

On April 29, 2019, we announced that we were conducting a formal internal review of our emissions certification process and compliance with emission standards for our pick-up truck applications, following conversations with the EPA and CARB regarding certification of our engines in model year 2019 RAM 2500 and 3500 trucks.

This review was conducted with external advisors as we continue to strive to ensure the certification and compliance processes for all of our pick-up truck applications are consistent with our internal policies, engineering standards and applicable laws.

In December 2023, we announced that we reached the Agreement in Principle with EPA, CARB, the Environmental and Natural Resources Division of the DOJ and the CA AG 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.

Failure to comply with the Agreement in Principle will subject us to further stipulated penalties.

This charge was in addition to the previously announced charges of $ 59 million for the recalls of model years 2013 through 2018 RAM 2500 and 3500 trucks and model years 2016 through 2019 Titan trucks.

The Agreement in Principle remains subject to final regulatory and judicial approvals, and we cannot be certain that the Agreement in Principle will be approved, in its current form, or at all.

See NOTE 2, "AGREEMENT IN PRINCIPLE," for additional information.

We have also been in communication with other non-U.S.

regulators regarding matters related to the emission systems in our engines and may also become subject to additional regulatory review in connection with these matters.

In connection with our announcement of our entry into the Agreement in Principle, we have become subject to shareholder, consumer and third-party litigation regarding the matters covered by the Agreement in Principle and we may become subject to additional litigation in connection with these matters.

The consequences resulting from the resolution of the foregoing matters are uncertain and the related expenses and reputational damage could have a material adverse impact on our results of operations, financial condition and cash flows.

Guarantees and Commitments

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We do not currently anticipate paying any penalties under these contracts.

We enter into physical forward contracts with suppliers of platinum and palladium to purchase certain volumes of the commodities at contractually stated prices for various periods, which generally fall within two years .

We enter into physical forward contracts with suppliers of platinum, palladium and iridium to purchase certain volumes of the commodities at contractually stated prices for various periods, which generally fall within two years .

At December 31, 2023, the total commitments under these contracts were $ 104 million.

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Because the indemnifications are not related to specified known liabilities and due to their uncertain nature, we are unable to estimate the maximum amount of the potential loss associated with these indemnifications.

REDEEMABLE NONCONTROLLING INTERESTS

A 19 percent minority shareholder in one of our businesses, Hydrogenics Corporation (Hydrogenics), has, among other rights and subject to related obligations and restrictive covenants, rights that are exercisable between September 2022 and September 2026 to require us to (1) purchase such shareholder's shares (put option) at an amount up to the fair market value (calculated pursuant to a process outlined in the shareholders' agreement) and (2) sell to such shareholder Hydrogenics' electrolyzer business at an amount up to the fair market value of the electrolyzer business (calculated pursuant to a process outlined in the shareholders’ agreement).

We recorded the estimated fair value of the put option as redeemable noncontrolling interests in our Consolidated Financial Statements with an offset to additional paid-in capital.

The redeemable noncontrolling interest balance was $ 258 million and $ 366 million at December 31, 2022 and 2021, respectively.

SHAREHOLDERS' EQUITY

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Stock Treasury

Stock Common Stock

Held in Trust

Balance at December 31, 2020 222.4 74.8

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Balance at December 31, 2022 222.5 81.2

Shares acquired — 1.9 —

Shares issued — ( 0.5 )

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In December 2021, the Board authorized the acquisition of up to $ 2.0 billion of additional common stock upon completion of the $ 2.0 billion repurchase plan authorized in 2019.

For the year ended December 31, 2022, we made the following purchases under the stock repurchase program:

In millions (except per share amounts)

For each quarter ended Shares Purchased Average Cost

Per Share Total Cost of

Repurchases Remaining

March 31 1.6 $ 199.27 $ 311 $ 2,281

June 30 0.1 194.00 36 2,245

September 30 0.2 197.72 23 2,222

December 31 0.0 (2)

206.12 4 2,218

Total 1.9 198.74 $ 374

(1) The remaining $ 218 million authorized capacity under the 2019 plan was calculated based on the cost to purchase the shares, but excludes commission expenses in accordance with the authorized plan.

(2) Shares purchased in the fourth quarter totaled 21,830 .

We repurchased $ 374 million, $ 1,402 million and $ 641 million of our common stock in the years ended December 31, 2022, 2021 and 2020, respectively.

The dollar value remaining available for future purchases under the 2019 program at December 31, 2023, was $ 218 million.

We did not make any repurchases of common stock during 2023.

We repurchased $ 374 million and $ 1,402 million of our common stock in the years ended December 31, 2022 and 2021, respectively.

Total dividends paid to common shareholders in 2023, 2022 and 2021 were $ 921 million, $ 855 million and $ 809 million, respectively.

Declaration and payment of dividends in the future depends upon our income and liquidity position, among other factors, and is subject to declaration by the Board, who meet quarterly to consider our dividend payment.

Declaration and payment of dividends in the future depends upon our income and liquidity position, among other factors, and is subject to declaration by the Board, who meets quarterly to consider our dividend payment.

We expect to fund dividend payments with cash from operations.

In July 2023, the Board authorized an increase to our quarterly dividend of 7.0 percent from $ 1.57 per share to $ 1.68 per share.

In July 2021, the Board authorized a 7.4 percent increase to our quarterly cash dividend on our common stock from $ 1.35 per share to $ 1.45 per share.

In October 2020, the Board approved a 3.0 percent increase to our quarterly dividend on our common stock from $ 1.311 per share to $ 1.35 per share.

In July 2022, the Board authorized an 8.3 percent increase to our quarterly cash dividend on our common stock from $ 1.45 per share to $ 1.57 per share.

In July 2021, the Board approved a 7.4 percent increase to our quarterly dividend on our common stock from $ 1.35 per share to $ 1.45 per share.

Cash dividends per share paid to common shareholders for the last three years were as follows:

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ACCUMULATED OTHER COMPREHENSIVE LOSS

Following are the changes in accumulated other comprehensive income (loss) by component:

Following are the changes in accumulated other comprehensive (loss) income by component:

In millions Change in pensions

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Before-tax amount 425 ( 5 ) 38 458 $ ( 5 ) $ 453

Tax benefit 26 8 9 43 — 43

Tax (expense) benefit ( 103 ) 1 ( 12 ) ( 114 ) — ( 114 )

After-tax amount 322 ( 4 ) 26 344 ( 5 ) 339

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67 — — 67 — 67

Net current period other comprehensive (loss) income ( 1 ) 81 ( 34 ) 46 $ ( 10 ) $ 36

Net current period other comprehensive income (loss) 389 ( 4 ) 26 411 $ ( 5 ) $ 406

Balance at December 31, 2021 $ ( 346 ) $ ( 1,208 ) $ ( 17 ) $ ( 1,571 )

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Before-tax amount ( 123 ) ( 350 ) 136 ( 337 ) $ ( 40 ) $ ( 377 )

Tax (expense) benefit ( 103 ) 1 ( 12 ) ( 114 ) — ( 114 )

Tax benefit (expense) 19 6 ( 32 ) ( 7 ) — ( 7 )

After-tax amount ( 104 ) ( 344 ) 104 ( 344 ) ( 40 ) ( 384 )

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Cummins India Ltd.

Other 132 125

Noncontrolling interests $ 1,054 $ 992

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The total intrinsic value of options exercised during the years ended December 31, 2023, 2022 and 2021, was approximately $ 35 million, $ 53 million and $ 41 million, respectively.

The weighted-average grant date fair value of performance and restricted shares was as follows:

The share-based activity and weighted-average grant date fair value of performance and restricted shares was as follows:

Performance Shares Restricted Shares

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The total vesting date fair value of performance shares vested during the years ended December 31, 2023, 2022 and 2021, was $ 25 million, $ 24 million and $ 35 million, respectively.

The total fair value of restricted shares vested was $ 1 million, $ 0 and less than $ 1 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The total fair value of restricted shares vested was $ 17 million, $ 1 million and $ 0 for the years ended December 31, 2023, 2022 and 2021, respectively.

The fair value of each option grant was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions:

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by the weighted-average number of common shares outstanding for the period.

The calculation of diluted EPS assumes the issuance of common stock for all potentially dilutive share equivalents outstanding.

We excluded shares of common stock held in the Employee Benefits Trust (EBT) from the calculation of the weighted-average common shares outstanding until those shares are distributed from the EBT to the Retirement Savings Plan.

The EBT was fully depleted at December 31, 2021.

The calculation of diluted EPS assumes the issuance of common stock for all potentially dilutive share equivalents outstanding, which is calculated using the treasury-stock method for share-based awards.

Following are the computations for basic and diluted earnings per share:

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Foreign Currency Exchange Rate Risk

We had foreign currency forward contracts with notional amounts of $ 3.6 billion and $ 2.7 billion at December 31, 2022 and 2021, respectively.

The following currencies comprise 88 percent and 87 percent of outstanding foreign currency forward contracts at December 31, 2022 and 2021, respectively:

We had foreign currency forward contracts with notional amounts of $ 4.5 billion at December 31, 2023, with the following currencies comprising 85 percent of outstanding foreign currency forward contracts:

British pound, Chinese renminbi, Canadian dollar, Australian dollar and Swedish kronor.

We had foreign currency forward contracts with notional amounts of $ 3.6 billion at December 31, 2022, with the following currencies comprising 88 percent of outstanding foreign currency forward contracts:

Chinese renminbi, British pound, Canadian dollar, Australian dollar and Euro.

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dollar reporting currency.

To help minimize movements for certain investments, in 2022 we began entering into foreign exchange forwards designated as net investment hedges for certain of our investments.

To help minimize movements for certain investments, in the third quarter of 2022 we began entering into foreign exchange forwards designated as net investment hedges for certain of our investments.

Under the current terms of our foreign exchange forwards, we agreed with third parties to sell British pound in exchange for U.S.

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The following table summarizes the net investment hedge activity in AOCL:

Year ended December 31,

Years ended December 31,

In millions 2023 2022

Type of Derivative Gain (Loss)

Recognized in AOCL Gain (Loss) Reclassified from AOCL into Earnings Gain (Loss)

Recognized in AOCL Gain (Loss) Reclassified from AOCL into Earnings

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Interest Rate Risk

In September 2023, we entered into a series of interest rate swaps with a total notional value of $ 500 million in order to trade a portion of the floating rate into a fixed rate on our term loan, due in 2025.

The maturity date of the interest rate swaps is August 1, 2025.

The weighted-average interest rate of the interest rate swaps is 5.72 percent.

We designated the swaps as cash flow hedges.

The gains and losses on these derivative instruments are initially recorded in other comprehensive income and reclassified into earnings as interest expense in the Consolidated Financial Statements as each interest payment is accrued.

The following table summarizes the interest rate swap activity in AOCL:

Year ended December 31,

In millions 2023

Type of Swap Gain (Loss)

Recognized in AOCL Gain (Loss) Reclassified from AOCL into Interest Expense

Interest rate swaps $ ( 4 ) $ —

In 2021, we entered into a series of interest rate swaps to effectively convert our $ 500 million senior notes, due in 2025, from a fixed rate of 0.75 percent to a floating rate equal to the three-month LIBOR plus a spread.

We also entered into a series of interest rate swaps to effectively convert $ 765 million of our $ 850 million senior notes, due in 2030, from a fixed rate of 1.50 percent to a floating rate equal to the three-month LIBOR plus a spread.

The swaps were designated, and will be accounted for, as fair value hedges.

The gain or loss on these derivative instruments, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk, are recognized in current income as interest expense.

The fallback protocol in our derivative agreements allowed for a transition from LIBOR to SOFR in the third quarter of 2023.

We designated the swaps as fair value hedges.

The gain or loss on these derivative instruments, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk, are recognized in current income

as interest expense.

The net swap settlements that accrue each period are also reported in the Consolidated Financial Statements as interest expense.

We had a series of interest rate swaps to effectively convert our September 2013, $ 500 million debt issue, due in 2023, from a fixed rate of 3.65 percent to a floating rate equal to the one-month LIBOR plus a spread.

The debt is included in the Consolidated Balance Sheets as long-term debt.

The terms of the swaps mirrored those of the debt, with interest paid semi-annually.

The swaps were designated, and were accounted for, as fair value hedges.

The gain or loss on these derivative instruments, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk, were recognized in current income as interest expense.

The net swap settlements that accrued each period were also reported in the Consolidated Financial Statements as interest expense.

A basis adjustment related to credit risk, excluded from the assessment of effectiveness, was being amortized over the life of the hedge using a straight-line method and was considered de minimis.

In March 2023, we settled a portion of our 2021 interest rate swaps with a notional amount of $ 100 million.

The $ 7 million loss on settlement will be amortized over the remaining term of the related debt.

The following table summarizes the gains and losses:

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(1) The difference between the gain (loss) on swaps and borrowings represented hedge ineffectiveness.

In 2019 we entered into $ 350 million of interest rate lock agreements, and in 2020 we entered into an additional $ 150 million of lock agreements to reduce the variability of the cash flows of the interest payments on a total of $ 500 million of fixed rate debt forecast to be issued in 2023 to replace our senior notes at maturity.

In 2019, we entered into $ 350 million of interest rate lock agreements, and in 2020 we entered into an additional $ 150 million of lock agreements to reduce the variability of the cash flows of the interest payments on a total of $ 500 million of fixed rate debt originally forecast to be issued in 2023 to replace our senior notes at maturity.

The terms of the rate locks mirror the time period of the expected fixed rate debt issuance and the expected timing of interest payments on that debt.

The gains and losses on these derivative instruments will be initially recorded in other comprehensive income and will be released to earnings in interest expense in future periods to reflect the difference in (1) the fixed rates economically locked in at the inception of the hedge and (2) the actual fixed rates established in the debt instrument at issuance.

In December 2022, we settled certain rate lock agreements with notional amounts totaling $ 150 million for $ 49 million.

This amount will remain in other comprehensive income to be recognized over the term of the anticipated new debt as discussed above.

The gains and losses on these derivative instruments are initially recorded in other comprehensive income and will be released to earnings in interest expense in future periods to reflect the difference in (1) the fixed rates economically locked in at the inception of the hedge and (2) the actual fixed rates established in the debt instrument at issuance.

In 2022, we settled certain rate lock agreements with notional amounts totaling $ 150 million for $ 49 million in cash.

In 2023, we settled all remaining rate lock agreements with notional amounts totaling $ 350 million for $ 101 million.

The majority of the $ 150 million of gains on settlements will remain in other comprehensive income and will be amortized over the term of the debt anticipated to be issued in early 2024.

The following table summarizes the interest rate lock activity in AOCL:

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$ 17 $ (4) $ (4)

Gain (loss) reclassified from AOCL into income - Cost of sales (1)(2)

Total $ ( 3 ) $ 2 $ 3

Gain reclassified from AOCL into income - Cost of sales (1)(2)

(1) Includes foreign currency forward contracts.

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Derivatives Not Designated as Hedging Instruments

The following table summarizes the effect on our Consolidated Statements of Net Income for derivative instruments not classified as cash flow hedges:

The following table summarizes the effect on our Consolidated Statements of Net Income for derivative instruments not designated as hedging instruments:

Years ended December 31,

In millions 2023 2022 2021

Gain (loss) recognized in income - Cost of sales (1)

(Loss) gain recognized in income - Cost of sales (1)

$ ( 3 ) $ 2 $ —

Gain (loss) recognized in income - Other income, net (1)

Total $ ( 3 ) $ 45 $ —

(Loss) gain recognized in income - Other income, net (1)

( 21 ) ( 5 ) 45

(1) Includes foreign currency forward contracts.

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We elected to present our derivative contracts on a gross basis in our Consolidated Balance Sheets .

Had we chosen to present on a net basis, we would have derivatives in a net asset position of $ 52 million and derivatives in a net liability position of $ 100 million.

Had we chosen to present on a net basis, we would have derivatives in a net asset position of $ 4 million and $ 52 million and derivatives in a net liability position of $ 148 million and $ 100 million at December 31, 2023, and 2022, respectively.

RUSSIAN OPERATIONS

On March 17, 2022, the Board indefinitely suspended 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 JV with KAMAZ (a Russian truck manufacturer) and direct sales into Russia from our other business segments.

As a result of the suspension of operations, we evaluated the recoverability of assets in Russia and assessed other potential liabilities.

We experienced and expect to continue to experience an inability to collect customer receivables and may be the subject of litigation as a consequence of our suspension of commercial operations in Russia.

We recorded a charge of $ 111 million during 2022 related to these actions.

As of December 31, 2022, we had no inventory and approximately $ 14 million of receivables in Russia, all of which are fully reserved.

In addition, we have cash balances of $ 66 million, some of which will be used to fund ongoing employee, tax and contract settlement obligations.

At the time of suspension, our Russian operations included a wholly-owned distributor in Russia, an unconsolidated joint venture with KAMAZ (a Russian truck manufacturer) and direct sales into Russia from our other business segments.

As a result of the indefinite suspension of operations, we evaluated the recoverability of assets in Russia and assessed other potential liabilities.

The following summarizes the costs associated with the suspension of our Russian operations in our Consolidated Statements of Net Income:

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Russian suspension costs, net of recoveries $ 111

We will continue to evaluate the situation as conditions evolve and may take additional actions as deemed necessary in future periods.

For the year ended December 31, 2023, there were no material additional costs.

FORMATION OF ATMUS AND IPO

On May 23, 2023, in connection with the Atmus IPO, Cummins issued approximately $ 350 million of commercial paper with certain lenders.

On May 26, 2023, Atmus shares began trading on the New York Stock Exchange under the symbol "ATMU." The IPO was completed on May 30, 2023, whereby Cummins exchanged 19.5 percent (approximately 16 million shares) of its ownership in Atmus, at $ 19.50 per share, to retire $ 299 million of the commercial paper as proceeds from the offering through a non-cash transaction.

In connection with the completion of the IPO, through a series of asset and equity contributions, we transferred the filtration business to Atmus.

In exchange, Atmus transferred consideration of $ 650 million to Cummins, which consisted primarily of the net proceeds from a term loan facility and revolver executed by Atmus during May 2023.

The commercial paper issued and retired through the IPO proceeds, coupled with the $ 650 million received, was used for the retirement of our historical debt and payment of dividends.

The difference between the commercial paper retired from the IPO, other IPO related fees and the net book value of our divested interest was $ 285 million and was recorded as an offset to additional paid-in capital.

Of our consolidated cash and cash equivalents at December 31, 2023, $ 166 million is retained by Atmus for its working capital purposes.

See NOTE 13 , " DEBT ," for additional information.

We will continue to consolidate the financial position and results of Atmus, so long as we retain control.

The earnings attributable to the divested, noncontrolling interest for the year ended December 31, 2023, were $ 17 million.

At December 31, 2023, the noncontrolling interest associated with Atmus is reflected in noncontrolling interests in our Consolidated Balance Sheets.

Subject to market conditions, we intend to make a tax-free split-off of Atmus, pursuant to which Cummins will offer its stockholders the option to exchange their shares of Cummins common stock for shares of Atmus common stock in an exchange offer.

Acquisitions for the years ended December 31, 2023 and 2022, were as follows:

Entity Acquired (Dollars in millions) Date of Acquisition Additional Percent Interest Acquired Payments to Former Owners Acquisition Related Debt Retirements Total Purchase Consideration Type of Acquisition (1)

Goodwill Acquired Intangibles Recognized (2)

Cummins France SA 10/31/23 100 % $ 25 $ 5 $ 30 COMB $ 4 $ —

Faurecia 10/02/23 100 % 210 — 210 (3)

Hydrogenics Corporation (Hydrogenics) 06/29/23 19 % 287 48 335 (4)

Teksid Hierro de Mexico, S.A.

(Teksid MX) 04/03/23 100 % 143 — 143 (5)

Siemens Commercial Vehicles Propulsion (Siemens CVP) 11/30/22 100 % $ 187 $ — $ 187 COMB $ 70 $ 106

Meritor, Inc.

(Meritor) 08/03/22 100 % 2,613 248 2,861 COMB 926 1,610

Jacobs Vehicle Systems (Jacobs) 04/08/22 100 % 345 — 345 COMB 108 164

Cummins Westport, Inc.

(Westport JV) 02/07/22 50 % 42 — 42 COMB — 20

(1) All results from acquired entities were included in segment results subsequent to the acquisition date.

Previously consolidated entities were accounted for as equity transactions (EQUITY).

Newly consolidated entities were accounted for as business combinations (COMB).

(2) Intangible assets acquired in the business combination were mostly customer, technology and trade name related.

(3) Total purchase consideration included $ 30 million for the settlement of accounts payable that were treated as an operating cash outflow.

(4) Hydrogenics entered into three non-interest-bearing promissory notes with $ 175 million paid on July 31, 2023, and the remaining $ 160 million due in three installments through 2025.

(5) Total purchase consideration included $ 32 million for the settlement of accounts payable that were treated as an operating cash outflow.

On October 2, 2023, we purchased, from the Forvia Group, all of the equity ownership of Faurecia's U.S.

and Europe commercial vehicle exhaust business for $ 210 million, subject to certain working capital and other customary adjustments, and does not contain any contingent consideration.

The acquisition provides canning and assembly operations for full exhaust systems primarily for on-highway applications, ensures the long-term supply of aftertreatment components, minimizes opportunities for supply disruptions, adds significant technical and manufacturing resources and enhances our existing portfolio.

The values assigned to individual assets acquired and liabilities assumed are preliminary based on management's current best estimate and subject to change as certain matters are finalized.

The primary areas that remain open are related to contingent liabilities and deferred taxes.

The preliminary purchase price allocation was as follows:

Cash and cash equivalents $ 8

Accounts and notes receivable, net (1)

Inventories 32

Property, plant and equipment 93

Other current and long-term assets 46

Accounts payable (principally trade) ( 62 )

Other current and long-term liabilities ( 49 )

Total purchase price $ 210

(1) Includes $ 30 million of Cummins receivables that were eliminated against payables at other Cummins entities.

Goodwill was determined based on the residual difference between the fair value of consideration transferred and the value assigned to tangible assets and liabilities.

All of the goodwill is expected to be deductible for tax purposes.

Among the factors contributing to a purchase price resulting in the recognition of goodwill are an acquired workforce and other economic benefits that are anticipated to arise from operational synergies from combining the business with Cummins.

The results of this business were reported in our Components segment within the emission solutions business.

Since we are the primary customer of this business, the acquisition is not expected to result in material incremental sales to our business.

Pro forma financial information for the acquisition was not presented as the effects were not material to our Consolidated Financial Statements.

Hydrogenics Corporation - Redeemable Noncontrolling Interest

On June 29, 2023, a share purchase agreement was executed with a 19 percent minority shareholder in one of our businesses, Hydrogenics Corporation (Hydrogenics), whereby we agreed to pay the minority shareholder $ 335 million for their 19 percent ownership, including the settlement of shareholder loans of $ 48 million.

As part of the share purchase agreement, Hydrogenics entered into three non-interest-bearing promissory notes with $ 175 million paid on July 31, 2023, and the remaining $ 160 million due in three installments through 2025.

We recorded the non-interest-bearing promissory notes at their present value in our Consolidated Financial Statements.

The debt amount, net of unamortized debt discount, was $ 148 million and reflected in current maturities of long-term debt and long-term debt at December 31, 2023.

Prior to the execution of this transaction, the minority shareholder had, among other rights and subject to related obligations and restrictive covenants, rights that were exercisable between September 2022 and September 2026 to require us to (1) purchase such shareholder's shares (put option) at an amount up to the fair market value (calculated pursuant to a process outlined in the shareholders' agreement) and (2) sell to such shareholder Hydrogenics' electrolyzer business at an amount up to the fair market value of the electrolyzer business (calculated pursuant to a process outlined in the shareholders’ agreement).

The estimated fair value of the put option was recorded as redeemable noncontrolling interests in our Consolidated Financial Statements with an offset to additional paid-in capital, and at December 31, 2022, the balance was $ 258 million.

The redeemable noncontrolling interest balance was reduced to zero as of the acquisition date.

Teksid Hierro de Mexico, S.A.

On April 3, 2023, we purchased all of the equity ownership interest of Teksid Hierro de Mexico, S.A.

(Teksid MX) and Teksid, Inc.

from Stellantis N.V.

for approximately $ 143 million (including $ 32 million for the settlement of accounts payable), subject to certain adjustments set forth in the agreement.

Teksid MX operates a cast iron foundry located in Monclova, Mexico, which primarily forges blocks and heads used in our and other manufacturers’ engines.

facilitates the commercialization of Teksid MX products in North America.

Since we are the primary customer of the foundry, the acquisition is not expected to result in material incremental sales to our business.

Approximately $ 90 million of the purchase price was allocated to property, plant and equipment.

The remainder was allocated primarily to working capital assets and liabilities (including approximately $ 16 million of cash and cash equivalents) and resulted in approximately $ 18 million of goodwill, none of which is deductible for tax purposes.

In the third quarter we finalized the purchase accounting and made certain other adjustments, which resulted in a $ 7 million decrease in goodwill.

The results of the business were reported in our Engine segment.

Pro forma financial information for the acquisition was not presented as the effects were not material to our Consolidated Financial Statements .

On November 30, 2022, we acquired Siemens' Commercial Vehicles Propulsion business for approximately $ 187 million, subject to working capital and other customary adjustments, and was allocated primarily to intangible assets, goodwill and inventories.

This business develops, designs and produces electric drive systems including electric motors, inverters, software and related services for the commercial vehicle markets.

This acquisition is included in our Accelera segment.

Final purchase accounting adjustments did not significantly impact goodwill.

Meritor, Inc.

The total purchase price was $ 2.9 billion, including debt that was retired on the closing date of $ 248 million.

In addition, we assumed $ 1.0 billion of additional debt, of which $ 0.9 billion was retired prior to the end of the third quarter of 2022.

The acquisition was funded with a combination of $ 2.0 billion in new debt (see NOTE 13, "DEBT" for additional details), cash on hand and additional commercial paper borrowings.

The majority of this business was be included within our Components segment with the exception of the electric powertrain business, which was included in our Accelera segment.

The final purchase price allocation has been updated as follows:

Cash and cash equivalents $ 98

Accounts and notes receivable, net 640

Inventories 750

Property, plant and equipment 841

Intangible assets 1,610

Investments and advances related to equity method investees 382

Pension assets 147

Other current and long-term assets 322

Accounts payable (principally trade) ( 711 )

Net deferred taxes ( 277 )

Other liabilities (pensions and other postretirement benefits) ( 129 )

Long-term debt ( 962 )

Other current and long-term liabilities ( 665 )

Noncontrolling interests ( 111 )

Total purchase price $ 2,861

During 2023, we finalized our accounting for the Meritor, Inc.

The primary components of the change were to increase contingent liabilities by $ 70 million offset by finalization of deferred taxes and tax reserves, with a net increase to goodwill of $ 32 million.

There was no impact to the Consolidated Statements of Net Income for any of the changes.

Fair Value (in millions) Weighted-Average Useful Life (in years) Valuation Methodology Key Assumptions

Customer relationships $ 960 12 Multi-period excess earnings Revenue, EBITDA (1) , discount rate, customer renewal rates, customer attrition rates

Technology 345 8 Relief-from-royalty Royalty rate, discount rate, obsolescence factor

Trade name 305 21 Relief-from-royalty Royalty rate, discount rate

(1) Earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests.

Annual amortization of the intangible assets for the next five years is expected to approximate $ 142 million per year.

Goodwill was determined based on the residual difference between the fair value of consideration transferred and the value assigned to tangible and intangible assets and liabilities.

Goodwill was allocated to the Components segment ($ 759 million) and the Accelera segment ($ 167 million) based on the relative value of those businesses compared to the assets and liabilities assigned to them.

We do not expect any of the goodwill to be deductible for tax purposes.

Included in our results for the year ended December 31, 2022, were revenues of $ 1.9 billion and net loss of $ 43 million related to this business.

In addition, in 2022 we incurred acquisition related costs of $ 30 million included in selling, general and administrative expenses in our Consolidated Statements of Net Income .

The following table presents the supplemental consolidated results of the Company for the years ended December 2022 and 2021, on an unaudited pro-forma basis as if the acquisition had been consummated on January 1, 2021.

(Unaudited) Years ended December 31,

In millions 2022 2021

Net sales $ 30,841 $ 27,949

Net income 2,196 2,058

The Meritor acquisition increased net assets in the Components segment by $ 3.8 billion and Accelera segment by $ 0.3 billion in 2022.

Jacobs Vehicle Systems

On April 8, 2022, we completed the acquisition of Jacobs Vehicle Systems business (Jacobs) from Altra Industrial Motion Corp.

The purchase price was $ 345 million in cash and does not contain any contingent consideration.

Jacobs is a supplier of engine braking, cylinder deactivation and start and stop thermal management technologies (valvetrain technologies).

The acquisition furthers our investment in key technologies and capabilities to drive growth, while securing our supply base.

The final purchase price allocation was as follows:

Cash and cash equivalents $ 18

Accounts and notes receivable, net 24

Inventories 15

Property, plant and equipment 70

Intangible assets 164

Accounts payable (principally trade) ( 21 )

Net deferred taxes ( 27 )

Other, net ( 6 )

Total purchase price $ 345

Fair Value (in millions) Weighted-Average Useful Life (in years) Valuation Methodology Key Assumptions

Customer relationships $ 108 9 Multi-period excess earnings Discount rate, customer renewal rates

Technology 31 7 Relief-from-royalty Royalty rate, rate of return, obsolescence factor

Trade name 25 14 Relief-from-royalty Royalty rate, discount

Annual amortization of the intangible assets for the next five years is expected to approximate $ 18 million per year.

Goodwill was determined based on the residual difference between the fair value of consideration transferred and the value assigned to tangible and intangible assets and liabilities.

Approximately $ 9 million of the goodwill is deductible for tax purposes.

Among the factors contributing to a purchase price resulting in the recognition of goodwill are Jacobs' expected future customers, new versions of technologies, an acquired workforce and other economic benefits that are anticipated to arise from future product sales and operational synergies from combining the business with Cummins.

Included in our results for the year ended December 31, 2022, were revenues of $ 118 million and loss of $ 1 million related to this business.

The results of this business were reported in our Components segment.

Pro forma financial information for the acquisition was not presented as the effects were not material to our Consolidated Financial Statements.

On February 7, 2022, we purchased Westport Fuel System Inc.'s stake in Westport JV.

We will continue to operate the business as the sole owner.

The purchase price was $ 42 million and was allocated primarily to cash, warranty and deferred revenue related to extended coverage contracts.

The results of the business were reported in our Engine segment.

Pro forma financial information for the acquisition was not presented as the effects were not material to our Consolidated Financial Statements.

OPERATING SEGMENTS

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Our CODM is the Chief Executive Officer.

Our reportable operating segments consist of Engine, Components, Distribution, Power Systems and New Power.

Our reportable operating segments consist of Components, Engine, Distribution, Power Systems and Accelera.

This reporting structure is organized according to the products and markets each segment serves.

The Components segment sells axles, drivelines, brakes and suspension systems for commercial diesel and natural gas applications, aftertreatment systems, turbochargers, fuel systems, valvetrain technologies, filtration products, automated transmissions and electronics.

The Engine segment produces engines (15 liters and smaller) and associated parts for sale to customers in on-highway and various off-highway markets.

Our engines are used in trucks of all sizes, buses and recreational vehicles, as well as in various industrial applications, including construction, agriculture, power generation systems and other off-highway applications.

The Components segment sells filtration products, aftertreatment systems, turbochargers, electronics, fuel systems, automated transmissions, axles, drivelines, brakes and suspension systems.

The Distribution segment includes wholly-owned and partially-owned distributorships engaged in wholesaling engines, generator sets and service parts, as well as performing service and repair activities on our products and maintaining relationships with various OEMs throughout the world.

The Distribution segment includes wholly-owned and partially-owned

distributorships engaged in wholesaling engines, generator sets and service parts, as well as performing service and repair activities on our products and maintaining relationships with various OEMs throughout the world.

The Power Systems segment is an integrated power provider, which designs, manufactures and sells engines (16 liters and larger) for industrial applications (including mining, oil and gas, marine and rail), standby and prime power generator sets, alternators and other power components.

The New Power segment designs, manufactures, sells and supports hydrogen production solutions as well as electrified power systems with innovative components and subsystems, including battery, fuel cell and electric powertrain technologies.

The New Power segment is currently in the early stages of commercializing these technologies with efforts primarily focused on the development of our electrolyzers for hydrogen production and electrified power systems and related components and subsystems.

The Accelera segment designs, manufactures, sells and supports hydrogen production technologies as well as electrified power systems with innovative components and subsystems, including battery, fuel cell and electric powertrain technologies.

The Accelera segment is currently in the early stages of commercializing these technologies with efforts primarily focused on the development of our electrolyzers for hydrogen production and electrified power systems and related components and subsystems.

We continue to serve all our markets as they adopt electrification and alternative power technologies, meeting the needs of our OEM partners and end customers.

We use segment earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests (EBITDA) as the primary basis for the CODM to evaluate the performance of each of our reportable operating segments.

We use segment earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests (EBITDA) as the basis for the CODM to evaluate the performance of each of our reportable operating segments.

We believe EBITDA is a useful measure of our operating performance as it assists investors and debt holders in comparing our performance on a consistent basis without regard to financing methods, capital structure, income taxes or depreciation and amortization methods, which can vary significantly depending upon many factors.

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These include certain costs and expenses of shared services, such as information technology, human resources, legal, finance and supply chain management.

We do not allocate gains or losses of corporate owned life insurance and certain filtration separation costs to individual segments.

We do not allocate gains or losses of corporate owned life insurance and certain Atmus separation costs to individual segments.

EBITDA may not be consistent with measures used by other companies.

As previously announced, in March 2023, we rebranded our New Power segment as "Accelera" to better represent our commitment to zero-emission technologies.

In addition, we moved our NPROXX joint venture from the Accelera segment to the Engine segment, which adjusted both the equity, royalty and interest income from investees and segment EBITDA line items for the current and prior year.

We started to report results for the changes within our operating segments effective January 1, 2023, and reflected these changes in the historical periods presented.

Summarized financial information regarding our reportable operating segments at December 31, is shown in the table below:

In millions Engine Components Distribution Power Systems New Power Total Segments

In millions Components Engine Distribution Power Systems Accelera Total Segments

External sales $ 11,531 $ 8,874 $ 10,199 $ 3,125 $ 336 $ 34,065

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Equity, royalty and interest income (loss) from investees 97 251 97 53 ( 15 ) 483

71 77 43 ( 8 ) 349

Interest income 31 19 34 9 2 95

Russian suspension costs (2)

5 54 19 — 111

Segment EBITDA 1,840 (1)

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Equity, royalty and interest income (loss) from investees 71 160 (3)

77 43 ( 2 ) 349

Interest income 12 14 16 7 — 49

Russian suspension costs (4)

Segment EBITDA 1,346 (6)

1,535 888 596 ( 334 ) 4,031

Depreciation and amortization (2)

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Research, development and engineering expenses 307 399 48 234 102 1,090

Equity, royalty and interest income (loss) from investees 312 61 62 21 ( 4 ) 452

Equity, royalty and interest income from investees 50 335 63 56 2 506

Interest income 5 8 7 5 — 25

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183 205 116 131 24 659

Net assets 2,938 1,554 2,294 2,251 602 9,639

Investments and advances to equity investees 254 771 329 164 20 1,538

Capital expenditures 184 341 92 80 37 734

(1) Includes a $ 28 million impairment of our joint venture with KAMAZ and $ 3 million of royalty charges as part of our costs associated with the suspension of our Russian operations.

See NOTE 23, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information.

(2) See NOTE 23, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information.

(3) Includes $ 31 million of Russian suspension costs reflected in the equity, royalty and interest income (loss) from investees line above.

(4) Includes $ 83 million of costs related to the acquisition and integration of Meritor and $ 28 million of costs associated with the planned separation of our filtration business.

(1) Includes $ 78 million of costs associated with the IPO and separation of Atmus for the year ended December 31, 2023.

(2) Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Consolidated Statements of Net Income as interest expense.

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A portion of depreciation expense is included in research, development and engineering expense.

(3) 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 indefinite suspension of our Russian operations.

See NOTE 22, "RUSSIAN OPERATIONS," for additional information.

(4) See NOTE 22, "RUSSIAN OPERATIONS," for additional information.

(5) Includes $ 31 million of Russian suspension costs reflected in the equity, royalty and interest income (loss) from investees line above.

(6) Includes $ 83 million of costs related to the acquisition and integration of Meritor and $ 28 million of costs associated with the separation of Atmus.

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

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Intersegment eliminations and other (1)

( 2,055 ) ( 232 ) ( 74 )

Interest expense 375 199 111

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INCOME BEFORE INCOME TAXES $ 1,626 $ 2,819 $ 2,751

Income tax expense 636 587 527

CONSOLIDATED NET INCOME 2,183 2,164 1,811

Net income attributable to noncontrolling interests 32 33 22

NET INCOME ATTRIBUTABLE TO CUMMINS INC.

$ 2,151 $ 2,131 $ 1,789

(1) Intersegment eliminations and other included $ 53 million of costs associated with the planned separation of our filtration business.

(1) Intersegment eliminations and other included $ 2.0 billion related to the Agreement in Principle, $ 22 million of costs associated with the IPO and separation of Atmus and $ 21 million of voluntary retirement and voluntary separation charges for the year ended December 31, 2023.

The year ended December 31, 2022, included $ 53 million of costs associated with the planned separation of Atmus.

See NOTE 2, "AGREEMENT IN PRINCIPLE," for additional information.

A reconciliation of our segment net assets to the corresponding amounts in the Consolidated Balance Sheets is shown in the table below:

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Net liabilities deducted in arriving at net segment assets (1)

14,531 11,270

Pension and OPEB adjustments excluded from net segment assets 307 832

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India 681 665

United Kingdom 431 384

Mexico 583 429

United Kingdom 489 431

Netherlands 437 334

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data