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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended April 4, 2021
 
Commission File Number 1-4949
CUMMINS INC.
(Exact name of registrant as specified in its charter)
Indiana35-0257090
(State of Incorporation)  (IRS Employer Identification No.)
500 Jackson Street
Box 3005
Columbus, Indiana 47202-3005
(Address of principal executive offices)
 
Telephone (812377-5000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common stock, $2.50 par valueCMINew York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No 
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit such files).  Yes x  No 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.  (Check one):
Large Accelerated FilerxAccelerated filerNon-accelerated filer
Smaller reporting companyEmerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No x
 
As of April 4, 2021, there were 146,202,578 shares of common stock outstanding with a par value of $2.50 per share.


1

Table of Contents
CUMMINS INC. AND SUBSIDIARIES
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q
 
  Page
  
 Condensed Consolidated Statements of Net Income for the three months ended April 4, 2021 and March 29, 2020
 Condensed Consolidated Statements of Comprehensive Income for the three months ended April 4, 2021 and March 29, 2020
 Condensed Consolidated Balance Sheets at April 4, 2021 and December 31, 2020
 Condensed Consolidated Statements of Cash Flows for the three months ended April 4, 2021 and March 29, 2020
 Condensed Consolidated Statements of Changes in Equity for the three months ended April 4, 2021 and March 29, 2020
 
  
 

2

Table of Contents
PART I.  FINANCIAL INFORMATION 
ITEM 1.  Condensed Consolidated Financial Statements 

CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME
(Unaudited)

 Three months ended
In millions, except per share amounts April 4,
2021
March 29,
2020
NET SALES (a) (Note 2)
$6,092 $5,011 
Cost of sales 4,606 3,717 
GROSS MARGIN 1,486 1,294 
OPERATING EXPENSES AND INCOME   
Selling, general and administrative expenses 574 546 
Research, development and engineering expenses 260 238 
Equity, royalty and interest income from investees (Note 4)166 129 
Other operating expense, net (8)(5)
OPERATING INCOME 810 634 
Interest expense 28 23 
Other income, net 1 44 
INCOME BEFORE INCOME TAXES 783 655 
Income tax expense 172 127 
CONSOLIDATED NET INCOME 611 528 
Less: Net income attributable to noncontrolling interests8 17 
NET INCOME ATTRIBUTABLE TO CUMMINS INC. $603 $511 
 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.   
Basic $4.10 $3.42 
Diluted $4.07 $3.41 
 
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING   
Basic 147.0 149.3 
Dilutive effect of stock compensation awards 1.3 0.4 
Diluted 148.3 149.7 
(a) Includes sales to nonconsolidated equity investees of $478 million for the three months ended April 4, 2021, compared with $257 million for the comparable period in 2020.

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
3

Table of Contents
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 Three months ended
In millions April 4,
2021
March 29,
2020
CONSOLIDATED NET INCOME $611 $528 
Other comprehensive income (loss), net of tax (Note 11)  
Change in pension and other postretirement defined benefit plans 29 2 
Foreign currency translation adjustments (56)(162)
Unrealized gain (loss) on derivatives 72 (79)
Total other comprehensive income (loss), net of tax 45 (239)
COMPREHENSIVE INCOME 656 289 
Less: Comprehensive income attributable to noncontrolling interests 8  
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC. $648 $289 
 
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
4

Table of Contents
CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
In millions, except par valueApril 4,
2021
December 31,
2020
ASSETS  
Current assets   
Cash and cash equivalents $2,958 $3,401 
Marketable securities (Note 5)397 461 
Total cash, cash equivalents and marketable securities 3,355 3,862 
Accounts and notes receivable, net
Trade and other 3,698 3,440 
Nonconsolidated equity investees 511 380 
Inventories (Note 6)3,753 3,425 
Prepaid expenses and other current assets 805 790 
Total current assets 12,122 11,897 
Long-term assets   
Property, plant and equipment 9,044 9,011 
Accumulated depreciation (4,848)(4,756)
Property, plant and equipment, net 4,196 4,255 
Investments and advances related to equity method investees1,592 1,441 
Goodwill 1,290 1,293 
Other intangible assets, net 964 963 
Pension assets1,085 1,042 
Other assets (Note 7)1,713 1,733 
Total assets $22,962 $22,624 
LIABILITIES  
Current liabilities   
Accounts payable (principally trade) $3,279 $2,820 
Loans payable (Note 8)93 169 
Commercial paper (Note 8)317 323 
Accrued compensation, benefits and retirement costs 393 484 
Current portion of accrued product warranty (Note 9)623 674 
Current portion of deferred revenue (Note 2)773 691 
Other accrued expenses (Note 7)1,121 1,112 
Current maturities of long-term debt (Note 8)61 62 
Total current liabilities 6,660 6,335 
Long-term liabilities   
Long-term debt (Note 8)3,620 3,610 
Pensions and other postretirement benefits621 630 
Accrued product warranty (Note 9)692 672 
Deferred revenue (Note 2)828 840 
Other liabilities (Note 7)1,510 1,548 
Total liabilities $13,931 $13,635 
Commitments and contingencies (Note 10)
 
EQUITY
Cummins Inc. shareholders’ equity   
Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.4 shares issued
$2,393 $2,404 
Retained earnings 15,825 15,419 
Treasury stock, at cost, 76.2 and 74.8 shares
(8,172)(7,779)
Accumulated other comprehensive loss (Note 11)(1,937)(1,982)
Total Cummins Inc. shareholders’ equity 8,109 8,062 
Noncontrolling interests 922 927 
Total equity $9,031 $8,989 
Total liabilities and equity $22,962 $22,624 
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
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CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three months ended
In millionsApril 4,
2021
March 29,
2020
CASH FLOWS FROM OPERATING ACTIVITIES  
Consolidated net income $611 $528 
Adjustments to reconcile consolidated net income to net cash provided by operating activities   
Depreciation and amortization170 168 
Deferred income taxes8 (11)
Equity in income of investees, net of dividends (136)(78)
Pension and OPEB expense (Note 3)20 27 
Pension contributions and OPEB payments (Note 3)(51)(60)
Share-based compensation expense 8 4 
Restructuring payments  (48)
Loss (gain) on corporate owned life insurance 32 (17)
Foreign currency remeasurement and transaction exposure 1 3 
Changes in current assets and liabilities  
Accounts and notes receivable (374)107 
Inventories (336)(171)
Other current assets (24)79 
Accounts payable 465 171 
Accrued expenses (24)(321)
Changes in other liabilities  28 
Other, net (31)(30)
Net cash provided by operating activities 339 379 
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital expenditures (87)(75)
Investments in internal use software (11)(8)
Investments in and advances to equity investees (24)(7)
Investments in marketable securities—acquisitions (143)(116)
Investments in marketable securities—liquidations (Note 5)207 95 
Cash flows from derivatives not designated as hedges 14 6 
Other, net 19 6 
Net cash used in investing activities (25)(99)
CASH FLOWS FROM FINANCING ACTIVITIES   
Net (payments) borrowings of commercial paper (6)957 
Payments on borrowings and finance lease obligations (16)(10)
Net (payments) borrowings under short-term credit agreements (102)25 
Distributions to noncontrolling interests (13)(13)
Dividend payments on common stock (197)(195)
Repurchases of common stock (418)(550)
Proceeds from issuing common stock 18 13 
Other, net (11)7 
Net cash (used in) provided by financing activities (745)234 
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (12)48 
Net (decrease) increase in cash and cash equivalents(443)562 
Cash and cash equivalents at beginning of year 3,401 1,129 
CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,958 $1,691 

 The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
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CUMMINS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
 
Three months ended
In millions, except per share amountsCommon StockAdditional Paid-in CapitalRetained EarningsTreasury StockCommon Stock Held in TrustAccumulated Other Comprehensive LossTotal Cummins Inc. Shareholders’ EquityNoncontrolling InterestsTotal Equity
BALANCE AT DECEMBER 31, 2020$556 $1,848 $15,419 $(7,779)$ $(1,982)$8,062 $927 $8,989 
Net income 603 603 8 611 
Other comprehensive income, net of tax (Note 11)45 45  45 
Repurchases of common stock(418)(418) (418)
Cash dividends on common stock, $1.35 per share
(197)(197) (197)
Distributions to noncontrolling interests  (13)(13)
Share-based awards (6)24 18  18 
Other shareholder transactions (5)1 (4) (4)
BALANCE AT APRIL 4, 2021$556 $1,837 $15,825 $(8,172)$ $(1,937)$8,109 $922 $9,031 
BALANCE AT DECEMBER 31, 2019$556 $1,790 $14,416 $(7,225)$(2)$(2,028)$7,507 $958 $8,465 
Adoption of new accounting standards(4)(4)— (4)
Net income511 511 17 528 
Other comprehensive loss, net of tax (Note 11)(222)(222)(17)(239)
Issuance of common stock9 9 — 9 
Employee benefits trust activity17 1 18 — 18 
Repurchases of common stock(550)(550)— (550)
Cash dividends on common stock, $1.311 per share
(195)(195)— (195)
Distributions to noncontrolling interests— (13)(13)
Share-based awards(18)31 13 — 13 
Other shareholder transactions(19)(19)5 (14)
BALANCE AT MARCH 29, 2020$556 $1,779 $14,728 $(7,744)$(1)$(2,250)$7,068 $950 $8,018 
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.




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CUMMINS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Overview
Cummins Inc. (“Cummins,” “we,” “our” or “us”) was founded in 1919 as Cummins Engine Company, a corporation in Columbus, Indiana, and one of the first diesel engine manufacturers. In 2001, we changed our name to Cummins Inc. We are a global power leader that designs, manufactures, distributes and services diesel, natural gas, electric and hybrid powertrains and powertrain-related components including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems, automated transmissions, electric power generation systems, batteries, electrified power systems, hydrogen production and fuel cell products. We sell our products to original equipment manufacturers (OEMs), distributors, dealers and other customers worldwide. We serve our customers through a network of over 500 wholly-owned, joint venture and independent distributor locations and over 9,000 Cummins certified dealer locations with service to approximately 190 countries and territories.
Interim Condensed Financial Statements
The unaudited Condensed Consolidated Financial Statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of operations, financial position and cash flows. All such adjustments are of a normal recurring nature. The Condensed Consolidated Financial Statements were prepared in accordance with accounting principles in the United States of America (GAAP) pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Certain information and footnote disclosures normally included in annual financial statements were condensed or omitted as permitted by such rules and regulations.
These interim condensed financial statements should be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2020. Our interim period financial results for the three month periods presented are not necessarily indicative of results to be expected for any other interim period or for the entire year. The year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all required annual disclosures.
Reclassifications
Certain amounts for prior year periods were reclassified to conform to the current year presentation.
Use of Estimates in Preparation of Financial Statements
Preparation of financial statements requires management to make estimates and assumptions that affect reported amounts presented and disclosed in our Condensed Consolidated Financial Statements. Significant estimates and assumptions in these Condensed Consolidated Financial Statements require the exercise of judgment. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates.
Reporting Period
Our reporting period usually ends on the Sunday closest to the last day of the quarterly calendar period. The first quarters of 2021 and 2020 ended on April 4 and March 29, respectively. Our fiscal year ends on December 31, regardless of the day of the week on which December 31 falls.
Weighted-Average Diluted Shares Outstanding
The weighted-average diluted common shares outstanding exclude the anti-dilutive effect of certain stock options. The options excluded from diluted earnings per share were as follows: 
 Three months ended
 April 4,
2021
March 29,
2020
Options excluded2,780 1,234,188 

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NOTE 2. REVENUE FROM CONTRACTS WITH CUSTOMERS
Long-term Contracts
The majority of our contracts are for a period of less than one year. We have certain long-term maintenance agreements, construction contracts and extended warranty coverage arrangements that span a period in excess of one year. The aggregate amount of the transaction price for long-term maintenance agreements and construction contracts allocated to performance obligations that were not satisfied as of April 4, 2021, was $847 million. We expect to recognize the related revenue of $152 million over the next 12 months and $695 million over periods up to 10 years. See Note 9, "PRODUCT WARRANTY LIABILITY," for additional disclosures on extended warranty coverage arrangements. Our other contracts generally are for a duration of less than one year, include payment terms that correspond to the timing of costs incurred when providing goods and services to our customers or represent sales-based royalties.
Deferred and Unbilled Revenue
The following is a summary of our unbilled and deferred revenue and related activity:
In millionsApril 4,
2021
December 31,
2020
Unbilled revenue$153 $114 
Deferred revenue, primarily extended warranty1,601 1,531 
We recognized revenue of $154 million for the three months ended April 4, 2021, compared with $112 million for the comparable period in 2020, that was included in the deferred revenue balance at the beginning of each year. We did not record any impairment losses on our unbilled revenues during the three months ended April 4, 2021 or March 29, 2020.
Disaggregation of Revenue
Consolidated Revenue
The table below presents our consolidated sales by geographic area. Net sales attributed to geographic areas were based on the location of the customer.
 Three months ended
In millionsApril 4,
2021
March 29,
2020
United States$3,060 $2,852 
China957 522 
India330 170 
Other international1,745 1,467 
Total net sales$6,092 $5,011 
Segment Revenue
Engine segment external sales by market were as follows:
Three months ended
In millionsApril 4,
2021
March 29,
2020
Heavy-duty truck$613 $519 
Medium-duty truck and bus483 490 
Light-duty automotive474 327 
Total on-highway1,570 1,336 
Off-highway325 243 
Total sales$1,895 $1,579 
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Distribution segment external sales by region were as follows:
Three months ended
In millionsApril 4,
2021
March 29,
2020
North America$1,166 $1,245 
Asia Pacific213 192 
Europe163 135 
China85 68 
Russia57 41 
Africa and Middle East54 51 
India49 36 
Latin America40 39 
Total sales$1,827 $1,807 
Distribution segment external sales by product line were as follows:
Three months ended
In millionsApril 4,
2021
March 29,
2020
Parts$754 $783 
Power generation416 375 
Engines333 322 
Service324 327 
Total sales$1,827 $1,807 
Components segment external sales by business were as follows:
Three months ended
In millionsApril 4,
2021
March 29,
2020
Emission solutions$966 $570 
Filtration301 249 
Turbo technologies225 158 
Electronics and fuel systems117 56 
Automated transmissions115 82 
Total sales$1,724 $1,115 
Power Systems segment external sales by product line were as follows:
Three months ended
In millionsApril 4,
2021
March 29,
2020
Power generation$351 $269 
Industrial179 165 
Generator technologies82 66 
Total sales$612 $500 

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NOTE 3. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
We sponsor funded and unfunded domestic and foreign defined benefit pension and other postretirement benefit (OPEB) plans. Contributions to these plans were as follows:
 Three months ended
In millionsApril 4,
2021
March 29,
2020
Defined benefit pension contributions$42 $56 
OPEB payments, net9 4 
Defined contribution pension plans35 34 
During the remainder of 2021, we anticipate making $17 million in additional defined benefit pension contributions in the U.K. and $12 million in contributions to our U.S. non-qualified benefit plans. These contributions may be made from trusts or company funds either to increase pension assets or to make direct benefit payments to plan participants. We expect our 2021 annual net periodic pension cost to approximate $79 million.
The components of net periodic pension and OPEB costs under our plans were as follows:
 Pension  
 U.S. PlansU.K. PlansOPEB
 Three months ended
In millionsApril 4,
2021
March 29,
2020
April 4,
2021
March 29,
2020
April 4,
2021
March 29,
2020
Service cost$35 $34 $8 $7 $ $ 
Interest cost19 24 8 9 1 2 
Expected return on plan assets(50)(49)(21)(19)  
Amortization of prior service cost   1   
Recognized net actuarial loss12 10 8 8   
Net periodic benefit cost$16 $19 $3 $6 $1 $2 

NOTE 4. EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES
Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Net Income for the reporting period was as follows:
 Three months ended
In millionsApril 4,
2021
March 29,
2020
Manufacturing entities
Beijing Foton Cummins Engine Co., Ltd.$39 $17 
Dongfeng Cummins Engine Company, Ltd.31 8 
Chongqing Cummins Engine Company, Ltd.10 9 
All other manufacturers61 

55 
(1)
Distribution entities
Komatsu Cummins Chile, Ltda.6 10 
All other distributors3  
Cummins share of net income150 99 
Royalty and interest income16 30 
Equity, royalty and interest income from investees$166 $129 
(1) Includes $37 million in favorable adjustments related to tax changes within India's 2020-2021 Union Budget of India (India Tax Law Change) passed in March 2020.

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NOTE 5. MARKETABLE SECURITIES
A summary of marketable securities, all of which were classified as current, was as follows:
 April 4, 2021December 31, 2020
In millionsCost
Gross unrealized gains/(losses)(1)
Estimated
fair value
Cost
Gross unrealized gains/(losses)(1)
Estimated
fair value
Equity securities      
Debt mutual funds$188 $3 $191 $267 $5 $272 
Certificates of deposit179  179 164  164 
Equity mutual funds20 6 26 19 5 24 
Debt securities1  1 1  1 
Total marketable securities$388 $9 $397 $451 $10 $461 
(1) Unrealized gains and losses for debt securities are recorded in other comprehensive income while unrealized gains and losses for equity securities are recorded in "Other income, net" in our Condensed Consolidated Statements of Net Income.
All debt securities are classified as available-for-sale. All marketable securities presented use a Level 2 fair value measure. The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 securities, and there were no transfers between Level 2 or 3 during the three months ended April 4, 2021 or the year ended December 31, 2020.

A description of the valuation techniques and inputs used for our Level 2 fair value measures is as follows:
Debt mutual funds — The fair value measures for the vast majority of these investments are the daily net asset values published on a regulated governmental website. Daily quoted prices are available from the issuing brokerage and are used on a test basis to corroborate this Level 2 input measure.
Certificates of deposit — These investments provide us with a contractual rate of return and generally range in maturity from three months to five years. The counterparties to these investments are reputable financial institutions with investment grade credit ratings. Since these instruments are not tradable and must be settled directly by us with the respective financial institution, our fair value measure is the financial institution's month-end statement.
Equity mutual funds — The fair value measures for these investments are the net asset values published by the issuing brokerage. Daily quoted prices are available from reputable third-party pricing services and are used on a test basis to corroborate this Level 2 input measure.
Debt securities — The fair value measures for these securities are broker quotes received from reputable firms. These securities are infrequently traded on a national exchange and these values are used on a test basis to corroborate our Level 2 input measure.
The proceeds from sales and maturities of marketable securities were as follows:
Three months ended
In millionsApril 4,
2021
March 29,
2020
Proceeds from sales of marketable securities$163 $53 
Proceeds from maturities of marketable securities44 42 
Investments in marketable securities - liquidations$207 $95 

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NOTE 6. INVENTORIES
Inventories are stated at the lower of cost or net realizable value. Inventories included the following: 
In millionsApril 4,
2021
December 31,
2020
Finished products$2,320 $2,216 
Work-in-process and raw materials1,585 1,346 
Inventories at FIFO cost3,905 3,562 
Excess of FIFO over LIFO(152)(137)
Total inventories$3,753 $3,425 

NOTE 7. SUPPLEMENTAL BALANCE SHEET DATA
Other assets included the following:
In millionsApril 4,
2021
December 31, 2020
Operating lease assets$466 $438 
Corporate owned life insurance462 508 
Deferred income taxes439 479 
Mark-to-market valuation on interest rate locks38  
Other308 308 
Other assets$1,713 $1,733 
Other accrued expenses included the following:
In millionsApril 4,
2021
December 31, 2020
Marketing accruals$279 $242 
Other taxes payable242 256 
Current portion of operating lease liabilities125 128 
Income taxes payable94 82 
Other381 404 
Other accrued expenses$1,121 $1,112 
Other liabilities included the following:
In millionsApril 4,
2021
December 31, 2020
Operating lease liabilities$343 $325 
Deferred income taxes322 325 
One-time transition tax289 289 
Accrued compensation192 203 
Mark-to-market valuation on interest rate locks 41 
Other long-term liabilities364 365 
Other liabilities$1,510 $1,548 

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NOTE 8. DEBT
Loans Payable and Commercial Paper
Loans payable, commercial paper and the related weighted-average interest rates were as follows:
In millionsApril 4,
2021
December 31,
2020
Loans payable (1)
$