Cummins (CMI) 10-K risk factor changes: FY2020 vs FY2019

We are conducting a formal internal review of our emission certification process and compliance with emission standards with respect to our pick-up truck applications and [added: are] working with the EPA and [removed: CARB, as well as the Department of Justice (DOJ) and SEC,] [added: CARB] to address their questions about these applications.

The results of this formal review and regulatory [removed: and government agency] processes, or the discovery of any noncompliance issues, could have a material adverse impact on our results of operations and cash flows.

During our discussions, the regulators have asked us to look at other model years and other [removed: engines, though the primary focus of our review has been the model year 2019 RAM.][added: engines.]

Due to the continuing nature of the formal review, our ongoing cooperation with the regulators and [removed: other government agencies, and] the presence of many unknown facts and circumstances, we are not yet able to estimate the financial impact of these matters.

It is possible that the consequences of any remediation plans resulting from our formal review and these regulatory [removed: and agency] processes could have a material adverse impact on our results of operations and cash flows in the periods in which these emissions certification issues are addressed.

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 [added: and fragmented] emission standards by multiple jurisdictions around the world, could have a material adverse impact on our results of operations, financial condition and cash flows.

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

Our manufacturing and supply chain abilities may be [added: materially and] adversely impacted by an extended shutdown [added: or disruption] of our operations [removed: in China] due to the [removed: recent coronavirus outbreak.][added: COVID-19 pandemic which could materially and adversely affect our results of operations, financial condition and cash flows.]

While the [removed: closures] [added: impacts of the pandemic] and [removed: limitations on movement in] the [removed: region] [added: resulting global recession] are expected to be temporary, the duration of the production and supply chain [removed: disruption,] [added: disruptions,] and related financial [removed: impact,] [added: impacts,] cannot be estimated at this time.

Should the [removed: production] [added: reduced manufacturing] and distribution [removed: closures] [added: capacities] continue for an extended period of [removed: time,] [added: time or worsen,] the impact on our [added: production and] supply chain [removed: in China and globally] could have a material adverse effect on our results of [removed: operations] [added: operations, financial condition] and cash flows.

We are investing in new products and technologies, including electrified powertrains, hydrogen [removed: generation] [added: production] and fuel cells, for planned introduction into certain [removed: existing and] new [added: and existing] markets.

Given the early stages of development of some of these new products and technologies, there can be no guarantee of the future market acceptance and investment returns with respect to [removed: these] [added: our] planned [removed: products.][added: products, which will face competition from an array of other technologies and manufacturers.]

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

Our business benefits from free trade agreements, such as the new United States-Mexico-Canada Agreement and the U.S. trade relationship with China, Brazil and France and efforts to withdraw from, or substantially modify such agreements or arrangements, in addition to the implementation of more restrictive trade policies, such as more detailed inspections, higher tariffs (including, but not limited to, additional tariffs on the import of steel or [removed: aluminum)] [added: aluminum),] import or export licensing requirements, exchange controls or new barriers to entry, could adversely impact our [added: production costs, customer demand and our relationships with customers and suppliers.]

Weakness in commodity prices, [added: including any negative impacts on 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.

[removed: Deterioration, or renewed weakness,] [added: Continued deterioration] in infrastructure and commodities [removed: markets] [added: markets, including the impacts from COVID-19,] could adversely affect our customers’ demand for vehicles and equipment and, as a result, could adversely affect our business.

Additionally, the results of the U.K.’s BREXIT [removed: has] caused, and may continue to cause, volatility in global stock markets, currency exchange rate fluctuations and global economic uncertainty.

Although it is unknown what the terms of the U.K.’s future relationship with the EU will be, it is possible that there will be higher tariffs or greater restrictions on imports and exports between the [removed: U. K.] [added: U.K.] and the EU and increased regulatory complexities.

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

Offering engines and services that customers desire and value can mitigate the risks of increasing [removed: price] competition and declining demand, but products and services that are perceived to be less than desirable (whether in terms of price, quality, overall value, fuel efficiency or other attributes) can exacerbate these risks.

Delays may be caused by factors affecting our suppliers (including [added: the COVID-19 pandemic,] capacity constraints, [added: port congestion,] labor disputes, economic downturns, availability of [removed: credit, the] [added: credit or] impaired financial condition), suppliers' allocations to other purchasers, weather emergencies, natural [removed: disasters] [added: disasters, acts of government] or acts of war or terrorism.

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

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

[added: Our truck manufacturers and OEM customers discontinuing outsourcing their engine supply needs, financial distress, particularly related to] the [removed: level] [added: COVID-19 pandemic or bankruptcy, or a change-in-control] of [removed: engine production outsourcing from] [added: one of] our [added: large] truck [removed: manufacturer or] OEM customers could have a material adverse [removed: effect] [added: impact] on our results of operations, financial condition and cash [removed: flows.][added: flows.]

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, results of operations and cash flows.][added: condition.]

In addition, some of these systems are managed by [removed: third party] [added: third-party] service providers and are not under our direct control.

Accurately forecasting our expected volumes and appropriately adjusting [removed: our capacity have been, and will continue to be, important factors in determining]

our [added: capacity are important factors in determining our] results of operations and cash flows.

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

We recognize significant sales of engines and components to a few large on-highway truck OEM customers [removed: in North America] which have been an integral part of our positive business results for several years.

[removed: If] [added: Any significant reduction in the level of engine production outsourcing from our truck manufacturer or OEM customers, financial distress of] one of our large truck OEM customers [removed: experiences financial distress,] [added: due to the COVID-19 pandemic or] bankruptcy or a change-in-control, [removed: such circumstance] could likely lead to significant reductions in our sales volumes, commercial disputes, receivable collection issues, and other negative consequences that could have a material adverse impact on our results of operations, financial condition and cash flows.

While we believe we will ultimately achieve these objectives, it is possible that we will be unable to achieve [removed: all of the goals] [added: our original expectations] within our anticipated time frame or in the anticipated amounts.

[removed: | • |] [added: -] the difficulty of enforcing agreements and collecting receivables through foreign legal systems; [removed: |]

[removed: | • |] [added: -] trade protection measures and import or export licensing requirements; [removed: |]

[removed: | • |] [added: -] the imposition of taxes on foreign income and tax rates in certain foreign countries that exceed those in the U.S.; [removed: |]

[removed: | • |] [added: -] the imposition of tariffs, exchange controls or other restrictions; [removed: |]

[removed: | • |] [added: -] difficulty in staffing and managing widespread operations and the application of foreign labor regulations; [removed: |]

[removed: | • |] [added: -] required compliance with a variety of foreign laws and regulations; and [removed: |]

[removed: | • |] [added: -] changes in general economic and political conditions in countries where we operate, particularly in emerging markets. [removed: |]

We face significant competition in the [removed: markets] [added: regions] we serve.

GOVERNMENT REGULATION

transportation, treatment and disposal of waste materials.

BUSINESS CONDITIONS / DISRUPTIONS

We are vulnerable to supply shortages from single-sourced suppliers, including suppliers that may be impacted by the COVID-19 pandemic, and any delay in receiving critical supplies could have a material adverse effect on our results of operations, financial condition and cash flows.

We single source a significant number of parts and raw materials critical to our business operations.

In particular, if the COVID-19 pandemic continues and results in extended periods of travel, commercial and other restrictions, we could continue to incur global supply disruptions.

A sustained market slowdown due to the impacts from the COVID-19 pandemic, other public health crises, epidemics or pandemics or otherwise, could have a material and adverse effect on our results of operations, financial condition and cash flows.

The COVID-19 pandemic triggered a significant downturn in our markets globally and these challenging market conditions could continue for an extended period of time.

Most global economies slowed and there is still much uncertainty as to when these global markets will fully recover.

If any or all of these major markets were to endure a sustained slowdown or recession due to the impacts of the COVID-19 pandemic, other public health crises, epidemics or pandemics or otherwise decline, it could have a material adverse effect on our results of operations, financial condition and cash flows.

The outbreak of COVID-19 spread throughout the world and became a global pandemic with the resultant economic impacts evolving into a worldwide recession.

The pandemic triggered a significant downturn in our markets globally, which continued to unfavorably impact market conditions throughout 2020 and these challenging market conditions could continue for an extended period of time.

In an effort to contain the spread of COVID-19, maintain the well-being of our employees and stakeholders, match the reduced demand from our customers and in accordance with governmental requirements, we closed or partially shut down certain office, manufacturing, distribution and technical center facilities around the world in March 2020.

Although most of our manufacturing, distribution and technical center facilities re-opened early in the second quarter of 2020, some operated at reduced capacities, most of our global office buildings remained closed through the remainder of 2020.

Despite many of our markets recovering in the second half of 2020, the ongoing spread of the virus prior to widespread vaccination presents several risks to our business, especially in the first half of 2021.

Our markets are cyclical in nature and we face periods when demand fluctuates significantly higher or lower than our normal operating levels, including COVID-19 related shut-downs.

We manage our capacity by adjusting our manufacturing workforce, capital expenditures and purchases from suppliers.

In periods of weak demand we may face under-utilized capacity and un-recovered overhead costs, while in periods of strong demand we may experience unplanned costs and could fail to meet customer demand.

We cannot guarantee that we will be able to adequately adjust our manufacturing capacity in response to significant changes in customer demand, which could harm our business.

In addition, the COVID-19 pandemic and related reductions in demand forced certain of our customer’s facilities around the world to close or partially shut down operations, inhibiting our ability to forecast demand and caused related closures and partial shut-downs of certain of our manufacturing facilities.

A significant component of our investment in the Eaton Cummins Automated Transmission Technologies joint venture related to the expected growth in automated transmission products in North America and China.

PRODUCTS AND TECHNOLOGY

GENERAL

The COVID-19 pandemic created disruptions and turmoil in global credit and financial markets and ongoing impacts could have a material adverse effect on our results of operations, financial condition and cash flows.

The COVID-19 pandemic created disruptions and turmoil in the global credit and financial markets and made it more difficult and costly for us to access capital on favorable terms to meet our liquidity needs.

The disruptions to the global credit and financial markets could also have material negative impacts on business operations and financial positions of our customers and suppliers, which may negatively impact our orders, sales and supply chain.

If the impacts of the COVID-19 pandemic on global credit and financial markets continue, or worsen, it could negatively impact our business, along with the financial condition of our customers and suppliers, and it could have a material adverse impact on our results of operations, financial condition and cash flows.

We rely on our executive leadership team and other key personnel as a critical part of our human capital resources.

We depend on the skills, institutional knowledge, working relationships, and continued services and contributions of key personnel, including our executive leadership team as a critical part of our human capital resources.

In addition, our ability to achieve our operating and strategic goals depends on our ability to identify, hire, train and retain qualified individuals.

We compete with other companies both within and outside of our industry for talented personnel and we may lose key personnel or fail to attract, train and retain other talented personnel.

In particular, our continued success will depend in part on our ability to retain the talents and dedication of key employees.

If key employees terminate their employment or become ill as a result of the COVID-19 pandemic or otherwise, our business activities may be adversely affected and our management team’s attention may be diverted.

In addition, we may not be able to locate suitable replacements for any key employees who leave.

We may be adversely impacted by the effects of climate change and may incur increased costs and experience other impacts due to new or more stringent greenhouse gas regulations designed to address climate change.

The scientific consensus indicates that emissions of greenhouse gases (GHG) continue to alter the composition of Earth’s atmosphere in ways that are affecting, and are expected to continue to affect, the global climate.

The potential impacts of climate change on our customers, product offerings, operations, facilities and suppliers are accelerating and uncertain, as they will be particular to local and customer-specific circumstances.

These potential impacts may include, among other items, physical long-term changes in freshwater availability and the frequency and severity of weather events as well as customer product changes either through preference or regulation.

Concerns regarding climate change may lead to additional international, national, regional and local legislative and regulatory responses.

Various stakeholders, including legislators and regulators, shareholders and non-governmental organizations, are continuing to look for ways to reduce GHG emissions.

We are also fully cooperating with the DOJ's and the SEC's information requests and inquiries.

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

Many of our on- and off-highway markets are cyclical in nature and experience volatility in demand throughout these cycles.

In the second half of 2019 we experienced slowing of demand growth in most of our North American on-highway and certain off-highway markets, while international sales declined in most markets, including China.

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, it could have a material adverse impact on our results of operations, financial condition and cash flows.

In December 2019, a novel strain of coronavirus began to impact the population of Wuhan, China, where several of our manufacturing and distribution facilities are located.

In late January 2020, in an effort to contain the spread of the virus, maintain the wellbeing of our employees and in accordance with governmental requirements, we closed several production and distribution facilities in the Hubei Provence of China.

We rely upon these facilities to support our business in China, as well as to export components for use in products in other parts of the world.

production costs, customer demand and our relationships with customers and suppliers.

We are vulnerable to supply shortages from single-sourced suppliers.

During 2019, we single sourced approximately 19 percent of the total types of parts in our product designs, compared to approximately 20 percent in 2018.

Our truck manufacturers and OEM customers may discontinue outsourcing their engine supply needs.

Any significant reduction in

We can experience idle capacity as economies slow or demand for certain products decline, while we can also experience capacity constraints and longer lead times for certain products in times of growing demand.

We cannot guarantee that we will be able to decrease our manufacturing capacity during market troughs, which could result in under-utilized manufacturing assets and unnecessary overhead costs or that we will be able to increase our manufacturing capacity to a level that meets demand for our products during market peaks, which could prevent us from meeting increased customer demand and could harm our business.

If we overestimate our demand and overbuild our capacity, we may have significantly underutilized assets and we may experience reduced margins.

We may experience difficulties and delays or unexpected costs in completing our cost reduction actions and announced restructuring initiatives, including achieving any anticipated savings and other benefits of these initiatives.

During the fourth quarter of 2019 and the first quarter of 2020 we are undertaking cost reduction actions and announced restructuring initiatives to respond to the slowdown in our global markets.

As we implement these initiatives, we may not realize anticipated savings or other benefits from one or more of the initiatives in the amounts or within the time periods we expect.

Other events or circumstances, such as implementation difficulties and delays or unexpected costs, may occur which could result in us not realizing our targeted cost reductions.

We are also subject to the risks of negative publicity and business disruption in connection with our restructuring and other cost reduction initiatives.

If we are unable to realize the expected savings or benefits from these initiatives, certain aspects of our business may be adversely affected.

If we experience any of these circumstances or otherwise fail to realize the anticipated savings or benefits from our restructuring and cost reduction initiatives, our results of operations could be materially and adversely affected.

Our ability to realize all of the expected enhanced revenue, earnings, and cash flow from our 2017 investment in the Eaton Cummins Automated Transmission Technologies joint venture will depend, in substantial part, on our ability to successfully launch the automated transmission products in North America and China and achieve our projected market penetration in those regions.

If we are not able to successfully complete our automated transmission strategy, the anticipated enhanced revenue, earnings, and cash flows resulting from this joint venture may not be realized fully or may take longer to realize than expected.

| | |

| --- | --- |

might result from favorable fluctuations in price.

costs, liabilities or claims with respect to existing or subsequently acquired operations, under either present laws and regulations or those that may be adopted or imposed in the future.

[removed: | • |] [added: -] EXECUTIVE SUMMARY AND FINANCIAL HIGHLIGHTS [removed: |]

[removed: | • |] [added: -] RESULTS OF OPERATIONS [removed: |]

[removed: | • |] [added: -] OPERATING SEGMENT RESULTS [removed: |]

[removed: | • |] [added: -] LIQUIDITY AND CAPITAL RESOURCES [removed: |]

[removed: | • |] [added: -] CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS [removed: |]

[removed: | • |] [added: -] APPLICATION OF CRITICAL ACCOUNTING ESTIMATES [removed: |]

[removed: | • |] [added: -] RECENTLY ADOPTED [removed: AND RECENTLY ISSUED] ACCOUNTING PRONOUNCEMENTS [removed: |]

The following is the discussion and analysis of changes in the financial condition and results of operations for fiscal year [removed: 2019] [added: 2020] compared to fiscal year [removed: 2018.][added: 2019.]

The discussion and analysis of fiscal year [removed: 2017] [added: 2018] and changes in the financial condition and results of operations for fiscal year [removed: 2018] [added: 2019] compared to fiscal year [removed: 2017] [added: 2018] that are not included in this Form 10-K may be found in Part II, ITEM 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, [removed: 2018,] [added: 2019,] filed with the Securities and Exchange Commission (SEC) on February 11, [removed: 2019.][added: 2020.]

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

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

We serve our customers through a network of [removed: approximately 600] [added: over 500] wholly-owned, joint venture and independent distributor locations and over [removed: 7,600] [added: 9,000] Cummins certified dealer locations [removed: in more than] [added: with service to approximately] 190 countries and territories.

The New Power segment designs, manufactures, sells and supports [added: hydrogen production solutions as well as] electrified power systems ranging from fully electric to hybrid along with innovative components and subsystems, including [removed: battery,] [added: battery and] fuel cell [removed: and hydrogen production] technologies.

As a worldwide business, our operations are also affected by currency, political, [removed: economic] [added: economic, public health crises, epidemics or pandemics] and regulatory matters, including adoption and enforcement of environmental and emission standards, in the countries we serve.

International demand (excludes the U.S. and Canada) declined by [removed: 6] [added: 7] percent compared to [removed: 2018,] [added: 2019,] with lower sales in [removed: most] [added: all geographic] regions [removed: (especially in Europe, India, Russia, Asia Pacific and Latin America).][added: except China.]

The following table contains sales and EBITDA [added: (defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests)] by operating segment for the years ended December 31, [removed: 2019] [added: 2020] and [removed: 2018.][added: 2019.]

| | | [added: | | | |] Operating Segments | | | | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | |]

| | | [removed: 2019] | | | | [added: 2020] | | | | | | | [removed: 2018] | | | | | | | | | | | [added: 2019 | | | | | | | | | | | | | | | | | |] Percent change | | | | | [added: | | | |]

| | | | | | | [removed: Percent of] [added: | | | | | | Percent of] Total | | | | | | | | | | | [removed: Percent of] [added: | | | | | | | Percent of] Total | | | | | | | [removed: 2019] [added: | | | | | 2020] vs. [removed: 2018] [added: 2019] | | | | | [added: | | | |]

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

| Engine | | [added: | | | |] $ | [removed: 10,056] [added: 8,022] | | | [removed: 43] | [added: | 41 | |] % | | [added: | |] $ | [removed: 1,454] [added: 1,235] | | | [added: | |] $ | [removed: 10,566] [added: 10,056] | | | [removed: 44] | [added: | 43 | |] % | | [added: | |] $ | [removed: 1,446] [added: 1,454] | | | [removed: (5] | [removed: )%] | [added: (20)] | [removed: 1] | % | [added: | | | (15) | | % |]

| Distribution | | [removed: 8,071] | | | | [removed: 34] [added: 7,136] | [added: | | | | | 36 | |] % | | [removed: 656] | | [added: 665] | | [removed: 7,828] | | | | [removed: 33] [added: 8,071] | [added: | | | | | 34 | |] % | | [removed: 563] | | [added: 656] | | [removed: 3] | [added: | | | (12) | |] % | | [removed: 17] | [added: | 1 | |] % |

| Components | | [removed: 6,914] | | | | [removed: 29] [added: 6,024] | [added: | | | | | 31 | |] % | | [removed: 1,097] | | [added: 961] | | [removed: 7,166] | | | | [removed: 30] [added: 6,914] | [added: | | | | | 29 | |] % | | [removed: 1,030] | | [added: 1,097] | | [removed: (4] | [removed: )%] | | [removed: 7] | [added: (13) | |] % | [added: | | | (12) | | % |]

| Power Systems | | [removed: 4,460] | | | | [removed: 19] [added: 3,631] | [added: | | | | | 18 | |] % | | [removed: 512] | | [added: 343] | | [removed: 4,626] | | | | [removed: 20] [added: 4,460] | [added: | | | | | 19 | |] % | | [removed: 614] | | [added: 512] | | [removed: (4] | [removed: )%] | | [removed: (17] | [removed: )%] [added: (19)] | [added: | % | | | | (33) | | % |]

| New Power | | [removed: 38] | | | | [added: 72 | | | | | |] — | [added: |] % | | [removed: (149] | | [removed: )] [added: (172)] | | [removed: 7] | | | | [added: 38 | | | | | |] — | [added: |] % | | [removed: (90] | | [removed: )] [added: (149)] | | [removed: NM] | | | [removed: (66] | [removed: )%] [added: 89] | [added: | % | | | | (15) | | % |]

| Intersegment eliminations | | [removed: (5,968] | | [removed: )] | | [removed: (25] [added: (5,074)] | [removed: )%] | | [removed: 42] | | | [added: (26)] | [removed: (6,422] | [added: %] | [removed: )] | | [removed: (27] | [removed: )%] [added: 76] | | [removed: (87] | | [removed: )] | | [removed: (7] [added: (5,968)] | [removed: )%] | | [removed: NM] | | [added: | (25) | | % | | | | 42 | | | | | | (15) | | % | | | | 81 | | % |]

| Total | | [added: | | | |] $ | [removed: 23,571] [added: 19,811] | | | [added: | |] 100 | [added: |] % | | [added: | |] $ | [removed: 3,612] [added: 3,108] | | | [added: | |] $ | [removed: 23,771] [added: 23,571] | | | [added: | |] 100 | [added: |] % | | [added: | |] $ | [removed: 3,476] [added: 3,612] | | | [removed: (1] | [removed: )%] | [added: (16)] | [removed: 4] | % | [added: | | | (14) | | % |]

[added: |] "NM" - not meaningful information [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

Net income attributable to Cummins Inc. for [removed: 2019] [added: 2020] was [removed: $2.3] [added: $1.8] billion, or [removed: $14.48] [added: $12.01] per diluted share, on sales of [removed: $23.6] [added: $19.8] billion, compared to [removed: 2018] [added: 2019] net income attributable to Cummins Inc. of [removed: $2.1] [added: $2.3] billion, or [removed: $13.15] [added: $14.48] per diluted share, on sales of [removed: $23.8] [added: $23.6] billion.

See Note [removed: 12, "PRODUCT WARRANTY LIABILITY,"] [added: 21, "RESTRUCTURING ACTIONS,"] to [removed: our] [added: the] *Consolidated Financial [removed: Statements*] [added: Statements,*] for additional [removed: information on the Engine System Campaign.][added: information.]

Diluted earnings per common share for [removed: 2019] [added: 2020] benefited [removed: $0.25] [added: $0.24] per share from fewer weighted-average shares outstanding, primarily due to the stock repurchase program.

We generated [removed: $3.2] [added: $2.7] billion of operating cash flows in [removed: 2019,] [added: 2020,] compared to [removed: $2.4] [added: $3.2] billion in [removed: 2018.][added: 2019.]

Our debt to capital ratio (total capital defined as debt plus equity) at December 31, [removed: 2019,] [added: 2020,] was [removed: 21.9] [added: 31.7] percent, compared to [removed: 23.1] [added: 21.9] percent at December 31, [removed: 2018.][added: 2019.]

At December 31, [removed: 2019,] [added: 2020,] we had [removed: $1.5] [added: $3.9] billion in cash and marketable securities on hand and access to our $3.5 billion credit facilities, if necessary, to meet currently anticipated [added: working capital,] investment and funding needs.

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

We voluntarily disclosed our formal internal review to the regulators and to other government agencies, the Department of Justice [added: (DOJ)] and the SEC.

Due to the continuing nature of our formal review, our ongoing cooperation with [removed: the] [added: our] regulators and [removed: other government agencies, and] the presence of many unknown facts and circumstances, we cannot predict the final outcome of this review and these regulatory [removed: and agency] processes, and we cannot provide assurance that the matter will not have a materially adverse impact on our results of operations and cash flows.

See Note [removed: 15,] [added: 14,] "COMMITMENTS AND CONTINGENCIES," to [removed: our] [added: the] *Consolidated Financial Statements* for additional information.

In [removed: July 2019, our] [added: October 2020, the] Board [removed: of Directors (the Board)] authorized an increase to our quarterly dividend of [removed: 15] [added: 3] percent from [removed: $1.14] [added: $1.311] per share to [removed: $1.311] [added: $1.35] per share.

On August [removed: 21, 2019,] [added: 19, 2020,] we entered into an amended and restated [removed: 364\-day] [added: 364-day] credit agreement that allows us to borrow up to $1.5 billion of unsecured funds at any time [removed: through] [added: prior to] August 18, [removed: 2020.][added: 2021.]

- 2021 OUTLOOK

Overview

COVID-19 Update

The outbreak of COVID-19 spread throughout the world and became a global pandemic with the resultant economic impacts evolving into a worldwide recession.

The pandemic triggered a significant downturn in our markets globally, which continued to unfavorably impact market conditions throughout 2020 and these challenging market conditions could continue for an extended period of time.

In an effort to contain the spread of COVID-19, maintain the well-being of our employees and stakeholders, match the reduced demand from our customers and in accordance with governmental requirements, we closed or partially shut down certain office, manufacturing, distribution and technical center facilities around the world in March 2020.

Although most of our manufacturing, distribution and technical center facilities re-opened early in the second quarter of 2020, some operated at reduced capacities, most of our global office buildings remained closed through the remainder of 2020.

Despite many of our markets recovering in the second half of 2020, the ongoing spread of the virus prior to widespread vaccination presents several risks to our business, especially in the first half of 2021.

COVID-19 vaccines are currently being administered around the world with the hope that the majority of the population will have access to the vaccine by the middle of 2021.

If the distribution and the effectiveness of the vaccine are consistent with current government and health organization estimates, we anticipate the vaccine will mitigate the spread of the virus by the end of 2021 and allow a return to more normal operations in the second half of the year.

While the impacts of the pandemic and the resulting global recession are expected to be temporary, the duration of the production and supply chain disruptions, and related financial impacts, cannot be estimated at this time.

Should the reduced manufacturing and distribution capacities continue for an extended period of time or worsen, the impact on our production and supply chain could have a material adverse effect on our results of operations, financial condition and cash flows.

Our Board of Directors (the Board) continues to monitor and evaluate all of these factors along with the continuing impacts of the COVID-19 pandemic on our business and operations.

2020 Results

A summary of our results is as follows:

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| In millions, except per share amounts | | | | | | 2020 | | | | | | 2019 | | | | | | 2018 | | | | | | | | | | | | | | |

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| Net sales | | | | | | $ | 19,811 | | | | | $ | 23,571 | | | | | $ | 23,771 | | | | | | | | | | | | | |

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| Earnings per common share attributable to Cummins Inc. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Basic | | | | | | $ | 12.07 | | | | | $ | 14.54 | | | | | $ | 13.20 | | | | | | | | | | | | | |

| Diluted | | | | | | 12.01 | | | | | | 14.48 | | | | | | 13.15 | | | | | | | | | | | | | | |

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| • | 2020 OUTLOOK |

In November 2019, we renamed our Electrified Power segment as "New Power" in order to better represent the incorporation of fuel cell and hydrogen production technologies resulting from our acquisition of Hydrogenics Corporation.

The New Power segment includes our electrified power, fuel cell and hydrogen production technologies.

Worldwide revenues decreased 1 percent in 2019 compared to 2018, as higher sales in the Distribution and New Power segments were more than offset by lower sales in all other operating segments.

The decrease in international sales was driven by lower on-highway demand (mainly in the light-commercial vehicle (LCV) market in China and Russia, truck markets in Western Europe and India, which negatively impacted our emission solutions and turbo technologies businesses, the medium-duty truck market in Brazil and the bus market in Europe), unfavorable foreign currency impacts of 4 percent of international sales (primarily the Chinese renminbi, Euro, British pound, Australian dollar, Brazilian real and Indian rupee) and decreased demand in industrial markets (especially construction markets in China, Asia Pacific and India and most international mining markets).

These decreases were partially offset by increased demand in China for both engines for oil and gas customers and power generation equipment for data center customers.

Net sales in the U.S. and Canada improved by 3 percent primarily due to increased demand in the pick-up truck and medium-duty truck markets and increased demand in most of our distribution product lines (largely related to power generation equipment for data center customers), partially offset by lower demand in heavy-duty truck and bus markets and decreased industrial demand (especially in the oil and gas market).

See the section titled "OPERATING SEGMENT RESULTS" for a more detailed discussion of net sales and EBITDA by operating segment including the reconciliation of segment EBITDA to net income attributable to Cummins Inc.

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The increase in net income attributable to Cummins Inc. and earnings per diluted share was driven by increased gross margin, lower variable compensation expenses and gains on corporate owned life insurance, partially offset by restructuring actions, higher research, development and engineering expenses and lower equity, royalty and interest income from investees.

The increase in gross margin and gross margin percentage was mainly due to lower warranty costs (due to the absence of the $368 million engine system charge recorded in 2018), favorable pricing and lower material costs, partially offset by lower volumes, unfavorable impacts from tariffs and unfavorable foreign currency impacts (primarily Australian dollar, Euro, Canadian dollar and Brazilian real).

The decrease was primarily due to a decline in outstanding commercial paper.

We are also fully cooperating with the government agencies’ information requests and inquiries.

On September 9, 2019, we acquired an 81 percent interest in Hydrogenics Corporation for total consideration of $235 million.

The Hydrogen Company, a wholly-owned subsidiary of L’Air Liquide, S.A., will maintain a 19 percent noncontrolling interest in Hydrogenics Corporation.

In November 2019, we announced our intentions to reduce our global workforce in response to the continued deterioration in our global markets in the second half of 2019, as well as expected reductions in orders in most U.S. and international markets in 2020.

In the fourth quarter of 2019, we began executing restructuring actions, primarily in the form of voluntary and involuntary employee separation programs.

We incurred a charge of $119 million ($90 million after-tax) in the fourth quarter of 2019 for these actions which impacted approximately 2,300 employees.

In December 2019, the Board authorized the acquisition of up to $2.0 billion of additional common stock upon completion of the 2018 repurchase plan.

In 2019, we repurchased $1,271 million or 8.1 million shares of common stock under the 2018 authorization.

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______________________________________

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| • | Engine segment sales decreased 5 percent, primarily due to lower demand across most markets, especially in global construction markets, LCV and bus markets, as well as the Brazilian medium-duty truck market and the North American heavy-duty truck market. |

These decreases were partially offset by increased sales of 3 percent in the Distribution segment, primarily due to higher demand in most geographic regions, especially in North America, driven by increased demand in power generation equipment for data center customers and improved aftermarket demand in China.

The increase in gross margin was mainly due to lower warranty costs (due to the absence of the $368 million engine system charge recorded in 2018), favorable pricing and lower material costs, partially offset by lower volumes, unfavorable impacts from tariffs and unfavorable foreign currency impacts (primarily Australian dollar, Euro, Canadian dollar and Brazilian real).

Research, development and engineering expenses increased $99 million, primarily due to higher compensation expense driven by headcount growth, including increased staffing for the New Power segment, decreased expense recovery and higher consulting expenses, partially offset by lower variable compensation expenses.

Due to the inherent uncertainty involved, actual amounts paid for such activities may differ from amounts initially recorded and we may need to revise previous estimates.

We expect to realize annualized savings from the restructuring and other actions of $250 million to $300 million.

Approximately 55 percent of the savings from our restructuring actions will be realized in cost of sales, 30 percent in selling, general and administrative expenses and 15 percent in research, development and engineering expenses.

We expect the severance to be paid in cash which will be funded from operations.

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This risk is closely monitored and managed through the use of financial derivative instruments including foreign currency forward contracts, interest rate swaps, commodity swap [removed: contracts and] [added: contracts,] zero-cost collars and physical forward contracts.

The following describes our risk exposures and provides the results of a sensitivity analysis performed at December 31, [removed: 2019.][added: 2020.]

These foreign currency forward contracts are designated and qualify as foreign currency cash flow [removed: hedges under GAAP.][added: hedges.]

For the years ended December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] there were no circumstances that resulted in the discontinuance of a foreign currency cash flow hedge.

These derivative instruments are not designated as [removed: hedges under GAAP.][added: hedges.]

At December 31, [removed: 2019,] [added: 2020,] 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: $4] [added: $10] million.

Commencing in 2019, these commodity swaps are designated and qualify as cash flow [removed: hedges under GAAP.][added: hedges.]

At December 31, [removed: 2019,] [added: 2020,] realized and unrealized gains and losses related to these hedges were not material to our financial statements.

At December 31, [removed: 2019,] [added: 2020,] 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 $1 million.

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

We serve our customers through a network of [removed: approximately 600] [added: over 500] wholly-owned, joint venture and independent distributor locations and over [removed: 7,600] [added: 9,000] Cummins certified dealer locations [removed: in more than] [added: with service to approximately] 190 countries and territories.

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

We use segment earnings [added: or losses] before interest expense, income taxes, [removed: noncontrolling interests,] depreciation and amortization [added: and noncontrolling interests] (EBITDA) as the primary basis for the Chief Operating Decision Maker to evaluate the performance of each of our reportable operating segments.

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

| | | [added: | | | | 2020 | | | | | |] 2019 | | | [removed: 2018] | | | [removed: 2017] [added: 2018] | | [added: |]

| Percent of consolidated net sales(1) | | [removed: 34] | [added: | | | 32 | |] % | | [removed: 35] | [added: | 34 | |] % | | [removed: 34] | [added: | 35 | |] % |

| Percent of consolidated EBITDA(1) | | [added: | | | |] 41 | [added: |] % | | [added: | |] 41 | [added: |] % | | [removed: 38] | [added: | 41 | |] % |

[added: |] (1) Measured before intersegment eliminations [added: | | | | | | | | | | | | | | | | | | | | |]

[removed: Our] [added: The] Engine segment manufactures and markets a broad range of diesel and natural gas-powered engines under the Cummins brand name, as well as certain customer brand names, for the heavy and medium-duty truck, bus, recreational vehicle (RV), light-duty automotive, construction, mining, marine, rail, oil and gas, defense and agricultural markets.

[removed: | • |] [added: -] Engines with a displacement range of 2.8 to 15 liters and horsepower ranging from 48 to [removed: 715;] [added: 715] and [removed: |]

[removed: | • |] [added: -] New parts and service, as well as remanufactured parts and engines, primarily through our extensive distribution network. [removed: |]

[removed: Our] [added: The] Engine segment is organized by engine displacement size and serves these end-user markets:

[removed: | • | Heavy-duty] [added: - Heavy-duty] truck - We manufacture diesel and natural gas engines that range from 310 to [removed: 605] [added: 615] horsepower serving global heavy-duty truck customers worldwide, primarily in North America, China and Australia. [removed: |]

[removed: | • | Medium-duty] [added: - 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, [added: Europe,] Latin America, China, [removed: Europe] [added: Australia] and India. [removed: Applications include pick-up, delivery and vocational trucks and school, transit and shuttle buses. We also provide diesel engines for Class A motor homes (RVs), primarily in North America. |]

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

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

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

The principal customers of our light-duty on-highway engines are [removed: Volkswagen Caminhões e Ônibus,] Gorkovsky Avtomobilny Zavod, Anhui Jianghuai Automobile [added: Group] Co., [removed: Ltd.] [added: Ltd., Volkswagen Caminhões e Ônibus] and China National Heavy Duty Truck Group.

In the markets served by [removed: our Engine] [added: the Power Systems] segment, we compete with [added: a variety of] independent engine manufacturers [added: and generator set assemblers] as well as OEMs who manufacture engines for their own [removed: products.][added: products around the world.]

[removed: Our primary] [added: In the Engine segment, our] competitors [removed: in international markets] vary from country to country, with local manufacturers generally predominant in each [removed: geographic market.][added: geography.]

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

| Percent of consolidated net sales(1) | | [removed: 27] | [added: | | | 29 | |] % | | [removed: 26] | [added: | 27 | |] % | | [removed: 27] | [added: | 26 | |] % |

| Percent of consolidated EBITDA(1) | | [removed: 18] | [added: | | | 22 | |] % | | [removed: 16] | [added: | 18 | |] % | | [removed: 17] | [added: | 16 | |] % |

[removed: Our] [added: The] Distribution segment is [removed: the company’s] [added: our] primary sales, [removed: service,] [added: service] and support channel.

The segment serves [removed: Cummins] [added: our] customers and certified dealers through a worldwide network of [removed: wholly owned,] [added: wholly-owned,] joint [removed: venture,] [added: venture] and independent distribution locations.

[removed: Wholly owned] [added: Wholly-owned] locations operate and serve markets in the eight geographic regions noted below.

Joint venture locations serve markets in South America, Southeast Asia, India, Middle East and [removed: Africa;] [added: Africa,] while independent distribution locations serve markets in these and other geographies.

Distribution’s mission encompasses the sales and support of a wide range of products and services, including power generation systems, high-horsepower engines, heavy-duty and [removed: mid-range] [added: medium-duty] engines designed for on- and off-highway use, application engineering services, custom-designed assemblies, retail and wholesale aftermarket [removed: parts,] [added: parts] and in-shop and field-based repair services.

[removed: Our] [added: The] Distribution segment is organized and managed as eight geographic regions, including North America, Asia Pacific, Europe, China, Africa and Middle East, [removed: India, Russia] [added: Russia, India] and Latin America.

In many cases, these competing distributors or dealers are owned by, or affiliated with the companies that are listed as competitors of [removed: our] [added: the] Engine, Components or Power Systems segments.

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

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

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

[removed: Our] [added: The] Components segment is organized around the following businesses:

[removed: | • | Turbo] [added: - Turbo] technologies - We design, manufacture and market turbochargers for light-duty, [removed: mid-range,] [added: medium-duty,] heavy-duty and high-horsepower diesel markets with worldwide sales and distribution. [removed: 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, China, India, Brazil, Russia and Australia. |]

[removed: | • | Electronics] [added: - Electronics] and fuel systems - We [removed: design and manufacture new, replacement and remanufactured fuel systems primarily for heavy-duty on-highway diesel engine applications, as well as] [added: design,] develop and supply electronic control modules (ECMs), sensors and [removed: harnesses] [added: supporting software] for [removed: the] on-highway, off-highway and power generation applications. [removed: We primarily serve markets in North America, China, India and Europe. |]

[removed: | • | Automated transmissions - We develop and supply automated transmissions for the heavy-duty commercial vehicle market.] 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. [removed: and primarily serves the North American market. |]

Customers of [removed: our] [added: the] Components segment generally include [removed: our] [added: the] Engine, Distribution and Power Systems segments, 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 [removed: our] [added: the] Engine segment, such as PACCAR, Daimler, Navistar, Volvo, Komatsu, Scania, Chrysler and other manufacturers that use our components in their product platforms.

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

COVID-19

The outbreak of the coronavirus disease of 2019 (COVID-19) spread throughout the world and became a global pandemic with the resultant economic impacts evolving into a worldwide recession.

The pandemic triggered a significant downturn in our markets globally, which continued to unfavorably impact market conditions throughout 2020 and these challenging market conditions could continue for an extended period of time.

In an effort to contain the spread of COVID-19, maintain the well-being of our employees and stakeholders, match the reduced demand from our customers and in accordance with governmental requirements, we closed or partially shut down certain office, manufacturing, distribution and technical center facilities around the world in March 2020.

Although most of our manufacturing, distribution and technical center facilities re-opened early in the second quarter of 2020, some operated at reduced capacities, most of our global office buildings remained closed through the remainder of 2020.

Despite many of our markets recovering in the second half of 2020, the ongoing spread of the virus prior to widespread vaccination presents several risks to our business, especially in the first half of 2021.

COVID-19 vaccines are currently being administered around the world with the hope that the majority of the population will have access to the vaccine by the middle of 2021.

If the distribution and the effectiveness of the vaccine are consistent with current government and health organization estimates, we anticipate the vaccine will mitigate the spread of the virus by the end of 2021 and allow a return to more normal operations in the second half of the year.

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Applications include pick-up, delivery, emergency vehicles, regional haul and vocational trucks and school, transit and shuttle buses.

We also provide diesel engines for Class A motor homes (RVs), primarily in North America.

Truck OEMs may also elect to produce their own engines and we must provide competitive products to win and keep their business.

Truck OEMs that currently produce some or all of their own engines include Daimler, PACCAR, TRATON AG, Volvo Powertrain, Ford Motor Company, Navistar, Hino Power, China First Auto Works, Dongfeng Motor Corporation, CNH Industrial and Isuzu.

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As part of our ongoing work to optimize marketplace coverage, we make regular operational and managerial changes to the number of outlets that provide sales, service and support to our customers.

The current count of distribution and dealer locations is the result of recategorization that includes customer facing product and service operations and excludes non-customer facing locations that provide internal operational support.

We serve our customers through a network of over 500 wholly-owned, joint venture and independent distributor locations and over 9,000 Cummins certified dealer locations with service to approximately 190 countries and territories.

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| | | | | | | 2020 | | | | | | 2019 | | | | | | 2018 | | |

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- Emission solutions - We are a global leader in designing, manufacturing and integrating aftertreatment technology and solutions for the commercial on and off-highway light-duty, medium-duty, heavy-duty and high-horsepower engine markets.

Aftertreatment is the mechanism used to convert engine emissions of criteria pollutants, such as particulate matter, nitrogen oxides (NOx), carbon monoxide and unburned hydrocarbons 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.

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, China, India, Brazil, Russia and Australia.

- Filtration - We design, manufacture and sell filters, coolant and chemical products.

In November 2019, we renamed our Electrified Power segment as "New Power" in order to better represent the incorporation of fuel cell and hydrogen production technologies resulting from our acquisition of Hydrogenics Corporation.

The New Power segment includes our electrified power, fuel cell and hydrogen production technologies.

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

| • | 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 matter, nitrogen oxides (NOx), carbon monoxide and unburned hydrocarbons 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. |

| • | 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 generation and marine. We produce and sell globally recognized Fleetguard® branded products in over 130 countries including countries in North America, Europe, South America, Asia and Africa. Fleetguard products are available through thousands of distribution points worldwide. |

In the markets served by our Power Systems segment, we compete with a variety of independent engine manufacturers and generator set assemblers as well as OEMs who manufacture engines for their own products around the world.

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(1) Tax legislation passed in December 2017 decreased our equity earnings at certain equity investees by $39 million due to withholding tax adjustments on foreign earnings and remeasurement of deferred taxes.

To see how this amount reconciles to "Equity, royalty and interest income from investees" in the *Consolidated Statements of Net Income*, see Note 3, "INVESTMENTS IN EQUITY INVESTEES," to our *Consolidated Financial Statements* for additional information*.*

| • | Beijing Foton Cummins Engine Co., Ltd. - Beijing Foton Cummins Engine Co., Ltd. is a joint venture in China with Beiqi Foton Motor Co., Ltd., a commercial vehicle manufacturer, which has two distinct lines of business - a light-duty business and a heavy-duty business. The light-duty business produces our families of ISF 2.8 liter to 4.5 liter high performance light-duty diesel engines in Beijing. These engines are used in light-duty and medium-duty commercial trucks, pick-up trucks, buses, multipurpose and sport utility vehicles with main markets in China, Brazil and Russia. Certain types of small construction equipment and industrial applications are also served by these engine families. The heavy-duty business produces the X11 and X12, ranging from 10.5 liter to 12.9 liter, high performance heavy-duty diesel engines in Beijing, and is nearing the launch of the X13 engine. Certain types of construction equipment and industrial applications are also served by these engine families. |

In the third quarter of 2017, we formed the Eaton Cummins Automated Transmission Technologies joint venture, which was consolidated and included in our Components segment as the automated transmissions business.

We design and/or manufacture our strategic components used in or with our engines and power generation units, including cylinder blocks and heads, turbochargers, connecting rods, camshafts, crankshafts, filters, alternators, electronic and emissions controls, automated transmissions and fuel systems.

We source externally purchased material and manufactured components from leading global suppliers.

Approximately 19 percent of the direct material in our product designs are single sourced to external suppliers.

We have an established sourcing strategy and supplier management process to evaluate and mitigate risk.

These processes are leading us to determine our need for dual sourcing and increase our use of dual and parallel sources to minimize risk and increase supply chain responsiveness.

Our current target for dual and parallel sourcing is approximately 90 percent of our direct material spend.

As of December 31, 2019, our analysis indicates that we have approximately 81 percent of direct material spend with dual or parallel sources.

We adopted our comprehensive environmental sustainability plan in 2014 after examining our entire environmental footprint, focusing on the key areas of water, waste, energy and greenhouse gases (GHG).

As the concept and scope of environmental sustainability has matured and broadened, leaders have moved from initially working on environmental impacts within our direct control in our operations to an expanded view of fuel and raw materials that reaches across the entire product life-cycle from design to manufacture to end of life.

Our environmental sustainability plan is the way we carry out our priorities, goals and initiatives in our action areas, including reducing our carbon footprint, using fewer natural resources and partnering to solve complex problems.

We currently report on the following environmental sustainability goals and commitments from our 2014 plan:

| • | a product vision statement — "powering the future through product innovation that makes people's lives better and reduces our environmental footprint;" |

On October 17, 2019, the Board approved the creation of a new Product Compliance and Regulatory Affairs Organization to lead engine emission certification and compliance and regulatory affairs.

To meet these regulations we used an evolution of our proven selective catalytic reduction (SCR) and exhaust gas recirculation (EGR) technology solutions and refined them for the EU and EPA certified engines to maintain power and torque with substantial fuel economy improvement and maintenance intervals comparable with our previous compliant engines.

We offer a complete lineup of on-highway engines to meet the near-zero emission standards.

EMPLOYEES

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| Steven M. Chapman (65) | | Group Vice President—China and Russia (2009) | | |

The matters described under [removed: "Loss Contingency"] [added: "Legal Proceedings"] in Note [removed: 12, "PRODUCT WARRANTY LIABILITY,"] [added: 14, "COMMITMENTS AND CONTINGENCIES,"] to the *Consolidated Financial Statements* are incorporated herein by reference.

We are subject to numerous lawsuits and claims arising out of the ordinary course of our business, including actions related to product liability; personal injury; the use and performance of our products; warranty matters; product recalls; patent, trademark or other intellectual property infringement; contractual liability; the conduct of our business; tax reporting in foreign jurisdictions; distributor termination; workplace safety; and environmental matters.

We also have been identified as a potentially responsible party at multiple waste disposal sites under U.S. federal and related state environmental statutes and regulations and may have joint and several liability for any investigation and remediation costs incurred with respect to such sites.

We have denied liability with respect to many of these lawsuits, claims and proceedings and are vigorously defending such lawsuits, claims and proceedings.

We carry various forms of commercial, property and casualty, product liability and other forms of insurance; however, such insurance may not be applicable or adequate to cover the costs associated with a judgment against us with respect to these lawsuits, claims and proceedings.

We do not believe that these lawsuits are material individually or in the aggregate.

While we believe we have also established adequate accruals pursuant to U.S. generally accepted accounting principles for our expected future liability with respect to pending lawsuits, claims and proceedings, where the nature and extent of any such liability can be reasonably estimated based upon then presently available information, there can be no assurance that the final resolution of any existing or future lawsuits, claims or proceedings will not have a material adverse effect on our business, results of operations, financial condition or cash flows.

We conduct significant business operations in Brazil that are subject to the Brazilian federal, state and local labor, social security, tax and customs laws.

While we believe we comply with such laws, they are complex, subject to varying interpretations and we are often engaged in litigation regarding the application of these laws to particular circumstances.

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

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

In addition, we voluntarily disclosed our formal internal review to our regulators and to other government agencies, the DOJ and the SEC, and have been working cooperatively with them to ensure a complete and thorough review.

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

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

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

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

During our discussions, the regulators have asked us to look at other model years and other engines, though the primary focus of our review has been the model year 2019 RAM.

We are also fully cooperating with the DOJ's and the SEC's information requests and inquiries.

Due to the continuing nature of our formal review, our ongoing cooperation with our regulators and other government agencies, and the presence of many unknown facts and circumstances, we cannot predict the final outcome of this review and these regulatory and agency processes, and we cannot provide assurance that the matter will not have a materially adverse impact on our results of operations and cash flows.

[removed: ][added: ]

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

For the Fiscal Year [removed: Ended December] [added: Ended December] 31, [removed: 2019][added: 2020]

Commission File [removed: Number 1-4949][added: Number 1-4949]

| Indiana | | [added: | | | |] 35-0257090 | [added: | |]

| (State of Incorporation) | | [added: | | | |] (IRS Employer Identification No.) | [added: | |]

[removed: Columbus, Indiana 47202-3005][added: Columbus, Indiana 47202-3005]

Telephone [removed: (812) 377-5000][added: (812) 377-5000]

| Title of each class | | [added: | | | |] Trading Symbol(s) | | [added: | | | |] Name of each exchange on which registered | [added: | |]

| Common stock, $2.50 par value | | [added: | | | |] CMI | | [added: | | | |] New York Stock Exchange | [added: | |]

| Large accelerated filer | [added: | |] x | | [added: | | | |] Accelerated filer | [added: | |] ☐ | | [added: | | | |] Non-accelerated filer | [added: | |] ☐ | [added: | |]

| Smaller reporting company | [added: | |] ☐ | | [added: | | | |] Emerging growth company | [added: | |] ☐ | | | | [added: | | | | | | | |]

Yes [removed: ☐] [added: ☒] No [removed: x][added: ☐]

The aggregate market value of the voting stock held by non-affiliates was approximately [removed: $27.0] [added: $24.9] billion at June 28, [removed: 2019.][added: 2020.]

As of [removed: January] [added: December] 31, 2020, there were [removed: 150,269,665] [added: 147,657,584] shares outstanding of $2.50 par value common stock.

Portions of the registrant's definitive Proxy Statement for its [removed: 2020] [added: 2021] 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: 2019,] [added: 2020,] will be incorporated by reference in Part III of this Form 10-K to the extent indicated therein upon such filing.

| PART | | [added: | | | |] ITEM | | | | [added: | | | | | | | |] PAGE | [added: | |]

| | | | | [added: | | | | | | | |] [Cautionary Statements Regarding Forward-Looking [removed: Information](#s004AAFA069D252C087C974B0BFF1BE7A)] [added: Information](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_10)] | | [removed: [3](#s004AAFA069D252C087C974B0BFF1BE7A)] | [added: | | | [3](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_10) | | |]

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Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Yes ☐ No ☒

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| [I](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_13) | | | | | | [1](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_16) | | | | | | [Business](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_16) | | | | | | [5](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_13) | | |

| | | | | | | | | | | | | [Overview](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_19) | | | | | | [5](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_19) | | |

| | | | | | | | | | | | | [Supply](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_43) | | | | | | [10](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_43) | | |

| | | | | | | | | | | | | [Seasonality](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_49) | | | | | | [11](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_49) | | |

| | | | | | | | | | | | | [Backlog](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_55) | | | | | | [11](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_55) | | |

| | | | | | | | | | | | | [Human Capital Resources](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_67) | | | | | | [14](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_67) | | |

| | | | | | | [2](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_82) | | | | | | [Properties](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_82) | | | | | | [26](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_82) | | |

| | | | | | | [6](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_97) | | | | | | [Selected Financial Dat](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_97)[a](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_97) | | | | | | [29](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_97) | | |

| | | | | | | [9A](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_310) | | | | | | [Controls and Procedures](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_310) | | | | | | [115](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_310) | | |

| | | | | | | [9B](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_313) | | | | | | [Other Information](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_313) | | | | | | [115](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_313) | | |

| | | | | | | [11](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_322) | | | | | | [Executive Compensation](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_322) | | | | | | [115](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_322) | | |

| [IV](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_334) | | | | | | [15](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_337) | | | | | | [Exhibits, Financial Statement Schedules](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_337) | | | | | | [116](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_337) | | |

| | | | | | | [16](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_340) | | | | | | [Form 10-K Summary (optional)](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_340) | | | | | | [118](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_340) | | |

| | | | | | | | | | | | | [Signatures](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_343) | | | | | | [119](#i95f6a4aa079d46e2b5a6c7fa1b7e9940_343) | | |

GOVERNMENT REGULATION

BUSINESS CONDITIONS / DISRUPTIONS

- market slowdown due to the impacts from the COVID-19 pandemic, other public health crises, epidemics or pandemics;

- impacts to manufacturing and supply chain abilities from an extended shutdown or disruption of our operations due to the COVID-19 pandemic;

- large truck manufacturers and original equipment manufacturers (OEMs) customers discontinuing outsourcing their engine supply needs or experiencing financial distress, particularly related to the COVID-19 pandemic, bankruptcy or change in control;

PRODUCTS AND TECHNOLOGY

GENERAL

- disruptions in global credit and financial markets as the result of the COVID-19 pandemic;

- reliance on our executive leadership team and other key personnel;

- climate change and global warming;

under the caption "Risk Factors."

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| [I](#s781905C43566536C8615571793BF6130) | | [1](#sCEF69F781DF25D549FB7B56CD4A5D671) | | [Business](#sCEF69F781DF25D549FB7B56CD4A5D671) | | [5](#s781905C43566536C8615571793BF6130) |

| | | | | [Overview](#sEB57063500FA595E85FA49AD32476A89) | | [5](#sEB57063500FA595E85FA49AD32476A89) |

| | | | | [Supply](#s90101EA50CD25A60B49E375F1394DBAB) | | [10](#s90101EA50CD25A60B49E375F1394DBAB) |

| | | | | [Seasonality](#s78D8E3DDA38A59C7821469F79FE295BA) | | [11](#s78D8E3DDA38A59C7821469F79FE295BA) |

| | | | | [Backlog](#s44DFE78209775914A3F9CF7484864A06) | | [11](#s44DFE78209775914A3F9CF7484864A06) |

| | | | | [Employees](#sF3C5EBCD2CBE51FEA561ED51736AEA09) | | [14](#sF3C5EBCD2CBE51FEA561ED51736AEA09) |

| | | [2](#sC28C150C1C9F5AD6ABC17AF6C3302244) | | [Properties](#sC28C150C1C9F5AD6ABC17AF6C3302244) | | [25](#sC28C150C1C9F5AD6ABC17AF6C3302244) |

| | | [6](#sFC791314CAE45ACEA9615A8263127C01) | | [Selected Financial Data](#sFC791314CAE45ACEA9615A8263127C01) | | [30](#sFC791314CAE45ACEA9615A8263127C01) |

| | | [9A](#sCEB28413EDE95BB58AC2388DCC3AB23A) | | [Controls and Procedures](#sCEB28413EDE95BB58AC2388DCC3AB23A) | | [117](#sCEB28413EDE95BB58AC2388DCC3AB23A) |

| | | [9B](#sDD9F9105DD5152A6BD8FEA612F90BF05) | | [Other Information](#sDD9F9105DD5152A6BD8FEA612F90BF05) | | [117](#sDD9F9105DD5152A6BD8FEA612F90BF05) |

| | | [11](#sC41332E84CE75BB48E2E730577A86828) | | [Executive Compensation](#sC41332E84CE75BB48E2E730577A86828) | | [117](#sC41332E84CE75BB48E2E730577A86828) |

| [IV](#s351F949BA402567C9182A99B7AE5C8C6) | | [15](#s2ADF7688FE0155E88F222514C14B2406) | | [Exhibits, Financial Statement Schedules](#s2ADF7688FE0155E88F222514C14B2406) | | [118](#s2ADF7688FE0155E88F222514C14B2406) |

| | | [16](#sEF3F2870BDD65257B0B22DF0300C4908) | | [Form 10-K Summary (optional)](#sEF3F2870BDD65257B0B22DF0300C4908) | | [121](#sEF3F2870BDD65257B0B22DF0300C4908) |

| | | | | [Signatures](#sB8E50D5CE1DF53EEA6765C0965FBAC68) | | [122](#sB8E50D5CE1DF53EEA6765C0965FBAC68) |

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| • | a sustained slowdown or significant downturn in our markets; |

| • | an extended shutdown of our operations in China due to the coronavirus outbreak; |

| • | changes in the engine outsourcing practices of significant customers; |

| • | challenges or unexpected costs in completing cost reduction actions and restructuring initiatives; |

| • | a major customer experiencing financial distress; |

Our principal manufacturing facilities by [removed: segments] [added: segment] are as follows:

| Segment | | [added: | | | |] U.S. Facilities | | [added: | | | |] Facilities Outside the U.S. | [added: | |]

| Engine | | [added: | | | |] Indiana: Columbus | | [added: | | | |] Brazil: Sao Paulo | [added: | |]

| | | [added: | | | |] New York: Lakewood | | [added: | | | |] India: Phaltan | [added: | |]

| | | [added: | | | |] North Carolina: Whitakers | | [added: | | | |] U.K.: Darlington | [added: | |]

| Components | | [added: | | | |] Indiana: Columbus | | [added: | | | |] Australia: Kilsyth | [added: | |]

| | | [added: | | | |] South Carolina: Charleston | | [added: | | | |] Brazil: Sao Paulo | [added: | |]

| | | [added: | | | |] Tennessee: Cookeville | | [added: | | | |] China: Shanghai, Wuxi, Wuhan | [added: | |]

| | | [added: | | | |] Wisconsin: Mineral Point, Neillsville | | [added: | | | |] France: Quimper | [added: | |]

| | | | | [added: | | | | | | | |] Germany: Marktheidenfeld | [added: | |]

| | | | | [added: | | | | | | | |] India: Pune, Dewas, Pithampur, Phaltan, Rudrapur | [added: | |]

| | | | | [added: | | | | | | | |] Mexico: Ciudad Juarez, San Luis Potosi | [added: | |]

| | | | | [added: | | | | | | | |] South Africa: Johannesburg | [added: | |]

| | | | | [added: | | | | | | | |] South Korea: Suwon | [added: | |]

| | | | | [added: | | | | | | | |] U.K.: Darlington, Huddersfield | [added: | |]

| Power Systems | | [added: | | | |] Indiana: Elkhart, Seymour | | [added: | | | |] Brazil: Sao Paulo | [added: | |]

| | | [added: | | | |] Minnesota: Fridley | | [added: | | | |] China: Wuxi, Wuhan | [added: | |]

| | | [added: | | | |] New Mexico: Clovis | | [added: | | | |] India: Pune, Ahmendnagar, Ranjangaon, Phaltan | [added: | |]

| | | | | [added: | | | | | | | |] Mexico: San Luis Potosi | [added: | |]

| | | | | [added: | | | | | | | |] Romania: Craiova | [added: | |]

| | | | | [added: | | | | | | | |] U.K.: Daventry | [added: | |]

| | | | | [added: | | | | | | | |] Nigeria: Lagos | [added: | |]

| New Power | | [added: | | | |] Indiana: Columbus | | [added: | | | |] Canada: Mississauga | [added: | |]

| | | | | [added: | | | | | | | |] Belgium: Oevel | [added: | |]

In addition, engines and engine components are manufactured by joint ventures or independent licensees at manufacturing plants in the U.S., China, India, Japan, Sweden, [removed: Germany, U.K., Mexico] [added: U.K.] and [removed: Canada.][added: Mexico.]

| [added: | | | | | |] U.S. Facilities | | [added: | | | |] Facilities Outside the U.S. | [added: | |]

| [added: | | | | | |] California: Irvine | | [added: | | | |] Australia: Scoresby | [added: | |]

| [added: | | | | | |] Colorado: Henderson | | [added: | | | |] Belgium: Mechelen | [added: | |]

| [added: | | | | | |] Georgia: Atlanta | | [added: | | | |] Canada: Montreal, Vancouver | [added: | |]

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

| [added: | | | | | |] Minnesota: White Bear Lake | | [added: | | | |] Germany: Gross-Gerau | [added: | |]

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

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

| | | [added: | | | | | | | | | |] Japan: Tokyo | [added: | |]

| | | [added: | | | | | | | | | |] Russia: Moscow | [added: | |]

| | | [added: | | | | | | | | | |] South Africa: Johannesburg | [added: | |]

| | | [added: | | | | | | | | | |] U.K.: Wellingborough | [added: | |]

| [added: | | | | | |] Indiana: Columbus | | [added: | | | |] Belgium: Rumst | [added: | |]

| [added: | | | | | |] Kentucky: Walton | | [added: | | | |] China: Beijing, Shanghai, Wuhan | [added: | |]

| [added: | | | | | |] Tennessee: Memphis | | [added: | | | |] India: Phaltan, Pithampur, Pune | [added: | |]

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| | | | | | | U.S. Facilities | | | | | | Facilities Outside the U.S. | | |

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Other Facilities

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| | | U.K.: Cumbernauld, Stockton |

Headquarters and Other Offices

Our Corporate Headquarters is located in Columbus, Indiana.

[removed: (a)] Our common stock is listed on the NYSE under the symbol "CMI." For other matters related to our common stock and shareholders' equity, see Note [removed: 16,] [added: 15,] "CUMMINS INC. SHAREHOLDERS' EQUITY," to the *Consolidated Financial Statements*.

[removed: (c)] The following information is provided pursuant to Item 703 of Regulation S-K:

| | | [added: | | | |] Issuer Purchases of Equity Securities | | | | | | | | | | | | [added: | | | | | | | | |]

| Period | | [removed: (a) Total] [added: | | | | Total] Number of Shares Purchased(1) | | | [removed: (b) Average Price Paid per] [added: | | | Average Price Paid per] Share | | | | [removed: (c) Total] [added: | | Total] Number [removed: of Shares Purchased as] [added: of Shares Purchased as] Part of [removed: Publicly Announced Plans] [added: Publicly Announced Plans] or Programs | | | [removed: (d) Maximum Number] [added: | | | Approximate Dollar Value] of Shares that May Yet Be Purchased Under the Plans or [removed: Programs(2)] [added: Programs (in millions) (2)] | | [added: |]

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

The dollar value remaining available for future purchases under the [removed: 2018] [added: 2019] program at December 31, [removed: 2019,] [added: 2020,] was [removed: $635] [added: $1,994] million.

During the three months ended December 31, [removed: 2019,] [added: 2020,] we repurchased [removed: $465] [added: $85] million of common stock under the 2018 [added: authorization, completing this program, and repurchased $6 million of common stock under the 2019] authorization.

[removed: During the three months ended December 31, 2019, we repurchased 12,325 shares of common stock from employees in connection with the] [added: Our] Key Employee Stock Investment Plan [removed: 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 effect, repurchase shares [added: only] if the participant defaulted in repayment of the loan.

Our 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 (Fortive Corporation is excluded from the peer index in the following graph as the company was founded after December 31, [removed: 2014).][added: 2015).]

[removed: ][added: ]

ASSUMES $100 INVESTED ON DECEMBER 31, [removed: 2014][added: 2015]

FISCAL YEAR ENDING DECEMBER 31, [removed: 2019][added: 2020]

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| September 28 - November 1 | | | | | | — | | | | | | $ | — | | | | | — | | | | | | $ | 2,085 | |

| November 2 - November 29 | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,085 | | |

| November 30 - December 31 | | | | | | 414,120 | | | | | | 219.14 | | | | | | 414,120 | | | | | | 1,994 | | |

| Total | | | | | | 414,120 | | | | | | 219.14 | | | | | | 414,120 | | | | | | | | |

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| (2) Shares repurchased under our Key Employee Stock Investment Plan only occur in the event of a participant default, which cannot be predicted, and were excluded from this column. | | | | | | | | | | | | | | | | | | | | | | | | | | |

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

Shares associated with participants' sales are sold as open-market transactions via a third-party broker as of May 1, 2020.

(b) Use of proceeds—not applicable.

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| September 30 - November 3 | | 1,621,817 | | | $ | 158.11 | | | 1,618,527 | | | 31,370 | |

| November 4 - December 1 | | 254,661 | | | 181.51 | | | | 247,913 | | | 25,208 | |

| December 2 - December 31 | | 911,293 | | | 181.41 | | | | 909,006 | | | 23,185 | |

| Total | | 2,787,771 | | | 167.87 | | | | 2,775,446 | | | | |

_____________________________________________________________

(2) These values reflect the sum of shares held in loan status under our Key Employee Stock Investment Plan.

The repurchase program authorized by the Board does not limit the number of shares that may be purchased and was excluded from this column.

Loans are issued for five-year terms at a fixed interest rate established at the date of purchase and may be refinanced after their initial five-year period for an additional five-year period.

Participants must hold shares for a minimum of six months from date of purchase.

If the shares are sold before the loan is paid off, the employee must wait six months before another share purchase may be made.

There is no maximum amount of shares that we may purchase under this plan.

The selected financial information presented below for each of the last five years ended December 31, beginning with [removed: 2019,] [added: 2020,] was derived from our *Consolidated Financial Statements*.

| In millions, except per share amounts | | [added: | | | | 2020 | | | | | |] 2019 | | | | [added: | |] 2018 | | | | [removed: 2017] | | [added: 2017] | | [removed: 2016] | | | | [removed: 2015] [added: 2016] | | |

| For the years ended December 31, | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | |]

| Net sales | | [added: | | | |] $ | [removed: 23,571] [added: 19,811] | | | [added: | |] $ | [removed: 23,771] [added: 23,571] | | | [added: | |] $ | [removed: 20,428] [added: 23,771] | | | [added: | |] $ | [removed: 17,509] [added: 20,428] | | | [added: | |] $ | [removed: 19,110] [added: 17,509] | |

| Net income attributable to Cummins Inc.(1) | | [removed: 2,260] | | | | [added: 1,789 | | | | | | 2,260 | | | | | |] 2,141 | | | | [removed: 999] | | [added: 999] | | [removed: 1,394] | | | | [removed: 1,399] [added: 1,394] | | |

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

| Basic | | [added: | | | |] $ | [removed: 14.54] [added: 12.07] | | | [added: | |] $ | [removed: 13.20] [added: 14.54] | | | [added: | |] $ | [removed: 5.99] [added: 13.20] | | | [added: | |] $ | [removed: 8.25] [added: 5.99] | | | [added: | |] $ | [removed: 7.86] [added: 8.25] | |

| Diluted | | [removed: 14.48] | | | | [added: 12.01 | | | | | | 14.48 | | | | | |] 13.15 | | | | [removed: 5.97] | | [added: 5.97] | | [removed: 8.23] | | | | [removed: 7.84] [added: 8.23] | | |

| Cash dividends declared per share | | [removed: 4.90] | | | | [added: 5.28 | | | | | | 4.90 | | | | | |] 4.44 | | | | [removed: 4.21] | | [added: 4.21] | | [removed: 4.00] | | | | [removed: 3.51] [added: 4.00] | | |

| At December 31, | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | |]

| Total assets | | [removed: 19,737] | | | | [added: 22,624 | | | | | | 19,737 | | | | | |] 19,062 | | | | [removed: 18,075] | | [added: 18,075] | | [removed: 15,011] | | | | [removed: 15,134] [added: 15,011] | | |

| Long-term debt | | [removed: 1,576] | | | | [added: 3,610 | | | | | | 1,576 | | | | | |] 1,597 | | | | [removed: 1,588] | | [added: 1,588] | | [removed: 1,568] | | | | [removed: 1,576] [added: 1,568] | | |

[added: |] (1) For the year ended December 31, 2019, net income attributable to Cummins Inc. was reduced by $119 million due to restructuring actions ($90 million after-tax). [added: For the year ended December 31, 2018, net income attributable to Cummins Inc. was reduced by $39 million due to Tax Legislation. For the year ended December 31, 2017, net income attributable to Cummins Inc. was reduced by $777 million due to Tax Legislation. For the year ended December 31, 2016, net income attributable to Cummins Inc. included a $138 million charge for a loss contingency ($74 million net of favorable variable compensation impact after-tax). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

[added: |] (2) For the year ended December 31, 2019, results for basic and diluted earnings per share were reduced by $0.58 per share and $0.57 per share, respectively, due to restructuring actions. [added: For the year ended December 31, 2018, results for basic and diluted earnings per share were reduced by $0.24 per share due to Tax Legislation. For the year ended December 31, 2017, results for basic and diluted earnings per share were reduced by $4.66 per share and $4.65 per share, respectively, due to Tax Legislation. For the year ended December 31, 2016, results for basic and diluted earnings per share were reduced by $0.44 per share due to a loss contingency charge. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

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

For the year ended December 31, 2017, net income attributable to Cummins Inc. was reduced by $777 million due to Tax Legislation.

For the year ended December 31, 2016, net income attributable to Cummins Inc. included a $138 million charge for a loss contingency ($74 million net of favorable variable compensation impact after-tax).

For the year ended December 31, 2015, net income attributable to Cummins Inc. included $211 million for an impairment of light-duty diesel assets ($133 million after-tax), $90 million of restructuring actions and other charges ($61 million after-tax) and a $60 million charge for a loss contingency ($38 million after-tax).

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

For the year ended December 31, 2017, results for basic and diluted earnings per share were reduced by $4.66 per share and $4.65 per share, respectively, due to Tax Legislation.

For the year ended December 31, 2016, results for basic and diluted earnings per share were reduced by $0.44 per share due to a loss contingency charge.

For the year ended December 31, 2015, results for basic and diluted earnings per share were reduced by $0.75 per share due to an impairment of light-duty diesel, $0.34 per share due to restructuring actions and other charges and $0.20 and $0.21 per share, respectively, due to a loss contingency charge.

[removed: | • | Management's] [added: - Management's] Report to Shareholders [removed: |]

[removed: | • | Report] [added: - Report] of Independent Registered Public Accounting Firm [removed: |]

[removed: | • | Consolidated] [added: - Consolidated] Statements of Net Income for the years ended December [removed: 31, 2019, 2018 and 2017 |][added: 31, 2020, 2019 and 2018]

[removed: | • | Consolidated] [added: - Consolidated] Statements of Comprehensive Income for the years ended December [removed: 31, 2019, 2018 and 2017 |][added: 31, 2020, 2019 and 2018]

[removed: | • | Consolidated] [added: - Consolidated] Balance Sheets at December [removed: 31, 2019 and 2018 |][added: 31, 2020 and 2019]

[removed: | • | Consolidated] [added: - Consolidated] Statements of Cash Flows for the years ended December [removed: 31, 2019, 2018 and 2017 |][added: 31, 2020, 2019 and 2018]

[removed: | • | Consolidated] [added: - Consolidated] Statements of Changes in Equity for the years ended December [removed: 31, 2019, 2018 and 2017 |][added: 31, 2020, 2019 and 2018]

[removed: | • | Notes] [added: - Notes] to the Consolidated Financial Statements [removed: |]

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

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

| NOTE | | [removed: 4] | | [added: | | 21 | | | | | |] RESTRUCTURING ACTIONS | [added: | |]

| NOTE | | [removed: 5] | | [added: | | 4 | | | | | |] INCOME TAXES | [added: | |]

| NOTE | | [removed: 6] | | [added: | | 5 | | | | | |] MARKETABLE SECURITIES | [added: | |]

| NOTE | | [removed: 7] | | [added: | | 6 | | | | | |] INVENTORIES | [added: | |]

| NOTE | | [removed: 8] | | [added: | | 7 | | | | | |] PROPERTY, PLANT AND EQUIPMENT | [added: | |]

| NOTE | | [removed: 9] | | [added: | | 8 | | | | | |] LEASES | [added: | |]

| NOTE | | [removed: 10] | | [added: | | 9 | | | | | |] GOODWILL AND OTHER INTANGIBLE ASSETS | [added: | |]

| NOTE | | [added: | | | |] 11 | | [added: | | | |] DEBT | [added: | |]

| NOTE | | [added: | | | |] 12 | | [added: | | | |] PRODUCT WARRANTY LIABILITY | [added: | |]

| NOTE | | [added: | | | |] 13 | | [added: | | | |] PENSIONS AND OTHER POSTRETIREMENT BENEFITS | [added: | |]

| NOTE | | [removed: 14] | | [added: | | 10 | | | | | |] SUPPLEMENTAL BALANCE SHEET DATA | [added: | |]

| NOTE | | [removed: 15] | | [added: | | 14 | | | | | |] COMMITMENTS AND CONTINGENCIES | [added: | |]

| NOTE | | [removed: 16] | | [added: | | 15 | | | | | |] CUMMINS INC. SHAREHOLDERS' EQUITY | [added: | |]

| NOTE | | [removed: 17] | | [added: | | 16 | | | | | |] ACCUMULATED OTHER COMPREHENSIVE LOSS | [added: | |]

| NOTE | | [removed: 18] | | [added: | | 17 | | | | | |] NONCONTROLLING INTERESTS | [added: | |]

| NOTE | | [removed: 19] | | [added: | | 18 | | | | | |] STOCK INCENTIVE AND STOCK OPTION PLANS | [added: | |]

| NOTE | | [removed: 20] | | [added: | | 19 | | | | | |] EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. | [added: | |]

| NOTE | | [removed: 21] | | [added: | | 20 | | | | | |] ACQUISITIONS | [added: | |]

| NOTE | | [added: | | | |] 22 | | [added: | | | |] OPERATING SEGMENTS | [added: | |]

[removed: | • |] [added: -] Selected Quarterly Financial Data (Unaudited) [removed: |]

Management assessed the effectiveness of our internal control over financial reporting and concluded it was effective as of December 31, [removed: 2019.][added: 2020.]

The effectiveness of our internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

| /s/ N. THOMAS LINEBARGER | | [added: | | | |] /s/ MARK A. SMITH | [added: | |]

| *Chairman and Chief Executive Officer* | | [added: | | | |] *Vice President and Chief Financial Officer* | [added: | |]

We have audited the accompanying consolidated balance sheets of Cummins Inc. and its subsidiaries (the “Company”) as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the related consolidated statements of net income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, [removed: 2019,] [added: 2020,] 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: 2019,] [added: 2020,] 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: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2019] [added: 2020] in conformity with accounting principles generally accepted in the United States of America.