CUMMINS INC [CMI] Filings

10-Q 1 cmi-20240630.htm 10-Q cmi-20240630

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 June 30, 2024

Commission File Number 1-4949

CUMMINS INC.

(Exact name of registrant as specified in its charter)


Indiana						35-0257090
(State of Incorporation)						(IRS Employer Identification No.)

500 Jackson Street

Box 3005

Columbus, Indiana 47202-3005

(Address of principal executive offices)

Telephone (812) 377-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common stock, $2.50 par value

CMI

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit such files). Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of June 30, 2024, there were 137,047,646 shares of common stock outstanding with a par value of $2.50 per share.

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CUMMINS INC. AND SUBSIDIARIES

TABLE OF CONTENTS

QUARTERLY REPORT ON FORM 10-Q


		Page
	PART I. FINANCIAL INFORMATION
ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Statements of Net Income for the three and six months ended June 30, 2024 and 2023	3
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2024 and 2023	4

	Condensed Consolidated Balance Sheets at June 30, 2024 and December 31, 2023	5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023	6
	Condensed Consolidated Statements of Changes in Redeemable Noncontrolling Interests and Equity for the three and six months ended June 30, 2024 and 2023	7
	Notes to Condensed Consolidated Financial Statements	9
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	51
ITEM 4.	Controls and Procedures	51
	PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	51
ITEM 1A.	Risk Factors	52
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
ITEM 3.	Defaults Upon Senior Securities	53
ITEM 4.	Mine Safety Disclosures	53
ITEM 5.	Other Information	53
ITEM 6.	Exhibits	53
	Signatures	54

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PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited)



	Three months ended				Six months ended
	June 30,				June 30,
In millions, except per share amounts	2024		2023		2024		2023
NET SALES (Notes 1 and 2)	$	8,796	$	8,638	$	17,199	$	17,091
Cost of sales	6,603		6,490		12,965		12,914
GROSS MARGIN	2,193		2,148		4,234		4,177

OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses	828		873		1,667		1,626
Research, development and engineering expenses	379		384		748		734
Equity, royalty and interest income from investees (Note 4)	103		133		226		252



Other operating expense, net	44		27		77		46
OPERATING INCOME	1,045		997		1,968		2,023


Interest expense	109		99		198		186
Other income, net (Note 14)	41		51		1,428		141
INCOME BEFORE INCOME TAXES	977		949		3,198		1,978

Income tax expense (Note 5)	225		212		418		435
CONSOLIDATED NET INCOME	752		737		2,780		1,543

Less: Net income attributable to noncontrolling interests	26		17		61		33
NET INCOME ATTRIBUTABLE TO CUMMINS INC.	$	726	$	720	$	2,719	$	1,510

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic	$	5.30	$	5.08	$	19.53	$	10.66
Diluted	$	5.26	$	5.05	$	19.42	$	10.60

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
Basic	137.1		141.7		139.2		141.6
Dilutive effect of stock compensation awards	0.8		0.8		0.8		0.9
Diluted	137.9		142.5		140.0		142.5

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

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CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	Three months ended				Six months ended
	June 30,				June 30,
In millions	2024		2023		2024		2023
CONSOLIDATED NET INCOME	$	752	$	737	$	2,780	$	1,543
Other comprehensive (loss) income, net of tax (Note 12)
Change in pension and other postretirement defined benefit plans	13		2		—		(7)
Foreign currency translation adjustments	(83)		(110)		(143)		(28)

Unrealized (loss) gain on derivatives	(3)		12		9		9
Total other comprehensive loss, net of tax	(73)		(96)		(134)		(26)
COMPREHENSIVE INCOME	679		641		2,646		1,517
Less: Comprehensive income attributable to noncontrolling interests	24		15		56		34
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC.	$	655	$	626	$	2,590	$	1,483

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

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CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


In millions, except par value	June 30, 2024		December 31, 2023
ASSETS
Current assets
Cash and cash equivalents	$	1,590	$	2,179

Marketable securities (Note 6)	593		562
Total cash, cash equivalents and marketable securities	2,183		2,741
Accounts and notes receivable, net	5,606		5,583


Inventories (Note 7)	5,857		5,677
Prepaid expenses and other current assets	1,316		1,197
Total current assets	14,962		15,198
Long-term assets
Property, plant and equipment	11,417		11,674
Accumulated depreciation	(5,364)		(5,425)
Property, plant and equipment, net	6,053		6,249
Investments and advances related to equity method investees	1,828		1,800
Goodwill	2,394		2,499
Other intangible assets, net	2,502		2,519
Pension assets (Note 3)	1,192		1,197
Other assets (Note 8)	2,389		2,543
Total assets	$	31,320	$	32,005

LIABILITIES
Current liabilities
Accounts payable (principally trade)	$	4,405	$	4,260
Loans payable (Note 9)	329		280
Commercial paper (Note 9)	1,581		1,496
Current maturities of long-term debt (Note 9)	167		118
Accrued compensation, benefits and retirement costs	801		1,108
Current portion of accrued product warranty (Note 10)	660		667
Current portion of deferred revenue (Note 2)	1,311		1,220

Other accrued expenses (Note 8)	1,890		3,754
Total current liabilities	11,144		12,903
Long-term liabilities
Long-term debt (Note 9)	5,426		4,802


Deferred revenue (Note 2)	1,046		966
Other liabilities (Note 8)	3,128		3,430
Total liabilities	$	20,744	$	22,101

Commitments and contingencies (Note 11)



EQUITY
Cummins Inc. shareholders’ equity
Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.5 shares issued	$	2,582	$	2,564
Retained earnings	20,101		17,851
Treasury stock, at cost, 85.5 and 80.7 shares	(10,797)		(9,359)

Accumulated other comprehensive loss (Note 12)	(2,335)		(2,206)



Total Cummins Inc. shareholders’ equity	9,551		8,850
Noncontrolling interests	1,025		1,054
Total equity	$	10,576	$	9,904
Total liabilities and equity	$	31,320	$	32,005

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)


	Six months ended
	June 30,
In millions	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income	$	2,780	$	1,543
Adjustments to reconcile consolidated net income to net cash (used in) provided by operating activities
Gain related to divestiture of Atmus (Note 14)	(1,333)		—
Depreciation and amortization	528		503



Deferred income taxes	(99)		(132)
Equity in income of investees, net of dividends	(86)		(113)
Pension and OPEB expense (Note 3)	19		3
Pension contributions and OPEB payments (Note 3)	(59)		(103)










Changes in current assets and liabilities, net of acquisitions and divestitures
Accounts and notes receivable	(161)		(635)
Inventories	(469)		(403)
Other current assets	(151)		(137)
Accounts payable	263		65
Accrued expenses (Notes 1 and 11)	(1,933)		261


Other, net	126		126
Net cash (used in) provided by operating activities	(575)		978

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(409)		(414)




Acquisition of businesses, net of cash acquired (Note 15)	(58)		(134)

Investments in marketable securities—acquisitions	(713)		(648)
Investments in marketable securities—liquidations (Note 6)	685		620

Cash associated with Atmus divestiture	(174)		—

Other, net	(137)		(30)
Net cash used in investing activities	(806)		(606)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings	2,482		737
Net borrowings (payments) of commercial paper	85		(658)
Payments on borrowings and finance lease obligations	(1,223)		(228)


Dividend payments on common stock	(469)		(445)





Other, net	(68)		(9)
Net cash provided by (used in) financing activities	807		(603)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	(15)		(68)
Net decrease in cash and cash equivalents	(589)		(299)
Cash and cash equivalents at beginning of year	2,179		2,101
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,590	$	1,802

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 REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

(Unaudited)


	Three months ended
In millions, except per share amounts	Redeemable Noncontrolling Interests		Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Cummins Inc. Shareholders’ Equity		Noncontrolling Interests		Total Equity
BALANCE AT MARCH 31, 2024	$	—	$	556	$	2,001	$	19,605	$	(10,831)	$	(2,264)	$	9,067	$	1,034	$	10,101

Net income							726						726		26		752
Other comprehensive loss, net of tax (Note 12)											(71)		(71)		(2)		(73)
Issuance of common stock					1								1		—		1


Cash dividends on common stock, $1.68 per share							(230)						(230)		—		(230)

Share-based awards					(2)				33				31		—		31





Other shareholder transactions					26				1				27		(33)		(6)
BALANCE AT JUNE 30, 2024	$	—	$	556	$	2,026	$	20,101	$	(10,797)	$	(2,335)	$	9,551	$	1,025	$	10,576

BALANCE AT MARCH 31, 2023	$	261	$	556	$	1,674	$	18,605	$	(9,389)	$	(1,823)	$	9,623	$	997	$	10,620

Net income	(12)						720						720		29		749
Other comprehensive loss, net of tax (Note 12)											(94)		(94)		(2)		(96)
Issuance of common stock					2								2		—		2


Cash dividends on common stock, $1.57 per share							(223)						(223)		—		(223)
Distributions to noncontrolling interests													—		(2)		(2)
Share-based awards					1				7				8		—		8

Fair value adjustment of redeemable noncontrolling interests	22				(22)								(22)		—		(22)
Acquisition of redeemable noncontrolling interests (Note 15)	(271)												—		—		—
Sale of Atmus stock (Note 14)					285								285		(3)		282
Other shareholder transactions					36				2				38		—		38
BALANCE AT JUNE 30, 2023	$	—	$	556	$	1,976	$	19,102	$	(9,380)	$	(1,917)	$	10,337	$	1,019	$	11,356

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

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	Six months ended
In millions, except per share amounts	Redeemable Noncontrolling Interests		Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Cummins Inc. Shareholders’ Equity		Noncontrolling Interests		Total Equity
BALANCE AT DECEMBER 31, 2023	$	—	$	556	$	2,008	$	17,851	$	(9,359)	$	(2,206)	$	8,850	$	1,054	$	9,904

Net income							2,719						2,719		61		2,780
Other comprehensive loss, net of tax (Note 12)											(190)		(190)		(5)		(195)
Issuance of common stock					1								1		—		1
Cash dividends on common stock, $3.36 per share							(469)						(469)		—		(469)
Distributions to noncontrolling interests													—		(33)		(33)
Share-based awards					(8)				93				85		—		85



Divestiture of Atmus (Note 14)									(1,532)		61		(1,471)		(19)		(1,490)
Other shareholder transactions					25				1				26		(33)		(7)
BALANCE AT JUNE 30, 2024	$	—	$	556	$	2,026	$	20,101	$	(10,797)	$	(2,335)	$	9,551	$	1,025	$	10,576

BALANCE AT DECEMBER 31, 2022	$	258	$	556	$	1,687	$	18,037	$	(9,415)	$	(1,890)	$	8,975	$	992	$	9,967

Net income	(20)						1,510						1,510		53		1,563
Other comprehensive (loss) income, net of tax (Note 12)											(27)		(27)		1		(26)
Issuance of common stock					2								2		—		2
Cash dividends on common stock, $3.14 per share							(445)						(445)		—		(445)
Distributions to noncontrolling interests													—		(24)		(24)
Share-based awards					(4)				32				28		—		28
Fair value adjustment of redeemable noncontrolling interests	33				(33)								(33)		—		(33)
Acquisition of redeemable noncontrolling interests (Note 15)	(271)												—		—		—
Sale of Atmus stock (Note 14)					285								285		(3)		282
Other shareholder transactions					39				3				42		—		42
BALANCE AT JUNE 30, 2023	$	—	$	556	$	1,976	$	19,102	$	(9,380)	$	(1,917)	$	10,337	$	1,019	$	11,356

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 solutions leader comprised of five business segments - Components, Engine, Distribution, Power Systems and Accelera - supported by our global manufacturing and extensive service and support network, skilled workforce and vast technical expertise. 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, batteries, electrified power systems, hydrogen production technologies and fuel cell products. We sell our products to original equipment manufacturers (OEMs), distributors, dealers and other customers worldwide. 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.

Divestiture of Atmus

On March 18, 2024, we completed the divestiture of our remaining 80.5 percent ownership of Atmus Filtration Technologies Inc. (Atmus) common stock through a tax-free split-off. See NOTE 14, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," 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. 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., which became final and effective in April 2024 (collectively, the Settlement Agreements). In the second quarter of 2024, we made $1.9 billion of payments required by the Settlement Agreements. See NOTE 11, “COMMITMENTS AND CONTINGENCIES,” for additional information.

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 consolidated 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, 2023. Our interim period financial results for the three and six 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.

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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		Six months ended
	June 30,		June 30,
	2024	2023	2024	2023
Options excluded	1,267	14,210	2,433	9,522

Related Party Transactions

In accordance with the provisions of various joint venture agreements, we may purchase products and components from our joint ventures, sell products and components to our joint ventures and our joint ventures may sell products and components to unrelated parties.

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


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2024		2023		2024		2023
Sales to nonconsolidated equity investees	$	334	$	320	$	685	$	696
Purchases from nonconsolidated equity investees	610		687		1,263		1,391

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


In millions	June 30, 2024		December 31, 2023		Balance Sheet Location
Accounts receivable from nonconsolidated equity investees	$	454	$	530	Accounts and notes receivable, net
Accounts payable to nonconsolidated equity investees	298		324		Accounts payable (principally trade)

Supply Chain Financing

We currently have supply chain financing programs with financial intermediaries, which provide certain vendors the option to be paid by financial intermediaries earlier than the due date on the applicable invoice. When a vendor utilizes the program and receives an early payment from a financial intermediary, they take a discount on the invoice. We then pay the financial intermediary the face amount of the invoice on the original due date, which generally have 60 to 90 day payment terms. The maximum amount that we could have outstanding under these programs was $538 million at June 30, 2024. We do not reimburse vendors for any costs they incur for participation in the program, their participation is completely voluntary and there are no assets pledged as security or other forms of guarantees provided for the committed payment to the finance provider or intermediary. As a result, all amounts owed to the financial intermediaries are presented as accounts payable in our Condensed Consolidated Balance Sheets. Amounts due to the financial intermediaries reflected in accounts payable at June 30, 2024, and December 31, 2023, were $212 million and $199 million, respectively.

Accounts Receivable Sales Program

In May 2024, we entered into an accounts receivable sales agreement with Wells Fargo Bank, N.A., to sell certain accounts receivable up to a Board approved limit of $500 million. We classify proceeds received from the sales of accounts receivable as an operating cash flow in the Condensed Consolidated Statements of Cash Flows, and we record the discount as other expense, net in the Condensed Consolidated Statements of Net Income. There was no material activity under the program in the second quarter of 2024.

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NOTE 2. REVENUE FROM CONTRACTS WITH CUSTOMERS

Long-term Contracts

We have certain arrangements, primarily long-term maintenance agreements, construction contracts, product sales with associated performance obligations extending beyond a year, product sales with lead times extending beyond one year that are non-cancellable or for which the customer incurs a penalty for cancellation and extended warranty coverage arrangements that span a period in excess of one year. The aggregate amount of the transaction price for these contracts, excluding extended warranty coverage arrangements, as of June 30, 2024, was $2.9 billion. We expect to recognize the related revenue of $1.5 billion over the next 12 months and $1.4 billion over periods up to 10 years. See NOTE 10, "PRODUCT WARRANTY LIABILITY," for additional disclosures on extended warranty coverage arrangements. Our other contracts generally are for a duration of less than one year, include payment terms that correspond to the timing of costs incurred when providing goods and services to our customers or represent sales-based royalties.

Deferred and Unbilled Revenue

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


In millions	June 30, 2024		December 31, 2023
Unbilled revenue	$	328	$	303
Deferred revenue	2,357		2,186

We recognized revenue of $250 million and $498 million for the three and six months ended June 30, 2024, compared with $178 million and $384 million for the comparable periods in 2023, 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 and six months ended June 30, 2024 or 2023.

Disaggregation of Revenue

Consolidated Revenue

The table below presents our consolidated net sales by geographic area based on the location of the customer:


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2024		2023		2024		2023
United States	$	5,119	$	4,937	$	9,904	$	9,739

China	747		762		1,470		1,552


India	425		413		869		824

Other international	2,505		2,526		4,956		4,976
Total net sales	$	8,796	$	8,638	$	17,199	$	17,091

Segment Revenue

Beginning in the second quarter of 2024, we realigned certain businesses within our Components segment to be consistent with how our segment manager now monitors performance. We reorganized the businesses to combine the engine components and software and electronics businesses into the newly formed components and software business. In addition, we rebranded our axles and brakes business as drivetrain and braking systems. We began reporting results for these changes within our Components segment effective April 1, 2024, and reflected these changes in the historical periods presented. The change had no impact on our consolidated results.

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Components segment external sales by business were as follows:


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2024		2023		2024			2023
Drivetrain and braking systems	$	1,255	$	1,249	$	2,487		$	2,521
Emission solutions	822		842		1,678			1,781
Components and software	279		312		579			624
Automated transmissions	162		180		327			358
Atmus	—		341		289		(1)	683
Total sales	$	2,518	$	2,924	$	5,360		$	5,967

(1) Included sales through the March 18, 2024, divestiture. See NOTE 14, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," for additional information.

Engine segment external sales by market were as follows:


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2024		2023		2024		2023
Heavy-duty truck	$	968	$	856	$	1,779	$	1,716
Medium-duty truck and bus	792		687		1,530		1,304
Light-duty automotive	454		444		892		885
Total on-highway	2,214		1,987		4,201		3,905
Off-highway	254		276		507		610
Total sales	$	2,468	$	2,263	$	4,708	$	4,515

Distribution segment external sales by region were as follows:


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2024		2023		2024		2023
North America	$	1,899	$	1,783	$	3,621	$	3,476
Asia Pacific	310		265		595		504
Europe	283		213		523		407
China	128		112		228		213
India	77		63		146		120
Latin America	64		60		123		113
Africa and Middle East	60		80		114		142

Total sales	$	2,821	$	2,576	$	5,350	$	4,975

Distribution segment external sales by product line were as follows:


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2024		2023		2024		2023
Parts	$	988	$	1,011	$	1,985	$	2,063
Power generation	950		609		1,655		1,100
Service	447		429		852		829
Engines	436		527		858		983
Total sales	$	2,821	$	2,576	$	5,350	$	4,975

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


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2024		2023		2024		2023
Power generation	$	490	$	447	$	850	$	827
Industrial	278		218		516		407
Generator technologies	120		129		230		239
Total sales	$	888	$	794	$	1,596	$	1,473

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				Six months ended
	June 30,				June 30,
In millions	2024		2023		2024		2023



Defined benefit pension contributions	$	8	$	6	$	47	$	94


OPEB payments, net	3		5		12		9


Defined contribution pension plans	26		30		74		73

We anticipate making additional defined benefit pension contributions during the remainder of 2024 of $22 million for our U.S. and U.K. qualified and non-qualified pension plans. These contributions may be made from trusts or company funds either to increase pension assets or to make direct benefit payments to plan participants. We expect our 2024 annual net periodic pension cost to approximate $34 million.

The components of net periodic pension and OPEB expense (income) under our plans were as follows:


	Pension
	U.S. Plans				U.K. Plans				OPEB
	Three months ended June 30,
In millions	2024		2023		2024		2023		2024		2023
Service cost	$	36	$	29	$	5	$	4	$	—	$	—
Interest cost	41		42		17		18		1		2
Expected return on plan assets	(73)		(69)		(25)		(27)		—		—
Amortization of prior service cost	1		1		—		—		—		—
Recognized net actuarial loss	4		2		3		—		—		—
Net periodic benefit expense (income)	$	9	$	5	$	—	$	(5)	$	1	$	2



	Pension
	U.S. Plans				U.K. Plans				OPEB
	Six months ended June 30,
In millions	2024		2023		2024		2023		2024		2023
Service cost	$	71	$	58	$	9	$	8	$	—	$	—
Interest cost	83		84		35		35		3		4
Expected return on plan assets	(145)		(138)		(50)		(52)		—		—
Amortization of prior service cost	1		1		—		—		—		—
Recognized net actuarial loss (gain)	7		4		6		—		(1)		(1)
Net periodic benefit expense (income)	$	17	$	9	$	—	$	(9)	$	2	$	3

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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 periods was as follows:


	Three months ended			Six months ended
	June 30,			June 30,
In millions	2024		2023	2024	2023
Manufacturing entities
Chongqing Cummins Engine Company, Ltd.	$	21