Cummins (CMI) 10-K risk factor changes: FY2018 vs FY2017

Set forth below and elsewhere in this Annual Report on Form 10-K are some of the principal risks and uncertainties that could cause our actual business results to differ materially from any forward-looking statements contained in this Report and could individually, or in combination, have a material adverse effect on our results of operations, financial position [removed: or] [added: and] cash flows.

A sustained slowdown or significant downturn in our markets could materially and adversely affect our results of operations, financial condition [removed: or] [added: and] cash flows.

Although in [removed: 2017] [added: 2018] we experienced demand growth in most of our North American [removed: and Chinese] on-highway [removed: markets] and certain off-highway markets [added: and continued strong demand in Chinese markets,] as well as growth in many of our [added: other] international markets, if the North American or Chinese markets suffer a significant downturn or if a slower pace of economic growth and weaker demand in our other significant international markets were to occur, depending upon the length, duration and severity of the slowdown, our results of operations, financial condition [removed: or] [added: and] cash flows would likely [removed: be] [added: have a] materially [removed: adversely affected.][added: adverse impact.]

Several of our engine customers, including PACCAR, [removed: Volvo ,] [added: Volvo,] Navistar, Fiat Chrysler, [removed: Daimler] [added: Daimler, Dongfeng] and [removed: Dongfeng,] [added: Tata,] are truck manufacturers or OEMs that manufacture engines for some of their own vehicles.

Any significant reduction in the level of engine production outsourcing from our truck manufacturer or OEM customers could have a material adverse effect on our results of [removed: operations.][added: operations, financial condition and cash flows.]

Furthermore, it is possible that we may not be successful in developing segment-leading electrified powertrains and some of our existing customers could choose to develop their own electrified or alternate fuel powertrains, or source from other manufacturers, and any of these factors could [added: have a] materially [removed: adversely] [added: adverse] impact our results of operations, financial condition and cash flows.

[removed: The] [added: The] discovery of [removed: any significant additional problems with our engine platforms or aftertreatment systems in North America] [added: noncompliance issues] could [removed: further] [added: have a] materially [removed: adversely] [added: adverse] impact [added: on] our results of operations, financial condition [removed: or] [added: and] cash [removed: flows.][added: flows.]

Our products [removed: may be] [added: are] subject to recall for performance or safety-related issues.

Product recalls subject us to [removed: harm to our reputation,] [added: reputational risk,] loss of current and future customers, reduced revenue and product recall costs.

Any significant product recalls could have [removed: a] material adverse [removed: effect] [added: effects] on our results of operations, financial condition and cash flows.

See Note [removed: 12, "COMMITMENTS AND CONTINGENCIES"] [added: 9, "PRODUCT WARRANTY LIABILITY"] to the *Consolidated Financial Statements* for additional information.

Lower-than-anticipated market acceptance of our new or existing products or services, including reductions in demand for diesel engines, could [added: have a] materially [removed: adversely] [added: adverse] impact [added: on] our results of operations, financial condition [removed: or] [added: and] cash flows.

With increased consumer interconnectedness through the internet, social media and other media, mere allegations relating to poor quality, safety, fuel efficiency, corporate responsibility or other key attributes can negatively impact our reputation or market acceptance of our products or services, [added: including with respect to the demand for diesel engines,] even if such allegations prove to be inaccurate or unfounded.

Weakness in [removed: commodities,] [added: commodity prices,] such as oil, gas and coal, adversely impacted mining industry participants’ demand for vehicles and equipment that contain our engines and other products over the past several years.

Although many of our off-highway markets began to recover in [removed: 2017,] [added: 2017 and 2018,] additional deterioration, or renewed weakness, in infrastructure and commodities markets could adversely affect our customers’ demand for vehicles and equipment [removed: and] [added: and, as a result,] could adversely affect our business.

Our engines are subject to extensive statutory and regulatory requirements governing [removed: emission] [added: emissions] and noise, including standards imposed by the EPA, the EU, state regulatory agencies (such as the CARB) and other regulatory agencies around the world.

Developing engines and components to meet [removed: numerous] [added: more stringent and] changing [removed: government] 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.

While we have met previous deadlines, our ability to comply with [removed: other] existing and future regulatory standards will be essential for us to maintain our [removed: competitive advantage in the engine markets we serve.]

In addition to these risks, the nature and timing of government implementation and enforcement of increasingly stringent emission standards in [removed: emerging] [added: our worldwide] markets are unpredictable and subject to change.

For [removed: 2017,] [added: 2018,] we recognized [removed: $357] [added: $394] million of equity, royalty and interest income from investees, compared to [removed: $301] [added: $357] million in [removed: 2016.][added: 2017.]

[added: Approximately half of our equity, royalty and interest income from investees is from four of our 50 percent owned joint ventures in] China - Beijing Foton Cummins Engine Co., Ltd., Dongfeng Cummins Engine Company, [removed: Ltd. and] [added: Ltd.,] Chongqing Cummins Engine Company, [added: Ltd.and Dongfeng Cummins Emission Solutions Co.] Ltd. As a result, although a significant percentage of our net income is derived from these unconsolidated entities, we do not unilaterally control their management or [removed: their operations, which puts a substantial portion of our net income at risk from the actions or inactions of these entities.]

The adoption of new tax [removed: legislation, changes in our provisional estimates] [added: legislation] or exposure to additional income tax liabilities could adversely affect our profitability.

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (Tax [removed: Legislation).][added: Legislation) and all adjustments to the 2017 estimates were incorporated into our financial results in 2018.]

[removed: In addition, there is] [added: There continues to be] a risk that states or foreign jurisdictions may amend their tax laws in response to the Tax Legislation, which could have a material impact on our future results.

[removed: We] [added: Our information technology systems and our products] are exposed [removed: to, and may be adversely affected by,] [added: to] potential security breaches or other disruptions [removed: to] [added: which may adversely impact] our [removed: information technology systems] [added: competitive position, reputation, results of operations, financial condition] and [removed: data security.][added: cash flows.]

We [removed: also] face the challenge of supporting our older systems and implementing necessary upgrades.

As customers adopt and rely on [removed: the] cloud-based digital technologies and services we offer, any disruption of the confidentiality, integrity or availability of those services could have an adverse effect on our business and reputation.

Information technology security threats, such as security breaches, computer [removed: malware] [added: malware, computer viruses] and other "cyber attacks," which are increasing in both frequency and sophistication, [added: along with power outages or hardware failures,] could result in unauthorized [added: public] disclosures of information and create financial liability, subject us to legal or regulatory sanctions, [added: disrupt our ability to conduct our business] or damage our reputation with customers, dealers, suppliers and other stakeholders.

[removed: We continuously seek to maintain a robust program of information security and controls, but the] [added: The] impact of a [removed: material] [added: significant] information technology event [added: on either of our information technology systems or our products] could have a material adverse effect on our competitive position, reputation, results of operations, financial condition and cash [removed: flow.][added: flows.]

Financial distress or a change-in-control of one of our large truck OEM customers could [added: have a] materially [removed: adversely] [added: adverse] impact [added: on] our results of [removed: operations.][added: operations, financial condition and cash flows.]

If one of our large truck OEM customers experiences financial distress, bankruptcy or a change-in-control, such circumstance could likely lead to significant reductions in our [removed: revenues and earnings,] [added: sales volumes,] commercial disputes, receivable collection issues, and other negative consequences that could have a material adverse impact on our results of [removed: operations.][added: operations, financial condition and cash flows.]

Our plan to reposition our portfolio of product offerings through [removed: exploring] [added: exploration of] strategic acquisitions and divestitures may expose us to additional costs and risks.

Part of our strategic plan is to improve our [added: 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.

In addition, if an acquisition results in any additional goodwill or increase in other intangible assets on our balance sheet and subsequently becomes impaired, we would be required to record a non-cash impairment charge, which could result in a material adverse effect on our financial [removed: condition and] [added: condition,] results of [removed: operations.][added: operations and cash flows.]

During [removed: 2017,] [added: 2018,] we single sourced approximately 20 percent of the total types of parts in our product designs, compared to approximately [removed: 56] [added: 20] percent in [removed: 2016.][added: 2017.]

Delays may be caused by factors affecting our [removed: suppliers, including] [added: suppliers (including] capacity constraints, labor disputes, economic downturns, availability of credit, the impaired financial [removed: condition of a particular supplier,] [added: condition),] suppliers' allocations to other purchasers, weather emergencies, natural disasters or acts of war or terrorism.

Any extended delay in receiving critical supplies could impair our ability to deliver products to our customers and [added: adversely affect] our results of [removed: operations.][added: operations, financial condition and cash flows.]

Our products primarily compete on the basis of price, performance, fuel economy, [added: emissions compliance,] speed of delivery, quality and customer support.

[removed: Policy] [added: We operate our business on a global basis and policy] changes affecting international trade could adversely impact the demand for our products and our competitive position.

Changes in government policies on foreign trade and investment can affect the demand for our products and services, [added: cause non-U.S. nationals to shift preferences toward domestically manufactured or branded products and] impact the competitive position of our products or prevent us from being able to sell products in certain countries.

Our products are subject to extensive statutory and regulatory requirements that can significantly increase our costs and, along with increased scrutiny from regulatory agencies and unpredictability in the adoption, implementation and enforcement of increasingly stringent emission standards by multiple jurisdictions around the world, could have a materially adverse impact on our results of operations, financial condition and cash flows.

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.

competitive advantage in the engine markets we serve.

Any delays in implementation or enforcement could result in a loss of our competitive advantage and could have a materially adverse impact on our results of operations, financial condition and cash flows.

We manufacture, sell and service products globally and rely upon a global supply chain to deliver the raw materials, components, systems and parts that we need to manufacture and service our products.

Any of these consequences could have a material adverse effect on our results of operations, financial condition and cash flows.

The United Kingdom’s decision to end its membership in the European Union could materially and adversely impact our results of operations, financial condition and cash flows.

In June 2016, a majority of voters in the United Kingdom elected to withdraw from the European Union (EU) in a national referendum (BREXIT).

The effects of BREXIT will depend on any agreements the United Kingdom makes to retain access to EU markets either during a transitional period or on a permanent basis.

These measures could potentially disrupt our supply chain, access to human capital and some of our target markets and jurisdictions in which we operate, and adversely change tax benefits or liabilities in these or other jurisdictions.

In addition, BREXIT could lead to legal uncertainty and potentially divergent national laws and regulations, including with respect to emissions and similar certifications granted to us by the EU, as the United Kingdom determines which EU laws to replace or replicate.

Any of these effects of BREXIT, among others, could have a materially adverse impact on our results of operations, financial condition and cash flows.

In addition, our products, including our engines, contain interconnected and increasingly complex systems that control various processes and these systems are potentially subject to "cyber attacks" and disruption.

their operations, which puts a substantial portion of our net income at risk from the actions or inactions of these entities.

We cannot guarantee that we will be able to increase manufacturing capacity to a level that meets demand for our products, which could prevent us from meeting increased customer demand and could harm our business.

These countries include China, India and Germany.

During 2017, the CARB and U.S. EPA selected certain of our pre-2013 model year engine systems for additional emissions testing.

Some of these engine systems failed CARB and EPA's tests as a result of degradation of an aftertreatment component.

We have not been issued an official notice from the CARB or EPA regarding these particular engine systems.

We are working with the agencies and will meet with them beginning in the first quarter of 2018, to develop a resolution of these matters.

We are developing and testing a variety of solutions to address the technical issues, which could include a combination of calibration changes, service practices and hardware changes.

In addition, we continue to evaluate other engine systems for model years 2010 through 2015 that could potentially be subject to similar aftertreatment component degradation issues.

At the close of 2017, we had not yet determined the impact to other model years or engine systems or the percentage of the engine system populations that could be affected.

Since there are many unresolved variables with respect to these degradation issues, we are not yet able to estimate the financial impact of these matters.

It is possible that they could have a material impact on our results of operations in the periods in which these degradation issues are resolved and a solution is determined.

Unpredictability in the adoption, implementation and enforcement of increasingly stringent emission standards by multiple jurisdictions around the world could adversely affect our business.

We have made, and will be required to continue to make, significant capital and research expenditures to ensure our engines comply with these emission standards.

In some cases, we are required to develop new products to comply with new regulations, particularly those relating to air emissions.

Any delays in implementation or enforcement could result in the products we developed or modified to comply with these standards becoming unnecessary or becoming necessary later than expected thereby, in some cases, negating our competitive advantage.

This in turn can delay, diminish or eliminate the expected return on capital and research expenditures that we have invested in such products and may adversely affect our perceived competitive advantage in being an early, advanced developer of compliant engines.

More than half of our equity, royalty and interest income from investees is from three of our 50 percent owned joint ventures in

The estimated effects based upon current interpretation of the Tax Legislation have been incorporated into our financial results.

As additional data is prepared and analyzed and as additional clarification and implementation guidance is issued on the new tax law, it may be necessary to adjust the provisional amounts.

Any adjustments could have a material impact on provisional amounts.

Any of these factors could adversely impact customer demand, our relationships with customers and suppliers and our results of operations.

While we believe

These cities include Athens, Madrid, Mexico City and Paris.

Similarly, Germany adopted legislation to ban new internal combustion engine vehicles by 2030, and China is considering a ban on the production and sale of diesel-powered vehicles to be adopted in the near future.

unionized work forces.

| [removed: •] [added: •] | [removed: Executive Summary and Financial Highlights] [added: EXECUTIVE SUMMARY AND FINANCIAL HIGHLIGHTS] |

| [removed: •] [added: •] | [removed: Results of Operations] [added: RESULTS OF OPERATIONS] |

| [removed: •] [added: •] | [removed: Operating Segment Results] [added: OPERATING SEGMENT RESULTS] |

| [removed: •] [added: •] | [removed: Liquidity and Capital Resources] [added: LIQUIDITY AND CAPITAL RESOURCES] |

| [removed: •] [added: •] | [removed: Contractual Obligations and Other Commercial Commitments] [added: CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS] |

| [removed: •] [added: •] | [removed: Application of Critical Accounting Estimates] [added: APPLICATION OF CRITICAL ACCOUNTING ESTIMATES] |

| [removed: •] [added: •] | [removed: Recently Adopted and Recently Issued Accounting Pronouncements] [added: RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS] |

We are a global power leader that designs, manufactures, distributes and services diesel and natural gas engines and [removed: engine-related] [added: powertrain-related] component products, including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems, [removed: transmissions and] [added: transmissions,] electric power generation [added: systems, batteries and electrified power] systems.

We sell our products to original equipment manufacturers (OEMs), [removed: distributors] [added: distributors, dealers] and other customers worldwide.

We have long-standing relationships with many of the leading manufacturers in the markets we serve, including PACCAR Inc, [added: Navistar International Corporation,] Daimler Trucks North [removed: America, Navistar International Corporation] [added: America] and Fiat Chrysler [removed: Automobiles.][added: Automobiles (Chrysler).]

We serve our customers through a network of approximately [removed: 500] [added: 600] wholly-owned and independent distributor locations and over [removed: 7,500] [added: 7,600] dealer locations in more than 190 countries and territories.

Our reportable operating segments consist of Engine, Distribution, [removed: Components and] [added: Components,] Power [removed: Systems.][added: Systems and Electrified Power.]

The Components segment sells filtration products, aftertreatment systems, turbochargers, [added: electronics,] fuel systems and transmissions.

Worldwide revenues improved [removed: 17] [added: 16] percent in [removed: 2017] [added: 2018] compared to [removed: 2016,] [added: 2017,] with all operating segments reporting higher [removed: revenue.][added: sales.]

[removed: Revenue in the U.S. and Canada improved by 15 percent] [added: | • | Distribution segment sales increased 14 percent,] primarily due to [removed: increased demand in the North American on-highway markets, increased industrial demand (especially] [added: an increase] in [removed: oil and gas, construction and mining markets) and] organic [removed: growth] [added: sales] and higher sales related to the acquisition of a North American distributor in the fourth quarter of 2016. [added: |]

International demand growth (excludes the U.S. and Canada) in [removed: 2017] [added: 2018] improved [removed: revenues] [added: international net sales] by [removed: 19 percent,] [added: 12 percent compared to 2017,] with sales up in most of our markets, [added: especially in Europe, Asia Pacific, Latin America, China and India.]

[removed: especially in China, Russia, India and the U.K.] The increase in international sales was primarily due to increased demand in [removed: the truck market] [added: industrial markets (especially construction and mining markets] in [removed: China, new emission regulations] [added: China and Europe), increased on-highway demand (especially] in [removed: India] [added: Brazil, Europe] and [added: India),] increased demand in [removed: industrial markets] [added: our distribution business] (especially [removed: construction markets] in [removed: China] [added: Western Europe, Asia Pacific] and [removed: mining markets] [added: China) and increased demand for power generation equipment (primarily] in [removed: Europe).][added: the Middle East, Asia Pacific and China).]

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs [removed: Act (Tax Legislation).][added: Act.]

[removed: Among other things,] [added: On December 22, 2017,] the [added: U.S. enacted] Tax Legislation [added: which, among other things,] changed the U.S. statutory rate to 21 percent effective January 1, 2018.

The components of the [added: 2018 and] 2017 [removed: charge] [added: charges] were as follows:

| [removed: In millions] | [added: |] Impact of Tax Legislation(1) | | | [added: | | | |]

| [removed: Increase in income] [added: Income] tax expense | [added: | $ | 12 | | |] $ | 781 | |

| Decrease in equity, royalty and other income from investees | [added: | 3 | | | |] 39 | | |

| [removed: Increase] [added: Decrease (increase)] in income attributable to noncontrolling interests(2) | [added: | 24 | | | |] (43 | | ) |

| Net impact of Tax Legislation | [added: | $ | 39 | | |] $ | 777 | |

(1) See Note [removed: 2,] [added: 4,] "INCOME TAXES," Note 3, "INVESTMENTS IN EQUITY INVESTEES" and Note [removed: 16,][added: 17, "NONCONTROLLING INTERESTS," to our *Consolidated Financial Statements* for additional information*.*]

[added: See Note 17,] "NONCONTROLLING INTERESTS," to our *Consolidated Financial Statements* for additional [removed: information*.*][added: information on the withholding tax adjustments.]

(2) Noncontrolling interest was [removed: reduced] [added: adjusted] for withholding taxes on foreign earnings which [removed: reduced] [added: changed] the income eliminated for [removed: non-][added: Cummins ownership interest attributable to Cummins India, Ltd.]

See the section titled [removed: "Operating Segment Results"] [added: "OPERATING SEGMENT RESULTS"] for a more detailed discussion of net sales and [removed: EBIT] [added: EBITDA] by operating segment including the reconciliation of segment [removed: EBIT] [added: EBITDA] to net income attributable to [removed: Cummins,] [added: Cummins] Inc.

| | | [removed: 2017] [added: 2018] | | | | | | | | | | | [removed: 2016] [added: 2017] | | | | | | | | | | | Percent change | | | | |

| | | | | | | Percent of Total | | | | | | | | | | | Percent of Total | | | | | | | [removed: 2017] [added: 2018] vs. [removed: 2016] [added: 2017] | | | | |

| In millions | | Sales | | | | [removed: EBIT] [added: EBITDA] | | | | Sales | | | | [removed: EBIT] [added: EBITDA] | | | | Sales | | | [removed: EBIT] [added: EBITDA] | | | | | | | |

| Intersegment eliminations | | [removed: (5,530] [added: (6,422] | | ) | | (27 | )% | | [removed: —] [added: (87] | | [added: )] | | [removed: (4,829] [added: (5,530] | | ) | | [removed: (28] [added: (27] | )% | | [removed: —] [added: 55] | | | | [removed: 15] [added: 16] | % | | [removed: —] [added: NM] | |

Net income attributable to Cummins Inc. for [removed: 2017] [added: 2018] was [removed: $999 million,] [added: $2.1 billion,] or [removed: $5.97] [added: $13.15] per diluted share, on sales of [removed: $20.4] [added: $23.8] billion, compared to [removed: 2016] [added: 2017] net income attributable to Cummins Inc. of [removed: $1.4] [added: $1.0] billion, or [removed: $8.23] [added: $5.97] per diluted share, on sales of [removed: $17.5] [added: $20.4] billion.

[removed: The decrease in net] [added: Net] income [added: and diluted earnings per share] attributable to Cummins Inc. [added: decreased $395 million] and [removed: earnings] [added: $2.26] per [removed: diluted share was driven by a $777 million reduction for tax adjustments related] [added: share, respectively, primarily due] to the [added: $777 million impact of] Tax Legislation, increased selling, general and administrative expenses and higher research, development and engineering expenses, partially offset by higher net sales and gross margin, lower charges for a loss contingency and higher equity, royalty and interest income from investees.

[removed: The increase in gross] [added: Gross] margin [removed: was] [added: increased $642 million,] primarily due to higher volumes, improved leverage and lower material costs, partially offset by higher warranty costs ($264 million primarily due to campaigns in the Engine, Components and Power Systems segments and changes in estimates in the Engine and Components segments) and increased variable compensation expense of $150 million.

Diluted earnings per share for [removed: 2017 was negatively impacted $4.65 per share due to the Tax Legislation, partially offset by a benefit of $0.04] [added: 2018 benefited $0.25] per share from fewer [removed: weighted-average] [added: weighted average] shares outstanding, primarily due to [removed: purchases under] the stock repurchase [removed: program.][added: programs, including shares acquired under the accelerated share repurchase agreement.]

Net income and diluted earnings per share attributable to [removed: Cummins,] [added: Cummins] Inc., excluding [removed: special items] [added: Tax Legislation,] were as follows:

| | | | Years ended December 31, | | | | | | | | | | | | | | | [removed: | | | | | | | |]

| | | [removed: | 2017 | | | | | |] [added: 2018] | | [removed: 2016] | | | | [added: 2017] | | | | [removed: 2015] | | [added: 2016] | | | | |

| • | 2019 OUTLOOK |

We formed the Electrified Power segment, effective January 1, 2018, which designs, manufactures, sells and supports electrified power systems ranging from fully electric to hybrid solutions along with innovative components and subsystems to serve all our markets as they adopt electrification, meeting the needs of our OEM partners and end customers.We currently offer the Cummins PowerDrive series of fully electric and hybrid powertrain systems targeting various applications in the Class 4-8 commercial vehicle markets and are developing the Cummins Battery Electric System and the Cummins Hybrid Power Plug-In System for the urban bus market, which are expected to launch in 2019 and 2020, respectively.

We also design and manufacture battery modules, packs and systems for commercial, industrial and material handling applications.

We use a range of cell chemistries which are suitable for pure electric, hybrid and plug-in hybrid applications.

In addition to electrified powertrains for urban buses, we intend to deliver product offerings to other markets as they adopt electric solutions, including, but not limited to, pick-up and delivery applications and industrial markets.

We invest in and utilize our internal research and development capabilities, along with strategic acquisitions and partnerships, to meet our objectives.

Net sales in the United States (U.S.) and Canada improved by 19 percent primarily due to increased demand in the North American on-highway markets (primarily in the heavy- and medium-duty truck markets), increased demand in all of our distribution product lines, sales from the automated transmission business acquired during the third quarter of 2017 and increased industrial demand (especially in oil and gas and construction markets).

Effective January 1, 2018, we changed our segment measure of profitability to EBITDA (defined as earnings before interest expense, income taxes, noncontrolling interests, depreciation and amortization) as a primary basis for the Chief Operating Decision Maker to evaluate the performance of each of our operating segments.

EBITDA assists investors and debt holders in comparing our performance on a consistent basis without regard for depreciation and amortization, which can vary significantly depending upon many factors.

Prior periods have been revised to reflect the current presentation.

The following tables contain sales and EBITDA by operating segment for the years ended December 31, 2018 and 2017.

| Engine | | $ | 10,566 | | | 44 | % | | $ | 1,446 | | | $ | 8,953 | | | 44 | % | | $ | 1,143 | | | 18 | % | | 27 | % |

| Distribution | | 7,828 | | | | 33 | % | | 563 | | | | 7,058 | | | | 34 | % | | 500 | | | | 11 | % | | 13 | % |

| Components | | 7,166 | | | | 30 | % | | 1,030 | | | | 5,889 | | | | 29 | % | | 917 | | | | 22 | % | | 12 | % |

| Power Systems | | 4,626 | | | | 20 | % | | 614 | | | | 4,058 | | | | 20 | % | | 411 | | | | 14 | % | | 49 | % |

| Electrified Power | | 7 | | | | — | % | | (90 | | ) | | — | | | | — | % | | — | | | | NM | | | NM | |

| Total | | $ | 23,771 | | | 100 | % | | $ | 3,476 | | | $ | 20,428 | | | 100 | % | | $ | 3,026 | | | 16 | % | | 15 | % |

The increase in net income attributable to Cummins Inc. and earnings per diluted share was driven by significantly higher net sales, the 2017 Tax Cuts and Jobs Act (Tax Legislation), higher gross margin and increased equity earnings from investees, partially offset by $368 million for an Engine System Campaign, higher research, development and engineering expenses, unfavorable foreign currency impacts (primarily the British pound, Brazilian real and Angolan kwanza partially offset by the Euro) and higher interest expense.

Tax Legislation resulted in the U.S. statutory rate decreasing from 35 percent to 21 percent, added incremental income tax expense in 2017 of $781 million to our tax provision (excluding the noncontrolling interest and equity investee adjustments) with a net impact of $777 million unfavorable to net income.

See Note 4, "INCOME TAXES," and Note 9, "PRODUCT WARRANTY LIABILITY," to the *Consolidated Financial Statements* for additional information on the Tax Legislation adjustments during the one year measurement period and the Engine System Campaign, respectively.

The increase in gross margin was primarily due to higher volumes, improved mix and favorable pricing, partially offset by increased warranty costs (primarily $368 million for an Engine System Campaign), higher compensation costs (driven by headcount growth to support increased sales) and unfavorable impacts from Chinese tariffs.

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| | | | 2018 | | | | | | | | 2017 | | | | | | |

| Net income and diluted EPS attributable to Cummins Inc. excluding Tax Legislation (2) | | | $ | 2,180 | | | $ | 13.39 | | | $ | 1,776 | | | $ | 10.62 | |

In October 2018, our Board of Directors authorized the acquisition of up to $2 billion of additional common stock upon completion of the 2016 repurchase plan.

During 2018, we repurchased $1.1 billion, or 7.9 million shares of common stock, including 3.5 million shares repurchased under the $500 million accelerated share repurchase program.

On August 22, 2018, we entered into a new five-year $2.0 billion revolving credit agreement and a 364-day $1.5 billion credit agreement that expire on August 22, 2023 and August 21, 2019, respectively.

These new credit facilities replace our previous five-year $1.75 billion and 364-day $1.0 billion facilities and will be used primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes.

The increase was primarily due to an increase in outstanding commercial paper.

2019 OUTLOOK

| • | We anticipate power generation markets will remain strong, with increased demand in global data center markets. |

| • | We expect construction markets will remain strong in North America and Europe. |

| • | We expect demand in mining markets to stabilize. |

| • | Improving economic conditions in Brazil could positively impact demand across our business. |

| • | We are experiencing cost increases as a result of trade tariffs recently imposed by the U.S. and some of its trading partners, especially China. |

| • | Prolonged trade disputes could negatively impact demand and trigger additional costs. |

| • | We anticipate demand in oil and gas markets in North America will decline. |

| • | 2018 Outlook |

The impact of the Tax Legislation resulted in a net incremental charge to our *Consolidated Statements of Income* of $777 million.

| | | | |

| --- | --- | --- | --- |

Cummins ownership interest attributable to Cummins India, Ltd.

The $781 million increase in tax expense is composed of three elements - the remeasurement of deferred taxes, a one-time transitional tax on unrepatriated earnings and withholding taxes on foreign earnings.

The following table contains sales and earnings before interest expense, income tax expense and noncontrolling interests (EBIT) results by operating segment for the years ended December 31, 2017 and 2016.

| Engine | | $ | 8,953 | | | 44 | % | | $ | 959 | | | $ | 7,804 | | | 45 | % | | $ | 686 | | (1) | 15 | % | | 40 | % |

| Distribution | | 7,058 | | | | 34 | % | | 384 | | | | 6,181 | | | | 35 | % | | 392 | | | | 14 | % | | (2 | )% |

| Components | | 5,889 | | | | 29 | % | | 754 | | | | 4,836 | | | | 28 | % | | 641 | | | | 22 | % | | 18 | % |

| Power Systems | | 4,058 | | | | 20 | % | | 294 | | | | 3,517 | | | | 20 | % | | 263 | | | | 15 | % | | 12 | % |

| Non-segment | | — | | | | — | | | 55 | | | | — | | | | — | | | 17 | | | | — | | | NM | |

| Total | | $ | 20,428 | | | 100 | % | | $ | 2,446 | | | $ | 17,509 | | | 100 | % | | $ | 1,999 | | | 17 | % | | 22 | % |

"NM" - not meaningful information

(1) The year ended December 31, 2016, included $138 million for loss contingency charges.

See the "Results of Operations" section for additional information.

See *Income Tax Expense* section for additional information on the new Tax Legislation.

| | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Add | | | | | | | | | | | | | | | | | | | | | | | | | |

| Impairment of light-duty diesel assets, net of tax(2) | | | — | | | | — | | | | — | | | | — | | | | 133 | | | | 0.75 | | |

| Restructuring actions and other charges, net of tax(3) | | | — | | | | — | | | | — | | | | — | | | | 61 | | | | 0.34 | | |

| Net income attributable to Cummins Inc. excluding special items(4) | | | $ | 1,776 | | | $ | 10.62 | | | $ | 1,394 | | | $ | 8.23 | | | $ | 1,593 | | | $ | 8.93 | |

During 2017 we repurchased $451 million, or 2.9 million shares of common stock.

On July 31, 2017, we formed a joint venture with Eaton Corporation PLC by purchasing a 50 percent interest in the new venture named Eaton Cummins Automated Transmission Technologies (ECJV) for $600 million in cash.

In addition, each partner contributed $20 million for working capital.

The joint venture will design, assemble, sell and support medium-duty and heavy-duty automated transmissions for the commercial vehicle market, including new product launches.

We consolidated the results of the joint venture in our Components segment as we have a majority voting interest in the venture by virtue of a tie-breaking vote on the joint venture's board of directors.

As of the date of filing this Annual Report on Form 10-K, our credit ratings were as follows:

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| | | Long-Term | | Short-Term | | |

| Credit Rating Agency | | Senior Debt Rating | | Debt Rating | | Outlook |

| Standard & Poor’s Rating Services | | A+ | | A1 | | Stable |

| Moody’s Investors Service, Inc. | | A2 | | P1 | | Stable |

In the first quarter of 2018, we will expand our segment reporting and add an additional segment called Electrified Power.

The segment will include Brammo Inc., a low voltage battery designer acquired in 2017, and our internally developed electrification business.

We will begin reporting the new segment effective with our first quarter Form 10-Q.

2018 OUTLOOK

| • | North American medium-duty truck demand will remain strong. |

The following describes our risk exposures and provides the results of a sensitivity analysis performed at December 31, [removed: 2017.][added: 2018.]

For the years ended December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] there were no circumstances that [removed: would have] resulted in the discontinuance of a foreign currency cash flow hedge.

At December 31, [removed: 2017,] [added: 2018,] 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 [removed: $101] [added: $91] million.

These commodity zero-cost collar contracts [removed: that] represent an economic hedge, but are not designated for hedge accounting and are marked to market through earnings.

At December 31, [removed: 2017,] [added: 2018,] the potential gain or loss related to the outstanding commodity zero-cost collar contracts, assuming a hypothetical 10 percent fluctuation in the price of such commodities, would be approximately [removed: $3] [added: $2] million.

We enter into physical forward contracts with suppliers of platinum and palladium to purchase some volumes of the commodities at contractually stated prices for various periods, generally [removed: not exceeding one year.][added: less than two years.]

Our foreign currency cash flow hedges generally mature within two years.

See Note 10, "DEBT," "Interest Rate Risk" section for additional information.

Our cash flow hedges generally mature within two years.

Our internal policy allows for managing anticipated foreign currency cash flows for up to 18 months.

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

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

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

The gain or loss on these derivative instruments, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk, are recognized in current income as “Interest expense.” The net swap settlements that accrue each period are also reported in interest expense.

The following table summarizes these gains and losses for the years presented below:

| | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | Years ended December 31, | | | | | | | | | | | | | | | | | | | | | | |

| In millions | | 2017 | | | | | | | | 2016 | | | | | | | | 2015 | | | | | | |

| Income Statement Classification | | Gain/(Loss) on Swaps | | | | Gain/(Loss) on Borrowings | | | | Gain/(Loss) on Swaps | | | | Gain/(Loss) on Borrowings | | | | Gain/(Loss) on Swaps | | | | Gain/(Loss) on Borrowings | | |

| Interest expense (1) | | $ | (7 | ) | | $ | 8 | | | $ | (8 | ) | | $ | 12 | | | $ | 6 | | | $ | (2 | ) |

___________________________________________________________

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

Our internal policy allows for managing our cash flow hedges for up to three years.

In 2001, we changed our name to Cummins Inc. We are a global power leader that designs, manufactures, distributes and services diesel and natural gas engines and [removed: engine-related] [added: powertrain-related] component products, including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems, [removed: transmissions and] [added: transmissions,] electric power generation [added: systems, batteries and electrified power] systems.

We sell our products to original equipment manufacturers (OEMs), [removed: distributors] [added: distributors, dealers] and other customers worldwide.

We serve our customers through a network of approximately [removed: 500] [added: 600] wholly-owned and independent distributor locations and over [removed: 7,500] [added: 7,600] dealer locations in more than 190 countries and territories.

We have [removed: four] [added: five] complementary operating segments: Engine, Distribution, [removed: Components and] [added: Components,] Power [removed: Systems.][added: Systems and Electrified Power.]

Engine segment sales and earnings before interest [added: expense, income taxes, noncontrolling interests, depreciation] and [removed: taxes (EBIT)] [added: amortization (EBITDA)] as a percentage of consolidated results were:

| | | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | |

| Percent of consolidated net sales(1) | | [removed: 34] [added: 35] | % | | [removed: 35] [added: 34] | % | | [removed: 36] [added: 35] | % |

| Percent of consolidated [removed: EBIT(1)] [added: EBITDA(1)] | | [removed: 40] [added: 41] | % | | [removed: 35] [added: 38] | % | | [removed: 30] [added: 34] | % |

| • | Heavy-duty truck - We manufacture diesel and natural gas engines that range from 310 to 605 horsepower serving global heavy-duty truck customers worldwide, primarily in North America, [removed: China, Latin America] [added: China] and Australia. |

| • | Medium-duty truck and bus - We manufacture diesel and natural gas engines ranging from 130 to 450 horsepower serving medium-duty truck and bus customers worldwide, with key markets including North America, Latin America, China, Europe and India. Applications include [removed: pickup and] [added: pick-up,] delivery [removed: trucks,] [added: and] vocational [removed: truck, school bus,] [added: trucks and school,] transit [removed: bus] and shuttle [removed: bus.] [added: buses.] We also provide diesel engines for Class A motor homes (RVs), primarily in North America. |

| • | Light-duty automotive [removed: (Pickup] [added: (Pick-up] and Light Commercial Vehicle (LCV)) - We manufacture 105 to [removed: 385] [added: 400] horsepower diesel engines, including engines for the [removed: pickup] [added: pick-up] truck market for Fiat Chrysler Automobiles (Fiat Chrysler) and Nissan in North America, and LCV markets in [removed: Europe, Latin America] [added: China, Europe] and [removed: China.] [added: Latin America.] |

| • | Off-highway - We manufacture diesel engines that range from 48 to 715 horsepower [removed: to] [added: serving] key global markets including [added: construction,] mining, marine, rail, oil and gas, [removed: defense, agriculture] [added: defense] and [removed: construction equipment] [added: agriculture] and also [removed: to] the power generation business for standby, mobile and distributed power generation solutions throughout the world. |

The principal customers of our medium-duty truck engines include truck manufacturers such as Daimler, [removed: PACCAR] [added: Navistar] and [removed: Navistar.][added: PACCAR.]

We sell our industrial engines to manufacturers of construction, agricultural and marine equipment, including Hyundai, Xuzhou Construction Machinery Group, Komatsu, John [removed: Deere] [added: Deere, JLG Industries, Inc.] and [removed: Wirtgen.][added: LiuGong.]

The principal customers of our [removed: light-duty] [added: pick-up] on-highway engines are Fiat [removed: Chrysler, Nissan] [added: Chrysler] and [removed: manufacturers of RVs.][added: Nissan.]

Our primary competitors in North America are Daimler, Caterpillar Inc. (CAT), Volvo Powertrain, Ford Motor Company (Ford), [added: Navistar,] PACCAR and Hino Power.

Other engine manufacturers in international markets include Weichai Power Co. Ltd., Volvo AB (Volvo), Daimler AG, [removed: Volkswagen] [added: TRATON] AG, [removed: MAN Nutzfahrzeuge AG (MAN), Scania AB,] Fiat Power Systems, Guangxi Yuchai Group, Rolls-Royce Power Systems AG, CAT, Yanmar Co., Ltd. and Deutz AG.

Distribution segment sales and [removed: EBIT] [added: EBITDA] as a percentage of consolidated results were:

| Percent of consolidated net sales(1) | | [removed: 27] [added: 26] | % | | [removed: 28] [added: 27] | % | | [removed: 26] [added: 28] | % |

| Percent of consolidated [removed: EBIT(1)] [added: EBITDA(1)] | | 16 | % | | [removed: 20] [added: 17] | % | | 20 | % |

The Distribution segment consists of [removed: the following] product lines which service and/or distribute the full range of our products and [removed: services:][added: services, including Parts, Engines, Power generation and Service.]

Our distribution network consists of independent, partially-owned and wholly-owned distributors which provide parts and [added: full] service to our customers.

These [removed: full-service] solutions include maintenance contracts, engineering services and integrated products, where we customize our products to cater to specific needs of end-users.

Our Distribution segment serves a highly diverse customer base with approximately [added: 40 percent and] 38 percent of its [removed: 2017] [added: 2018] and [removed: 2016 sales] [added: 2017 sales, respectively,] being generated from new engines and power generation equipment, with its remaining sales generated by parts and service revenue.

Components segment sales and [removed: EBIT] [added: EBITDA] as a percentage of consolidated results were:

| Percent of consolidated net sales(1) | | [removed: 23] [added: 24] | % | | [removed: 21] [added: 23] | % | | 21 | % |

| Percent of consolidated [removed: EBIT(1)] [added: EBITDA(1)] | | [removed: 32] [added: 29] | % | | [removed: 32] [added: 31] | % | | [removed: 34] [added: 31] | % |

Our Components segment supplies products which complement our Engine and Power Systems segments, including aftertreatment systems, turbochargers, transmissions, filtration [removed: products] [added: products, electronics] and fuel systems for commercial diesel [added: and natural gas] applications.

In the third quarter of 2017, we formed the Eaton Cummins Automated Transmission Technologies joint [removed: venture (ECJV),] [added: venture,] which was consolidated and included in our Components segment as the automated transmissions business.

See Note [removed: 18,] [added: 19,] "ACQUISITIONS", in the Notes to our *Consolidated Financial Statements* for additional information.

| • | Emission solutions - We are a global leader in designing, manufacturing and integrating aftertreatment technology and solutions for the commercial on- and off-highway light, medium, heavy-duty and high-horsepower engine markets. Aftertreatment is the mechanism used to convert engine emissions of criteria pollutants, such as particulate [removed: matter (PM),] [added: matter,] nitrogen oxides (NOx), carbon monoxide [removed: (CO)] and unburned hydrocarbons [removed: (HC)] into harmless emissions. Our products include custom engineering systems and integrated controls, oxidation catalysts, particulate filters, selective catalytic reduction systems and engineered components, including dosers. Our emission solutions business primarily serves markets in North America, Europe, China, India, Brazil, Russia and Australia. We serve both OEM first fit and retrofit customers. |

| • | Turbo technologies - We design, manufacture and market turbochargers for light-duty, mid-range, heavy-duty and high-horsepower diesel markets with worldwide sales and distribution. We provide critical air handling technologies for engines to meet challenging performance requirements and worldwide emission standards. We primarily serve markets in North America, Europe, [removed: China] [added: China, India, Brazil, Russia] and [removed: India.] [added: Australia.] |

| • | Filtration - We design, manufacture and sell filters, coolant and chemical products. Our filtration business offers over 8,300 products for first fit and aftermarket applications including air filters, fuel filters, fuel water separators, lube filters, hydraulic filters, coolants, fuel additives and other filtration systems to OEMs, dealers/distributors and end users. We support a wide customer base in a diverse range of markets including on- and off-highway segments such as oil and gas, agriculture, mining, construction, power [removed: generation, marine] [added: generation] and [removed: industrial markets.] [added: marine.] We produce and sell globally recognized Fleetguard® branded products in over [removed: 160] [added: 130] countries including countries in North America, Europe, South America, Asia and Africa. Fleetguard products are available through thousands of distribution points worldwide. |

| • | Automated transmissions - We develop and supply automated transmissions [removed: to] [added: for] the heavy-duty and medium-duty commercial vehicle markets. Formed in 2017, the Eaton Cummins Automated Transmission Technologies joint venture is a consolidated 50/50 joint venture between Cummins Inc. and Eaton Corporation Plc. and primarily serves the North American market. |

Customers of our Components segment generally include our Engine, Distribution and Power Systems segments, [added: joint ventures including Beijing Foton Cummins Engine Co., Ltd., Dongfeng Cummins Emission Solutions Co., Ltd. and Tata Cummins Ltd.,] truck manufacturers and other OEMs, many of which are also customers of our Engine segment, such as PACCAR, Daimler, Navistar, Volvo, Komatsu, Scania, Fiat Chrysler and other manufacturers that use our components in their product platforms.

Our Components segment competes with other manufacturers of aftertreatment systems, filtration, [removed: turbochargers and] [added: turbochargers,] fuel [removed: systems.][added: systems and transmissions.]

Our primary competitors in these markets include Robert Bosch GmbH, Donaldson Company, Inc., Parker Hannifin Corporation, Mann+Hummel Group, Honeywell International, Borg-Warner Inc., Tenneco Inc., Eberspacher Holding GmbH & Co. [removed: KG and] [added: KG,] Denso [removed: Corporation.][added: Corporation, Allison Transmission and Aisin Seiki Co., Ltd.]

Power Systems segment sales and [removed: EBIT] [added: EBITDA] as a percentage of consolidated results were:

| Percent of consolidated net sales(1) | | [removed: 16] [added: 15] | % | | 16 | % | | [removed: 17] [added: 16] | % |

| Percent of consolidated [removed: EBIT(1)] [added: EBITDA(1)] | | [removed: 12] [added: 17] | % | | [removed: 13] [added: 14] | % | | [removed: 16] [added: 15] | % |

The principal customers of our light-duty on-highway engines are Anhui Jianghuai Automobile Co., Ltd., China National Heavy Duty Truck Group and Gorkovsky Avtomobilny Zavod.

| | | 2018 | | | 2017 | | | 2016 | |

The Distribution segment is organized into eight primary geographic regions, including North America, Asia Pacific, Europe, China, Africa and Middle East, India, Latin America and Russia.

| | | 2018 | | | 2017 | | | 2016 | |

We develop aftertreatment systems, turbochargers, fuel systems and electronics to meet increasingly stringent emissions and fuel economy standards.

| | | 2018 | | | 2017 | | | 2016 | |

Electrified Power Segment

Our Electrified Power segment designs, manufactures, sells and supports electrified power systems ranging from fully electric to hybrid.

We currently offer the Cummins PowerDrive series of fully electric and hybrid powertrain systems targeting various applications in the Class 4-8 commercial vehicle markets and are developing the Cummins Battery Electric System and the Cummins Hybrid Power Plug-In System for the urban bus market, which are expected to launch in 2019 and 2020, respectively.

We also design and manufacture battery modules, packs and systems for commercial, industrial and material handling applications.

We use a range of cell chemistries which are suitable for pure electric, hybrid and plug-in hybrid applications.

In addition to electrified powertrains for urban buses, we intend to deliver product offerings to other markets as they adopt electric solutions, including, but not limited to, pick-up and delivery applications and industrial markets.

We invest in and utilize our internal research and development capabilities, along with strategic acquisitions and partnerships, to meet our objectives.

We anticipate our customer base for Electrified Power offerings will be highly diversified, with customer groups varying by their power and range needs.

We have secured a partnership with Gillig for our urban bus electrified powertrain in North America.

Outside of North America, our largest anticipated geographic markets are Europe and China.

In the markets served by our Electrified Power segment, we compete with electric start-ups, vehicle manufacturers and vertically integrated OEMs.

Our primary competitors include Proterra, Inc., Motiv Power Systems, Inc., Daimler, PACCAR, Volvo, Navistar, TRATON AG, BYD Company Limited, BAE Systems plc and Siemens AG.

| Tata Cummins, Ltd. | 14 | | | | 4 | % | | (7 | | ) | (1) | (2 | )% | | 6 | | | | 2 | % |

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

Distribution Entity

Komatsu Cummins Chile, Ltda.

- Komatsu Cummins Chile, Ltda.

is a joint venture with Komatsu America Corporation.

The highest level of accountability for Cummins’ climate-related risks and opportunities is with the Safety, Environment and Technology (SET) committee of the Board of Directors.

The Action Committee for Environmental Sustainability meets monthly and reports to the Chairman and to the SET committee at least annually.

Our Sustainability Progress Report for 2017/2018 includes goal progress and other key environmental and climate metrics and targets.

Our annual submission to the Carbon Disclosure Project (CDP) is also available on the website.

This submission provides information on our scenario planning exercise for climate and other risks as requested by CDP.

These reports and data book are not incorporated into this Form 10-K by reference.

We were named in the Top 25 in Newsweek's 2018 Green Ranking of U.S. companies, as well as named to the Dow Jones North American Sustainability Index for the thirteenth consecutive year in 2018 and given the highest scores possible in the 2018 inaugural ESG rating from Institutional Investor Services.

The current EU Stage V off-highway emission standards will come into effect between the 2019 - 2020 time frame for all power categories.

Financial information about our operating segments, including geographic information, is incorporated by reference from Note 21, "OPERATING SEGMENTS," to our *Consolidated Financial Statements.*

| | |

| --- | --- |

In the first quarter of 2017, our Distribution segment reorganized its regions to align with how the segment is managed.

| • | Parts; |

| • | Engines; |

| • | Power generation and |

| • | Service. |

The Distribution segment is organized into eight primary geographic regions:

| • | North America; |

| • | Asia Pacific; |

| • | Europe; |

| • | Africa and Middle East; |

| • | China; |

| • | India; |

| • | Latin America and |

| • | Russia. |

In addition, we develop aftertreatment systems and turbochargers to help our customers meet increasingly stringent emission standards and fuel systems which have primarily supplied our Engine segment and our joint venture partners Beijing Foton, Dongfeng, Scania and Tata.

In the first quarter of 2017, our Components segment reorganized its reporting structure to move the electronics business out of the emission solutions business and into the fuel systems business to enhance operational, administrative and product development efficiencies.

We renamed our fuel systems business to electronics and fuel systems.

In the first quarter of 2017, our Power Systems segment reorganized its product lines to better reflect how the segment is managed.

| Shanghai Fleetguard Filter Co., Ltd. | 12 | | | | 4 | % | | 10 | | | | 4 | % | | 10 | | | | 4 | % |

Distribution Entities

| • | Shanghai Fleetguard Filter Co., Ltd. - Shanghai Fleetguard Filter Co. Ltd. is a joint venture in China with Dongfeng Motor Co., Ltd., a manufacturer of numerous on-highway vehicles. This joint venture produces and sells filters and filter parts to support the full line of Dongfeng's commercial vehicles. |

For 2017, 2016 and 2015, approximately $10 million, $77 million and $90 million, or 1 percent, 13 percent and 13 percent, respectively, of our research and development expenditures were directly related to compliance with 2017 U.S. Environmental Protection Agency (EPA) emission standards.

We were named in the Top 25 in Newsweek's 2017 Green Ranking of U.S. companies, while also being named "Best in Industry" in the "Machinery" category for U.S. Companies, as well as named to the Dow Jones North American Sustainability Index for the twelfth consecutive year in 2017 and rated AAA by MSCI ESG Research, included in the “Disclosure Leadership Index” of the Carbon Disclosure Project’s climate report in 2015.

You may read and copy any document we file with the SEC at the SEC's public reference room at 100 F Street, N.E., Washington, DC 20549.

Please call the SEC at 1-800-SEC-0330 for information on the public reference room.

The matters described under "Loss [removed: Contingency Charges"] [added: Contingency"] in Note [removed: 12, "COMMITMENTS AND CONTINGENCIES,"] [added: 9, "PRODUCT WARRANTY LIABILITY,"] to the *Consolidated Financial Statements* are incorporated herein by reference.

[removed: ][added: ]

[removed: FORM 10-K][added: FORM 10-K]

For the Fiscal Year Ended December 31, [removed: 2017][added: 2018]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or] a smaller reporting [added: company, or an emerging growth] company.

See the definition of "large accelerated filer," "accelerated [removed: filer" and] [added: filer,"] "smaller reporting [added: company," and "emerging growth] company" in Rule 12b-2 of the Exchange Act.

| Large accelerated filer x | | Accelerated filer o | | Non-accelerated filer o [removed: (Do not check if a smaller reporting company)] | | Smaller reporting company o |

The aggregate market value of the voting stock held by non-affiliates was approximately [removed: $27.2] [added: $21.7] billion at July [removed: 2, 2017.][added: 1, 2018.]

As of February [removed: 2, 2018,] [added: 1, 2019,] there were [removed: 165,683,334] [added: 157,338,874] shares outstanding of $2.50 par value common stock.

Portions of the registrant's definitive Proxy Statement for its [removed: 2018] [added: 2019] annual meeting of shareholders, which will be filed with the Securities and Exchange Commission on Schedule 14A within 120 days after the end of [removed: 2017,] [added: 2018,] will be incorporated by reference in Part III of this Form 10-K to the extent indicated therein upon such filing.

| | | | | [Cautionary Statements Regarding Forward-Looking [removed: Information](#s2938AE51E1885300B889482F90CBA452)] [added: Information](#sB4E408A0CC635CB6AE646BD23C16185D)] | | [removed: [3](#s2938AE51E1885300B889482F90CBA452)] [added: [3](#sB4E408A0CC635CB6AE646BD23C16185D)] |

| | | | | [Operating [removed: Segments](#sE27F2CF439F355BEA2DA2D564FBB543B)] [added: Segments](#s05EE37966D7851EFA74F8777DB7C08F6)] | | [removed: [5](#sE27F2CF439F355BEA2DA2D564FBB543B)] [added: [5](#s05EE37966D7851EFA74F8777DB7C08F6)] |

| | | | | [Engine [removed: Segment](#s734DBDB13F305C8D86B17B467E687FC3)] [added: Segment](#sDCD805F5511A54019F2E7AB47A86C2FD)] | | [removed: [5](#s734DBDB13F305C8D86B17B467E687FC3)] [added: [5](#sDCD805F5511A54019F2E7AB47A86C2FD)] |

| | | | | [Distribution [removed: Segment](#sB6C1D3767FCB5579B78A53684052CF53)] [added: Segment](#sCFEB8934A83657E0BF2AEBF0007FCF44)] | | [removed: [6](#sB6C1D3767FCB5579B78A53684052CF53)] [added: [6](#sCFEB8934A83657E0BF2AEBF0007FCF44)] |

| | | | | [Components [removed: Segment](#s4218BBB3D6A05BCAAE8F28D44F48DCB1)] [added: Segment](#s5BD3686CEB1C5689994F51D7922DD6CE)] | | [removed: [7](#s4218BBB3D6A05BCAAE8F28D44F48DCB1)] [added: [7](#s5BD3686CEB1C5689994F51D7922DD6CE)] |

| | | | | [Power Systems [removed: Segment](#s1523F750C29E52B0A252AF96A0F20429)] [added: Segment](#sB09E522A42E85E69905E367F4F702FAF)] | | [removed: [8](#s1523F750C29E52B0A252AF96A0F20429)] [added: [8](#sB09E522A42E85E69905E367F4F702FAF)] |

| | | | | [Joint Ventures, Alliances and Non-Wholly-Owned [removed: Subsidiaries](#s8456BE86128C5EE88FF81AFA9967EB82)] [added: Subsidiaries](#s68DDBFB51C1256ADA3FBDFEB01C80605)] | | [removed: [9](#s8456BE86128C5EE88FF81AFA9967EB82)] [added: [9](#s68DDBFB51C1256ADA3FBDFEB01C80605)] |

| | | | | [Patents and [removed: Trademarks](#sED6B03EBBA83515DB57B841745C810AE)] [added: Trademarks](#sA8899C199B7A5B48A7155D8ED82C3773)] | | [removed: [11](#sED6B03EBBA83515DB57B841745C810AE)] [added: [11](#sA8899C199B7A5B48A7155D8ED82C3773)] |

| | | | | [Largest [removed: Customers](#sCB1E606336C45008BB4C178C358702DC)] [added: Customers](#s34957A01985658F7AD32767F7B41AE8E)] | | [removed: [11](#sCB1E606336C45008BB4C178C358702DC)] [added: [11](#s34957A01985658F7AD32767F7B41AE8E)] |

| | | | | [Research and [removed: Development](#sEF1A2897B88A55D1B57933E5C6E41D76)] [added: Development](#s5018C4545466587BA085D84177732B7D)] | | [removed: [12](#sEF1A2897B88A55D1B57933E5C6E41D76)] [added: [12](#s5018C4545466587BA085D84177732B7D)] |

| | | | | [Environmental [removed: Sustainability](#sC6E84817D694543DA532020692C88F4D)] [added: Sustainability](#sF91090D761575D7F8175D6EC67B44DA4)] | | [removed: [12](#sC6E84817D694543DA532020692C88F4D)] [added: [12](#sF91090D761575D7F8175D6EC67B44DA4)] |

| | | | | [Environmental [removed: Compliance](#sFFC918031C8A59128DBFDB151F0BDA5F)] [added: Compliance](#s7F87B11FEE965E9A99926E06391EA111)] | | [removed: [13](#sFFC918031C8A59128DBFDB151F0BDA5F)] [added: [13](#s7F87B11FEE965E9A99926E06391EA111)] |

| | | | | [Available [removed: Information](#s96276190CCA753EF96124D4889697270)] [added: Information](#s801D1504C37753FF8A0D30CE3D92AF7A)] | | [removed: [14](#s96276190CCA753EF96124D4889697270)] [added: [14](#s801D1504C37753FF8A0D30CE3D92AF7A)] |

| | | | | [Executive Officers of the [removed: Registrant](#s2C4746F1724253A28231646CE799A233)] [added: Registrant](#s8A140166B10D51E6B712B674EC415261)] | | [removed: [15](#s2C4746F1724253A28231646CE799A233)] [added: [15](#s8A140166B10D51E6B712B674EC415261)] |

| | | [removed: [1A](#s689C9C4DEAEB51919253509EB02C144C)] [added: [1A](#sAC3ADBCC16455B96AD340DEC28E0D40D)] | | [Risk [removed: Factors](#s689C9C4DEAEB51919253509EB02C144C)] [added: Factors](#sAC3ADBCC16455B96AD340DEC28E0D40D)] | | [removed: [17](#s689C9C4DEAEB51919253509EB02C144C)] [added: [17](#sAC3ADBCC16455B96AD340DEC28E0D40D)] |

| | | [removed: [1B](#sC5476733A6245BDA9E2D857B3B102C0D)] [added: [1B](#s6A9B511B31405EFD82B5F87BCDAE7D62)] | | [Unresolved Staff [removed: Comments](#sC5476733A6245BDA9E2D857B3B102C0D)] [added: Comments](#s6A9B511B31405EFD82B5F87BCDAE7D62)] | | [removed: [24](#sC5476733A6245BDA9E2D857B3B102C0D)] [added: [24](#s6A9B511B31405EFD82B5F87BCDAE7D62)] |

| | | [removed: [3](#sA232696D17C55B2581641B41FB017F73)] [added: [3](#sEE84208D4AB95EF1B9BD9FA6F37F9B17)] | | [Legal [removed: Proceedings](#sA232696D17C55B2581641B41FB017F73)] [added: Proceedings](#sEE84208D4AB95EF1B9BD9FA6F37F9B17)] | | [removed: [26](#sA232696D17C55B2581641B41FB017F73)] [added: [26](#sEE84208D4AB95EF1B9BD9FA6F37F9B17)] |

| | | [removed: [4](#s3E4BB30EA3735B359EBFB546F9BDCC9A)] [added: [4](#s802457F6CCB051A3B51CA56DDF82B07A)] | | [Mine Safety [removed: Disclosures](#s3E4BB30EA3735B359EBFB546F9BDCC9A)] [added: Disclosures](#s802457F6CCB051A3B51CA56DDF82B07A)] | | [removed: [26](#s3E4BB30EA3735B359EBFB546F9BDCC9A)] [added: [26](#s802457F6CCB051A3B51CA56DDF82B07A)] |

| [removed: [II](#s86E2581A2FCF5535833F0D70B81557A0)] [added: [II](#s3C5F2D9914595DA982B372AA53567D54)] | | [removed: [5](#s1D42CCD026F057AEA87C375814A7ECC3)] [added: [5](#sDE68715E122C519EA7705B44C7F1F027)] | | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s1D42CCD026F057AEA87C375814A7ECC3)] [added: Securities](#sDE68715E122C519EA7705B44C7F1F027)] | | [removed: [27](#s1D42CCD026F057AEA87C375814A7ECC3)] [added: [27](#sDE68715E122C519EA7705B44C7F1F027)] |

| | | [removed: [6](#s16703AE15826567D8554EA23526C6D3C)] [added: [6](#s592AC48FB6A558F7B868DFF7ADF61892)] | | [Selected Financial [removed: Data](#s16703AE15826567D8554EA23526C6D3C)] [added: Data](#s592AC48FB6A558F7B868DFF7ADF61892)] | | [removed: [29](#s16703AE15826567D8554EA23526C6D3C)] [added: [29](#s592AC48FB6A558F7B868DFF7ADF61892)] |

| | | [removed: [7](#s239C4A31AAC6520BBB236EAC4B9EDA3F)] [added: [7](#sFFEA42F95413547BAC5BA39EFF74FCF7)] | | [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s03DFA374B83556099642354E64631F75)] [added: Operations](#s35D7CE96019755B4A935ADB5D0012C7D)] | | [removed: [30](#s03DFA374B83556099642354E64631F75)] [added: [30](#s35D7CE96019755B4A935ADB5D0012C7D)] |

| | | [removed: [7A](#s0D1CF01649FE5690A2BBAA61397B6596)] [added: [7A](#s5262499390E35AB6A1E78D2BF3E75E2E)] | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s0D1CF01649FE5690A2BBAA61397B6596)] [added: Risk](#s5262499390E35AB6A1E78D2BF3E75E2E)] | | [removed: [61](#s0D1CF01649FE5690A2BBAA61397B6596)] [added: [59](#s5262499390E35AB6A1E78D2BF3E75E2E)] |

| | | [removed: [8](#s378E4994E10C5AFB8A465883DE64C94F)] [added: [8](#s95FD8BC798CB50BD803E5616EDE35953)] | | [Financial Statements and Supplementary [removed: Data](#s378E4994E10C5AFB8A465883DE64C94F)] [added: Data](#s95FD8BC798CB50BD803E5616EDE35953)] | | [removed: [63](#s378E4994E10C5AFB8A465883DE64C94F)] [added: [61](#s95FD8BC798CB50BD803E5616EDE35953)] |

| | | | | [Index to Financial [removed: Statements](#s89318C9B4E0651FFB99ED6DD4C10100F)] [added: Statements](#sAE88860AC02C5CCFBC00CF2BE0FBDA94)] | | [removed: [63](#s89318C9B4E0651FFB99ED6DD4C10100F)] [added: [61](#sAE88860AC02C5CCFBC00CF2BE0FBDA94)] |

| | | [removed: [9](#s10F8B2D44C035B4D9ED906BDDF7AF8CF)] [added: [9](#s837159BA66195A229ECD0B4BFE39D85D)] | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s10F8B2D44C035B4D9ED906BDDF7AF8CF)] [added: Disclosure](#s837159BA66195A229ECD0B4BFE39D85D)] | | [removed: [116](#s10F8B2D44C035B4D9ED906BDDF7AF8CF)] [added: [118](#s837159BA66195A229ECD0B4BFE39D85D)] |

| | | [removed: [9A](#s7B099EFB4E265BFE84A85303E251FB83)] [added: [9A](#s7520D1510C2351CD8F465A2C7DC41B18)] | | [Controls and [removed: Procedures](#s7B099EFB4E265BFE84A85303E251FB83)] [added: Procedures](#s7520D1510C2351CD8F465A2C7DC41B18)] | | [removed: [116](#s7B099EFB4E265BFE84A85303E251FB83)] [added: [118](#s7520D1510C2351CD8F465A2C7DC41B18)] |

| [removed: [III](#s087B651713105209BE2F30F697CF31CE)] [added: [III](#s852A6C2DD15250FD86A9ADEC70BD3BC6)] | | [removed: [10](#sEDE27973718B5E9D9D2B80882265D602)] [added: [10](#s64C755DD0FF651159C0284D6C758896E)] | | [Directors, Executive Officers and Corporate [removed: Governance](#sEDE27973718B5E9D9D2B80882265D602)] [added: Governance](#s64C755DD0FF651159C0284D6C758896E)] | | [removed: [116](#sEDE27973718B5E9D9D2B80882265D602)] [added: [118](#s64C755DD0FF651159C0284D6C758896E)] |

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| | | [removed: [13](#sB8FDB8C63CA45CC392267E5DA67010B4)] [added: [13](#sF65953EEF1075EAA854FC63FB28F1E94)] | | [Certain Relationships, Related Transactions and Director [removed: Independence](#sB8FDB8C63CA45CC392267E5DA67010B4)] [added: Independence](#sF65953EEF1075EAA854FC63FB28F1E94)] | | [removed: [117](#sB8FDB8C63CA45CC392267E5DA67010B4)] [added: [119](#sF65953EEF1075EAA854FC63FB28F1E94)] |

| | | [removed: [14](#s20EB3EFA7F25521FA7A7C4421CFDB655)] [added: [14](#sF6E5D2C8788F5FF9A4FF01D12C277A27)] | | [Principal Accounting Fees and [removed: Services](#s20EB3EFA7F25521FA7A7C4421CFDB655)] [added: Services](#sF6E5D2C8788F5FF9A4FF01D12C277A27)] | | [removed: [117](#s20EB3EFA7F25521FA7A7C4421CFDB655)] [added: [119](#sF6E5D2C8788F5FF9A4FF01D12C277A27)] |

| Emerging growth company o | | | | | | |

| [I](#s59E1E77F9DD65B2FB23382375F365A6A) | | [1](#s7547FA91CEE75293B84CAC5BD5E9C451) | | [Business](#s7547FA91CEE75293B84CAC5BD5E9C451) | | [5](#s59E1E77F9DD65B2FB23382375F365A6A) |

| | | | | [Overview](#s0F0E4926D1AC530B88C55B20BB8598BC) | | [5](#s0F0E4926D1AC530B88C55B20BB8598BC) |

| | | | | [Electrified Power Segment](#sB88EB71DE8D55A66B59589D32751F6BC) | | [8](#sB88EB71DE8D55A66B59589D32751F6BC) |

| | | | | [Supply](#s5AED0C626B9C5841BED869E601950356) | | [11](#s5AED0C626B9C5841BED869E601950356) |

| | | | | [Seasonality](#sA42B613BD0255867B81EFE6494D30AA4) | | [11](#sA42B613BD0255867B81EFE6494D30AA4) |

| | | | | [Backlog](#s880EE6E88AA650BE87756EE6E23DD594) | | [12](#s880EE6E88AA650BE87756EE6E23DD594) |

| | | | | [Employees](#s77BBC6118EC556CFAB8EC615ED16EBF3) | | [14](#s77BBC6118EC556CFAB8EC615ED16EBF3) |

| | | [2](#s17F2B42DF2645E01AE9AB1A238ADA9B2) | | [Properties](#s17F2B42DF2645E01AE9AB1A238ADA9B2) | | [25](#s17F2B42DF2645E01AE9AB1A238ADA9B2) |

| | | [9B](#s4CDA3820E5F857BCA70FBD94C1D71BD4) | | [Other Information](#s4CDA3820E5F857BCA70FBD94C1D71BD4) | | [118](#s7520D1510C2351CD8F465A2C7DC41B18) |

| | | [11](#s9879D36DCAFE59769CF15BF2A96E85C2) | | [Executive Compensation](#s9879D36DCAFE59769CF15BF2A96E85C2) | | [118](#s9879D36DCAFE59769CF15BF2A96E85C2) |

| | | | | [Signatures](#sA0552E5A8056519DA062D94E33AFE33A) | | [123](#sA0552E5A8056519DA062D94E33AFE33A) |

| • | the United Kingdom's decision to end its membership in the European Union; |

| [I](#s9AF4399A3D515F2DBEEACA4EFECBBDDE) | | [1](#sFD58E381743D55028B5962C5A3E54DAC) | | [Business](#sFD58E381743D55028B5962C5A3E54DAC) | | [5](#s9AF4399A3D515F2DBEEACA4EFECBBDDE) |

| | | | | [Overview](#sCF0B5F1D83365E0EAD17E030EDEF19E6) | | [5](#sCF0B5F1D83365E0EAD17E030EDEF19E6) |

| | | | | [Supply](#s9B2FDA4391445A2892B12ADA4666EB29) | | [11](#s9B2FDA4391445A2892B12ADA4666EB29) |

| | | | | [Seasonality](#sDF6DC61356055558BC77CEDA743B9E0D) | | [11](#sDF6DC61356055558BC77CEDA743B9E0D) |

| | | | | [Backlog](#s62671AD4BB2B519583A83FECA8610730) | | [12](#s62671AD4BB2B519583A83FECA8610730) |

| | | | | [Employees](#s53F0907693AD5B8CB42265D9D3269A88) | | [14](#s53F0907693AD5B8CB42265D9D3269A88) |

| | | [2](#s7763DC07283E59CF96ADD945F6D1A8A6) | | [Properties](#s7763DC07283E59CF96ADD945F6D1A8A6) | | [25](#s7763DC07283E59CF96ADD945F6D1A8A6) |

| | | [9B](#s7753F1CB4DF65465B8E2009031EE8237) | | [Other Information](#s7753F1CB4DF65465B8E2009031EE8237) | | [116](#s7B099EFB4E265BFE84A85303E251FB83) |

| | | [11](#sF82009AD5E8C52B4851E52C6EA2FD7D4) | | [Executive Compensation](#sF82009AD5E8C52B4851E52C6EA2FD7D4) | | [116](#sF82009AD5E8C52B4851E52C6EA2FD7D4) |

| | | | | [Signatures](#s20FDBD1EC9795D3CB877037423A4EB0D) | | [121](#s20FDBD1EC9795D3CB877037423A4EB0D) |

| | |

| --- | --- |

| • | any significant additional problems in our engine platforms or aftertreatment systems; |

| • | technological implementation and cost/financial risks in our increasing use of large, multi-year contracts; |

| | | Tennessee: Cookeville | | China: [removed: Beijing,] Shanghai, Wuxi, Wuhan |

| | | | | U.K.: Daventry, [removed: Margate, Manston,] Stamford |

| [removed: Georgia: Atlanta] | | Russia: Moscow |

| Michigan: New Hudson | | [removed: Singapore: Singapore] [added: China: Beijing] |

| [removed: Minnesota: White Bear Lake] | | South Africa: Johannesburg |

| Tennessee: Memphis | | [added: Holland: Dordrecht] |

| Texas: Dallas | | [added: India: Pune] |

| | | U.K.: [removed: Staines,] [added: London,] Stockton |

| | | | | |

| | | | | |

| | | | | |

| Electrified Power | | Indiana: Columbus | | |

| California: Irvine | | Australia: Scoresby |

| Colorado: Henderson | | Belgium: Mechelen |

| Georgia: Atlanta | | Canada: Montreal,Vancouver |

| Minnesota: White Bear Lake | | Germany: Gross-Gerau |

| | | Japan: Tokyo |

| | | U.K.: Wellingborough |

| | | Turkey: Izmir |

| California: Irvine | | Canada: Vancouver |

| Colorado: Henderson | | China: Beijing |

| Nebraska: Omaha | | |

(a) Our common stock is listed on the NYSE under the symbol "CMI." For [removed: information about the quoted market prices of] [added: other matters related to] our common [removed: stock, information regarding dividend payments and the number of common] stock [removed: shareholders,] [added: and shareholders' equity,] see [removed: "Selected Quarterly] [added: Note 14, "SHAREHOLDERS' EQUITY," to the *Consolidated] Financial [removed: Data" in this report.][added: Statements*.]

(1) Shares purchased represent shares under our Key Employee Stock Investment Plan established in 1969 (there is no maximum repurchase limitation in this plan) and our Board of Directors authorized share repurchase [removed: programs.][added: program.]

The repurchase [removed: programs] [added: program] authorized by the Board of Directors [removed: do] [added: does] not limit the number of shares that may be purchased and were excluded from this column.

The dollar value remaining available for future purchases under [removed: such programs] [added: the 2018 program] as of December 31, [removed: 2017,] [added: 2018,] was [removed: $1.0] [added: $1.9] billion.

During the three months ended December 31, [removed: 2017,] [added: 2018,] we repurchased [removed: $60] [added: $167] million of common stock under the [removed: 2015] [added: 2016] Board of Directors authorized [removed: plan.][added: plan, completing this program, and repurchased $94 million of common stock under the 2018 authorization.]

During the three months ended December 31, [removed: 2017,] [added: 2018,] we repurchased [removed: 4,902] [added: 5,782] shares [added: of common stock] from employees in connection with the Key Employee Stock Investment Plan which allows certain employees, other than officers, to purchase shares of common stock on an installment basis up to an established credit limit.

We hold participants’ shares as security for the loans and would, in [removed: effect] [added: effect,] repurchase shares if the participant defaulted in repayment of the loan.

Our [removed: revised] [added: peer] group includes BorgWarner Inc., Caterpillar, Inc., Daimler AG, Deere & Company, Donaldson Company Inc., Eaton Corporation, Emerson Electric Co., Fortive Corporation, W.W. Grainger Inc., Honeywell International, Illinois Tool Works Inc., Navistar, PACCAR, Parker-Hannifin Corporation, Textron Inc. and Volvo AB.

[removed: ][added: ]

ASSUMES $100 INVESTED ON [removed: DEC.][added: DECEMBER 31, 2013]

FISCAL YEAR ENDING [removed: DEC.][added: DECEMBER 31, 2018]

| October 1 - November 4 | | 1,441,542 | | | $ | 137.97 | | | 1,441,542 | | | 80,751 | |

| November 5 - December 2 | | 740,384 | | | 145.34 | | | | 735,907 | | | 78,448 | |

| December 3 - December 31 | | 406,164 | | | 135.90 | | | | 404,859 | | | 85,313 | |

| Total | | 2,588,090 | | | 139.75 | | | | 2,582,308 | | | | |

In October 2018, our Board of Directors authorized the acquisition of up to $2 billion of additional common stock upon completion of the 2016 repurchase plan.

For other matters related to our common stock and shareholders' equity, see Note 13, "SHAREHOLDERS' EQUITY," to the *Consolidated Financial Statements*.

| October 2 - November 5 | | 538 | | | $ | 173.90 | | | — | | | 39,622 | |

| November 6 - December 3 | | 349,637 | | | 166.01 | | | | 348,837 | | | 40,522 | |

| December 4 - December 31 | | 15,584 | | | 167.66 | | | | 12,020 | | | 36,058 | |

| Total | | 365,759 | | | 166.10 | | | | 360,857 | | | | |

In 2017 the Board of Directors updated their benchmark criteria for peer companies, re-evaluated our peer group based on the updated criteria and updated our group to include current companies that participate in similar end-markets and have similar businesses.

31, 2012

31, 2017

The selected financial information presented below for each of the last five years ended December 31, beginning with [removed: 2017,] [added: 2018,] was derived from our *Consolidated Financial Statements*.

| In millions, except per share amounts | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Net sales | | $ | [removed: 20,428] [added: 23,771] | | | $ | [removed: 17,509] [added: 20,428] | | | $ | [removed: 19,110] [added: 17,509] | | | $ | [removed: 19,221] [added: 19,110] | | | $ | [removed: 17,301] [added: 19,221] | |

| *U.S. percentage of sales* | | [removed: 54] [added: 56] | | % | | 54 | | % | | [removed: 56] [added: 54] | | % | | [removed: 52] [added: 56] | | % | | [removed: 48] [added: 52] | | % |

| *Non-U.S. percentage of sales* | | [removed: 46] [added: 44] | | % | | 46 | | % | | [removed: 44] [added: 46] | | % | | [removed: 48] [added: 44] | | % | | [removed: 52] [added: 48] | | % |

| Gross margin [added: (1)] | | [removed: 5,090] [added: 5,737] | | | | [removed: 4,452] [added: 5,100] | | | | [removed: 4,947] [added: 4,458] | | | | [removed: 4,861] [added: 4,947] | | | | [removed: 4,280] [added: 4,861] | | |

| Research, development and engineering [removed: expenses] [added: expenses(1)] | | [removed: 752] [added: 902] | | | | [removed: 636] [added: 754] | | | | [removed: 735] [added: 637] | | | | [removed: 754] [added: 735] | | | | [removed: 713] [added: 754] | | |

| Equity, royalty and interest income from investees | | [removed: 357] [added: 394] | | | | [removed: 301] [added: 357] | | | | [removed: 315] [added: 301] | | | | [removed: 370] [added: 315] | | | | [removed: 361] [added: 370] | | |

| Interest expense | | [removed: 81] [added: 114] | | | | [removed: 69] [added: 81] | | | | [removed: 65] [added: 69] | | | | [removed: 64] [added: 65] | | | | [removed: 41] [added: 64] | | |

| Net income attributable to Cummins [removed: Inc.(1)] [added: Inc.(2)] | | [removed: 999] [added: 2,141] | | | | [removed: 1,394] [added: 999] | | | | [removed: 1,399] [added: 1,394] | | | | [removed: 1,651] [added: 1,399] | | | | [removed: 1,483] [added: 1,651] | | |

| Earnings per common share attributable to Cummins [removed: Inc. (2)] [added: Inc.(3)] | | | | | | | | | | | | | | | | | | | | |

| Basic | | $ | [removed: 5.99] [added: 13.20] | | | $ | [removed: 8.25] [added: 5.99] | | | $ | [removed: 7.86] [added: 8.25] | | | $ | [removed: 9.04] [added: 7.86] | | | $ | [removed: 7.93] [added: 9.04] | |

| Diluted | | [removed: 5.97] [added: 13.15] | | | | [removed: 8.23] [added: 5.97] | | | | [removed: 7.84] [added: 8.23] | | | | [removed: 9.02] [added: 7.84] | | | | [removed: 7.91] [added: 9.02] | | |

| Cash dividends declared per share | | [removed: 4.21] [added: 4.44] | | | | [removed: 4.00] [added: 4.21] | | | | [removed: 3.51] [added: 4.00] | | | | [removed: 2.81] [added: 3.51] | | | | [removed: 2.25] [added: 2.81] | | |

| Net cash provided by operating [removed: activities] [added: activities(4)] | | $ | [removed: 2,277] [added: 2,378] | | | $ | [removed: 1,935] [added: 2,277] | | | $ | [removed: 2,059] [added: 1,939] | | | $ | [removed: 2,266] [added: 2,065] | | | $ | [removed: 2,089] [added: 2,283] | |

| Capital expenditures | | [removed: 506] [added: 709] | | | | [removed: 531] [added: 506] | | | | [removed: 744] [added: 531] | | | | [removed: 743] [added: 744] | | | | [removed: 676] [added: 743] | | |

| Cash and cash equivalents | | $ | [removed: 1,369] [added: 1,303] | | | $ | [removed: 1,120] [added: 1,369] | | | $ | [removed: 1,711] [added: 1,120] | | | $ | [removed: 2,301] [added: 1,711] | | | $ | [removed: 2,699] [added: 2,301] | |

| Total assets | | [removed: 18,075] [added: 19,062] | | | | [removed: 15,011] [added: 18,075] | | | | [removed: 15,134] [added: 15,011] | | | | [removed: 15,764] [added: 15,134] | | | | [removed: 14,728] [added: 15,764] | | |

| Long-term [removed: debt(3)] [added: debt(5)] | | [removed: 1,588] [added: 1,597] | | | | [removed: 1,568] [added: 1,588] | | | | [removed: 1,576] [added: 1,568] | | | | [removed: 1,577] [added: 1,576] | | | | [removed: 1,672] [added: 1,577] | | |

| Total [removed: equity(4)] [added: equity(6)] | | [removed: 8,164] [added: 8,259] | | | | [removed: 7,174] [added: 8,164] | | | | [removed: 7,750] [added: 7,174] | | | | [removed: 8,093] [added: 7,750] | | | | [removed: 7,870] [added: 8,093] | | |

[removed: (1)] For the year ended December 31, 2017, net income attributable to Cummins Inc. was reduced by $777 million due to [removed: tax reform.][added: Tax Legislation.]

[removed: (2)] For the year ended December 31, [removed: 2017,] [added: 2017] results for basic and diluted earnings per share were reduced by $4.66 per share and $4.65 per share, respectively, due to [removed: tax reform.][added: Tax Legislation.]

[removed: (3)] [added: (5)] In 2015, we adopted new rules related to balance sheet debt issuance costs, which resulted in the reclassification of our December 31, 2014, debt balance, reducing our long-term debt by $12 million.

[removed: (4)] [added: (6)] For the years ended December 31, [added: 2018,] 2017, 2016, [removed: 2015, 2014] [added: 2015] and [removed: 2013,] [added: 2014,] we recorded non-cash charges (credits) to equity of [added: ($74) million,] ($28) million, $65 million, $63 [removed: million, $78] million and [removed: ($102)] [added: $78] million, respectively, to record net actuarial losses (gains) associated with the valuation of our pension plans.

For the years ended December 31, [added: 2018,] 2017, 2016, [removed: 2015, 2014] [added: 2015] and [removed: 2013,] [added: 2014,] we recorded non-cash charges (credits) to equity of [added: $326 million,] ($315) million, $431 million, $290 [removed: million, $227] million and [removed: $18] [added: $227] million, respectively, to record unrealized losses (gains) associated with the foreign currency translation adjustments.

(1) In 2018, we adopted the standard related to pension and other postretirement benefit costs resulting in reclassification of balances between *Cost of sales,* *Selling, general and administrative expenses,* *Research, development and engineering expenses* and *Other income, net*.

Reclassifications resulted in an increase in gross margin of $10 million and $6 million and an increase in *Research, development and engineering expenses* of $2 million and $1 million for the years ended December 31, 2017 and 2016, respectively.

Reclassifications were not made for the years ended December 31, 2015 and 2014 as the changes were immaterial.

(2) For the year ended December 31, 2018, net income attributable to Cummins Inc. was reduced by $39 million due to Tax Legislation.

(3) For the year ended December 31, 2018 results for basic and diluted earnings per share were reduced by $0.24 due to Tax Legislation.

(4) In 2017, we adopted new rules related to accounting for stock compensation which resulted in a net reclassification of $4 million, $6 million and $17 million of compensation payments from operating to financing activities for the years ended December 31, 2016, 2015 and 2014, respectively.

In September 2013, we issued $1 billion of senior unsecured debt.

| • | Consolidated Statements of Income for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015] [added: 2016] |

| • | Consolidated Statements of Comprehensive Income for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015] [added: 2016] |

| • | Consolidated Balance Sheets at December 31, [removed: 2017] [added: 2018] and [removed: 2016] [added: 2017] |

| • | Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015] [added: 2016] |

| • | Consolidated Statements of Changes in Equity for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015] [added: 2016] |

| NOTE [added: | |] 1 | | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |

| NOTE [removed: 2] | | [added: 4 | |] INCOME TAXES |

| NOTE [added: | |] 3 | | INVESTMENTS IN EQUITY INVESTEES |

| NOTE [removed: 4] | | [added: 5 | |] MARKETABLE SECURITIES |

| NOTE [removed: 5] | | [added: 6 | |] INVENTORIES |

| NOTE [removed: 6] | | [added: 7 | |] PROPERTY, PLANT AND EQUIPMENT |

| NOTE [removed: 7] | | [added: 8 | |] GOODWILL AND OTHER INTANGIBLE ASSETS |

| NOTE [removed: 8] | | [added: 9 | |] PRODUCT WARRANTY LIABILITY |

| NOTE [removed: 9] | | [added: 10 | |] DEBT |

| NOTE [removed: 10] | | [removed: PENSION] [added: 11 | | PENSIONS] AND OTHER POSTRETIREMENT BENEFITS |

| NOTE [removed: 11] | | [added: 12 | |] OTHER [removed: LIABILITIES] [added: ACCRUED EXPENSES] AND [removed: DEFERRED REVENUE] [added: OTHER LIABILITIES] |

| NOTE [removed: 12] | | [added: 13 | |] COMMITMENTS AND CONTINGENCIES |

| NOTE [removed: 13] | | [added: 14 | |] SHAREHOLDERS' EQUITY |

| NOTE [removed: 14] | | [added: 15 | |] ACCUMULATED OTHER COMPREHENSIVE LOSS |

| NOTE [removed: 15] | | [added: 16 | |] STOCK INCENTIVE AND STOCK OPTION PLANS |

| NOTE [removed: 16] | | [added: 17 | |] NONCONTROLLING INTERESTS |

| NOTE [removed: 17] | | [added: 18 | |] EARNINGS PER SHARE |

| NOTE [removed: 18] | | [added: 19 | |] ACQUISITIONS |

| NOTE [removed: 21] | | [added: 20 | |] OPERATING SEGMENTS |

Management assessed the effectiveness of our internal control over financial reporting and concluded it was effective as of December 31, [removed: 2017.][added: 2018.]

The effectiveness of our internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

We have audited the accompanying consolidated balance sheets of Cummins Inc. and its subsidiaries [added: (the “Company”)] as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] and the related consolidated statements of income, comprehensive income, cash flows, and changes in equity for each of the three years in the period ended December 31, [removed: 2017,] [added: 2018,] including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] and the results of [removed: their] [added: its] operations and [removed: their] [added: its] cash flows for each of the three years in the period ended December 31, [removed: 2017] [added: 2018] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the COSO.

| In millions, except per share amounts | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | |

| NET SALES (a) [added: (Note 2)] | | $ | [removed: 20,428] [added: 23,771] | | | $ | [removed: 17,509] [added: 20,428] | | | $ | [removed: 19,110] [added: 17,509] | |

| Cost of sales | | [removed: 15,338 | | | | 13,057] [added: $] | [added: 10] | | | [removed: 14,163] [added: $] | [added: 6] | |

| Selling, general and administrative expenses | | [removed: 2,390 | | | | 2,046] [added: (39] | | [added: )] | | [removed: 2,092] [added: (53] | | [added: )] |

| Research, development and engineering expenses | | [removed: 752 | | | | 636] [added: (2] | | [added: )] | | [removed: 735] [added: (1] | | [added: )] |

| Equity, royalty and interest income from investees (Note 3) | | [removed: 357] [added: 394] | | | | [removed: 301] [added: 357] | | | | [removed: 315] [added: 301] | | |

| Loss contingency (Note [removed: 12)] [added: 9)] | | [removed: 5] [added: —] | | | | [removed: 138] [added: 5] | | | | [removed: 60] [added: 138] | | |

| Other operating income (expense), net | | [removed: 65] [added: (6] | | [added: )] | | [removed: (5] [added: 65] | | [removed: )] | | [removed: (17] [added: (5] | | ) |

| Interest income | | [removed: 18] [added: 35] | | | | [removed: 23] [added: 18] | | | | [removed: 24] [added: 23] | | |

| Interest expense (Note [removed: 9)] [added: 10)] | | [removed: 81] [added: 114] | | | | [removed: 69] [added: 81] | | | | [removed: 65] [added: 69] | | |

| NOTE | | 2 | | DISAGGREGATION OF REVENUE |

February 11, 2019

| Cost of sales | | 18,034 | | | | 15,328 | | | | 13,051 | | |

| GROSS MARGIN | | 5,737 | | | | 5,100 | | | | 4,458 | | |

| Selling, general and administrative expenses | | 2,437 | | | | 2,429 | | | | 2,099 | | |

| OPERATING INCOME | | 2,786 | | | | 2,334 | | | | 1,880 | | |

| Other accrued expenses (Note 12) | | 852 | | | | 915 | | |

| Pensions and other postretirement benefits (Note 11) | | 532 | | | | 619 | | |

| Other liabilities (Note 12) | | 892 | | | | 957 | | |

| Foreign currency remeasurement and transaction exposure | | (46 | | ) | | 71 | | | | (55 | | ) |

| Impact of adopting accounting standards (Note 1) | | | | | | | | | | 30 | | | | | | | | | | | | | | | | 30 | | | | — | | | | 30 | | |

| Net income | | | | | | | | | | 2,141 | | | | | | | | | | | | | | | | 2,141 | | | | 46 | | | | 2,187 | | |

| BALANCE AT DECEMBER 31, 2018 | | $ | 556 | | | $ | 1,715 | | | $ | 12,917 | | | $ | (6,028 | ) | | $ | (5 | ) | | $ | (1,807 | ) | | $ | 7,348 | | | $ | 911 | | | $ | 8,259 | |

On January 1, 2018, we adopted the new revenue recognition standard in accordance with GAAP on a modified retrospective basis.

See "RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS" below for additional information.

Revenue Recognition Sales of Products

We sell to customers either through long-term arrangements or standalone purchase orders.

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

Our performance obligations vary by contract, but may include diesel and natural gas engines and engine-related component products, including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems, transmissions, power generation systems and construction related projects, batteries, battery systems, parts, maintenance services and extended warranty coverage.

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

Since control of construction projects transfer to the customer as the work is performed, revenue on these projects is recognized based on the percentage of inputs incurred to date compared to the total expected cost of inputs, which is reflective of the value transferred to the customer.

Revenue is recognized under long-term maintenance and other service agreements over the term of the agreement as underlying services are performed based on the percentage of the cost of services provided to date compared to the total expected cost of services to be provided under the contract.

Sales of extended coverage are recognized based on the pattern of expected costs over the extended coverage period or, if such a pattern is unknown, on a straight-line basis over the coverage period as the customer is considered to benefit from our stand ready obligation over the coverage period.

In all cases, we believe cost incurred is the most representative depiction of the extent of service performed to date on a particular contract.

Our arrangements may include the act of shipping products to our customers after the performance obligation related to that product has been satisfied.

We have elected to account for shipping and handling as activities to fulfill the promise to transfer goods and have not allocated revenue to the shipping activity.

Our sales arrangements may include the collection of sales and other similar taxes that are then remitted to the related taxing authority.

We have elected to present the amounts collected for these taxes net of the related tax expense rather than presenting them as additional revenue.

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

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

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

For contracts where this time period exceeds one year, generally the timing difference is the result of business concerns other than financing.

We do have a limited amount of customer financing for which we charge or impute interest, but such amounts are immaterial to our *Consolidated Statements of Income.*

Sales Incentives

When there is uncertainty surrounding these sales incentives, we may limit the amount of revenue we recognize under a contract until the uncertainty has been resolved.

We consider the expected amount of these rebates at the time of the original sale as we determine the overall transaction price.

These rebates are typically measured either quarterly or annually and we assess them at least quarterly to determine our current estimates of amounts expected to be earned.

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

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

Sales Returns

| | |

| --- | --- |

| | | |

| --- | --- | --- |

| NOTE 19 | | IMPAIRMENT OF LIGHT-DUTY DIESEL ASSETS |

| NOTE 20 | | RESTRUCTURING ACTIONS AND OTHER CHARGES |

February 14, 2018

| GROSS MARGIN | | 5,090 | | | | 4,452 | | | | 4,947 | | |

| Impairment of light-duty diesel assets (Note 19) | | — | | | | — | | | | 211 | | |

| Restructuring actions and other charges (Note 20) | | — | | | | — | | | | 90 | | |

| OPERATING INCOME | | 2,365 | | | | 1,928 | | | | 2,057 | | |

| Pensions (Note 10) | | 330 | | | | 326 | | |

| Other liabilities and deferred revenue (Note 11) | | 2,027 | | | | 1,289 | | |

| Gains on fair value adjustment for consolidated investees (Note 18) | | — | | | | (15 | | ) | | (18 | | ) |

| Restructuring charges and other actions, net of cash payments (Note 20) | | — | | | | (59 | | ) | | 64 | | |

| BALANCE AT DECEMBER 31, 2014 | $ | 556 | | | $ | 1,583 | | | $ | 9,545 | | | $ | (2,844 | ) | | $ | (13 | ) | | $ | (1,078 | ) | | $ | 7,749 | | | $ | 344 | | | $ | 8,093 | |

| Net income | | | | | | | | | 1,399 | | | | | | | | | | | | | | | | 1,399 | | | | 71 | | | | 1,470 | | |

We recognize revenue, net of estimated costs of returns, allowances and sales incentives, when it is realized or realizable, which generally occurs when:

| • | Persuasive evidence of an arrangement exists; |

| • | The product has been shipped and legal title and all risks of ownership have been transferred; |

| • | The sales price is fixed or determinable; and |

| • | Payment is reasonably assured. |

Products are generally sold on open account under credit terms customary to the geographic region of distribution.

We perform ongoing credit evaluations of our customers and generally do not require collateral to secure our accounts receivable.

For engines, service parts, service tools and other items sold to independent distributors and to partially-owned distributors accounted for under the equity method, revenues are recorded when title and risk of ownership transfers.

This transfer is based on the agreement in effect with the respective distributor, which generally occurs when the products are shipped.

To the extent of our ownership percentage, margins on sales to distributors accounted for under the equity method are deferred until the distributor sells the product to unrelated parties.

The incentives are classified as a reduction in sales in our *Consolidated Statements of Income*.

We classify shipping and handling billed to customers as sales in our *Consolidated Statements of Income*.

We are exposed to market risk from fluctuations in interest rates.

We manage our exposure to interest rate fluctuations through the use of interest rate swaps.

The objective of the swaps is to more effectively balance our borrowing costs and interest rate risk.

We performed the required procedures as of the end of our fiscal third quarter and determined that our goodwill was not impaired.

Approximately 50 percent and 4 percent of goodwill resides in our new automated transmissions reporting unit and our Brammo Inc. acquisition (not yet allocated to a segment), respectively.

Since these businesses were just acquired in the second half of 2017, we did not perform an additional quantitative test as of the end of our third fiscal quarter.

In February 2018, the Financial Accounting Standards Board (FASB) amended its standard on comprehensive income to provide an option for an entity to reclassify the stranded tax effects of the Tax Cuts and Jobs Act (Tax Legislation) that was passed in December of 2017 from accumulated other comprehensive income (AOCI) directly to retained earnings.

The stranded tax effects result from the remeasurement of deferred tax assets and liabilities which were originally recorded in comprehensive income but whose remeasurement is reflected in the income statement.

This is a one-time amendment applicable only to the changes resulting from the Tax Legislation.

The standard is effective for us on January 1, 2019, and may be reflected retroactively to any period in which the impacts of the Tax Legislation are recognized.

The standard permits early adoption for any financial statements that have not been released as of the date of the revised standard.

There has been no change in our internal control over financial reporting during the quarter ended December 31, [removed: 2017,] [added: 2018,] that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The information required by Item 10 is incorporated by reference to the relevant information under the captions "Corporate Governance," "Election of Directors" and "Other Information—Section 16(a) Beneficial Ownership Reporting Compliance" in our [removed: 2018] [added: 2019] Proxy Statement, which will be filed within 120 days after the end of [removed: 2017.][added: 2018.]

The information required by Item 11 is incorporated by reference to the relevant information under the caption "Executive Compensation" in our [removed: 2018] [added: 2019] Proxy Statement, which will be filed within 120 days after the end of [removed: 2017.][added: 2018.]

Information concerning our equity compensation plans at December 31, [removed: 2017,] [added: 2018,] was as follows:

[removed: | Equity] [added: We have no equity] compensation plans not approved by security [removed: holders | | — | | | — | | | | — | |][added: holders.]

| (1) | The number is comprised of [removed: 2,901,369] [added: 3,243,662] stock options, [removed: 411,239] [added: 410,350] performance shares and [removed: 8,089] [added: 5,393] restricted shares. See NOTE [removed: 15,] [added: 16,] "STOCK INCENTIVE AND STOCK OPTION PLANS," to the *Consolidated Financial Statements* for a description of how options and shares are awarded. |

| (2) | The weighted-average exercise price relates only to the [removed: 2,901,369] [added: 3,243,662] stock options. Performance and restricted shares do not have an exercise price and, therefore, are not included in this calculation. |

The remaining information required by Item 12 is incorporated by reference to the relevant information under the caption "Stock Ownership of Directors, Management and Others" in our [removed: 2018] [added: 2019] Proxy Statement, which will be filed within 120 days after the end of [removed: 2017.][added: 2018.]

| Equity compensation plans approved by security holders | | 3,659,405 | | | $ | 130.55 | | | 7,849,044 | |

| Equity compensation plans approved by security holders | | 3,320,697 | | | $ | 123.49 | | | 8,510,444 | |

| Total | | 3,320,697 | | | $ | 123.49 | | | 8,510,444 | |

The information required by Item 13 is incorporated by reference to the relevant information under the captions "Corporate Governance" and "Other Information-Related Party Transactions" in our [removed: 2018] [added: 2019] Proxy Statement, which will be filed within 120 days after the end of [removed: 2017.][added: 2018.]

The information required by Item 14 is incorporated by reference to the relevant information under the caption "Selection of Independent Public Accountants" in our [removed: 2018] [added: 2019] Proxy Statement, which will be filed within 120 days after the end of [removed: 2017.][added: 2018.]

| • | Consolidated Statements of Income for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015] [added: 2016] |

| • | Consolidated Statements of Comprehensive Income for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015] [added: 2016] |

| • | Consolidated Balance Sheets at December 31, [removed: 2017] [added: 2018] and [removed: 2016] [added: 2017] |

| • | Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015] [added: 2016] |

| • | Consolidated Statements of Changes in Equity for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015] [added: 2016] |

| [removed: [3](http://www.sec.gov/Archives/edgar/data/26172/000110465909045874/a09-19109_1ex3da.htm)] [added: [10](http://www.sec.gov/Archives/edgar/data/26172/000002617218000039/cmi2018q210-qex10.htm)] | [removed: [(a)](http://www.sec.gov/Archives/edgar/data/26172/000110465909045874/a09-19109_1ex3da.htm)] [added: [(o)#](http://www.sec.gov/Archives/edgar/data/26172/000002617218000039/cmi2018q210-qex10.htm)] | | [removed: [Restated Articles of Incorporation,] [added: [2012 Omnibus Incentive Plan,] as amended [added: and restated] (incorporated by reference to Exhibit [removed: 3(a)] [added: 10] to Cummins Inc.'s Quarterly Report on Form 10-Q for the quarter ended [removed: June 28, 2009).](http://www.sec.gov/Archives/edgar/data/26172/000110465909045874/a09-19109_1ex3da.htm)] [added: July 1, 2018 (File No. 001-04949)).](http://www.sec.gov/Archives/edgar/data/26172/000002617218000039/cmi2018q210-qex10.htm)] |