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What changed in Cummins's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Cummins's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+413 added−440 removedSource: 10-K (2025-02-11) vs 10-K (2024-02-12)

Top changes in Cummins's 2024 10-K

413 paragraphs added · 440 removed · 319 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

101 edited+27 added−31 removed36 unchanged
Biggest changeOur equity income from these investees was as follows: Years ended December 31, In millions 2023 2022 2021 Manufacturing entities Dongfeng Cummins Engine Company, Ltd. $ 65 19 % $ 45 20 % $ 82 19 % Beijing Foton Cummins Engine Co., Ltd. 47 14 % 37 17 % 112 26 % Chongqing Cummins Engine Company, Ltd. 36 11 % 32 14 % 39 9 % Tata Cummins, Ltd. 29 9 % 27 12 % 18 4 % All other manufacturers 91 27 % 28 (1) 12 % 131 32 % Distribution entities Komatsu Cummins Chile, Ltda. 55 16 % 44 20 % 32 8 % All other distributors 16 4 % 11 5 % 10 2 % Cummins share of net income (2) $ 339 100 % $ 224 100 % $ 424 100 % (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.
Biggest changeFinancial information about our investments in joint ventures and alliances is incorporated by reference from NOTE 3, "INVESTMENTS IN EQUITY INVESTEES," to our Consolidated Financial Statements. 9 Table of Contents Our equity income from these investees was as follows: Years ended December 31, In millions 2024 2023 2022 Manufacturing entities Dongfeng Cummins Engine Company, Ltd. $ 66 22 % $ 65 19 % $ 45 20 % Chongqing Cummins Engine Company, Ltd. 60 20 % 36 11 % 32 14 % Beijing Foton Cummins Engine Co., Ltd. 42 14 % 47 14 % 37 17 % Tata Cummins, Ltd. 31 10 % 29 9 % 27 12 % All other manufacturers 25 (1) 9 % 91 27 % 28 (2) 12 % Distribution entities Komatsu Cummins Chile, Ltda. 55 19 % 55 16 % 44 20 % All other distributors 17 6 % 16 4 % 11 5 % Cummins share of net income (3) $ 296 100 % $ 339 100 % $ 224 100 % (1) Included a $17 million impairment of our joint ventures in the fourth quarter of 2024 related to our Accelera strategic reorganization actions.
We also provide turnkey solutions for distributed generation and energy management applications using natural gas, diesel and newer alternative sustainable fuels such as hydrotreated vegetable oil and renewable natural gas. • Industrial - We design, manufacture, sell and support diesel and natural gas high-speed, high-horsepower engines up to 4,400 horsepower for a wide variety of equipment in mining, rail, defense, oil and gas and marine applications throughout the world. • Generator technologies - We design, manufacture, sell and support A/C generator/alternator products for internal consumption and for external generator set assemblers.
We also provide turnkey solutions for distributed generation and energy management applications using natural gas, diesel and newer alternative sustainable fuels such as hydrotreated vegetable oil and renewable natural gas. • Industrial - We design, manufacture, sell and support diesel and natural gas high-speed, high-horsepower engines up to 4,400 horsepower for a wide variety of equipment in mining, oil and gas, marine, rail and defense applications throughout the world. • Generator technologies - We design, manufacture, sell and support A/C generator/alternator products for internal consumption and for external generator set assemblers.
Accelera Segment 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.
Accelera Segment The Accelera segment designs, manufactures, sells and supports electrified power systems with innovative components and subsystems, including battery, fuel cell and electric powertrain technologies as well as hydrogen production 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 anticipate our customer base for Accelera offerings will be highly diversified, representing multiple end markets with a broad range of application requirements.
The Accelera segment is currently in the early stages of commercializing these technologies with efforts primarily focused on the development of electrified power systems and related components and subsystems and our electrolyzers for hydrogen production. We anticipate our customer base for Accelera offerings will be highly diversified, representing multiple end markets with a broad range of application requirements.
This includes new markets, like the growing green hydrogen market, which we serve with our leading hydrogen production technologies. We will continue to pursue relationships in markets as they adopt hydrogen and electric solutions.
This includes new markets, like the growing green hydrogen market, which we serve with our leading hydrogen production technologies. We will continue to pursue relationships in markets as they adopt electric and hydrogen solutions.
ECJV develops and supplies automated transmissions for the heavy-duty commercial vehicle markets in North America and China. • Cummins India Ltd. (CIL) - We have a controlling interest in Cummins India Ltd. (CIL), which is a publicly listed company on various stock exchanges in India.
ECJV develops and supplies automated transmissions for the heavy-duty commercial vehicle markets in North America and China. • Cummins India Ltd. - We have a controlling interest in Cummins India Ltd. (CIL), which is a publicly listed company on various stock exchanges in India.
We make available, free of charge, on or through our Investors and Media webpage, our proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934 or the Securities Act of 1933, as amended, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.
We make available, free of charge, on or through our Investors and Media webpage, our proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934 or the Securities Act of 1933, each, as amended, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.
Distribution’s mission encompasses the sales and support of a wide range of products and services, including power generation systems, high-horsepower engines, heavy-duty and medium-duty engines designed for on- and off-highway use, application engineering services, custom-designed assemblies, retail and wholesale aftermarket parts and in-shop and field-based repair services. We also provide selected sales and aftermarket support for the Accelera business.
Distribution’s mission encompasses the sale and support of a wide range of products and services, including power generation systems, high-horsepower engines, heavy-duty and medium-duty engines designed for on- and off-highway use, application engineering services, custom-designed assemblies, retail and wholesale aftermarket parts and in-shop and field-based repair services. We also provide selected sales and aftermarket support for the Accelera business.
This organization is led by the Vice President - Product Compliance and Regulatory Affairs and reports directly to the Chief Administrative Officer and the CEO for product emissions matters. The focus of this organization is to strengthen our ability to design great products that help our customers win while complying with increasingly challenging global emission regulations.
This organization is led by the Vice President - Product Compliance and Regulatory Affairs and reports directly to the Chief Administrative Officer and the Chief Executive Officer (CEO) for product emissions matters. The focus of this organization is to strengthen our ability to design great products that help our customers win while complying with increasingly challenging global emission regulations.
The nine PLANET 2050 goals for 2030 are as follows: • Reduce absolute GHG emissions from facilities and operations by 50 percent. • Reduce scope three absolute lifetime GHG emissions from newly sold products by 25 percent. • Partner with customers to reduce scope three GHG emissions from products in the field by 55 million metric tons. • Reduce volatile organic compounds emissions from paint and coating operations by 50 percent. • Create a circular lifecycle plan for every part to use less, use better, use again. • Generate 25 percent less waste in facilities and operations as percent of revenue. • Reuse or responsibly recycle 100 percent of packaging plastics and eliminate single-use plastics in dining facilities, employee amenities and events. • Reduce absolute water consumption in facilities and operations by 30 percent. • Produce net water benefits that exceed our annual water use in all our regions.
The nine goals for 2030 are as follows: • Reduce absolute GHG emissions from facilities and operations by 50 percent. • Reduce scope three absolute lifetime GHG emissions from newly sold products by 25 percent. • Partner with customers to reduce scope three GHG emissions from products in the field by 55 million metric tons. • Reduce volatile organic compounds emissions from paint and coating operations by 50 percent. • Create a circular lifecycle plan for every part to use less, use better, use again. • Generate 25 percent less waste in facilities and operations as percent of revenue. • Reuse or responsibly recycle 100 percent of packaging plastics and eliminate single-use plastics in dining facilities, employee amenities and events. • Reduce absolute water consumption in facilities and operations by 30 percent. • Produce net water benefits that exceed our annual water use in all our regions.
Throughout our more than 100-year history, we always recognized that people drive the strength of our business and our ability to effectively serve our customers and sustain our competitive position. We are focused on harmonizing our approach to talent to provide seamless opportunities and better experiences to our employees around the world.
Throughout our more than 100-year history, we have always recognized that people drive the strength of our business and our ability to effectively serve our customers and sustain our competitive position. We are focused on harmonizing our approach to talent to provide seamless opportunities and better experiences to our employees around the world.
In addition to our agreement with PACCAR, we have long-term heavy-duty and medium-duty engine and aftertreatment system supply agreements with Traton and Daimler. We also have an agreement with Stellantis to supply engines for its pick-up truck applications.
In addition to our agreement with PACCAR, we have long-term heavy-duty and medium-duty engine and aftertreatment system supply agreements with Traton and Daimler. We also have an agreement with Stellantis to supply engines and aftertreatment products for its pick-up truck applications.
Power Systems Segment Power Systems segment sales and EBITDA as a percentage of consolidated results were: Years ended December 31, 2023 2022 2021 Percent of consolidated net sales (1) 14 % 14 % 15 % Percent of consolidated EBITDA (1) 16 % 15 % 14 % (1) Measured before intersegment eliminations The Power Systems segment is organized around the following product lines: • Power generation - We are a global OEM offering standby and prime power generators ranging from 2 kilowatts to 3.5 megawatts, as well as controls, paralleling systems and transfer switches, for customers with consumer, commercial, industrial, data center, health care, prime rental fleet and defense applications.
Power Systems Segment Power Systems segment sales and EBITDA as a percentage of consolidated results were: Years ended December 31, 2024 2023 2022 Percent of consolidated net sales (1) 16 % 14 % 14 % Percent of consolidated EBITDA (1) 23 % 16 % 15 % (1) Measured before intersegment eliminations The Power Systems segment is organized around the following product lines: • Power generation - We are a global OEM offering standby and prime power generators ranging from 2 kilowatts to 3.5 megawatts, as well as controls, paralleling systems and transfer switches, for customers with consumer, data center, commercial, industrial, health care, prime rental fleet and defense applications.
The loss of this customer or a significant decline in the production level of PACCAR vehicles that use our engines would have an adverse effect on our results of operations and financial condition. We have supplied engines to PACCAR for 79 years. A summary of principal customers for each operating segment is included in our segment discussion.
The loss of this customer or a significant decline in the production level of PACCAR vehicles that use our engines would have an adverse effect on our results of operations and financial condition. We have supplied engines to PACCAR for 80 years. A summary of principal customers for each operating segment is included in our segment discussion.
Excluding PACCAR, net sales to any single customer were less than 9 percent of our consolidated net sales in 2023, less than 8 percent in 2022 and less than 8 percent in 2021. These agreements contain standard purchase and sale agreement terms covering engine, aftertreatment and engine parts pricing, quality and delivery commitments, as well as engineering product support obligations.
Excluding PACCAR, net sales to any single customer were less than 9 percent of our consolidated net sales in 2024, less than 9 percent in 2023 and less than 8 percent in 2022. These agreements contain standard purchase and sale agreement terms covering engine, aftertreatment and engine parts pricing, quality and delivery commitments, as well as engineering product support obligations.
Many of these open orders are historically subject to month-to-month releases and are subject to cancellation on reasonable notice without cancellation charges and therefore are not considered firm. We continue to work closely with our suppliers and customers to meet the demand. RESEARCH AND DEVELOPMENT In 2023, we continued to invest in future critical technologies and products.
Many of these open orders are historically subject to month-to-month releases and are subject to cancellation on reasonable notice without cancellation charges and therefore are not considered firm. We continue to work closely with our suppliers and customers to meet the demand. RESEARCH AND DEVELOPMENT In 2024, we continued to invest in future critical technologies and products.
While a significant number of our sales to PACCAR are under long-term supply agreements, these agreements provide for particular engine requirements for specific vehicle models and not a specific volume of engines or aftertreatment systems. PACCAR is our only customer accounting for more than 10 percent of our net sales in 2023.
While a significant number of our sales to PACCAR are under long-term supply agreements, these agreements provide for particular engine requirements for specific vehicle models and not a specific volume of engines or aftertreatment systems. PACCAR is our only customer accounting for more than 10 percent of our net sales in 2024.
Other Environmental Statutes and Regulations Expenditures for environmental control activities and environmental remediation projects at our facilities in the U.S. were not a substantial portion of our annual expenses and are not expected to be material in 2024. We believe we are in compliance in all material respects with laws and regulations applicable to our plants and operations.
Other Environmental Statutes and Regulations Expenditures for environmental control activities and environmental remediation projects at our facilities in the U.S. were not a substantial portion of our annual expenses and are not expected to be material in 2025. We believe we are in compliance in all material respects with laws and regulations applicable to our plants and operations.
We sell our products to original equipment manufacturers (OEMs), distributors, dealers and other customers worldwide. We serve our customers through a service network of approximately 450 wholly-owned, joint venture and independent distributor locations and more than 19,000 Cummins certified dealer locations in approximately 190 countries and territories.
We sell our products to original equipment manufacturers (OEMs), distributors, dealers and other customers worldwide. We serve our customers through a service network of approximately 650 wholly-owned, joint venture and independent distributor locations and more than 19,000 Cummins certified dealer locations in approximately 190 countries and territories.
SEASONALITY While individual product lines may experience modest seasonal variation in production, there is no material effect on the demand for the majority of our products on a quarterly basis. 11 Table of Contents LARGEST CUSTOMERS We have thousands of customers around the world and have developed long-standing business relationships with many of them.
SEASONALITY While individual product lines may experience modest seasonal variation in production, there is no material effect on the demand for the majority of our products on a quarterly basis. LARGEST CUSTOMERS We have thousands of customers around the world and have developed long-standing business relationships with many of them.
Davis (54) Vice President and President—Accelera and Components (2023) Vice President and President—Accelera (2020-2023) Vice President—Cummins Filtration (2018-2020) Bonnie Fetch (53) Vice President and President—Distribution Business (2024) Vice President—Global Supply Chain and Manufacturing (2022-2023) Vice President—DBU Supply Chain Services (2020-2022) Executive Director, Supply Chain—DBU (2018-2020) Nicole Y.
Davis (55) Vice President and President—Accelera and Components (2023) Vice President and President—Accelera (2020-2023) Vice President—Cummins Filtration (2018-2020) Bonnie Fetch (54) Vice President and President—Distribution Business (2024) Vice President—Global Supply Chain and Manufacturing (2022-2023) Vice President—DBU Supply Chain Services (2020-2022) Executive Director, Supply Chain—DBU (2018-2020) Nicole Y.
The segment serves our customers and certified dealers through a worldwide network of wholly-owned, joint venture and independent distribution locations. Wholly-owned locations operate and serve markets in the seven geographic regions noted below. Joint venture locations serve markets in South America, Southeast Asia, India, Middle East and Africa, while independent distribution locations serve markets in these and other geographies.
The segment serves our customers and certified dealers through a worldwide network of wholly-owned, joint venture and independent distribution locations. Wholly-owned locations operate and serve markets in the seven geographic regions noted below. Joint venture locations serve markets in South America, Southeast Asia and India while independent distribution locations serve markets in these and other geographies.
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.
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, valvetrain technologies, automated transmissions and electronics that are used with our engines as well as some competitors' products.
Our research and development programs are focused on product improvements, product extensions, innovations and cost reductions for our customers. Research and development expenditures include salaries, contractor fees, building costs, utilities, testing, technical information technology expenses, administrative expenses and allocation of corporate costs and are expensed, net of contract reimbursements, when incurred.
Our research and development programs are focused on product improvements, product extensions, innovations and cost reductions for our customers. Research and development expenditures include salaries, contractor fees, building costs, utilities, testing, technical IT expenses, administrative expenses and allocation of corporate costs and are expensed, net of contract reimbursements, when incurred.
In the markets served by the Accelera segment, we compete with emerging fuel cell and battery companies, powertrain component manufacturers, vertically integrated OEMs and entities providing hydrogen production solutions. Our primary competitors include Daimler, PACCAR, Volvo, Traton, BYD Company Limited, Dana Incorporated, BorgWarner Inc., Ballard Power Systems, Inc., Nel ASA, ITM Power, Siemens Energy, Thyssenkrupp and Plug Power Inc.
In the markets served by the Accelera segment, we compete with battery and emerging fuel cell companies, powertrain component manufacturers, vertically integrated OEMs and entities providing hydrogen production solutions. Our primary competitors include Daimler, PACCAR, Traton, BYD Company Limited, Dana Incorporated, BorgWarner Inc., Nel ASA, Siemens Energy, Thyssenkrupp and Plug Power Inc.
The information on our internet site is not incorporated by reference into this report. 16 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS Following are the names and ages of our executive officers, their positions with us at January 31, 2024, and summaries of their backgrounds and business experience: Name and Age Present Cummins Inc. position and year appointed to position Principal position during the past five years other than Cummins Inc. position currently held Jennifer Rumsey (50) Chair and Chief Executive Officer (2023) President and Chief Executive Officer (2022-2023) President and Chief Operating Officer (2021-2022) Vice President and President—Components (2019-2020) Vice President—Chief Technical Officer (2015-2019) Sharon R.
The information on our internet site is not incorporated by reference into this report. 16 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS Following are the names and ages of our executive officers, their positions with us at January 31, 2025, and summaries of their backgrounds and business experience: Name and Age Present Cummins Inc. position and year appointed to position Principal position during the past five years other than Cummins Inc. position currently held Jennifer Rumsey (51) Chair and Chief Executive Officer (2023) President and Chief Executive Officer (2022-2023) President and Chief Operating Officer (2021-2022) Vice President and President—Components (2019-2020) Sharon R.
Wiltrout (43) Vice President—Corporate Strategy (2022) Executive Director—Corporate Development (2021-2022) Strategy Director—Power Systems Business Unit (2018-2021) Jonathan Wood (53) Vice President—Chief Technical Offer (2023) Vice President—New Power Engineering (2021-2023) Vice President—Components Engineering (2018-2021) Our Chair and CEO is elected annually by the Board and holds office until the meeting of the Board at which her election is next considered.
Wiltrout (44) Vice President—Corporate Strategy (2022) Executive Director—Corporate Development (2021-2022) Strategy Director—Power Systems Business Unit (2018-2021) Jonathan Wood (54) Vice President—Chief Technical Offer (2023) Vice President—New Power Engineering (2021-2023) Vice President—Components Engineering (2018-2021) Our Chair and CEO is elected annually by the Board and holds office until the meeting of the Board at which her election is next considered.
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 small construction equipment and industrial applications are also served by these engine families. The heavy-duty business produces 7.0 liter to 14.5 liter high performance heavy-duty diesel and natural gas engines in Beijing.
Through our talent strategy, our goal is to provide all employees equitable access to the development and career opportunities that a global company enables. Competitive Pay and Benefits To attract and retain the best employees, we focus on providing progressive, competitive pay and benefits.
Through our talent strategy, our goal is to provide all employees with equitable access to the development and career opportunities that a global company, like Cummins, enables. Competitive Pay and Benefits To attract and retain the best employees, we focus on providing progressive, competitive pay and benefits.
PACCAR is our largest customer, accounting for 16 percent of our consolidated net sales in 2023, 16 percent in 2022 and 15 percent in 2021. We have long-term supply agreements with PACCAR for our heavy-duty and medium-duty engines and aftertreatment systems.
PACCAR is our largest customer, accounting for 16 percent of our consolidated net sales in 2024, 16 percent in 2023 and 16 percent in 2022. We have long-term supply agreements with PACCAR for our heavy-duty and medium-duty engines and aftertreatment systems.
(2) This total represents our share of net income of our equity investees and is exclusive of royalties and interest income from our equity investees.
(3) This total represents our share of net income of our equity investees and is exclusive of royalties and interest income from our equity investees.
Bush (49) Vice President and President—Power Systems (2022) Vice President—Cummins Sales & Service North America (2017-2022) Amy R.
Bush (50) Vice President and President—Power Systems (2022) Vice President—Cummins Sales & Service North America (2017-2022) Amy R.
Collectively, our net sales to these four customers, including PACCAR, were 37 percent of our consolidated net sales in 2023, 36 percent in 2022 and 33 percent in 2021.
Collectively, our net sales to these four customers, including PACCAR, were 36 percent of our consolidated net sales in 2024, 37 percent in 2023 and 36 percent in 2022.
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.
In September 2023, our Accelera business signed an agreement to form a joint venture, Amplify Cell Technologies LLC, with Daimler Truck, 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.
Research and development expenses, net of contract reimbursements, were $1.4 billion in 2023, $1.2 billion in 2022 and $1.1 billion in 2021. Contract reimbursements were $81 million, $110 million and $104 million in 2023, 2022 and 2021, respectively. ENVIRONMENTAL SUSTAINABILITY We are committed to making people's lives better by powering a more prosperous world.
Research and development expenses, net of contract reimbursements, 12 Table of Contents were $1.4 billion in 2024, $1.4 billion in 2023 and $1.2 billion in 2022. Contract reimbursements were $72 million, $81 million and $110 million in 2024, 2023 and 2022, respectively. ENVIRONMENTAL SUSTAINABILITY We are committed to making people's lives better by powering a more prosperous world.
The principal customers of our heavy-duty truck engines include truck manufacturers such as PACCAR, Traton and Daimler. The principal customers of our medium-duty truck and bus engines include truck manufacturers such as Daimler, Traton and PACCAR.
The principal customers of our heavy-duty truck engines include truck manufacturers such as PACCAR Inc. (PACCAR), Traton Group (Traton) and Daimler Trucks AG (Daimler). The principal customers of our medium-duty truck and bus engines include truck manufacturers such as Daimler, Traton and PACCAR.
We manufacture a wide variety of engine products including: • Engines with a displacement range of 2.8 to 15 liters and horsepower ranging from 48 to 715 and • New parts and service, as well as remanufactured parts and engines, primarily through our extensive distribution network.
We manufacture a wide variety of engine products including: • Engines with a displacement range of 2.8 to 15 liters and horsepower ranging from 48 to 715; and • New and remanufactured parts and engines, which are sold and serviced primarily through our extensive distribution network.
We will continue to make investments to develop new products and improve our current technologies to meet future emission standards around the world, improvements in fuel economy performance of diesel and natural gas-powered engines and related components, as well as development activities around hydrogen engine solutions, battery electric, fuel cell electric and hydrogen production technologies.
We will continue to make investments to develop new products and improve our current technologies to meet future emission standards around the world, improvements in fuel economy performance of diesel and natural gas-powered engines and related components, as well as development activities around electrified power systems with innovative components and systems including battery and electric power technologies and hydrogen production technologies.
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.
We recorded a charge of $2.0 billion in the fourth quarter of 2023 to resolve the matters addressed by the Settlement Agreements involving approximately one million of our pick-up truck applications in the U.S.
Barner (66) Vice President—Chief Administrative Officer (2021) Vice President—Chief Administrative Officer and Corporate Secretary (2021-2023) Vice President—General Counsel and Corporate Secretary (2020-2021) Vice President—General Counsel (2012-2020) Marvin Boakye (50) Vice President—Chief Human Resources Officer (2022) Chief People and Diversity Officer—Papa John's International (2019-2022) Chief People Officer—Papa John's International (2019) Vice President, Human Resources—Andeavor (2017-2019) Jenny M.
Barner (67) Vice President—Chief Administrative Officer (2021) Vice President—Chief Administrative Officer and Corporate Secretary (2021-2023) Vice President—General Counsel and Corporate Secretary (2020-2021) Vice President—General Counsel (2012-2020) Marvin Boakye (51) Vice President—Chief Human Resources Officer (2022) Chief People and Diversity Officer—Papa John's International (2019-2022) Jenny M.
The SEC maintains an internet site that contains annual, quarterly and current reports, proxy and information statements and other information that Cummins files electronically with the SEC. The SEC's internet site is www.sec.gov. Our internet site is www.cummins.com.
AVAILABLE INFORMATION We file annual, quarterly and current reports, proxy statements and other information electronically with the Securities and Exchange Commission (SEC). The SEC maintains an internet site that contains annual, quarterly and current reports, proxy and information statements and other information that Cummins files electronically with the SEC. The SEC's internet site is www.sec.gov. Our internet site is www.cummins.com.
Our workforce strategy cultivates an environment where all employees, regardless of employee type and location, know what is expected of them, are rewarded based on performance and have access to differentiated experiences, tools and leadership coaching to help them develop.
Our workforce strategy aims to cultivate an environment where all employees, regardless of employee type and location, know what is expected of them, are rewarded for their performance based on fair and equitable reviews, and have access to differentiated experiences, tools and leadership coaching to help them develop.
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.
As part of the Settlement Agreements, 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 other payments. Failure to comply with the terms and conditions of the Settlement Agreements subjects us to stipulated penalties.
Diversity, Equity and Inclusion At Cummins, we leverage the strength of our diverse, global workforce to drive innovation and deliver superior solutions for our customers and communities. We do this through our commitment to fostering an accountable culture that champions our vision of a workforce mirroring the diversity of the communities we serve.
We leverage the strength of our broadly diverse, global workforce to drive innovation and business results and deliver superior solutions for our customers and communities. We do this through our commitment to fostering an accountable culture that champions our vision of a workforce mirroring the communities we serve.
Lamb-Hale (57) Vice President—Chief Legal Officer and Corporate Secretary (2023) Vice President—Chief Legal Officer (2022-2023) Vice President—General Counsel (2021-2022) Managing Director and Washington, DC City Leader—Kroll (2020-2021) Managing Director—Kroll (2016-2020) Brett Merritt (47) Vice President and President—Engine Business (2024) Vice President—On-Highway Engine Business and Vice President of Strategic Customer Relations (2023) Vice President—On-Highway Engine Business (2017-2023) Srikanth Padmanabhan (59) Executive Vice President and President—Operations (2024) Vice President and President—Engine Business (2016-2023) Livingston L.
Lamb-Hale (58) Vice President—Chief Legal Officer and Corporate Secretary (2023) Vice President—Chief Legal Officer (2022-2023) Vice President—General Counsel (2021-2022) Managing Director and Washington, DC City Leader—Kroll (2020-2021) Managing Director—Kroll (2016-2020) Brett Merritt (48) Vice President and President—Engine Business (2024) Vice President—On-Highway Engine Business and Vice President of Strategic Customer Relations (2023) Vice President—On-Highway Engine Business (2017-2023) Srikanth Padmanabhan (60) Executive Vice President and President—Operations (2024) Vice President and President—Engine Business (2016-2023) Mark A.
In many cases, these competing distributors or dealers are owned by, or affiliated with the companies that are listed as competitors of the Components, Engine or Power Systems segments. These competitors vary by geographical location and application market.
Across these regions, our locations compete with distributors or dealers that offer similar products. In many cases, these competing distributors or dealers are owned by, or affiliated with the companies that are listed as competitors of the Engine, Components or Power Systems segments. These competitors vary by geographical location and application market.
Our largest manufacturing joint ventures are based in China and are included in the list below. Our engine manufacturing joint ventures are supplied by our Components segment in the same manner as it supplies our wholly-owned Engine segment and Power Systems segment manufacturing facilities.
Our 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.
We encourage leaders to connect our people and their work to our mission, vision, values, brand promise and strategies of the company, motivating and giving them a higher sense of purpose. We have designed leadership and talent development programs for employees ranging from the manufacturing floor and technicians through middle management and executives.
We encourage leaders to connect our people and their work to our mission, vision, values, brand promise and growth strategy, thus, motivating employees and hopefully helping them feel a higher sense of purpose in their contributions. We have designed leadership and talent development programs for employees ranging from the manufacturing floor and technicians through to middle management and executives.
Employee Safety and Wellness Cummins is committed to being world-class in health and safety. We strive to ensure a hazard-free workplace with zero incidents. We are committed to removing conditions that cause personal injury or occupational illness and we make decisions and promote behaviors that protect others from risk of injury.
Employee Safety and Wellness Cummins is committed to being world-class in health and safety. We are committed to removing conditions that cause personal injury or occupational illness, and we make decisions and promote behaviors that protect employees from risk of injury.
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).
Department of Justice (DOJ) and the California Attorney General’s Office to resolve certain regulatory civil claims regarding our emissions certification and compliance process for certain engines primarily used in pick-up truck applications in the U.S., which became final and effective in April 2024 (collectively, the Settlement Agreements).
The costs for these remediation projects are not expected to be material. HUMAN CAPITAL RESOURCES At December 31, 2023, we employed approximately 75,500 persons worldwide. Approximately 21,900 of our employees worldwide were represented by various unions under collective bargaining agreements that expire between 2024 and 2028.
The costs for these remediation projects are not expected to be material. 14 Table of Contents HUMAN CAPITAL RESOURCES At December 31, 2024, we employed approximately 69,600 persons worldwide. Approximately 22,000 of our employees worldwide were represented by various unions under collective bargaining agreements that expire between 2025 and 2029.
Engine Segment Engine segment sales and EBITDA as a percentage of consolidated results were: Years ended December 31, 2023 2022 2021 Percent of consolidated net sales (1) 28 % 31 % 33 % Percent of consolidated EBITDA (1) 32 % 38 % 39 % (1) Measured before intersegment eliminations The Engine segment manufactures and markets a broad range of diesel and natural gas-powered engines under the Cummins brand name, as well as certain customer brand names, for the heavy-duty truck, medium-duty truck and bus, light-duty automotive and off-highway markets.
See NOTE 25, "OPERATING SEGMENTS," to our Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Consolidated Statements of Net Income . 5 Table of Contents Engine Segment Engine segment sales and EBITDA as a percentage of consolidated results were: Years ended December 31, 2024 2023 2022 Percent of consolidated net sales (1) 28 % 28 % 31 % Percent of consolidated EBITDA (1) 33 % 32 % 38 % (1) Measured before intersegment eliminations The Engine segment manufactures and markets a broad range of diesel and natural gas-powered engines under the Cummins brand name, as well as certain customer brand names, for the heavy-duty truck, medium-duty truck and bus, light-duty automotive and off-highway markets.
We are committed to cultivating a learning culture by providing employees and their managers with the tools and 14 Table of Contents resources to have meaningful conversations, envision and plan their career, thrive in their work and navigate in a large global organization.
We are promoting a learning culture by providing employees and their managers with tools and resources to have meaningful development conversations, envision and plan their careers, thrive in their work and navigate in a large global organization.
We also provide diesel engines for Class A motor homes (RVs), primarily in North America. • Light-duty automotive (pick-up and light commercial vehicle (LCV)) - We manufacture 105 to 400 horsepower diesel engines, including engines for the pick-up truck market for Stellantis in North America and LCV markets in Latin America and China. • Off-highway - We manufacture diesel engines that range from 48 to 715 horsepower serving key global markets including construction, mining, marine, rail, oil and gas, defense and agriculture and also the power generation business for standby, mobile and distributed power generation solutions throughout the world.
(Stellantis) in North America and LCV markets in Latin America and China. • Off-highway (industrial engines) - We manufacture diesel engines that range from 48 to 715 horsepower serving key global markets including construction, mining, marine, rail, oil and gas, defense and agriculture and also the power generation business for standby, mobile and distributed power generation solutions throughout the world.
Other important elements of our sourcing strategy include the following: • expanding risk management scope to include sub-tier value chain suppliers for critical components; • broadening dual and multi-sourcing where applicable; • selecting and managing suppliers to comply with our Supplier Code of Conduct; and • assuring our suppliers comply with our prohibited and restricted materials policy.
Other important elements of our sourcing strategy include the following: • expanding risk management scope to include sub-tier value chain suppliers for critical components; • broadening dual and multi-sourcing where applicable; • selecting and managing suppliers to comply with our Supplier Code of Conduct; and • assuring our suppliers comply with our prohibited and restricted materials policy. 11 Table of Contents Disruption risk in certain categories of our supply chains exist and could negatively impact our ability to meet customer demand.
We primarily serve markets in the Americas, China, India and Europe. Customers of the Components segment generally include the Engine, Distribution, Power Systems and Accelera segments, joint ventures including Tata Cummins Ltd. and Beijing Foton Cummins Engine Co., Ltd., truck manufacturers and other OEMs, many of which are also customers of the Engine segment, such as PACCAR Inc.
Customers of the Components segment generally include the Engine, Distribution, Power Systems and Accelera segments, joint ventures including Tata Cummins Ltd., Dongfeng Cummins Engine Co., Ltd. and Beijing Foton Cummins Engine Co., Ltd., truck manufacturers and other OEMs, many of which are also customers of the Engine segment, such as PACCAR, Daimler, Volvo, Traton, Tata Motors Ltd.
We sell our industrial engines to manufacturers of construction and agricultural equipment including Hyundai Heavy Industries, Komatsu, Zoomlion Heavy Industry Science & Technology Co., Ltd, Xuzhou Construction Machinery Group, Guangxi LiuGong Machinery Co., Ltd, JLG Industries, Inc. and Sany Group. In the Engine segment, our competitors vary from country to country, with local manufacturers generally predominant in each geography.
(Komatsu), Zoomlion Heavy Industry Science & Technology Co., Ltd, Xuzhou Construction Machinery Group, Guangxi LiuGong Machinery Co., Ltd, JLG Industries, Inc. and Sany Group. In the Engine segment, our competitors vary from country to country, with local manufacturers generally predominant in each geography. Other independent engine manufacturers include Weichai Power Co. Ltd. and Deutz AG.
The joint venture is a distributor that offers the full range of our products and services to customers and end-users in Chile and Peru. See further discussion of our distribution network under the Distribution segment section above. Non-Wholly-Owned Subsidiaries • Atmus Filtration Technologies Inc.
Distribution Entity Komatsu Cummins Chile, Ltda. - Komatsu Cummins Chile, Ltda. is a joint venture with Komatsu America Corporation. The joint venture is a distributor that offers the full range of our products and services to customers and end-users in Chile and Peru. See further discussion of our distribution network under the Distribution segment section above.
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 13 Table of Contents litigation in connection with these matters.
In connection with our announcement of our entry into the agreement in principle, we became subject to shareholder, consumer and third-party litigation regarding the matters covered by the Settlement Agreements, and we may become subject to additional litigation in connection with these matters. See NOTE 14, "COMMITMENTS AND CONTINGENCIES," to our Consolidated Financial Statements.
Our programs target the market for competitiveness and sustainability while ensuring that we honor our core values. We provide benefit programs with the goal of improving the physical, emotional, social and financial wellness of our employees throughout their lifetime. Some examples include base and variable pay, medical, paid time off, retirement saving plans and employee stock purchase plans.
Our programs target the market for competitiveness and sustainability while ensuring that we honor our core values. We provide benefit programs with the goal of improving the physical, mental, emotional, social and financial wellness of our employees throughout their lifetime.
We review wages globally as we continuously work to ensure we are fair, equitable, competitive and can attract and retain the best talent.
We also perform annual compensation studies to assess market movement, pay equity and living wages. We review wages globally as we continuously work to ensure we are fair, equitable, competitive and can attract and retain the best talent.
These reports and data book are not incorporated into this Form 10-K by reference. We continue to articulate our positions on key public policy issues and on a wide range of environmental issues.
We also published a report in accordance with the Task Force on Climate-Related Financial Disclosures framework. These reports are not incorporated into this Form 10-K by reference. We continue to articulate our positions on key public policy issues and on a wide range of environmental issues.
Other independent engine manufacturers include Weichai Power Co. Ltd. and Deutz AG. Truck OEMs may also elect to produce their own engines, and we must provide competitive products to win and keep their business.
Truck OEMs may also elect to produce their own engines, and we must provide competitive products to win and keep their business.
We are actively engaged around the world to promote science-based climate policies by working with regulatory, industry and other stakeholders, including joining advocacy groups and testifying before legislators and regulators. We will continue to work in partnership with others to advocate for tough, clear and enforceable regulations around the globe to address air and GHG emissions.
We are actively engaged around the world to promote science-based climate policies by working with regulatory, industry and other stakeholders, including joining advocacy groups and testifying before legislators and regulators.
Stoner (46) Vice President—China ABO (2020) General Manager—Partnerships and EBU China Joint Venture Business (2018-2020) Jeffrey T.
Smith (57) Vice President—Chief Financial Officer (2019) Nathan R. Stoner (47) Vice President—China ABO (2020) General Manager—Partnerships and EBU China Joint Venture Business (2018-2020) Jeffrey T.
We serve both OEM first fit and retrofit customers. • Engine components - We design, manufacture and market turbocharger, fuel system and valvetrain technologies for light-duty, mid-range, heavy-duty and high-horsepower markets across North America, China, Europe and India. • Atmus - We design, manufacture and sell filters, coolants and chemical products.
Our emission solutions business primarily serves markets in North America, Europe, China, India, Brazil and Asia Pacific. We serve both OEM first fit and retrofit customers. • Components and software - We design, manufacture and market turbocharger, fuel system and valvetrain technologies for light-duty, mid-range, heavy-duty and high-horsepower markets.
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.
Our products range from advanced diesel, natural gas, electric and hybrid powertrains and powertrain-related components including aftertreatment, turbochargers, fuel systems, valvetrain technologies, controls systems, air handling systems, automated transmissions, axles, drivelines, brakes, suspension systems, electric power generation systems, electrified power systems with innovative components and subsystems, including battery, fuel cell and electric power technologies and hydrogen production technologies.
Agreements with most OEMs contain bilateral termination provisions giving either party the right to terminate in the event of a material breach, change of control or insolvency or bankruptcy of the other party.
Agreements with most OEMs contain bilateral termination provisions giving either party the right to terminate in the event of a material breach, change of control or insolvency or bankruptcy of the other party. BACKLOG Disruption risk in certain categories of our supply chains exist and could negatively impact our ability to meet customer demand.
We design and/or manufacture our strategic components used in or with our engines, power generation units and Accelera products. Key suppliers are managed through long-term supply agreements that seek to secure capacity, delivery and quality and to assure cost requirements are met over an extended period.
Key suppliers are managed through long-term supply agreements that seek to secure capacity, delivery and quality and to assure cost requirements are met over an extended period.
Our products primarily compete on the basis of performance, price, total cost of ownership, fuel economy, emissions compliance, speed of delivery, quality and customer support. We use segment EBITDA as the basis for the Chief Operating Decision Maker to evaluate the performance of each of our reportable operating segments.
Our products primarily compete on the basis of performance, price, total cost of ownership, fuel economy, emissions compliance, speed of delivery, quality and customer support.
We started reporting progress on these nine goals, most of which have a baseline year of 2018, in 2022. Key actions in 2023 included increasing planned capital spending to meet the 2030 facility reduction goals for GHG emissions, water and waste; improving GHG measurement and modeling for product emissions; and identifying technology portfolio opportunities toward progress of product GHG reduction.
Key actions in 2024 included completing the planned capital spending to meet the 2030 facility reduction goals for GHG emissions, water and waste; improving GHG measurement and modeling for product emissions; and identifying technology portfolio opportunities toward progress of product GHG reduction. In 2024, we also initiated a planned midpoint review of our 2030 sustainability goals.
This commitment starts at the top with our Board and permeates throughout our organization as everyone plays a role in nurturing inclusive environments where all employees can reach their full potential and thrive. This is exemplified by the composition of the Board and Cummins Leadership Team.
This commitment starts at the top with our Board and permeates throughout our organization as everyone plays a role in nurturing inclusive environments where all employees can reach their full potential and thrive. Our strong focus on cultivating an inclusive culture underscores our belief that a diverse and inclusive workforce is a core value and competitive advantage for Cummins.
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.
This joint venture manufactures several models of our heavy-duty and high-horsepower diesel engines primarily serving the industrial and stationary power markets in China. • 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.
Certain types of construction equipment and industrial applications are also served by these engine families. • Chongqing Cummins Engine Company, Ltd. - Chongqing Cummins Engine Company, Ltd. is a joint venture in China with Chongqing Machinery and Electric Co. Ltd.
Certain types of construction equipment and industrial applications are also served by these engine families. 10 Table of Contents • Tata Cummins, Ltd. - Tata Cummins, Ltd. 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.
In conjunction with the realignment of certain businesses during the first quarter of 2023, the Components segment is organized around the following businesses: • Axles and brakes - We design, manufacture and supply drivetrain systems, including axles, drivelines, brakes and suspension systems primarily for commercial vehicle and industrial applications.
The change had no impact on our consolidated results. The Components segment is organized around the following businesses: • Drivetrain and braking systems - We design, manufacture and supply drivetrain systems, including axles, drivelines, brakes and suspension systems primarily for commercial vehicle and industrial applications.
The principal customers of our light-duty on-highway engines are Anhui Jianghuai Automobile Group Co., Ltd., Volkswagen Caminhões e Ônibus and China National Heavy Duty Truck Group. The principal customer of our pick-up on-highway engines is Stellantis.
The principal customers of our light-duty automotive engines are Stellantis, Anhui Jianghuai Automobile Group Co., Ltd., Volkswagen Caminhões e Ônibus and China National Heavy Duty Truck Group. We sell our industrial engines to manufacturers of construction and agricultural equipment including Hyundai Heavy Industries, Komatsu Ltd.
We also provide diverse benefit programs that are aligned with our values and focused on supporting employees and their families based on their unique needs, some of which include the following: healthcare plans that offer lower out-of-pocket costs and higher employer-paid Health Savings Account contributions to lower wage earners; paid parental leave for primary and secondary caregivers; travel benefits and advanced medical services to support complex health care needs; global employee assistance programs with diverse providers; and a global mental health program, all designed to meet employee needs from race-related trauma to financial planning to transgender transition support and more.
We also provide an array of benefits as part of our total rewards program that are aligned with our values and focused on supporting employees and their families based on their unique needs, some of which include the following: healthcare plans that are tiered by salary, to ensure affordability to all of our employees; paid parental leave for primary and secondary caregivers; travel benefits and advanced medical services to support complex health care needs; global employee assistance programs; and a global mental health program, all designed to support employees on the journey to well-being.
ENVIRONMENTAL COMPLIANCE Agreement in Principle In December 2023, we announced that we reached an agreement in principle with the U.S. Environmental Protection Agency (EPA), the California Air Resources Board (CARB), the Environmental and Natural Resources Division of the U.S.
See NOTE 21, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," to our Consolidated Financial Statements for additional information. Settlement Agreements In December 2023, we announced that we reached an agreement in principle with the U.S. Environmental Protection Agency (EPA), the California Air Resources Board (CARB), the Environmental and Natural Resources Division of the U.S.
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.
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. We made $1.9 billion of payments required by the Settlement Agreements in the second quarter of 2024.
We increased frequency of formal and informal supplier engagement to address potentially impactful supply base constraints and enhanced collaboration to develop specific countermeasures to mitigate risks. PATENTS AND TRADEMARKS We own or control a significant number of patents and trademarks relating to the products we manufacture. These patents and trademarks were granted and registered over a period of years.
PATENTS AND TRADEMARKS We own or control a significant number of patents and trademarks relating to the products we manufacture. These patents and trademarks were granted and registered over a period of years.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

47 edited+13 added−16 removed94 unchanged
Biggest changeOur business benefits from free trade agreements, such as the United States-Mexico-Canada Agreement and the U.S. trade relationship with China, Brazil and France and efforts to withdraw from, or substantially modify such agreements or arrangements, in addition to the implementation of more restrictive trade policies, such as more detailed inspections, higher tariffs (including, but not limited to, additional tariffs on the import of steel or aluminum and imposition of new or retaliatory tariffs against certain countries, including based on developments in U.S. and China relations), import or export licensing requirements and exchange controls or new barriers to entry, could limit our ability to capitalize on current and future growth opportunities in international markets, impair our ability to expand the business by offering new technologies, products and services, and could adversely impact our production costs, customer demand and our relationships with customers and suppliers.
Biggest changeMore restrictive trade policies, such as efforts to withdraw from or substantially modify such agreements or arrangements, including, without limitation, higher tariffs or new barriers to entry could adversely impact our production costs, customer demand and our relationships with customers and suppliers.
Any of these consequences could have a material adverse effect on our results of operations, financial condition and cash flows. Embargoes, sanctions and export controls imposed by the U.S. and other governments restricting or prohibiting transactions with certain persons or entities, including financial institutions, to certain countries or regions, or involving certain products, limit the sales of our products.
Any of these consequences could have a material adverse effect on our results of operations, financial condition and cash flows. Embargoes, sanctions and export controls imposed by the U.S. and other governments restricting or prohibiting transactions with certain persons or entities, including financial institutions, to certain countries or regions, or involving certain products, could limit the sales of our products.
Developing engines and components to meet more stringent and changing regulatory requirements, with different implementation timelines and emission requirements, makes developing engines efficiently for multiple markets complicated and could result in substantial additional costs that may be difficult to recover in certain markets.
Developing engines and components to meet more stringent and continuously changing regulatory requirements, with different implementation timelines and emission requirements, makes developing engines efficiently for multiple markets complicated and could result in substantial additional costs that may be difficult to recover in certain markets.
We may be adversely impacted by the effects of climate change and may incur increased costs and experience other impacts due to new or more stringent climate change regulations, accords, mitigation efforts, GHG regulations or other legislation designed to address climate change.
GENERAL We may be adversely impacted by the effects of climate change and may incur increased costs and experience other impacts due to new or more stringent climate change regulations, accords, mitigation efforts, GHG regulations or other legislation designed to address climate change.
Delays may be caused by factors affecting our suppliers (including, but not limited to, raw material availability, capacity constraints, port congestion, labor disputes or unrest, shortages of labor, economic downturns, availability of credit, impaired financial condition, sanctions/tariffs, pandemic restrictions, energy inflation/availability, suppliers' allocations to other purchasers, weather emergencies, natural disasters, acts of government or acts of war or terrorism).
Delays may be caused by factors affecting our suppliers (including, but not limited to, raw material availability, capacity constraints, port congestion, labor disputes or unrest, shortages of labor, economic downturns, availability of credit, impaired financial condition, sanctions/tariffs, energy inflation/availability, suppliers' allocations to other purchasers, weather emergencies, natural disasters, acts of government or acts of war or terrorism).
Given our commitment to certain ESG principles, we actively manage these issues and have established and publicly announced certain goals, commitments and targets which we may refine, or even expand further, in the future. These goals, commitments and targets reflect our current plans and aspirations and are not guarantees that we will be able to achieve them.
Given our commitment to certain sustainability principles, we actively manage these issues and have established and publicly announced certain goals, commitments and targets which we may refine, or even expand further, in the future. These goals, commitments and targets reflect our current plans and aspirations and are not guarantees that we will be able to achieve them.
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. See NOTE 15, "COMMITMENTS AND CONTINGENCIES," to the Consolidated Financial Statements for additional information.
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. See NOTE 14, "COMMITMENTS AND CONTINGENCIES," to our Consolidated Financial Statements for additional information.
In recent years, there has been an increased focus from stakeholders on ESG matters, including GHG emissions and climate-related risks, renewable energy, water stewardship, waste management, diversity, equity and inclusion, responsible sourcing and supply chain, human rights and social responsibility.
In recent years, there has been an increased focus from stakeholders on sustainability matters, including GHG emissions and climate-related risks, renewable energy, water stewardship, waste management, diversity, equity and inclusion, responsible sourcing and supply chain, human rights and social responsibility.
In addition, since our financial statements are denominated in U.S. dollars, changes in foreign currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our results of operations, financial condition and cash flows. We also face risks arising from the imposition of foreign exchange controls and currency devaluations.
In addition, since our financial statements are denominated in U.S. dollars, changes in foreign currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our results of operations, financial condition and cash flows. 25 Table of Contents We also face risks arising from the imposition of foreign exchange controls and currency devaluations.
Any such loss or failure could have material adverse effects on our results of operations, financial condition and cash flows. Our information technology environment and our products are exposed to potential security breaches or other disruptions which may adversely impact our competitive position, reputation, results of operations, financial condition and cash flows.
Any such loss or failure could have material adverse effects on our results of operations, financial condition and cash flows. Our IT environment and our products are exposed to potential security breaches or other disruptions which may adversely impact our competitive position, reputation, results of operations, financial condition and cash flows.
As the result of changing market conditions, a large percentage of our salaried employees continue to work remotely full or part-time. This remote working environment may pose a heightened risk for security breaches or other disruptions of our information technology environment.
As the result of changing market conditions, a large percentage of our salaried employees continue to work remotely full or part-time. This remote working environment may pose a heightened risk for security breaches or other disruptions of our IT environment.
Rising interest rates may increase our cost of capital which could have material adverse effects on our financial condition and cash 23 Table of Contents flows. Rising interest rates could also impact certain goodwill assets requiring non-cash impairment charges which could have a material adverse impact on our earnings.
Rising interest rates may increase our cost of capital which could have material adverse effects on our financial condition and cash flows. Rising interest rates could also impact certain goodwill assets requiring non-cash impairment charges which could have a material adverse impact on our earnings.
We rely on the capacity, reliability and security of our information technology environment and data security infrastructure in connection with various aspects of our business activities. We also rely on our ability to expand and continually update these technologies and related infrastructure in response to the changing needs of our business.
We rely on the capacity, reliability and security of our IT environment and data security infrastructure in connection with various aspects of our business activities. We also rely on our ability to expand and continually update these technologies and related infrastructure in response to the changing needs of our business.
Recent years have seen an increase in the development and enforcement of laws regarding trade compliance and anti-corruption, such as the U.S. Foreign Corrupt Practices Act and similar laws from other countries, as well as new regulatory requirements regarding data privacy, such as the European Union General Data Protection Regulation.
Recent years have seen an increase in the development and enforcement of laws regarding trade compliance and anti-corruption, such as the U.S. Foreign Corrupt Practices Act and similar laws from other countries and expected global sustainability regulations, as well as new regulatory requirements regarding data privacy, such as the European Union General Data Protection Regulation.
In addition, to the extent the competition does not correspond to overall growth in demand, we may see little or no benefit from this type of expansion by our emerging market customers. Failure to meet environmental, social and governance (ESG) expectations or standards, or to achieve our ESG goals, could adversely affect our business, results of operations and financial condition.
In addition, to the extent the competition does not correspond to overall growth in demand, we may see little or no benefit from this type of expansion by our emerging market customers. Failure to meet sustainability expectations or standards, or to achieve our sustainability goals, could adversely affect our business, results of operations and financial condition.
Regulatory agencies are making certification and compliance with emissions and noise standards more stringent and subjecting diesel engine products to an increasing level of scrutiny. In addition, failure to comply with the terms and conditions of the Agreement in Principle will subject us to stipulated penalties.
Regulatory agencies are making certification and compliance with emissions and noise standards more stringent and subjecting diesel engine products to an increasing level of scrutiny. In addition, failure to comply with the terms and conditions of the Settlement Agreements will subject us to stipulated penalties.
Similarly, any strategic divestiture of a product line or business may reduce our revenue and earnings, reduce the diversity of our business, result in substantial costs and expenses and cause disruption to our employees, customers, vendors and communities in which we operate.
Similarly, any strategic divestiture of a product line or business or exit of a product line or product category may reduce our revenue and earnings, reduce the diversity of our business, result in material costs and expenses and cause disruption to our employees, customers, vendors and communities in which we operate.
See NOTE 14, "PRODUCT WARRANTY LIABILITY" to the Consolidated Financial Statements for additional information. Our products are exposed to variability in material and commodity costs.
See NOTE 13, "PRODUCT WARRANTY LIABILITY" to our Consolidated Financial Statements for additional information. Our products are exposed to variability in material and commodity costs.
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.
In connection with our announcement of our entry into the agreement in principle, we became subject to shareholder, consumer and third-party litigation regarding the matters covered by the Settlement Agreements, and we may become subject to additional litigation in connection with these matters.
Part of our strategic plan is to improve our revenue growth, gross margins and earnings by exploring the repositioning of our portfolio of product line offerings through the pursuit of potential strategic acquisitions and/or divestitures to provide future strategic, financial and operational benefits and improve shareholder value.
Part of our strategic plan is to improve our revenue growth, gross margins and earnings by exploring the repositioning of our portfolio of product line offerings through the pursuit of potential strategic acquisitions, divestitures and/or exiting the production of certain product lines or product categories to provide future strategic, financial and operational benefits and improve shareholder value.
These risks include: • public health crises, including the spread of a contagious disease, such as future pandemics or epidemics, quarantines or shutdowns related to public health crises, and other catastrophic events; • economic and political instability, including international conflicts, war, acts of terrorism or the threat thereof, political or labor unrest, civil unrest, riots or insurrections; • the difficulty of enforcing agreements and collecting receivables through foreign legal systems; • trade protection measures and import or export licensing requirements; • the imposition of taxes on foreign income and tax rates in certain foreign countries that exceed those in the U.S.; • the imposition of tariffs, exchange controls or other restrictions; • difficulty in staffing and managing widespread operations and the application of foreign labor regulations; • required compliance with a variety of foreign laws and regulations; and 24 Table of Contents • changes in general economic and political conditions, including changes in relationship with the U.S., in countries where we operate, particularly in China and emerging markets.
These risks include: • economic and political instability, including international conflicts, war, acts of terrorism or the threat thereof, political or labor unrest, civil unrest, riots, insurrections or trade wars; • potential changes to, uncertainty around or repeal of certain environmental laws and regulations, potentially slowing adoption of technologies we are investing in and developing; • the difficulty of enforcing agreements and collecting receivables through foreign legal systems; • trade protection measures and import or export licensing requirements; • the imposition of taxes on foreign income and tax rates in certain foreign countries that exceed those in the U.S.; • the imposition of tariffs, exchange controls or other restrictions; • difficulty in staffing and managing widespread operations and the application of foreign labor regulations; • public health crises, including the spread of a contagious disease, such as future pandemics or epidemics, quarantines or shutdowns related to public health crises, and other catastrophic events; • required compliance with a variety of foreign laws and regulations; and • changes in general economic and political conditions, including changes in relationship with the U.S., in countries where we operate, particularly in China and emerging markets.
These threats could result in unauthorized public disclosures of information, create financial liability, subject us to legal or regulatory sanctions, disrupt our ability to conduct our business, result in the loss of intellectual property or damage our reputation with customers, dealers, suppliers and other stakeholders.
Increasing use of artificial intelligence may increase these risks. These threats could result in unauthorized public disclosures of information, create financial liability, subject us to legal or regulatory sanctions, disrupt our ability to conduct our business, result in the loss of intellectual property or damage our reputation with customers, dealers, suppliers and other stakeholders.
We are experiencing supply chain disruptions and related challenges throughout the supply chain. We single source a number of parts and raw materials critical to our business operations. Any delay in our suppliers' deliveries may adversely affect our operations at multiple manufacturing locations, forcing us to seek alternative supply sources to avoid serious disruptions.
We single source a number of parts and raw materials critical to our business operations. Any delay in our suppliers' deliveries may adversely affect our operations at multiple manufacturing locations, forcing us to seek alternative supply sources to avoid serious disruptions.
Furthermore, it is possible that we may not be successful in developing segment-leading electrified or alternate fuel powertrains and some of our existing customers could choose to develop their own, or source from other manufacturers, and any of these factors could have a material adverse impact on our results of operations, financial condition and cash flows.
Furthermore, it is possible that we may not be successful in developing segment-leading electrified or alternate fuel powertrains and some of our existing customers could choose to develop their own, or source from other manufacturers, and any of these factors could have a material adverse impact on our results of operations, financial condition and cash flows. 21 Table of Contents Lower-than-anticipated market acceptance of our new or existing products or services could have a material adverse impact on our results of operations, financial condition and cash flows.
Approximately one third of our equity, royalty and interest income from investees is from three of our 50 percent owned joint ventures in China - Beijing Foton Cummins Engine Co., Ltd., Dongfeng Cummins Engine Company, Ltd. and Chongqing Cummins Engine Company, Ltd.
In 2024, more than forty percent of our equity, royalty and interest income from investees is from three of our 50 percent owned joint ventures in China - Beijing Foton Cummins Engine Co., Ltd., Dongfeng Cummins Engine Company, Ltd. and Chongqing Cummins Engine Company, Ltd.
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. Failure to comply with the terms and conditions of the Agreement in Principle will also subject us to further stipulated penalties.
This fourth quarter of 2023 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. Failure to comply with the terms and conditions of the Settlement Agreements subjects us to stipulated penalties.
Also, our ability to effectively integrate any potential acquisition into our existing business and culture may not be successful, which could jeopardize future financial and operational performance for the combined businesses.
Any acquisition may not be accretive to us for a significant period of time following the completion of such acquisition. Also, our ability to effectively integrate any potential acquisition into our existing business and culture may not be successful, which could jeopardize future financial and operational performance for the combined businesses.
Such risks and uncertainties include: • reputational harm, including damage to our relationships with customers, suppliers, investors, governments or other stakeholders; • adverse impacts on our ability to sell and manufacture products; • the success of our collaborations with third parties; • increased risk of litigation, investigations or regulatory enforcement actions; • unfavorable ESG ratings or investor sentiment; • diversion of resources and increased costs to control, assess and report on ESG metrics; • our ability to achieve our goals, commitments and targets within the timeframes announced; • access to and increased cost of capital and • adverse impacts on our stock price. 25 Table of Contents Any failure, or perceived failure, to meet evolving stakeholder expectations and industry standards or achieve our ESG goals, commitments and targets could have a material adverse effect on our business, results of operations and financial condition.
Such risks and uncertainties include: • reputational harm, including damage to our relationships with customers, suppliers, investors, governments or other stakeholders; • adverse impacts on our ability to sell and manufacture products; • the success of our collaborations with third parties; • increased risk of litigation, investigations or regulatory enforcement actions; • unfavorable sustainability ratings or investor sentiment; • diversion of resources and increased costs to control, assess and report on sustainability metrics; • our ability to achieve our goals, commitments and targets within the timeframes announced; • access to and increased cost of capital and • adverse impacts on our stock price.
Material, transportation, labor and other cost inflation has impacted and could continue to impact our results of operations, financial condition and cash flows. We face the challenge of accurately aligning our capacity with our demand.
Further, the labor market for skilled manufacturing remains tight, and our labor costs have increased as a result. Material, transportation, labor and other cost inflation has impacted and could continue to impact our results of operations, financial condition and cash flows. We face the challenge of accurately aligning our capacity with our demand.
The amounts ultimately paid upon resolution of these or 19 Table of Contents subsequent tax audits could be materially different from the amounts previously included in our income tax provision and, therefore, could have a material impact on our tax provision.
The amounts ultimately paid upon resolution of these or subsequent tax audits could be materially different from the amounts previously included in our income tax provision and, therefore, could have a material impact on our tax provision. 19 Table of Contents Our global operations are subject to laws and regulations that impose significant compliance costs and create reputational and legal risk.
In addition, the current economic environment has resulted, and may continue to result, in price volatility and increased levels of inflation of many of our raw material, transportation and other costs.
In addition, the current economic environment has resulted, and may continue to result, in price volatility and increased levels of inflation of many of our raw material, transportation and other costs. In particular, increased levels of inflation, fluctuating interest rates and concerns regarding a potential economic recession may result in increased operating costs and/or decreased levels of profitability.
Strategic transactions also may have adverse effects on our existing business relationships with suppliers and customers. If required, the financing for strategic acquisitions could result in an increase in our indebtedness, dilute the interests of our shareholders or both. Any acquisition may not be accretive to us for a significant period of time following the completion of such acquisition.
Strategic transactions also may have adverse effects on our existing business relationships with suppliers and customers. 22 Table of Contents If required, the financing for strategic acquisitions could result in an increase in our indebtedness, dilute the interests of our shareholders or both.
As such, our information technology environment faces information technology security threats, such as security breaches, computer malware, ransomware attacks and other "cyber attacks," which are increasing in both frequency and sophistication, along with power outages or hardware failures.
Our operations routinely involve receiving, storing, processing and transmitting sensitive information pertaining to our business, customers, dealers, suppliers, employees and other sensitive matters. As such, our IT environment faces information technology security threats, such as security breaches, computer malware, ransomware attacks and other "cyber attacks," which are increasing in both frequency and sophistication, along with power outages or hardware failures.
Climate change may exacerbate the frequency and intensity of natural disasters and adverse weather conditions, which may cause disruptions to our operations, including disrupting manufacturing, distribution and our supply chain. Our plan to reposition our portfolio of product offerings through exploration of strategic acquisitions and divestitures may expose us to additional costs and risks.
Climate change may exacerbate the frequency and intensity of natural disasters and adverse weather conditions, which may cause disruptions to our operations, including disrupting manufacturing, distribution and our supply chain.
The impact of a significant information technology event on either our information technology environment or our products could have a material adverse effect on our competitive position, reputation, results of operations, financial condition and cash flows. We are exposed to political, economic and other risks that arise from operating a multinational business.
The impact of a significant IT event on either our IT environment or our products could have a material adverse effect on our competitive position, reputation, results of operations, financial condition and cash flows.
GOVERNMENT REGULATION While we have reached the Agreement in Principle with the EPA, CARB, DOJ and 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. and recorded a charge of $2.036 billion in the fourth quarter of 2023 in connection with the Agreement in Principle, the Agreement in Principle remains subject to final regulatory and judicial approvals.
In December 2023, we announced that we reached the agreement in principle and recorded a charge of $2.0 billion in the fourth quarter of 2023 to resolve certain regulatory civil claims regarding our emissions certification and compliance process for certain engines primarily used in pick-up truck applications in the U.S., which became final and effective in April 2024.
The development of new technologies may materially reduce the demand for our current products and services. We are investing in new products and technologies, including electrified powertrains, hydrogen production and fuel cells, for planned introduction into certain new and existing markets.
The development of new technologies may materially reduce the demand for our current products and services. We are investing in new products and technologies, including electrolyzers for hydrogen production and electrified power systems and related components and subsystems.
Furthermore, even if we are successful in defending against a claim relating to our products, claims of this nature could cause our customers to lose confidence in our products and us. GENERAL We may not realize the anticipated value or tax treatment for the anticipated full divestiture of our interest in Atmus Filtration Technologies Inc. (Atmus).
Furthermore, even if we are successful in defending against a claim relating to our products, claims of this nature could cause our customers to lose confidence in our products and us.
Failure to successfully integrate Meritor and / or realize the anticipated benefits could have a material adverse impact on our results of operations, financial condition and cash flows. We are vulnerable to raw material, transportation and labor price fluctuations and supply shortages, which impacted and could continue to impact our results of operations, financial condition and cash flows.
BUSINESS CONDITIONS / DISRUPTIONS We are vulnerable to raw material, transportation and labor price fluctuations and supply shortages, which impacted and could continue to impact our results of operations, financial condition and cash flows. We continue to experience pockets of supply chain disruptions and related challenges throughout the supply chain.
In addition, we have incurred, and likely will incur, other additional claims, costs and expenses in connection with the matters covered by the Agreement in Principle and other matters related to our compliance with emission standards for our engines, including with respect to additional regulatory action and collateral litigation related to these matters.
Department of Justice and the California Attorney General's Office to resolve certain regulatory civil claims regarding our emissions certification and compliance process for certain engines primarily used in pick-up truck applications in the U.S., we have incurred, and likely will incur, other additional claims, costs and expenses in connection with the matters covered by the Settlement Agreements and other matters related to our compliance with emission standards for our engines, including with respect to additional regulatory action and collateral litigation related to these matters.
Increasing global competition among our customers may affect our existing customer relationships and restrict our ability to benefit from some of our customers' growth. As our customers in emerging markets continue to grow in size and scope, they are increasingly seeking to export their products to other countries.
As our customers in emerging markets continue to grow in size and scope, they are increasingly seeking to export their products to other countries.
We may become subject to additional evolving regulations related to the cleanup of contaminated property, such as the EPA's proposal to designate two widely used PFAS as hazardous substances. Concern over climate change has resulted in, and could continue to result in, new legal or regulatory requirements designed to reduce or mitigate the effects of GHG emissions.
We may become subject to additional evolving regulations related to the cleanup of contaminated property, such as the EPA's proposal to designate two widely used PFAS as hazardous substances.
We cannot guarantee that we will be able to adequately adjust our manufacturing capacity in response to significant changes in customer demand, which could harm our business. If we do not accurately align our manufacturing capabilities with demand it could have a material adverse effect on our results of operations, financial condition and cash flows.
We cannot guarantee that we will be able to adequately adjust our manufacturing capacity in response to significant changes in customer demand, which could harm our business.
Additionally, we face increasing competition to develop innovative products that result in lower emissions. There can be no assurance that our products will be able to compete successfully with the products of other companies and in other markets.
There can be no assurance that our products will be able to compete successfully with the products of other companies and in other markets. 24 Table of Contents Increasing global competition among our customers may affect our existing customer relationships and restrict our ability to benefit from some of our customers' growth.
We derive significant earnings from investees that we do not directly control, with more than 50 percent of these earnings from our China-based investees. For 2023, we recognized $483 million of equity, royalty and interest income from investees, compared to $349 million in 2022.
For 2024, we recognized $395 million of equity, royalty and interest income from investees, compared to $483 million in 2023.
Our global operations are subject to laws and regulations that impose significant compliance costs and create reputational and legal risk. Due to the international scope of our operations, we are subject to a complex system of commercial and trade regulations around the world.
Due to the international scope of our operations, we are subject to additional regulatory frameworks, including a complex system of commercial and trade regulations, around the world. In some cases, foreign regulatory frameworks are more stringent or complex than similar regimes in the United States.
We may be adversely impacted by work stoppages and other labor matters. At December 31, 2023, we employed approximately 75,500 persons worldwide. Approximately 21,900 of our employees worldwide were represented by various unions under collective bargaining agreements that expire between 2024 and 2028.
Approximately 22,000 of our employees worldwide were represented by various unions under collective bargaining agreements that expire between 2025 and 2029.
Removed
In December 2023, we announced that we reached the Agreement in Principle and 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.
Added
GOVERNMENT REGULATION While we have reached Settlement Agreements with the EPA, CARB, the Environmental and Natural Resources Division of the U.S.
Removed
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.
Added
Subsequent to the second quarter of 2024, we recorded immaterial amounts related to stipulated penalties we determined to be probable and estimable. Any further non-compliance with the Settlement Agreements will likely subject us to further stipulated penalties and other adverse consequences.
Removed
BUSINESS CONDITIONS / DISRUPTIONS We may fail to successfully integrate the acquisition of Meritor and / or fail to fully realize all of the anticipated benefits, including enhanced revenue, earnings and cash flow from our acquisition which could have a material adverse impact on our results of operations, financial condition and cash flows.
Added
Concern over climate change has resulted in, and could continue to result in, new legal or regulatory requirements including those designed to reduce or mitigate carbon content or the effects of GHG emissions.
Removed
The acquisition of Meritor involves the integration of Meritor’s operations with our existing operations, and there are uncertainties inherent in such an integration. We have, and will be continued to be required to, devote significant management attention and resources to integrating Meritor’s operations.
Added
Our business benefits from free trade agreements, such as the United States-Mexico-Canada Agreement and the U.S. trade relationships including those with China, Brazil, E.U. and the U.K.
Removed
Our ability to fully realize all of the anticipated benefits, including enhanced revenue, earnings and cash flow, from our acquisition of Meritor will depend, in substantial part, on our ability to successfully integrate the products into our segments, launch the Meritor products around the world and achieve our projected sales goals.
Added
These new and emerging regulations are likely to require significant resources and data management systems and could increase our cost of doing business, restrict our ability to operate our business or execute our strategies, and could result in fines and penalties or reputational harm if we do not fully comply.
Removed
While we believe we will ultimately achieve these objectives, it is possible that we will be unable to achieve some or all of these objectives within our anticipated time frame or in the anticipated amounts.
Added
If we do not accurately align our manufacturing capabilities with demand it could have a material adverse effect on our results of operations, financial condition and cash flows. 20 Table of Contents We derive significant earnings from investees that we do not directly control, with more than 50 percent of these earnings from our China-based investees.
Removed
If we are not able to successfully complete the integration of the Meritor business or implement our Meritor strategy, we may not fully realize the anticipated benefits, including enhanced revenue, earnings and cash flows, from this acquisition or such anticipated benefits may take longer to realize than expected.
Added
Our plan to reposition our portfolio of product offerings through exploration of strategic acquisitions, divestitures or exiting the production of certain product lines or product categories may expose us to additional costs and risks.
Removed
As part of the purchase accounting associated with the acquisition, significant goodwill and intangible asset balances were recorded on the consolidated balance sheet. If cash flows from the acquisition fall short of our anticipated amounts, these assets could be subject to non-cash impairment charges, negatively impacting our earnings.
Added
We may use artificial intelligence in our business and in our products, and challenges with properly managing its use could result in reputational harm, competitive harm, and legal liability, and adversely affect our results of operations. 23 Table of Contents We may incorporate artificial intelligence solutions into our products, services and features, and we may leverage artificial intelligence, including generative artificial intelligence and machine learning, in our product development, operations and software programming.
Removed
In particular, increased levels of inflation, rising interest rates and 20 Table of Contents concerns regarding a potential economic recession may result in increased operating costs and/or decreased levels of profitability. Further, the labor market for skilled manufacturing remains tight, and our labor costs have increased as a result.
Added
Our competitors or other third parties may incorporate artificial intelligence into their products or operational processes more quickly or more successfully than us, which could have a material adverse effect on our competitive position, reputation and results of operations.
Removed
Additionally, higher material and commodity costs around the world as well as elevated levels of inflation may offset our 21 Table of Contents efforts to reduce our cost structure.
Added
In addition, there are significant risks involved in developing and deploying artificial intelligence and there can be no assurance that the usage of artificial intelligence will enhance our products or services or be beneficial to our business, including our efficiency or profitability.
Removed
Lower-than-anticipated market acceptance of our new or existing products or services could have a material adverse impact on our results of operations, financial condition and cash flows.
Added
The rapid evolution of artificial intelligence, including the regulation of artificial intelligence by government or other regulatory agencies, will require significant resources to develop, test and maintain our platforms, offerings, services, and features to implement artificial intelligence ethically and minimize any unintended harmful impacts. We are exposed to political, economic and other risks that arise from operating a multinational business.
Removed
There are uncertainties and risks related to the timing and potential value to Cummins, Atmus and our respective shareholders of the planned divestiture of Atmus, including business, industry and market risks, as well as risks involving realizing the anticipated favorable tax treatment of the divestiture if there is a significant delay or failure to complete the divestiture.
Added
Additionally, we face increasing competition to develop innovative products that result in lower emissions.
Removed
Failure to implement the divestiture effectively could result in a lower value to Cummins, Atmus and our respective shareholders.
Added
Any failure, or perceived failure, to meet evolving stakeholder expectations and industry standards or achieve our sustainability goals, commitments and targets could have a material adverse effect on our business, results of operations and financial condition. We may be adversely impacted by work stoppages and other labor matters. At December 31, 2024, we employed approximately 69,600 persons worldwide.
Removed
A delay or failure to complete the divestiture could result in our businesses facing material challenges in connection with this transaction, including, without limitation: • the diversion of management’s attention from ongoing business concerns and impact on our businesses as a result of the devotion of management’s attention to strategic alternatives for the Atmus divestiture; • maintaining employee morale and retaining key management and other employees; • retaining existing business and operational relationships, including with customers, suppliers, employees and other counterparties, and attracting new business and operational relationships; and 22 Table of Contents • foreseen and unforeseen dis-synergy costs, costs of restructuring transactions (including taxes) and other significant costs and expenses.
Removed
Any of these factors could have a material adverse effect on each of Cummins' and Atmus's respective business, financial condition, results of operations and cash flows. In addition, if the divestiture is completed, the new independent company will incur ongoing costs, including costs of operating as an independent company, that the divested business will no longer be able to share.
Removed
Our operations routinely involve receiving, storing, processing and transmitting sensitive information pertaining to our business, customers, dealers, suppliers, employees and other sensitive matters.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

16 edited+3 added−0 removed3 unchanged
Biggest changeWe have incident response plans to assess and manage cybersecurity incidents. These plans include escalation procedures based on the nature and severity of the incident. The most critical incidents, which could be material to us, are escalated to executive management and the Enterprise Cybersecurity MRG.
Biggest changeThese assessments provide insights which the Enterprise Cybersecurity function uses to better manage third-party risks. A cybersecurity operations team is in place to regularly monitor the environment for cybersecurity threats and incidents. We have incident response plans to assess and manage cybersecurity incidents. These plans include escalation procedures based on the nature and severity of the incident.
Additional information on cybersecurity risks we face is discussed in Part I, Item 1A "Risk Factors" under the heading "General," which should be read in conjunction with the foregoing information. Cybersecurity Governance We are committed to protecting our Information Technology (IT) assets and the data stored within these assets.
Additional information on cybersecurity risks we face is discussed in Part I, Item 1A "Risk Factors" under the heading "General," which should be read in conjunction with the foregoing information. Cybersecurity Governance We are committed to protecting our IT assets and the data stored within these assets.
This commitment includes the protection of IT assets relevant to our operations, stakeholder data (including employee, customer and supplier data), intellectual property and our products.
This commitment includes the protection of cyber assets relevant to our operations, stakeholder data (including employee, customer and supplier data), intellectual property and our products.
The Product Cybersecurity MRG meets regularly with the Executive Director – Corporate Product Cybersecurity and Functional Safety to review the cybersecurity program, including risks and the status of key initiatives. Both the Enterprise and Product Cybersecurity functions administer policies related to cybersecurity in consultation with other stakeholders at the company.
The Product Cybersecurity MRG meets regularly with the Principal Engineer – Product Cybersecurity to review the product cybersecurity program, including risks and the status of key initiatives. Both the Enterprise and Product Cybersecurity functions administer policies related to cybersecurity in consultation with other stakeholders at the company.
This MRG meets regularly, at least four times per year, with our Chief Information Security Officer to review the cybersecurity program and related risks. The MRG receives updates on the status of key cybersecurity initiatives and is responsible for our response to material cybersecurity incidents.
This MRG meets regularly with our Chief Information Security Officer to review the enterprise cybersecurity program and related risks. The MRG receives updates on the status of key cybersecurity initiatives and is responsible for our response to material cybersecurity incidents. For material cybersecurity incidents, our process is to escalate through the MRG to the Audit Committee and Board.
The Executive Risk Council is comprised of senior leaders with cross-functional experience and responsibilities. Our Board and its committees are engaged in the oversight of our most significant enterprise risks, including cybersecurity risks. We assign a member of our executive management team to report material information to our Board regarding these risks.
Our Board and its committees are engaged in the oversight of our most significant enterprise risks, including cybersecurity risks. We assign a member of our executive management team to report material information to our Board regarding these risks. The Audit Committee, working with the Chief Information Officer, provides oversight of the enterprise cybersecurity program.
Our processes for oversight of cybersecurity risks are integrated into our Enterprise Risk Management (ERM) program, which is led by the Executive Director, Global Risk. To govern the ERM program, we established an Executive Risk Council that meets regularly to review and monitor our most significant enterprise risks, including the prevention, detection and mitigation plans, including with respect to cybersecurity.
To govern the ERM program, we established an Executive Risk Council that meets regularly to review and monitor our most significant enterprise risks, and our prevention, detection and mitigation plans, including with respect to cybersecurity. The Executive Risk Council is comprised of senior leaders with cross-functional experience and responsibilities.
The Cummins Enterprise Cybersecurity function, which is responsible for the administration of our enterprise cybersecurity program, is led by the Chief Information Security Officer, who has more than 25 years of information technology, IT architecture and operations experience in the industrial manufacturing industry. The Chief Information Security Officer reports to our Chief Information Officer.
The Enterprise Cybersecurity function, which is responsible for the administration of our enterprise cybersecurity program, is led by the Chief Information Security Officer, who holds a degree in Management Information Systems (MIS) and a Certified Information Security Manager (CISM) designation, and has more than 20 years of IT, cybersecurity, audit and risk management experience in the industrial manufacturing industry.
The Product Cybersecurity function, which is responsible for the administration of our product cybersecurity program, is led by the Executive Director – Corporate Product Cybersecurity and Functional Safety, who has more than 35 years of automotive industry and electronic controls design experience. The Executive Director – Corporate Product Cybersecurity and Functional Safety reports to our Chief Technical Officer.
The Product Cybersecurity function, which is responsible for the administration of our product cybersecurity program, is led by the Principal Engineer – Product Cybersecurity, who has more than 35 years of embedded electronic systems design experience. The Principal Engineer – Product Cybersecurity works directly with the Chief Technical Officer.
These leaders provide regular updates to the SET Committee of the Board on product related cybersecurity risks. Through these updates, the SET Committee receives a report discussing product level vulnerability management, product level incident management and the status of relevant product cybersecurity activities.
These leaders provide regular updates to the SET Committee of the Board on product related cybersecurity risks.
The Audit Committee, working with the Chief Information Officer, provides oversight of the enterprise cybersecurity program. The SET Committee, working with the Chief Technical Officer, provides oversight of the product cybersecurity program.
The SET Committee, working with the Chief Technical Officer, provides oversight of the product cybersecurity program. Our Board, Audit Committee and SET Committee receive reports and information from our senior leaders who have functional responsibility for the mitigation of enterprise cybersecurity and product cybersecurity risks.
The Enterprise Cybersecurity MRG practices the incident response process through a tabletop exercise facilitated by external consultants. In addition, cyber insurance is in place, which may mitigate the impact of cybersecurity incidents. We engage outside experts where appropriate to aid in developing and implementing the cybersecurity program and to review its operations.
The most critical incidents, which could be material to us, are escalated to executive management and the Enterprise Cybersecurity MRG. In addition, cyber insurance is in place, which may mitigate the impact of cybersecurity incidents. We engage outside experts where appropriate to aid in maturing, implementing and testing the cybersecurity program and to review our cybersecurity operations.
These leaders provide regular updates to the Audit Committee of the Board on cybersecurity risks. Through these updates, the Audit Committee receives a cybersecurity dashboard illustrating the status of key cybersecurity activities such as email phishing, event logging and data encryption. Information regarding relevant cybersecurity training is provided as well.
The Chief Information Security Officer reports to our Chief Information Officer. These leaders provide regular updates to the Audit Committee of the Board on cybersecurity risks. Through these updates, the Audit Committee receives a cybersecurity dashboard illustrating cybersecurity priorities and the status of key initiatives.
We have a third-party risk management process, which is designed to assess and manage cybersecurity risks posed by third parties. This process is administered by the Enterprise Cybersecurity function. 27 Table of Contents In addition, a cybersecurity operations team is in place, which monitors the environment for cybersecurity incidents on a regular basis.
We also have a third-party risk management process, which is designed to assess and manage cybersecurity risks posed by third parties. This process is administered by the Enterprise Cybersecurity function, and through this program, the company evaluates the type of data that is shared with certain vendors with the goal of conducting risk-informed assessments.
Our Internal Audit function also performs regular assessments of the design and operational effectiveness of the program’s key processes and controls. We will continue to enhance our cybersecurity operations to respond to the dynamic cybersecurity landscape. 28 Table of Contents
We will continue to develop and mature our cybersecurity operations to respond to the dynamic cybersecurity landscape. 27 Table of Contents
Our Board, Audit Committee and SET Committee receive reports and information from our senior leaders who have functional responsibility for the mitigation of enterprise cybersecurity and product cybersecurity risks. These leaders meet with the committees on a regular basis, at least four times per year, and provide dashboards or reports, which summarize cybersecurity risks and action plans.
These leaders meet with the committees on a regular basis and provide dashboards or reports, which summarize cybersecurity risks and action plans. The committees elevate matters to the Board as appropriate.
Added
Through these updates, the SET Committee receives a report discussing product level vulnerability management, product level incident management and the status of relevant product cybersecurity activities. 26 Table of Contents Our processes for oversight of cybersecurity risks are integrated into our Enterprise Risk Management (ERM) program, which is led by the Executive Director, Global Risk.
Added
Our risk-based cybersecurity program is designed to protect, detect, and respond to cybersecurity threats and incidents. This program, developed alongside the National Institute of Standards and Technology Cybersecurity Framework, aims to protect the confidentiality, integrity, and availability of our IT assets and the data stored thereon.
Added
This includes incident response testing through tabletop exercises facilitated by external consultants. We have implemented training and awareness programs to educate our employees on cybersecurity risks, which includes regular educational phishing campaigns, and our Internal Audit function performs regular assessments of the design and operational effectiveness of the program’s key processes and controls.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed1 unchanged
Biggest changeComponents Indiana: Columbus Australia: Kilsyth North Carolina: Fletcher Brazil: Sao Paulo South Carolina: Charleston China: Shanghai, Wuhan, Wuxi Tennessee: Cookeville France: Quimper Wisconsin: Mineral Point, Neillsville Germany: Marktheidenfeld India: Dewas, Phaltan, Pithampur, Pune, Rudrapur Mexico: Ciudad Juarez, Monterrey, San Luis Potosi South Korea: Suwon U.K.: Darlington, Huddersfield Engine Indiana: Columbus Brazil: Sao Paulo New York: Lakewood India: Phaltan North Carolina: Whitakers U.K.: Darlington Power Systems Indiana: Elkhart, Seymour Brazil: Sao Paulo Minnesota: Fridley China: Wuhan, Wuxi New Mexico: Clovis India: Ahmednagar, Phaltan, Pune, Ranjangaon Mexico: San Luis Potosi Nigeria: Lagos Romania: Craiova U.K.: Daventry Accelera Indiana: Columbus Belgium: Oevel Minnesota: Fridley Canada: Mississauga North Carolina: Asheville, Forest City China: Shanghai, Tianjin Germany: Herten In addition, engines and engine components are manufactured by joint ventures or independent licensees at manufacturing plants in the U.S., China, India, Japan, Sweden, U.K. and Mexico. 29 Table of Contents Distribution Facilities The principal distribution facilities that serve our segments are as follows: U.S.
Biggest changeEngine Indiana: Columbus Brazil: Sao Paulo New York: Lakewood India: Phaltan North Carolina: Whitakers Mexico: San Luis Potosi U.K.: Darlington Components Indiana: Columbus Brazil: Sao Paulo North Carolina: Fletcher, Laurinburg China: Wuxi South Carolina: Charleston, York India: Phaltan Wisconsin: Mineral Point Italy: Cameri Mexico: Ciudad Juarez, Monterrey, San Luis Potosi Netherlands: Roermond Sweden: Lindesberg U.K.: Darlington, Huddersfield Power Systems Indiana: Elkhart, Seymour Brazil: Sao Paulo Minnesota: Fridley China: Wuhan, Wuxi New Mexico: Clovis India: Ahmednagar, Phaltan, Pune, Ranjangaon Wisconsin: Kenosha Mexico: San Luis Potosi Romania: Craiova U.K.: Daventry Accelera Indiana: Columbus Belgium: Oevel Minnesota: Fridley Canada: Mississauga North Carolina: Asheville, Forest City China: Shanghai, Tianjin Germany: Herten Spain: Guadalajara In addition, engines and engine components are manufactured by joint ventures or independent licensees at manufacturing plants in the U.S., China, India, Japan, Sweden, U.K. and Mexico. 28 Table of Contents Distribution Facilities The principal distribution facilities that serve our segments are as follows: U.S.
Georgia: Atlanta Belgium: Rumst Indiana: Columbus, Indianapolis China: Beijing, Shanghai, Wuhan Kentucky: Walton India: Phaltan, Pithampur, Pune North Carolina: Enfield Mexico: Juarez, San Luis Potosi Oregon: Portland U.K.: Darlington, Daventry Pennsylvania: Harrisburg South Carolina: Charleston Tennessee: Memphis Texas: Dallas Other Facilities We operate numerous management, research and development, marketing and administrative facilities globally.
Georgia: Atlanta Belgium: Rumst Indiana: Columbus, Indianapolis Brazil: Guarulhos Kentucky: Walton China: Beijing, Shanghai, Wuhan North Carolina: Enfield India: Phaltan, Pithampur, Pune Oregon: Portland Mexico: Juarez, San Luis Potosi Pennsylvania: Harrisburg Singapore: Pandan Avenue South Carolina: Charleston U.K.: Darlington, Daventry Tennessee: Memphis Texas: Dallas Other Facilities We operate numerous management, research and development, marketing and administrative facilities globally.
Facilities Facilities Outside the U.S. Arizona: Avondale Australia: Mackay, Perth Colorado: Henderson Canada: Fort McMurray New Jersey: Kearny China: Beijing Texas: Dallas India: Pune Utah: West Valley City South Africa: Johannesburg U.K.: Wellingborough Supply Chain Facilities The principal supply chain facilities that serve our segments are as follows: U.S. Facilities Facilities Outside the U.S.
Facilities Facilities Outside the U.S. Arizona: Avondale Australia: Mackay, Perth Colorado: Henderson Canada: Fort McMurray AB Kentucky: Florence (1) China: Beijing New Jersey: Kearny India: Pune Texas: Dallas South Africa: Johannesburg Utah: West Valley City U.K.: Wellingborough (1) Florence is a Components distribution facility. Supply Chain Facilities The principal supply chain facilities that serve our segments are as follows: U.S.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+0 added−1 removed3 unchanged
Biggest changeIn 2023, we re-evaluated our peer group that the Board benchmarks against and chose to include companies that participate in similar end-markets and have similar businesses.
Biggest changeIn 2024, we re-evaluated our peer group that the Board benchmarks against and chose to remove companies that we no longer believe participate in similar end-markets or are strongly aligned with our businesses. We removed W.W. Grainger since they are primarily U.S. focused and Fortive Corporation due to a spin-off transaction that shrank the size of their business.
Shares associated with participants' sales are sold as open-market transactions via a third-party broker. 31 Table of Contents Performance Graph (Unaudited) The following Performance Graph and related information shall not be deemed "soliciting material" or to be "filed" with the SEC, nor shall such information be incorporated by reference into any of our future filings under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.
Shares associated with participants' sales are sold as open-market transactions via a third-party broker. 30 Table of Contents Performance Graph (Unaudited) The following Performance Graph and related information shall not be deemed "soliciting material" or to be "filed" with the SEC, nor shall such information be incorporated by reference into any of our future filings under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.
The dollar value remaining available for future purchases under the 2019 program at December 31, 2023, was $218 million. Our Key Employee Stock Investment Plan allows certain employees, other than officers, to purchase shares of common stock on an installment basis up to an established credit limit.
The dollar value remaining available for future purchases under the 2019 program at December 31, 2024, was $218 million. Our Key Employee Stock Investment Plan allows certain employees, other than officers, to purchase shares of common stock on an installment basis up to an established credit limit.
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the NYSE under the symbol "CMI." For other matters related to our common stock and shareholders' equity, see NOTE 16, "CUMMINS INC. SHAREHOLDERS' EQUITY," to the Consolidated Financial Statements .
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the NYSE under the symbol "CMI." For other matters related to our common stock and shareholders' equity, see NOTE 15, "CUMMINS INC. SHAREHOLDERS' EQUITY," to our Consolidated Financial Statements .
At December 31, 2023, there were 2,371 holders of record of Cummins Inc.'s $2.50 par value common stock. 30 Table of Contents The following information is provided pursuant to Item 703 of Regulation S-K: Issuer Purchases of Equity Securities Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (1) October 1 - October 31 — $ — — $ 2,218 November 1 - November 30 — — — 2,218 December 1 - December 31 — — — 2,218 Total — — — (1) Shares repurchased under our Key Employee Stock Investment Plan only occur in the event of a participant default, which cannot be predicted, and were excluded from this column.
At December 31, 2024, there were 2,253 holders of record of Cummins Inc.'s $2.50 par value common stock. 29 Table of Contents The following information is provided pursuant to Item 703 of Regulation S-K: Issuer Purchases of Equity Securities Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (1) October 1 - October 31 — $ — — $ 2,218 November 1 - November 30 — — — 2,218 December 1 - December 31 — — — 2,218 Total — — — (1) Shares repurchased under our Key Employee Stock Investment Plan only occur in the event of a participant default, which cannot be predicted, and were excluded from this column.
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. During the three months ended December 31, 2023, we did not make any repurchases of common stock.
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. During the three months ended December 31, 2024, we did not make any repurchases of common stock.
The comparisons in this table are required by the SEC and are not intended to forecast or be indicative of possible future performance of our stock. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN AMONG CUMMINS INC., S&P 500 INDEX AND CUSTOM PEER GROUP ASSUMES $100 INVESTED ON DECEMBER 31, 2018 ASSUMES DIVIDENDS REINVESTED FISCAL YEAR ENDING DECEMBER 31, 2023
The comparisons in this table are required by the SEC and are not intended to forecast or be indicative of possible future performance of our stock. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN AMONG CUMMINS INC., S&P 500 INDEX AND CUSTOM PEER GROUP ASSUMES $100 INVESTED ON DECEMBER 31, 2019 ASSUMES DIVIDENDS REINVESTED FISCAL YEAR ENDING DECEMBER 31, 2024
Our revised peer group includes BorgWarner Inc., Caterpillar, Inc., Daimler Truck Holding AG, Deere & Company, Dana Inc., Eaton Corporation, Emerson Electric Co., Fortive Corporation, W.W. Grainger Inc., Honeywell International, Illinois Tool Works Inc., PACCAR, Parker-Hannifin Corporation, Textron Inc. and Volvo AB.
Our peer group includes BorgWarner Inc., Caterpillar, Inc., Daimler Truck Holding AG, Dana Inc., Deere & Company, Eaton Corporation, Emerson Electric Co., Honeywell International, Illinois Tool Works Inc., PACCAR, Parker-Hannifin Corporation, Textron Inc. and Volvo AB.
Removed
Dana Incorporated was added to provide exposure to similar products including e-axles, drivetrain components and transmissions and electric and hybrid products, while Donaldson Company Inc. was removed due to the IPO of Atmus (formerly our filtration business) into a separate publicly traded company.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

133 edited+51 added−73 removed48 unchanged
Biggest changeAs of the date of this filing, our credit ratings from Moody's Investor Services, Inc. remain unchanged and the outlook remains stable, while Standard and Poor's Rating Services downgraded our long-term rating to A while our short-term rate remained at A1 and our outlook remained stable . 36 Table of Contents RESULTS OF OPERATIONS Favorable/(Unfavorable) Years ended December 31, 2023 vs. 2022 2022 vs. 2021 In millions (except per share amounts) 2023 2022 2021 Amount Percent Amount Percent NET SALES $ 34,065 $ 28,074 $ 24,021 $ 5,991 21 % $ 4,053 17 % Cost of sales 25,816 21,355 18,326 (4,461) (21) % (3,029) (17) % GROSS MARGIN 8,249 6,719 5,695 1,530 23 % 1,024 18 % OPERATING EXPENSES AND INCOME Selling, general and administrative expenses 3,333 2,687 2,374 (646) (24) % (313) (13) % Research, development and engineering expenses 1,500 1,278 1,090 (222) (17) % (188) (17) % Equity, royalty and interest income from investees 483 349 506 134 38 % (157) (31) % Other operating expense, net 2,138 174 31 (1,964) NM (143) NM OPERATING INCOME 1,761 2,929 2,706 (1,168) (40) % 223 8 % Interest expense 375 199 111 (176) (88) % (88) (79) % Other income, net 240 89 156 151 NM (67) (43) % INCOME BEFORE INCOME TAXES 1,626 2,819 2,751 (1,193) (42) % 68 2 % Income tax expense 786 636 587 (150) (24) % (49) (8) % CONSOLIDATED NET INCOME 840 2,183 2,164 (1,343) (62) % 19 1 % Less: Net income attributable to noncontrolling interests 105 32 33 (73) NM 1 3 % NET INCOME ATTRIBUTABLE TO CUMMINS INC . $ 735 $ 2,151 $ 2,131 $ (1,416) (66) % $ 20 1 % Diluted earnings per common share attributable to Cummins Inc. $ 5.15 $ 15.12 $ 14.61 $ (9.97) (66) % $ 0.51 3 % "NM" - not meaningful information Favorable/(Unfavorable) Percentage Points Percent of sales 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Gross margin 24.2 % 23.9 % 23.7 % 0.3 0.2 Selling, general and administrative expenses 9.8 % 9.6 % 9.9 % (0.2) 0.3 Research, development and engineering expenses 4.4 % 4.6 % 4.5 % 0.2 (0.1) 2023 vs. 2022 Net Sales Net sales increased $6.0 billion, primarily driven by the following: • Components segment sales increased 38 percent largely due to axles and brakes sales from the Meritor acquisition. • Distribution segment sales increased 15 percent due to higher demand across all product lines, especially in North America. • Engine segment sales increased 7 percent principally due to stronger heavy-duty and medium-duty truck demand in North America. • Power Systems segment sales increased 13 percent primarily due to higher demand in power generation markets.
Biggest changeAs of the date of this filing, our credit ratings and outlooks from the credit rating agencies remain unchanged. 35 Table of Contents RESULTS OF OPERATIONS Favorable/(Unfavorable) Years ended December 31, 2024 vs. 2023 2023 vs. 2022 In millions (except per share amounts) 2024 2023 2022 Amount Percent Amount Percent NET SALES $ 34,102 $ 34,065 $ 28,074 $ 37 — % $ 5,991 21 % Cost of sales 25,663 25,816 21,355 153 1 % (4,461) (21) % GROSS MARGIN 8,439 8,249 6,719 190 2 % 1,530 23 % OPERATING EXPENSES AND INCOME Selling, general and administrative expenses 3,275 3,333 2,687 58 2 % (646) (24) % Research, development and engineering expenses 1,463 1,500 1,278 37 2 % (222) (17) % Equity, royalty and interest income from investees 395 483 349 (88) (18) % 134 38 % Other operating expense, net 346 2,138 174 1,792 84 % (1,964) NM OPERATING INCOME 3,750 1,761 2,929 1,989 NM (1,168) (40) % Interest expense 370 375 199 5 1 % (176) (88) % Other income, net 1,523 240 89 1,283 NM 151 NM INCOME BEFORE INCOME TAXES 4,903 1,626 2,819 3,277 NM (1,193) (42) % Income tax expense 835 786 636 (49) (6) % (150) (24) % CONSOLIDATED NET INCOME 4,068 840 2,183 3,228 NM (1,343) (62) % Less: Net income attributable to noncontrolling interests 122 105 32 (17) (16) % (73) NM NET INCOME ATTRIBUTABLE TO CUMMINS INC . $ 3,946 $ 735 $ 2,151 $ 3,211 NM $ (1,416) (66) % Diluted earnings per common share attributable to Cummins Inc. $ 28.37 $ 5.15 $ 15.12 $ 23.22 NM $ (9.97) (66) % "NM" - not meaningful information Favorable/(Unfavorable) Percentage Points Percent of sales 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Gross margin 24.7 % 24.2 % 23.9 % 0.5 0.3 Selling, general and administrative expenses 9.6 % 9.8 % 9.6 % 0.2 (0.2) Research, development and engineering expenses 4.3 % 4.4 % 4.6 % 0.1 0.2 2024 vs. 2023 Net Sales Net sales increased $37 million, primarily driven by the following: • Distribution segment sales increased 11 percent primarily due to higher demand in power generation markets, especially in North America and Europe. • Power Systems segment sales increased 13 percent primarily due to higher demand in power generation markets, especially in North America and China. • Engine segment sales were flat as stronger demand in North American medium-duty truck markets was offset by lower demand in North American pick-up truck and heavy-duty truck markets and weaker demand in global construction markets.
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 designs, manufactures, sells and supports electrified power systems with innovative components and subsystems, including battery, fuel cell and electric powertrain technologies as well as hydrogen production technologies.
This process includes an extensive review of expectations for the long-term growth of our businesses and forecasted future cash flows. In order to determine the valuation of our reporting units, we use either the market approach or the income approach using a discounted cash flow model.
This process includes an extensive review of expectations for the long-term growth of our businesses and forecasted future cash flows. In order to determine the valuation of our reporting units, we use either the income approach using a discounted cash flow model or the market approach.
During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Any adjustments subsequent to the measurement period are recorded to our consolidated statements of income.
During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Any adjustments subsequent to the measurement period are recorded to our Consolidated Statements of Net Income .
At December 31, 2023, based upon our target asset allocations, it is anticipated that our U.S. investment policy will generate an average annual return over the 30-year projection period equal to or in excess of 7 percent, including the additional positive returns expected from active investment management.
At December 31, 2024, based upon our target asset allocations, it is anticipated that our U.S. investment policy will generate an average annual return over the 30-year projection period equal to or in excess of 7 percent, including the additional positive returns expected from active investment management.
See NOTE 24, "ACQUISITIONS," to our Consolidated Financial Statements for additional information about our recent business combinations. Goodwill Impairment We are required to make certain subjective and complex judgments in assessing whether a goodwill impairment event has occurred, including assumptions and estimates used to determine the fair value of our reporting units.
See NOTE 23, "ACQUISITIONS," to our Consolidated Financial Statements for additional information about our recent business combinations. Goodwill Impairment We are required to make certain subjective and complex judgments in assessing whether a goodwill impairment event has occurred, including assumptions and estimates used to determine the fair value of our reporting units.
Long-term Expected Return Assumptions 2024 2023 2022 2021 U.S. plans 7.25 % 7.00 % 6.50 % 6.25 % U.K. plans 5.00 % 5.00 % 4.01 % 4.00 % Pension accounting offers various acceptable alternatives to account for the differences that eventually arise between the estimates used in the actuarial valuations and the actual results.
Long-term Expected Return Assumptions 2025 2024 2023 2022 U.S. plans 7.00 % 7.25 % 7.00 % 6.50 % U.K. plans 5.00 % 5.00 % 5.00 % 4.01 % Pension accounting offers various acceptable alternatives to account for the differences that eventually arise between the estimates used in the actuarial valuations and the actual results.
Our MD&A is presented in the following sections: • EXECUTIVE SUMMARY AND FINANCIAL HIGHLIGHTS • RESULTS OF OPERATIONS • OPERATING SEGMENT RESULTS • 2024 OUTLOOK • LIQUIDITY AND CAPITAL RESOURCES • APPLICATION OF CRITICAL ACCOUNTING ESTIMATES • RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The following is the discussion and analysis of changes in the financial condition and results of operations for fiscal year 2023 compared to fiscal year 2022.
Our MD&A is presented in the following sections: • EXECUTIVE SUMMARY AND FINANCIAL HIGHLIGHTS • RESULTS OF OPERATIONS • OPERATING SEGMENT RESULTS • 2025 OUTLOOK • LIQUIDITY AND CAPITAL RESOURCES • APPLICATION OF CRITICAL ACCOUNTING ESTIMATES • RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The following is the discussion and analysis of changes in the financial condition and results of operations for fiscal year 2024 compared to fiscal year 2023.
All bonds used to develop our hypothetical portfolio in the U.S. and U.K. were deemed high-quality, non-callable bonds (Aa or better) at December 31, 2023, by at least one of the bond rating agencies. Our model called for projected payments until near extinction for the U.S. and the U.K.
All bonds used to develop our hypothetical portfolio in the U.S. and U.K. were deemed high-quality, non-callable bonds (Aa or better) at December 31, 2024, by at least one of the bond rating agencies. Our model called for projected payments until near extinction for the U.S. and the U.K.
NOTE 11, "PENSIONS AND OTHER POSTRETIREMENT BENEFITS," to our Consolidated Financial Statements provides a summary of our pension benefit plan activity, the funded status of our plans and the amounts recognized in our Consolidated Financial Statements . RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS See NOTE 1, "SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES" to our Consolidated Financial Statements for additional information.
NOTE 10, "PENSIONS AND OTHER POSTRETIREMENT BENEFITS," to our Consolidated Financial Statements provides a summary of our pension benefit plan activity, the funded status of our plans and the amounts recognized in our Consolidated Financial Statements . RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS See NOTE 1, "SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES," to our Consolidated Financial Statements for additional information.
A more complete description of our income taxes and the future benefits of our net operating loss and credit carryforwards is disclosed in NOTE 5, "INCOME TAXES," to our Consolidated Financial Statements . Pension Benefits We sponsor a number of pension plans globally, with the majority of assets in the U.S. and the U.K.
A more complete description of our income taxes and the future benefits of our net operating loss and credit carryforwards is disclosed in NOTE 4, "INCOME TAXES," to our Consolidated Financial Statements . Pension Benefits We sponsor a number of pension plans globally, with the majority of assets in the U.S. and the U.K.
The resulting discount rate is reflective of both the current interest rate environment and the plan's distinct liability characteristics. The table below sets forth the estimated impact on our 2024 net periodic pension cost relative to a change in the discount rate and a change in the expected rate of return on plan assets.
The resulting discount rate is reflective of both the current interest rate environment and the plan's distinct liability characteristics. The table below sets forth the estimated impact on our 2025 net periodic pension cost relative to a change in the discount rate and a change in the expected rate of return on plan assets.
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 Power Systems segment is an integrated power provider, which designs, manufactures and sells standby and prime power generators, engines (16 liters and larger) for standby and prime power generator sets and industrial applications (including mining, oil and gas, marine, rail and defense), alternators and other power components.
If we adopted the immediate recognition approach, we would record a loss of $1.1 billion ($0.8 billion after-tax) from cumulative actuarial net losses for our U.S. and U.K. pension plans.
If we adopted the immediate recognition approach, we would record a loss of $1.1 billion ($0.9 billion after-tax) from cumulative actuarial net losses for our U.S. and U.K. pension plans.
As part of our growth strategy, we invest in businesses in certain countries that carry higher levels of these risks such as China, Brazil, India, Mexico and countries in the Middle East and Africa.
As part of our growth strategy, we invest in businesses in certain countries that carry higher levels of these risks such as China, Brazil, India, Mexico and other countries in Europe, the Middle East and Africa.
The discussion and analysis of fiscal year 2021 and changes in the financial condition and results of operations for fiscal year 2022 compared to fiscal year 2021, that are not included in this Form 10-K, may be found in Part II, ITEM 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (SEC) on February 14, 2023.
The discussion and analysis of fiscal year 2022 and changes in the financial condition and results of operations for fiscal year 2023 compared to fiscal year 2022, that are not included in this Form 10-K, may be found in Part II, ITEM 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (SEC) on February 12, 2024.
However, to help fund cash needs of the U.S. or other international subsidiaries as they arise, we repatriate available cash from certain foreign subsidiaries whose earnings are not permanently reinvested when it is cost effective to do so.
However, to help fund cash needs of the U.S. or other international subsidiaries as they arise, we repatriate available cash from certain foreign subsidiaries whose earnings are not completely permanently reinvested when cost effective to do so.
In millions Impact on Pension Cost Increase/(Decrease) Discount rate used to value liabilities 0.25 percent increase $ (6) 0.25 percent decrease 7 Expected rate of return on assets 1 percent increase (61) 1 percent decrease 61 The above sensitivities reflect the impact of changing one assumption at a time.
In millions Impact on Pension Cost Increase/(Decrease) Discount rate used to value liabilities 0.25 percent increase $ (6) 0.25 percent decrease 6 Expected rate of return on assets 1 percent increase (56) 1 percent decrease 56 The above sensitivities reflect the impact of changing one assumption at a time.
The details were as follows: Years ended December 31, 2023 2022 In millions Translation adjustment Primary currency driver vs. U.S. dollar Translation adjustment Primary currency driver vs.
The details were as follows: Years ended December 31, 2024 2023 In millions Translation adjustment Primary currency driver vs. U.S. dollar Translation adjustment Primary currency driver vs.
See NOTE 25, "OPERATING SEGMENTS," to the Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Consolidated Statements of Net Income . Following is a discussion of results for each of our operating segments.
See NOTE 25, "OPERATING SEGMENTS," to our Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Consolidated Statements of Net Income . 39 Table of Contents Following is a discussion of results for each of our operating segments.
Based on the historical returns and forward-looking return expectations, we believe that an investment return assumption of 5.00 percent in 2024 for U.K. pension assets is reasonable and attainable. 56 Table of Contents Our target allocation for 2024 and pension plan asset allocations, at December 31, 2023 and 2022 are as follows: U.S. Plan U.K.
Based on the historical returns and forward-looking return expectations, we believe that an investment return assumption of 5.00 percent in 2025 for U.K. pension assets is reasonable and attainable. Our target allocation for 2025 and pension plan asset allocations, at December 31, 2024 and 2023 are as follows: U.S. Plan U.K.
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.
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 Settlement Agreements, $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 benefits.
At December 31, 2023, based upon our target asset allocations, it is anticipated that our U.K. investment policy will generate an average annual return over the 20-year projection period equal to or in excess of 5 percent. The one-year return for our U.K. plans was a 4.37 percent loss for 2023.
At December 31, 2024, based upon our target asset allocations, it is anticipated that our U.K. investment policy will generate an average annual return over the 20-year projection period equal to or in excess of 5 percent. The one-year return for our U.K. plans was a 9.6 percent loss for 2024.
At December 31, 2023, we had $2.7 billion in cash and marketable securities on hand and access to our $4.0 billion credit facilities (net of commercial paper outstanding), if necessary, to meet acquisition, working capital, investment and funding needs.
At December 31, 2024, we had $2.3 billion in cash and marketable securities on hand and access to our $4.0 billion credit facilities (net of $1.3 billion commercial paper outstanding), if necessary, to meet working capital, investment, acquisition and funding needs.
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 50 Table of Contents intermediaries reflected in accounts payable at December 31, 2023, were $199 million. See NOTE 1, "SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES" to our Consolidated Financial Statements for additional information.
As a result, all amounts owed 48 Table of Contents 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, 2024, were $142 million. See NOTE 1, "SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES," to our Consolidated Financial Statements for additional information.
NOTE 14, "PRODUCT WARRANTY LIABILITY," to our Consolidated Financial Statements contains a summary of the activity in our warranty liability account for 2023, 2022 and 2021 including adjustments to pre-existing warranties. Fair Value of Intangible Assets We make strategic acquisitions that may have a material impact on our consolidated results of operations or financial position.
NOTE 13, "PRODUCT WARRANTY LIABILITY," to our Consolidated Financial Statements contains a summary of the activity in our warranty liability account for 2024, 2023 and 2022 including adjustments to pre-existing warranties. 51 Table of Contents Fair Value of Intangible Assets We make strategic acquisitions that may have a material impact on our consolidated results of operations or financial position.
See NOTE 22, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information. (2) See NOTE 22, "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 from investees line above.
See NOTE 24, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information. (2) Included $31 million of Russian suspension costs reflected in the equity, royalty and interest income from investees line above. See NOTE 24, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information.
Net actuarial losses decreased our shareholders' equity by $329 million after-tax in 2023. The loss is primarily due to unfavorable asset returns, partially offset by higher discount rates. The table below sets forth the net periodic pension cost for the years ended December 31 and our expected cost for 2024.
Net actuarial losses decreased our shareholders' equity by $34 million after-tax in 2024. The loss is primarily due to unfavorable asset returns, partially offset by a favorable change in discount rates. The table below sets forth the net periodic pension cost for the years ended December 31 and our expected cost for 2025.
Cash dividends per share paid to common shareholders and the Board authorized increases for the last three years were as follows: Quarterly Dividends 2023 2022 2021 First quarter $ 1.57 $ 1.45 $ 1.35 Second quarter 1.57 1.45 1.35 Third quarter 1.68 1.57 1.45 Fourth quarter 1.68 1.57 1.45 Total $ 6.50 $ 6.04 $ 5.60 Capital Expenditures Capital expenditures were $1.2 billion, $916 million and $734 million in 2023, 2022 and 2021, respectively.
Cash dividends per share paid to common shareholders and the Board authorized increases for the last three years were as follows: Quarterly Dividends 2024 2023 2022 First quarter $ 1.68 $ 1.57 $ 1.45 Second quarter 1.68 1.57 1.45 Third quarter 1.82 1.68 1.57 Fourth quarter 1.82 1.68 1.57 Total $ 7.00 $ 6.50 $ 6.04 Capital Expenditures Capital expenditures were $1.2 billion, $1.2 billion and $916 million in 2024, 2023 and 2022, respectively.
The contractual obligations reported above exclude our unrecognized tax benefits of $330 million as of December 31, 2023, which includes $170 million of current tax liabilities and $160 million of long-term deferred tax liabilities. We are not able to reasonably estimate the period in which cash outflows relating to uncertain tax contingencies could occur.
The contractual obligations reported above exclude our unrecognized tax benefits of $304 million as of December 31, 2024, which includes $187 million of current tax liabilities and $117 million of long-term deferred tax liabilities. We are not able to reasonably estimate the period in which cash outflows relating to uncertain tax contingencies could occur.
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 then pay the financial intermediary the face amount of the invoice on the original due date, which generally have 60 to 90 day payment terms. The maximum amount that we could have outstanding under these programs was $551 million at December 31, 2024.
Research activities continue to focus on development of new products and improvements of current technologies to meet future emission standards around the world, improvements in fuel economy performance of diesel and natural gas-powered engines and related components, as well as development activities around hydrogen engine solutions, battery electric, fuel cell electric and hydrogen production technologies.
Research activities continue to focus on development of new products and improvements of current technologies to meet future emission standards around the world, improvements in fuel economy performance of diesel and natural gas-powered engines and related components, as well as development activities around electrified power systems with innovative components and systems including battery and electric power technologies and hydrogen production technologies.
We generated average annualized returns of 1.25 percent over ten years, resulting in approximately $532 million of actuarial losses in AOCL. Our strategy with respect to our investments in pension plan assets is to be invested with a long-term outlook.
We generated average annualized losses of 1.31 percent over ten years, resulting in approximately $942 million of actuarial losses in AOCL. Our strategy 53 Table of Contents with respect to our investments in pension plan assets is to be invested with a long-term outlook.
The one-year return for our U.S. plans was a 6.81 percent gain for 2023. Our U.S. plan assets averaged annualized returns of 6.50 percent over the prior ten years and resulted in approximately $223 million of actuarial losses in accumulated other comprehensive loss (AOCL) in the same period.
The one-year return for our U.S. plans was a 5.5 percent gain for 2024. Our U.S. plan assets averaged annualized returns of 5.74 percent over the prior ten years and resulted in approximately $473 million of actuarial losses in accumulated other comprehensive loss (AOCL) in the same period.
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, maintaining relationships with various OEMs throughout the world and providing selected sales and aftermarket support for our Accelera business.
(2) The five-year credit facility for $2.0 billion and the 364-day credit facility for $2.0 billion, maturing August 2026 and June 2024, respectively, are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes.
(2) The 5-year credit facility for $2.0 billion and the 364-day credit facility for $2.0 billion, maturing June 2029 and June 2025, respectively, are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes.
U.S. dollar Wholly-owned subsidiaries $ 118 British pound and Brazilian real, partially offset by Chinese renminbi $ (250) Chinese renminbi and Indian rupee Equity method investments (23) Chinese renminbi, partially offset by Brazilian real (94) Chinese renminbi Consolidated subsidiaries with a noncontrolling interest (3) Chinese renminbi (40) Indian rupee Total $ 92 $ (384) 2022 vs. 2021 For prior year foreign currency translation adjustment comparisons to 2021 see the Results of Operations section of our 2022 Form 10-K .
U.S. dollar Wholly-owned subsidiaries $ (245) Brazilian real, Chinese renminbi, Euro and Indian rupee $ 118 British pound and Brazilian real, partially offset by Chinese renminbi Equity method investments (15) Chinese renminbi and Brazilian real, partially offset by Indian rupee (23) Chinese renminbi, partially offset by Brazilian real Consolidated subsidiaries with a noncontrolling interest (16) Indian rupee (3) Chinese renminbi Total $ (276) $ 92 For all prior year foreign currency translation adjustment results comparisons to 2022 see the Results of Operations section of our 2023 Form 10-K .
In millions 2024 2023 2022 2021 Net periodic pension cost $ 33 $ 1 $ 19 $ 78 We expect 2024 net periodic pension cost to increase compared to 2023, primarily due to unfavorable asset returns in the U.K., lower discount rates in the U.S. and U.K. and increased headcount from recent acquisitions, partially offset by a higher expected rate of return on assets in the U.S.
The increase in net periodic pension cost in 2024 compared to 2023 was primarily due to unfavorable asset returns in the U.K., lower discount rates in the U.S. and U.K. and increased headcount from recent acquisitions, partially offset by a higher expected rate of return on assets in the U.S.
This reporting structure is organized according to the products and markets each segment serves. We use segment EBITDA as the basis for the Chief Operating Decision Maker to evaluate the performance of each of our reportable operating segments.
OPERATING SEGMENT RESULTS Our reportable operating segments consist of the Engine, Components, Distribution, Power Systems and Accelera segments. This reporting structure is organized according to the products and markets each segment serves. We use segment EBITDA as the basis for the Chief Operating Decision Maker to evaluate the performance of each of our reportable operating segments.
We believe our access to capital markets, our existing cash and marketable securities, operating cash flow and revolving credit facilities provide us with the financial flexibility needed to make payments required by the Agreement in Principle, targeted capital expenditures, dividend payments, debt service obligations, projected pension obligations, common stock repurchases and fund acquisitions through 2024 and beyond.
We believe our access to capital markets, our existing cash and marketable securities, operating cash flow and revolving credit facilities provide us with the financial flexibility needed to fund targeted capital expenditures, dividend payments, debt service obligations, projected pension obligations, common stock repurchases, joint venture contributions and acquisitions through 2025 and beyond.
Our U.S. defined benefit plans (qualified and non-qualified), which represented approximately 69 percent of the worldwide pension obligation, were 113 percent funded, and our U.K. defined benefit plans were 113 percent funded at December 31, 2023.
Our U.S. defined benefit plans (qualified and non-qualified), which represented approximately 70 percent of the worldwide pension obligation, were 117 percent funded, and our U.K. defined benefit plans were 109 percent funded at December 31, 2024.
In July 2023, the Board authorized an increase to our quarterly dividend of approximately 7 percent from $1.57 per share to $1.68 per share.
In July 2024, the Board authorized an increase to our quarterly dividend of approximately 8 percent from $1.68 per share to $1.82 per share.
Cost of Sales The types of expenses included in cost of sales are the following: parts and material consumption, including direct and indirect materials; compensation and related expenses including variable compensation, salaries and fringe benefits; depreciation on 37 Table of Contents production equipment and facilities and amortization of technology intangibles; estimated costs of warranty programs and campaigns; production utilities; production-related purchasing; warehousing, including receiving and inspection; freight costs; engineering support costs; repairs and maintenance; production and warehousing facility property insurance; rent for production facilities; charges for the write-downs of inventories in Russia and other production overhead.
A more detailed discussion of sales by segment is presented in the "OPERATING SEGMENT RESULTS" section. 36 Table of Contents Cost of Sales The types of expenses included in cost of sales are the following: parts and material consumption, including direct and indirect materials; compensation and related expenses, including variable compensation, salaries and fringe benefits; depreciation on production equipment and facilities and amortization of technology intangibles; estimated costs of warranty programs and campaigns; production utilities; production-related purchasing; warehousing, including receiving and inspection; freight costs; engineering support costs; repairs and maintenance; production and warehousing facility property insurance and rent for production facilities and other production overhead.
See NOTE 2, "AGREEMENT IN PRINCIPLE," to our Consolidated Financial Statements for additional information. 2023 Results A summary of our results is as follows: Years ended December 31, In millions, except per share amounts 2023 2022 2021 Net sales $ 34,065 $ 28,074 $ 24,021 Net income attributable to Cummins Inc. 735 2,151 2,131 Earnings per common share attributable to Cummins Inc.
See NOTE 14, "COMMITMENTS AND CONTINGENCIES," to our Consolidated Financial Statements for additional information. 2024 Results A summary of our results is as follows: Years ended December 31, In millions, except per share amounts 2024 (1) 2023 (2) 2022 Net sales $ 34,102 $ 34,065 $ 28,074 Net income attributable to Cummins Inc. 3,946 735 2,151 Earnings per common share attributable to Cummins Inc.
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.
An increase in discount rates, a reduction in projected 52 Table of Contents 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.
The effect of exchange rate changes on cash and cash equivalents decreased $118 million, primarily due to unfavorable fluctuations in the British pound, partially offset by the Chinese renminbi. 2022 vs. 2021 For prior year liquidity comparisons see the Liquidity and Capital Resources section of our 2022 Form 10-K . 48 Table of Contents Sources of Liquidity We generate significant ongoing operating cash flow.
The effect of exchange rate changes on cash and cash equivalents increased $28 million, primarily due to favorable fluctuations in the British pound, partially offset by the Brazilian real. 2023 vs. 2022 For prior year liquidity comparisons see the Liquidity and Capital Resources section of our 2023 Form 10-K . Sources of Liquidity We generate significant ongoing operating cash flow.
At the same time, our geographic diversity and broad product and service offerings have helped limit the impact from a drop in demand in any one industry, region, the economy of any single country or customer on our consolidated results. Agreement in Principle In December 2023, we announced that we reached an agreement in principle with the U.S.
At the same time, our geographic diversity and broad product and service offerings have helped limit the impact from a drop in demand in any one industry, region, the economy of any single country or customer on our consolidated results.
Segment EBITDA Distribution segment EBITDA increased $321 million, primarily due to increased volumes and favorable mix, partially offset by higher compensation expenses. 44 Table of Contents Power Systems Segment Results Financial data for the Power Systems segment was as follows: Favorable/(Unfavorable) Years ended December 31, 2023 vs. 2022 2022 vs. 2021 In millions 2023 2022 2021 Amount Percent Amount Percent External sales $ 3,125 $ 2,951 $ 2,650 $ 174 6 % $ 301 11 % Intersegment sales 2,548 2,082 1,765 466 22 % 317 18 % Total sales 5,673 5,033 4,415 640 13 % 618 14 % Research, development and engineering expenses 237 240 234 3 1 % (6) (3) % Equity, royalty and interest income from investees 53 43 56 10 23 % (13) (23) % Interest income 9 7 5 2 29 % 2 40 % Russian suspension costs (1) — 19 — 19 100 % (19) NM Segment EBITDA 836 596 496 240 40 % 100 20 % Percentage Points Percentage Points Segment EBITDA as a percentage of total sales 14.7 % 11.8 % 11.2 % 2.9 0.6 "NM" - not meaningful information (1) See NOTE 22, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information.
Segment EBITDA Distribution segment EBITDA increased $169 million, primarily due to favorable pricing, partially offset by higher compensation expenses. 43 Table of Contents Power Systems Segment Results Financial data for the Power Systems segment was as follows: Favorable/(Unfavorable) Years ended December 31, 2024 vs. 2023 2023 vs. 2022 In millions 2024 2023 2022 Amount Percent Amount Percent External sales $ 3,500 $ 3,125 $ 2,951 $ 375 12 % $ 174 6 % Intersegment sales 2,908 2,548 2,082 360 14 % 466 22 % Total sales 6,408 5,673 5,033 735 13 % 640 13 % Research, development and engineering expenses 236 237 240 1 — % 3 1 % Equity, royalty and interest income from investees 79 53 43 26 49 % 10 23 % Interest income 7 9 7 (2) (22) % 2 29 % Russian suspension costs (1) — — 19 — — % 19 100 % Segment EBITDA 1,180 836 596 344 41 % 240 40 % Percentage Points Percentage Points Segment EBITDA as a percentage of total sales 18.4 % 14.7 % 11.8 % 3.7 2.9 (1) See NOTE 24, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information.
Positive Trends • We expect demand for medium-duty trucks in North America to remain strong. • We believe market demand for trucks in India will continue to be strong. • We expect demand within our Power Systems business to remain strong, including the power generation, mining and marine markets. • We anticipate demand in our aftermarket business will continue to be robust, driven primarily by strong demand in our Engine business and Power Systems business.
Positive Trends • We expect demand within our Power Systems business to remain strong, including the power generation and mining markets. • We expect North American pick-up truck demand to improve. • We believe market demand for trucks in India will continue to be strong. • We anticipate demand in our aftermarket business will continue to be robust, driven primarily by strong demand in our Engine and Power Systems businesses. • We expect demand for trucks in China to remain stable in 2025.
The net deferred tax assets included $881 million for the value of net operating loss and credit carryforwards. A valuation allowance of $789 million was recorded to reduce the tax assets to the net value management believed was more likely than not to be realized.
At December 31, 2024, we recorded a net deferred tax asset of $730 million. The net deferred tax assets included $907 million for the value of net operating loss and credit carryforwards. A valuation allowance of $872 million was recorded to reduce the tax assets to the net value management believed was more likely than not to be realized.
Engine Segment Results Financial data for the Engine segment was as follows: Favorable/(Unfavorable) Years ended December 31, 2023 vs. 2022 2022 vs. 2021 In millions 2023 2022 2021 Amount Percent Amount Percent External sales $ 8,874 $ 8,199 $ 7,589 $ 675 8 % $ 610 8 % Intersegment sales 2,810 2,746 2,365 64 2 % 381 16 % Total sales 11,684 10,945 9,954 739 7 % 991 10 % Research, development and engineering expenses 614 506 399 (108) (21) % (107) (27) % Equity, royalty and interest income from investees 251 160 (1) 335 91 57 % (175) (52) % Interest income 19 14 8 5 36 % 6 75 % Russian suspension costs (2) — 33 (3) — 33 100 % (33) NM Segment EBITDA 1,630 1,535 1,406 95 6 % 129 9 % Percentage Points Percentage Points Segment EBITDA as a percentage of total sales 14.0 % 14.0 % 14.1 % — (0.1) "NM" - not meaningful information (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.
Engine Segment Results Financial data for the Engine segment was as follows: Favorable/(Unfavorable) Years ended December 31, 2024 vs. 2023 2023 vs. 2022 In millions 2024 2023 2022 Amount Percent Amount Percent External sales $ 8,987 $ 8,874 $ 8,199 $ 113 1 % $ 675 8 % Intersegment sales 2,725 2,810 2,746 (85) (3) % 64 2 % Total sales 11,712 11,684 10,945 28 — % 739 7 % Research, development and engineering expenses 616 614 506 (2) — % (108) (21) % Equity, royalty and interest income from investees 212 251 160 (1) (39) (16) % 91 57 % Interest income 17 19 14 (2) (11) % 5 36 % Russian suspension costs — — 33 (2) — — % 33 100 % Segment EBITDA 1,653 1,630 1,535 23 1 % 95 6 % Percentage Points Percentage Points Segment EBITDA as a percentage of total sales 14.1 % 14.0 % 14.0 % 0.1 — (1) Included 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.
Credit Ratings Our rating and outlook from each of the credit rating agencies as of the date of filing are shown in the table below: Long-Term Short-Term Credit Rating Agency (1) Senior Debt Rating Debt Rating Outlook Standard & Poor’s Rating Services A A1 Stable Moody’s Investors Service, Inc.
See NOTE 4, "INCOME TAXES," to our Consolidated Financial Statements for additional information. 50 Table of Contents Credit Ratings Our rating and outlook from each of the credit rating agencies as of the date of filing are shown in the table below: Long-Term Short-Term Credit Rating Agency (1) Senior Debt Rating Debt Rating Outlook Standard & Poor’s Rating Services A A1 Stable Moody’s Investors Service, Inc.
Uses of Cash Agreement in Principle In December 2023, we announced that we reached the Agreement in Principle with the EPA, CARB, DOJ and 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.
Uses of Cash Settlement Agreements In December 2023, we announced that we reached an agreement in principle with the EPA, CARB, DOJ and the California Attorney General’s Office to resolve certain regulatory civil claims regarding our emissions certification and compliance process for certain engines primarily used in pick-up truck applications in the U.S., which became final and effective in April 2024 (collectively, the Settlement Agreements).
The decrease in net periodic pension cost in 2023 compared to 2022 was primarily due to the full year benefit of the Meritor pension plans added during the acquisition and a higher estimated return on assets in the U.S. and U.K.
The decrease in net periodic pension cost in 2023 compared to 2022 was due primarily due to the full year benefit of the Meritor pension plans added during the acquisition and a higher estimated return on assets in the U.S. and U.K. 54 Table of Contents The weighted-average discount rates used to develop our net periodic pension cost are set forth in the table below.
See NOTE 4, "INVESTMENTS IN EQUITY INVESTEES," and NOTE 22, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information.
See NOTE 3, "INVESTMENTS IN EQUITY INVESTEES," to our Consolidated Financial Statements for additional information.
Distribution Segment Results Financial data for the Distribution segment was as follows: Favorable/(Unfavorable) Years ended December 31, 2023 vs. 2022 2022 vs. 2021 In millions 2023 2022 2021 Amount Percent Amount Percent External sales $ 10,199 $ 8,901 $ 7,742 $ 1,298 15 % $ 1,159 15 % Intersegment sales 50 28 30 22 79 % (2) (7) % Total sales 10,249 8,929 7,772 1,320 15 % 1,157 15 % Research, development and engineering expenses 57 52 48 (5) (10) % (4) (8) % Equity, royalty and interest income from investees 97 77 63 20 26 % 14 22 % Interest income 34 16 7 18 NM 9 NM Russian suspension costs (1) — 54 — 54 100 % (54) NM Segment EBITDA 1,209 888 731 321 36 % 157 21 % Percentage Points Percentage Points Segment EBITDA as a percentage of total sales 11.8 % 9.9 % 9.4 % 1.9 0.5 "NM" - not meaningful information (1) See NOTE 22, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information. 43 Table of Contents Sales for our Distribution segment by region, including adjusted prior year balances for the changes noted above, were as follows: Favorable/(Unfavorable) Years ended December 31, 2023 vs. 2022 2022 vs. 2021 In millions 2023 2022 2021 Amount Percent Amount Percent North America $ 7,081 $ 5,948 $ 4,912 $ 1,133 19 % $ 1,036 21 % Asia Pacific 1,096 1,016 906 80 8 % 110 12 % Europe 853 929 966 (76) (8) % (37) (4) % China 430 355 330 75 21 % 25 8 % Africa and Middle East 294 251 278 43 17 % (27) (10) % India 270 220 198 50 23 % 22 11 % Latin America 225 210 182 15 7 % 28 15 % Total sales $ 10,249 $ 8,929 $ 7,772 $ 1,320 15 % $ 1,157 15 % Sales for our Distribution segment by product line were as follows: Favorable/(Unfavorable) Years ended December 31, 2023 vs. 2022 2022 vs. 2021 In millions 2023 2022 2021 Amount Percent Amount Percent Parts $ 4,071 $ 3,818 $ 3,145 $ 253 7 % $ 673 21 % Power generation 2,509 1,774 1,762 735 41 % 12 1 % Engines 1,997 1,776 1,499 221 12 % 277 18 % Service 1,672 1,561 1,366 111 7 % 195 14 % Total sales $ 10,249 $ 8,929 $ 7,772 $ 1,320 15 % $ 1,157 15 % 2023 vs. 2022 Sales Distribution segment sales increased $1.3 billion.
Distribution Segment Results Financial data for the Distribution segment was as follows: Favorable/(Unfavorable) Years ended December 31, 2024 vs. 2023 2023 vs. 2022 In millions 2024 2023 2022 Amount Percent Amount Percent External sales $ 11,352 $ 10,199 $ 8,901 $ 1,153 11 % $ 1,298 15 % Intersegment sales 32 50 28 (18) (36) % 22 79 % Total sales 11,384 10,249 8,929 1,135 11 % 1,320 15 % Research, development and engineering expenses 55 57 52 2 4 % (5) (10) % Equity, royalty and interest income from investees 90 97 77 (7) (7) % 20 26 % Interest income 37 34 16 3 9 % 18 NM Russian suspension costs (1) — — 54 — — % 54 100 % Segment EBITDA 1,378 1,209 888 169 14 % 321 36 % Percentage Points Percentage Points Segment EBITDA as a percentage of total sales 12.1 % 11.8 % 9.9 % 0.3 1.9 "NM" - not meaningful information (1) See NOTE 24, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information. 42 Table of Contents Sales for our Distribution segment by region, were as follows: Favorable/(Unfavorable) Years ended December 31, 2024 vs. 2023 2023 vs. 2022 In millions 2024 2023 2022 Amount Percent Amount Percent North America $ 7,625 $ 7,081 $ 5,948 $ 544 8 % $ 1,133 19 % Asia Pacific 1,245 1,096 1,016 149 14 % 80 8 % Europe 1,184 853 929 331 39 % (76) (8) % China 478 430 355 48 11 % 75 21 % India 317 270 220 47 17 % 50 23 % Africa and Middle East 268 294 251 (26) (9) % 43 17 % Latin America 267 225 210 42 19 % 15 7 % Total sales $ 11,384 $ 10,249 $ 8,929 $ 1,135 11 % $ 1,320 15 % Sales for our Distribution segment by product line were as follows: Favorable/(Unfavorable) Years ended December 31, 2024 vs. 2023 2023 vs. 2022 In millions 2024 2023 2022 Amount Percent Amount Percent Parts $ 3,980 $ 4,071 $ 3,818 $ (91) (2) % $ 253 7 % Power generation 3,972 2,509 1,774 1,463 58 % 735 41 % Service 1,753 1,672 1,561 81 5 % 111 7 % Engines 1,679 1,997 1,776 (318) (16) % 221 12 % Total sales $ 11,384 $ 10,249 $ 8,929 $ 1,135 11 % $ 1,320 15 % 2024 vs. 2023 Sales Distribution segment sales increased $1.1 billion and increased across most regions.
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.
We recorded a charge of $2.0 billion in the fourth quarter of 2023 to resolve the matters addressed by the Settlement Agreements involving approximately one million of our pick-up truck applications in the U.S. In the second quarter of 2024, we made $1.9 billion of payments required by the Settlement Agreements.
Sales for our Engine segment by market were as follows: Favorable/(Unfavorable) Years ended December 31, 2023 vs. 2022 2022 vs. 2021 In millions 2023 2022 2021 Amount Percent Amount Percent Heavy-duty truck $ 4,399 $ 3,847 $ 3,328 $ 552 14 % $ 519 16 % Medium-duty truck and bus 3,670 3,460 2,777 210 6 % 683 25 % Light-duty automotive 1,762 1,738 1,912 24 1 % (174) (9) % Total on-highway 9,831 9,045 8,017 786 9 % 1,028 13 % Off-highway 1,853 1,900 1,937 (47) (2) % (37) (2) % Total sales $ 11,684 $ 10,945 $ 9,954 $ 739 7 % $ 991 10 % Percentage Points Percentage Points On-highway sales as percentage of total sales 84 % 83 % 81 % 1 2 42 Table of Contents Unit shipments by engine classification (including unit shipments to Power Systems and off-highway engine units included in their respective classification) were as follows: Favorable/(Unfavorable) Years ended December 31, 2023 vs. 2022 2022 vs. 2021 2023 2022 2021 Amount Percent Amount Percent Heavy-duty 141,900 120,700 117,600 21,200 18 % 3,100 3 % Medium-duty 294,100 283,600 273,800 10,500 4 % 9,800 4 % Light-duty 211,500 227,600 273,300 (16,100) (7) % (45,700) (17) % Total unit shipments 647,500 631,900 664,700 15,600 2 % (32,800) (5) % 2023 vs. 2022 Sales Engine segment sales increased $739 million across most markets.
Sales for our Engine segment by market were as follows: Favorable/(Unfavorable) Years ended December 31, 2024 vs. 2023 2023 vs. 2022 In millions 2024 2023 2022 Amount Percent Amount Percent Heavy-duty truck $ 4,244 $ 4,399 $ 3,847 $ (155) (4) % $ 552 14 % Medium-duty truck and bus 4,166 3,670 3,460 496 14 % 210 6 % Light-duty automotive 1,595 1,762 1,738 (167) (9) % 24 1 % Total on-highway 10,005 9,831 9,045 174 2 % 786 9 % Off-highway 1,707 1,853 1,900 (146) (8) % (47) (2) % Total sales $ 11,712 $ 11,684 $ 10,945 $ 28 — % $ 739 7 % Percentage Points Percentage Points On-highway sales as percentage of total sales 85 % 84 % 83 % 1 1 Unit shipments by engine classification (including unit shipments to Power Systems and off-highway engine units included in their respective classification) were as follows: Favorable/(Unfavorable) Years ended December 31, 2024 vs. 2023 2023 vs. 2022 2024 2023 2022 Amount Percent Amount Percent Heavy-duty 132,900 141,900 120,700 (9,000) (6) % 21,200 18 % Medium-duty 310,300 294,100 283,600 16,200 6 % 10,500 4 % Light-duty 189,400 211,500 227,600 (22,100) (10) % (16,100) (7) % Total unit shipments 632,600 647,500 631,900 (14,900) (2) % 15,600 2 % 40 Table of Contents 2024 vs. 2023 Sales Engine segment sales increased $28 million.
For all prior year segment results comparisons to 2021 see the Results of Operations section of our 2022 Form 10-K . 40 Table of Contents Components Segment Results Financial data for the Components segment was as follows: Favorable/(Unfavorable) Years ended December 31, 2023 vs. 2022 2022 vs. 2021 In millions 2023 2022 2021 Amount Percent Amount Percent External sales $ 11,531 $ 7,847 $ 5,932 $ 3,684 47 % $ 1,915 32 % Intersegment sales 1,878 1,889 1,733 (11) (1) % 156 9 % Total sales 13,409 9,736 7,665 3,673 38 % 2,071 27 % Research, development and engineering expenses 387 309 307 (78) (25) % (2) (1) % Equity, royalty and interest income from investees 97 71 50 26 37 % 21 42 % Interest income 31 12 5 19 NM 7 NM Russian suspension costs (1) — 5 — 5 100 % (5) NM Segment EBITDA 1,840 (2) 1,346 (3) 1,180 494 37 % 166 14 % Percentage Points Percentage Points Segment EBITDA as a percentage of total sales 13.7 % 13.8 % 15.4 % (0.1) (1.6) "NM" - not meaningful information (1) See NOTE 22, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information.
Financial data for the Components segment was as follows: Favorable/(Unfavorable) Years ended December 31, 2024 vs. 2023 2023 vs. 2022 In millions 2024 2023 2022 Amount Percent Amount Percent External sales $ 9,894 $ 11,531 $ 7,847 $ (1,637) (14) % $ 3,684 47 % Intersegment sales 1,785 1,878 1,889 (93) (5) % (11) (1) % Total sales 11,679 13,409 9,736 (1,730) (13) % 3,673 38 % Research, development and engineering expenses 328 387 309 59 15 % (78) (25) % Equity, royalty and interest income from investees 64 97 71 (33) (34) % 26 37 % Interest income 25 31 12 (6) (19) % 19 NM Russian suspension costs (1) — — 5 — — % 5 100 % Segment EBITDA 1,591 (2) 1,840 (2) 1,346 (3) (249) (14) % 494 37 % Percentage Points Percentage Points Segment EBITDA as a percentage of total sales 13.6 % 13.7 % 13.8 % (0.1) (0.1) "NM" - not meaningful information (1) See NOTE 24, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information.
We serve our customers through a service network of approximately 450 wholly-owned, joint venture and independent distributor locations and more than 19,000 Cummins certified dealer locations in approximately 190 countries and territories.
We serve our customers through a service network of approximately 650 wholly-owned, joint venture and independent distributor locations and more than 19,000 Cummins certified dealer locations in approximately 190 countries and territories. Our segment reporting structure is organized according to the products and markets each segment serves.
Based on the historical returns and forward-looking return expectations for capital markets, as plan assets continue to be de-risked, consistent with our investment policy, we believe our investment return assumption of 7.25 percent in 2024 for U.S. pension assets is reasonable and attainable.
Based on the historical returns and forward-looking return expectations for capital markets, we believe our investment return assumption of 7.00 percent in 2025 for U.S. pension assets is reasonable and attainable.
Noncontrolling interests in income of consolidated subsidiaries increased $73 million principally due to higher earnings at Cummins India Limited and Eaton Cummins Joint Venture, as well as earnings attributable to the divested, noncontrolling interest in Atmus. 2022 vs. 2021 For prior year results of operations comparisons to 2021 see the Results of Operations section of our 2022 Form 10-K . 39 Table of Contents Comprehensive Income - Foreign Currency Translation Adjustment The foreign currency translation adjustment was a net gain of $92 million and net loss of $384 million for the years ended December 31, 2023 and 2022, respectively.
Noncontrolling interests in income of consolidated subsidiaries increased $17 million principally due to higher earnings at Cummins India Limited and the absence of losses at Hydrogenics Corporation resulting from the June 2023 acquisition, partially offset by lower earnings at Eaton Cummins Joint Venture and the divestiture of Atmus. 2023 vs. 2022 For all prior year segment results comparisons to 2022 see the Results of Operations section of our 2023 Form 10-K . 38 Table of Contents Comprehensive Income - Foreign Currency Translation Adjustment The foreign currency translation adjustment was a net loss of $276 million and net gain of $92 million for the years ended December 31, 2024 and 2023, respectively.
The following table contains sales and EBITDA by operating segment for the years ended December 31, 2023, and 2022. See NOTE 25, "OPERATING SEGMENTS," to the Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Consolidated Statements of Net Income .
See NOTE 25, "OPERATING SEGMENTS," to our Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Consolidated Statements of Net Income .
See NOTE 23, "FORMATION OF ATMUS AND IPO," to the Consolidated Financial Statements for additional information. Debt Facilities and Other Sources of Liquidity 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.
Debt Facilities and Other Sources of Liquidity On June 3, 2024, we entered into an amended and restated 5-year credit agreement that allows us to borrow up to $2.0 billion of unsecured funds at any time prior to June 3, 2029.
Various assets and liabilities, including short-term debt, can fluctuate significantly from month to month depending on short-term liquidity needs. As a result, working capital is a prime focus of management's attention.
LIQUIDITY AND CAPITAL RESOURCES Key Working Capital and Balance Sheet Data We fund our working capital with cash from operations and short-term borrowings, including commercial paper, when necessary. Various assets and liabilities, including short-term debt, can fluctuate significantly from month-to-month depending on short-term liquidity needs. As a result, working capital is a prime focus of management's attention.
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 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.
At December 31, 2023, we had $1.5 billion of commercial paper outstanding, which effectively reduced our available capacity under our revolving credit facilities to $2.5 billion. See NOTE 13, "DEBT," to our Consolidated Financial Statements for additional information .
The total combined borrowing capacity under the revolving credit facilities and commercial paper programs should not exceed $4.0 billion. At December 31, 2024, we had $1.3 billion of commercial paper outstanding, which effectively reduced our available capacity under our revolving credit facilities to $2.7 billion. See NOTE 12, "DEBT," to our Consolidated Financial Statements for additional information .
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.
The Accelera segment is currently in the early stages of commercializing these technologies with efforts primarily focused on the development of electrified power systems and related components and subsystems and our electrolyzers for hydrogen production.
The weighted-average discount rates used to develop our net periodic pension cost are set forth in the table below. 57 Table of Contents Discount Rates 2024 2023 2022 2021 U.S. plans 5.15 % 5.55 % 3.31 % 2.62 % U.K. plans 4.72 % 4.99 % 2.26 % 1.50 % The discount rate enables us to state expected future cash payments for benefits as a present value on the measurement date.
Discount Rates 2025 2024 2023 2022 U.S. plans 5.69 % 5.15 % 5.55 % 3.31 % U.K. plans 5.62 % 4.72 % 4.99 % 2.26 % The discount rate enables us to state expected future cash payments for benefits as a present value on the measurement date.
See NOTE 24, "ACQUISITIONS," to the Consolidated Financial Statements for additional information. 35 Table of Contents 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.
We also 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 2, 2025. This credit agreement amended and restated the prior $2.0 billion 364-day credit facility that matured on June 3, 2024.
The funded status of our pension plans is dependent upon a variety of variables and assumptions including return on invested assets, market interest rates and levels of voluntary contributions to the plans. In 2023, the investment gain on our U.S. pension trusts was 6.81 percent, while our U.K. pension trusts' loss was 4.37 percent.
The funded status of our pension plans is dependent upon a variety of variables and assumptions including return on invested assets, market interest rates and levels of voluntary contributions to the plans.
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.
Department of Justice (DOJ) and the California Attorney General’s Office to resolve certain regulatory civil claims regarding our emissions certification and compliance process for certain engines primarily used in pick-up truck applications in the U.S., which became final and effective in April 2024 (collectively, the Settlement Agreements).
(2) See NOTE 22, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information.
See NOTE 22, "ACCELERA STRATEGIC REORGANIZATION ACTIONS," to our Consolidated Financial Statements for additional information.
Net cash used in financing activities increased $3.8 billion, primarily due to higher net payments of commercial paper of $3.0 billion and lower proceeds from borrowings of $1.2 billion, partially offset by lower payments on borrowings and finance lease obligations of $414 million and the absence of repurchases of common stock of $374 million.
Net cash used in financing activities decreased $2.0 billion, primarily due to higher proceeds from borrowings of $1.9 billion (principally related to our 2024 note issuance) and lower net payments of commercial paper of $542 million, partially offset by higher payments on borrowings and finance lease obligations of $432 million.
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. The total combined borrowing capacity under the revolving credit facilities and commercial paper programs should not exceed $4.0 billion.
Our committed credit facilities also provide access up to $4.0 billion of unsecured, short-term promissory notes (commercial paper) pursuant to 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 general corporate purposes.
We evaluate the recoverability of our deferred tax assets each quarter by assessing the likelihood of future profitability and available tax planning strategies that could be implemented to realize our net deferred tax assets. At December 31, 2023, we recorded a net deferred tax asset of $552 million.
Future tax benefits of net operating loss and credit carryforwards are also recognized as deferred tax assets. We evaluate the recoverability of our deferred tax assets each quarter by assessing the likelihood of future profitability and available tax planning strategies that could be implemented to realize our net deferred tax assets.
We test for goodwill impairment at the reporting unit level and our reporting units are the operating segments or the components of operating segments that constitute businesses for which discrete financial information is available and is regularly reviewed by management. 54 Table of Contents 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 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 have elected this option on certain reporting units.
See NOTE 22, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information. Net income attributable to Cummins Inc. for 2023 was $735 million, or $5.15 per diluted share, on sales of $34.1 billion, compared to 2022 net income attributable to Cummins Inc. of $2.2 billion, or $15.12 per diluted share, on sales of $28.1 billion.
See NOTE 14, "COMMITMENTS AND CONTINGENCIES," to our Consolidated Financial Statements for additional information. 33 Table of Contents Net income attributable to Cummins Inc. for 2024 was $3.9 billion, or $28.37 per diluted share, on sales of $34.1 billion, compared to 2023 net income attributable to Cummins Inc. of $0.7 billion, or $5.15 per diluted share, on sales of $34.1 billion.
Under this method, deferred tax assets and liabilities are recognized for the future tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Future tax benefits of net operating loss and credit carryforwards are also recognized as deferred tax assets.
Accounting for Income Taxes We determine our income tax expense using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.
See application of critical accounting estimates within MD&A and NOTE 11, "PENSIONS AND OTHER POSTRETIREMENT BENEFITS," to the Consolidated Financial Statements , for additional information concerning our pension and other postretirement benefit plans.
In addition, we expect our 2025 net periodic pension cost to approximate $76 million. See "APPLICATION OF CRITICAL ACCOUNTING ESTIMATES" and NOTE 10, "PENSIONS AND OTHER POSTRETIREMENT BENEFITS," to our Consolidated Financial Statements for additional information concerning our pension and other postretirement benefit plans.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe sensitivity analysis assumes instantaneous, parallel shifts in foreign currency exchange rates and commodity prices. See NOTE 21, "DERIVATIVES," to our Consolidated Financial Statements for additional information. 58 Table of Contents Foreign Currency Exchange Rate Risk As a result of our international business presence, we are exposed to foreign currency exchange rate risks.
Biggest changeThe sensitivity analysis assumes instantaneous, parallel shifts in foreign currency exchange rates and commodity prices. See NOTE 20, "DERIVATIVES," to our Consolidated Financial Statements for additional information. Foreign Currency Exchange Rate Risk As a result of our international business presence, we are exposed to foreign currency exchange rate risks.
This risk is closely monitored and managed through the use of physical forward contracts (which are not considered derivatives) and financial derivative instruments including foreign currency forward contracts, commodity swap contracts and interest rate swaps and locks. Financial derivatives are used expressly for hedging purposes and under no circumstances are they used for speculative purposes.
This risk is closely monitored and managed through the use of physical forward contracts (which are not considered derivatives) and financial derivative instruments including foreign currency forward contracts, commodity swap contracts and interest rate swaps. Financial derivatives are used expressly for hedging purposes and under no circumstances are they used for speculative purposes.
We also enter into physical forward contracts, which qualify for the normal purchases scope exception and are treated as purchase commitments. 59 Table of Contents We also limit our exposure to commodity price risk by entering into purchasing arrangements to fix the price of certain volumes of platinum, palladium and iridium expected to be used in our products.
We also enter into physical forward contracts, which qualify for the normal purchases scope exception and are treated as purchase commitments. 56 Table of Contents We also limit our exposure to commodity price risk by entering into purchasing arrangements to fix the price of certain volumes of platinum, palladium and iridium expected to be used in our products.
Our foreign currency cash flow hedges generally mature within two years. These foreign currency forward contracts are designated and qualify as foreign currency cash flow hedges. For the years ended December 31, 2023, and 2022, there were no circumstances that resulted in the discontinuance of a foreign currency cash flow hedge.
Our foreign currency cash flow hedges generally mature within two years. These foreign currency forward contracts are designated and qualify as foreign currency cash flow hedges. For the years ended December 31, 2024, and 2023, there were no circumstances that resulted in the discontinuance of a foreign currency cash flow hedge.
These commodity swaps are designated and qualify as cash flow hedges. At December 31, 2023, realized and unrealized gains and losses related to these hedges were not material to our financial statements.
These commodity swaps are designated and qualify as cash flow hedges. At December 31, 2024, realized and unrealized gains and losses related to these hedges were not material to our financial statements.
At any time, a change in interest rates could have an adverse impact on the fair value of our portfolios. Assuming a hypothetical adverse movement in interest rates of one percentage point, the combined value of our interest rate derivatives portfolios would be reduced by $3 million, as calculated as of December 31, 2023.
At any time, a change in interest rates could have an adverse impact on the fair value of our portfolios. Assuming a hypothetical adverse movement in interest rates of one percentage point, the combined value of our interest rate derivatives portfolios would be reduced by $29 million, as calculated as of December 31, 2024.
These forwards are utilized to hedge portions of our net investments denominated in the British pound against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar.
These forwards are utilized to hedge portions of our net investments denominated in these currencies against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar.
These arrangements, as further described below, enable us to fix the prices of portions of our normal purchases of these commodities, which otherwise are subject to market volatility. The following describes our risk exposures and provides the results of a sensitivity analysis performed at December 31, 2023.
These arrangements, as further described below, enable us to fix the prices of portions of our normal purchases of these commodities, which otherwise are subject to market volatility. 55 Table of Contents The following describes our risk exposures and provides the results of a sensitivity analysis performed at December 31, 2024.
Under the terms of our foreign exchange forwards, we agreed with third parties to sell British pounds in exchange for U.S. dollar currency at a specified rate at the maturity of the contract.
Under the terms of our foreign exchange forwards, we agreed with third parties to sell British pounds, Chinese renminbi and Euros in exchange for U.S. dollar currency at a specified rate at the maturity of the contract.
At December 31, 2023, the potential gain or loss in the fair value of our outstanding foreign currency contracts, assuming a hypothetical 10 percent fluctuation in the currencies of such contracts, would be approximately $29 million.
At December 31, 2024, the potential gain or loss in the fair value of our outstanding foreign currency contracts, assuming a hypothetical 10 percent fluctuation in the currencies of such contracts, would be approximately $25 million.
Additional information on the physical forwards is included in NOTE 15, "COMMITMENTS AND CONTINGENCIES." 60 Table of Contents
Additional information on the physical forwards is included in NOTE 14, "COMMITMENTS AND CONTINGENCIES." 57 Table of Contents

Other CMI 10-K year-over-year comparisons