Item 1. Condensed Consolidated Financial Statements

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited)

						Three months ended
						March 31,
In millions, except per share amounts						2023						2022
NET SALES (Notes 1 and 2)						$	8,453					$	6,385
Cost of sales						6,424						4,853
GROSS MARGIN						2,029						1,532
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses						753						615
Research, development and engineering expenses						350						298
Equity, royalty and interest income from investees (Note 4)						119						96
Other operating expense, net						19						111
OPERATING INCOME						1,026						604
Interest expense						87						17
Other income (expense), net						90						(9)
INCOME BEFORE INCOME TAXES						1,029						578
Income tax expense (Note 5)						223						155
CONSOLIDATED NET INCOME						806						423
Less: Net income attributable to noncontrolling interests						16						5
NET INCOME ATTRIBUTABLE TO CUMMINS INC.						$	790					$	418
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic						$	5.58					$	2.94
Diluted						$	5.55					$	2.92
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
Basic						141.5						142.2
Dilutive effect of stock compensation awards						0.9						0.9
Diluted						142.4						143.1

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

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

									Three months ended
									March 31,
			In millions						2023						2022
			CONSOLIDATED NET INCOME						$	806					$	423
			Other comprehensive income (loss), net of tax (Note 13)
			Change in pension and other postretirement defined benefit plans						(9)						16
			Foreign currency translation adjustments						82						4
			Unrealized (loss) gain on derivatives						(3)						28
			Total other comprehensive income, net of tax						70						48
			COMPREHENSIVE INCOME						876						471
			Less: Comprehensive income (loss) attributable to noncontrolling interests						19						(3)
			COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC.						$	857					$	474

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

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

In millions, except par value						March 31, 2023						December 31, 2022
ASSETS
Current assets
Cash and cash equivalents						$	1,980					$	2,101
Marketable securities (Note 6)						459						472
Total cash, cash equivalents and marketable securities						2,439						2,573
Accounts and notes receivable, net						5,834						5,202
Inventories (Note 7)						5,878						5,603
Prepaid expenses and other current assets						1,217						1,073
Total current assets						15,368						14,451
Long-term assets
Property, plant and equipment						10,629						10,507
Accumulated depreciation						(5,039)						(4,986)
Property, plant and equipment, net						5,590						5,521
Investments and advances related to equity method investees						1,860						1,759
Goodwill						2,365						2,343
Other intangible assets, net						2,640						2,687
Pension assets (Note 3)						1,496						1,398
Other assets (Note 8)						2,114						2,140
Total assets						$	31,433					$	30,299
LIABILITIES
Current liabilities
Accounts payable (principally trade)						$	4,636					$	4,252
Loans payable (Note 9)						229						210
Commercial paper (Note 9)						2,545						2,574
Current maturities of long-term debt (Note 9)						569						573
Accrued compensation, benefits and retirement costs						510						617
Current portion of accrued product warranty (Note 10)						746						726
Current portion of deferred revenue (Note 2)						1,040						1,004
Other accrued expenses (Note 8)						1,648						1,465
Total current liabilities						11,923						11,421
Long-term liabilities
Long-term debt (Note 9)						4,409						4,498
Deferred revenue (Note 2)						937						844
Other liabilities (Note 8)						3,283						3,311
Total liabilities						$	20,552					$	20,074
Commitments and contingencies (Note 11)
Redeemable noncontrolling interests (Note 12)						$	261					$	258
EQUITY
Cummins Inc. shareholders’ equity
Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.5 shares issued						$	2,230					$	2,243
Retained earnings						18,605						18,037
Treasury stock, at cost, 80.9 and 81.2 shares						(9,389)						(9,415)
Accumulated other comprehensive loss (Note 13)						(1,823)						(1,890)
Total Cummins Inc. shareholders’ equity						9,623						8,975
Noncontrolling interests						997						992
Total equity						$	10,620					$	9,967
Total liabilities, redeemable noncontrolling interests and equity						$	31,433					$	30,299

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

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

						Three months ended
						March 31,
In millions						2023						2022
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income						$	806					$	423
Adjustments to reconcile consolidated net income to net cash provided by operating activities
Depreciation and amortization						246						161
Deferred income taxes						(38)						(66)
Equity in income of investees, net of dividends						(67)						(76)
Pension and OPEB expense (Note 3)						1						9
Pension contributions and OPEB payments (Note 3)						(92)						(43)
Russian suspension costs (Note 15)						—						158
(Gain) loss on corporate owned life insurance						(19)						37
Foreign currency remeasurement and transaction exposure						(11)						(7)
Changes in current assets and liabilities, net of acquisitions
Accounts and notes receivable						(621)						(417)
Inventories						(263)						(289)
Other current assets						(142)						(57)
Accounts payable						381						484
Accrued expenses						151						(251)
Changes in other liabilities						64						70
Other, net						99						28
Net cash provided by operating activities						495						164
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures						(193)						(104)
Acquisition of a business, net of cash acquired (Note 16)						—						83
Investments in marketable securities—acquisitions						(326)						(197)
Investments in marketable securities—liquidations (Note 6)						345						254
Other, net						(54)						(46)
Net cash used in investing activities						(228)						(10)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings						43						14
Net payments of commercial paper						(29)						(2)
Payments on borrowings and finance lease obligations						(142)						(24)
Dividend payments on common stock						(222)						(207)
Repurchases of common stock						—						(311)
Other, net						(13)						33
Net cash used in financing activities						(363)						(497)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS						(25)						27
Net decrease in cash and cash equivalents						(121)						(316)
Cash and cash equivalents at beginning of year						2,101						2,592
CASH AND CASH EQUIVALENTS AT END OF PERIOD						$	1,980					$	2,276

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

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

(Unaudited)

						Three months ended
In millions, except per share amounts						Redeemable Noncontrolling Interests						Common Stock						Additional Paid-in Capital						Retained Earnings						Treasury Stock												Accumulated Other Comprehensive Loss						Total Cummins Inc. Shareholders’ Equity						Noncontrolling Interests						Total Equity
BALANCE AT DECEMBER 31, 2022						$	258					$	556					$	1,687					$	18,037					$	(9,415)											$	(1,890)					$	8,975					$	992					$	9,967
Net income						(8)																		790																								790						24						814
Other comprehensive income, net of tax (Note 13)																																										67						67						3						70
Cash dividends on common stock, $1.57 per share																								(222)																								(222)						—						(222)
Distributions to noncontrolling interests																																																—						(22)						(22)
Share-based awards																		(5)												25																		20						—						20
Fair value adjustment of redeemable noncontrolling interests						11												(11)																														(11)						—						(11)
Other shareholder transactions																		3												1																		4						—						4
BALANCE AT MARCH 31, 2023						$	261					$	556					$	1,674					$	18,605					$	(9,389)											$	(1,823)					$	9,623					$	997					$	10,620
BALANCE AT DECEMBER 31, 2021						$	366					$	556					$	1,543					$	16,741					$	(9,123)											$	(1,571)					$	8,146					$	889					$	9,035
Net income						(4)																		418																								418						9						427
Other comprehensive income (loss), net of tax (Note 13)																																										56						56						(8)						48
Repurchases of common stock																														(311)																		(311)						—						(311)
Cash dividends on common stock, $1.45 per share																								(207)																								(207)						—						(207)
Distributions to noncontrolling interests																																																—						(14)						(14)
Share-based awards																		(9)												18																		9						—						9
Fair value adjustment of redeemable noncontrolling interests						30												(30)																														(30)						—						(30)
Other shareholder transactions																		(7)												4																		(3)						17						14
BALANCE AT MARCH 31, 2022						$	392					$	556					$	1,497					$	16,952					$	(9,412)											$	(1,515)					$	8,078					$	893					$	8,971

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

CUMMINS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Overview

Cummins Inc. (“Cummins,” “we,” “our” or “us”) was founded in 1919 as Cummins Engine Company, a corporation in Columbus, Indiana, and one of the first diesel engine manufacturers. In 2001, we changed our name to Cummins Inc. We are a global power leader that designs, manufactures, distributes and services diesel, natural gas, electric and hybrid powertrains and powertrain-related components including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems, automated transmissions, axles, drivelines, brakes, suspension systems, electric power generation systems, batteries, electrified power systems, electric powertrains, hydrogen production and fuel cell products. We sell our products to original equipment manufacturers (OEMs), distributors, dealers and other customers worldwide. We serve our customers through a service network of approximately 460 wholly-owned, joint venture and independent distributor locations and more than 10,000 Cummins certified dealer locations in approximately 190 countries and territories.

Interim Condensed Financial Statements

The unaudited Condensed Consolidated Financial Statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of operations, financial position and cash flows. All such adjustments are of a normal recurring nature. The Condensed Consolidated Financial Statements were prepared in accordance with accounting principles in the United States of America (GAAP) pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Certain information and footnote disclosures normally included in annual financial statements were condensed or omitted as permitted by such rules and regulations.

These interim condensed financial statements should be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022. Our interim period financial results for the three month periods presented are not necessarily indicative of results to be expected for any other interim period or for the entire year. The year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements but does not include all required annual disclosures.

Reclassifications

Certain amounts for prior year periods were reclassified to conform to the current year presentation.

Use of Estimates in Preparation of Financial Statements

Preparation of financial statements requires management to make estimates and assumptions that affect reported amounts presented and disclosed in our Condensed Consolidated Financial Statements. Significant estimates and assumptions in these Condensed Consolidated Financial Statements require the exercise of judgment. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates.

Weighted-Average Diluted Shares Outstanding

The weighted-average diluted common shares outstanding exclude the anti-dilutive effect of certain stock options. The options excluded from diluted earnings per share were as follows:

			Three months ended
			March 31,
			2023						2022
Options excluded			4,833						20,463

Related Party Transactions

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

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

						Three months ended
						March 31,
In millions						2023						2022
Sales to nonconsolidated equity investees						$	376					$	344
Purchases from nonconsolidated equity investees						704						427

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

In millions						March 31, 2023						December 31, 2022						Balance Sheet Location
Accounts receivable from nonconsolidated equity investees						$	469					$	376					Accounts and notes receivable, net
Accounts payable to nonconsolidated equity investees						370						292						Accounts payable (principally trade)

Supply Chain Financing

We currently have supply chain financing programs with financial intermediaries, which provide certain vendors the option to be paid by financial intermediaries earlier than the due date on the applicable invoice. When a vendor utilizes the program and receives an early payment from a financial intermediary, they take a discount on the invoice. We then pay the financial intermediary the face amount of the invoice on the original due date. The maximum amount that we may have outstanding under the program is $532 million at March 31, 2023. We do not reimburse vendors for any costs they incur for participation in the program, their participation is completely voluntary and there are no assets pledged as security or other forms of guarantees provided for the committed payment to the finance provider or intermediary. As a result, all amounts owed to the financial intermediaries are presented as accounts payable in our Condensed Consolidated Balance Sheets. Amounts due to the financial intermediaries reflected in accounts payable at March 31, 2023 and December 31, 2022, were $253 million and $331 million, respectively.

NOTE 2. REVENUE FROM CONTRACTS WITH CUSTOMERS

Long-term Contracts

The majority of our contracts are for a period of less than one year. We have certain long-term maintenance agreements, construction contracts and extended warranty coverage arrangements that span a period in excess of one year. The aggregate amount of the transaction price for long-term maintenance agreements and construction contracts allocated to performance obligations that were not satisfied as of March 31, 2023, was $649 million. We expect to recognize the related revenue of $126 million over the next 12 months and $523 million over periods up to 10 years. See NOTE 10, "PRODUCT WARRANTY LIABILITY," for additional disclosures on extended warranty coverage arrangements. Our other contracts generally are for a duration of less than one year, include payment terms that correspond to the timing of costs incurred when providing goods and services to our customers or represent sales-based royalties.

Deferred and Unbilled Revenue

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

In millions						March 31, 2023						December 31, 2022
Unbilled revenue						$	332					$	257
Deferred revenue						1,977						1,848

We recognized revenue of $206 million for the three months ended March 31, 2023, compared with $240 million for the comparable period in 2022, that was included in the deferred revenue balance at the beginning of each year. We did not record any impairment losses on our unbilled revenues during the three months ended March 31, 2023 or March 31, 2022.

Disaggregation of Revenue

Consolidated Revenue

The table below presents our consolidated sales by geographic area. Net sales attributed to geographic areas were based on the location of the customer.

						Three months ended
						March 31,
In millions						2023						2022
United States						$	4,802					$	3,457
China						790						653
India						411						309
Other international						2,450						1,966
Total net sales						$	8,453					$	6,385

Segment Revenue

As previously announced, our Components segment reorganized its reporting structure to carve out the electronics business into the newly formed software and electronics business and combined the turbo technologies and fuels systems businesses into the newly formed engine components business. We started reporting results for the reorganized business in the first quarter of 2023 and reflected these changes for prior periods.

Components segment external sales by business were as follows:

						Three months ended
						March 31,
In millions						2023						2022
Axles and brakes						$	1,272					$	—
Emission solutions						939						808
Filtration						342						308
Engine components						292						240
Automated transmissions						178						134
Software and electronics						20						27
Total sales						$	3,043					$	1,517

Engine segment external sales by market were as follows:

						Three months ended
						March 31,
In millions						2023						2022
Heavy-duty truck						$	860					$	684
Medium-duty truck and bus						617						591
Light-duty automotive						441						487
Total on-highway						1,918						1,762
Off-highway						334						287
Total sales						$	2,252					$	2,049

As previously announced, due to the indefinite suspension of operations in Russia, we reorganized the regional management structure of our Distribution segment and moved all Commonwealth of Independent States (CIS) sales into the Europe and Africa and Middle East regions. The Russian portion of prior period CIS sales moved to the Europe region. We started to report results for our new regional management structure in the first quarter of 2023 and reflected these changes for historical periods.

Distribution segment external sales by region were as follows:

						Three months ended
						March 31,
In millions						2023						2022
North America						$	1,693					$	1,371
Asia Pacific						239						244
Europe						194						275
China						101						82
Africa and Middle East						62						50
India						57						48
Latin America						53						41
Total sales						$	2,399					$	2,111

Distribution segment external sales by product line were as follows:

						Three months ended
						March 31,
In millions						2023						2022
Parts						$	1,052					$	926
Power generation						491						398
Engines						456						438
Service						400						349
Total sales						$	2,399					$	2,111

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

						Three months ended
						March 31,
In millions						2023						2022
Power generation						$	380					$	399
Industrial						189						188
Generator technologies						110						96
Total sales						$	679					$	683

NOTE 3. PENSIONS AND OTHER POSTRETIREMENT BENEFITS

We sponsor funded and unfunded domestic and foreign defined benefit pension and other postretirement benefit (OPEB) plans. Contributions to these plans were as follows:

						Three months ended
						March 31,
In millions						2023						2022
Defined benefit pension contributions						$	88					$	33
OPEB payments, net						4						10
Defined contribution pension plans						43						36

We anticipate making additional defined benefit pension contributions during the remainder of 2023 of $20 million for our U.S. and U.K. qualified and non-qualified pension plans. These contributions may be made from trusts or company funds either to increase pension assets or to make direct benefit payments to plan participants. We expect our 2023 annual net periodic pension cost to be near zero.

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

						Pension
						U.S. Plans												U.K. Plans												OPEB
						Three months ended March 31,
In millions						2023						2022						2023						2022						2023						2022
Service cost						$	29					$	34					$	4					$	8					$	—					$	—
Interest cost						42						22						17						9						2						1
Expected return on plan assets						(69)						(52)						(25)						(20)						—						—
Recognized net actuarial loss (gain)						2						6						—						1						(1)						—
Net periodic benefit expense (income)						$	4					$	10					$	(4)					$	(2)					$	1					$	1

NOTE 4. EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES

Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Net Income for the reporting period was as follows:

						Three months ended
						March 31,
In millions						2023						2022
Manufacturing entities
Dongfeng Cummins Engine Company, Ltd.						$	19					$	16
Beijing Foton Cummins Engine Co., Ltd.						16						14
Chongqing Cummins Engine Company, Ltd.						9						9
Tata Cummins, Ltd.						8						9
All other manufacturers						19						(10)			(1)
Distribution entities
Komatsu Cummins Chile, Ltda.						14						7
All other distributors						3						2
Cummins share of net income						88						47
Royalty and interest income						31						49
Equity, royalty and interest income from investees						$	119					$	96
(1) Includes a $28 million impairment of our joint venture with KAMAZ and $3 million of royalty charges as part of our costs associated with the suspension of our Russian operations. See NOTE 15, "RUSSIAN OPERATIONS," to our Condensed Consolidated Financial Statements for additional information.

NOTE 5. INCOME TAXES

Our effective tax rates for the three months ended March 31, 2023 and 2022, were 21.7 percent and 26.8 percent, respectively.

The three months ended March 31, 2023, contained favorable discrete tax items of $3 million, primarily due to share-based compensation tax benefits.

The three months ended March 31, 2022, contained unfavorable discrete items of $31 million, primarily due to $18 million of unfavorable changes associated with the indefinite suspension of Russian operations, $9 million of net unfavorable changes in tax reserves and $4 million of net unfavorable other discrete tax items.

NOTE 6. MARKETABLE SECURITIES

A summary of marketable securities, all of which were classified as current, was as follows:

						March 31, 2023																		December 31, 2022
In millions						Cost						Gross unrealized gains/(losses)****(1)						Estimated fair value						Cost						Gross unrealized gains/(losses)****(1)						Estimated fair value
Equity securities
Certificates of deposit						$	226					$	—					$	226					$	209					$	—					$	209
Debt mutual funds						206						(4)						202						238						(5)						233
Equity mutual funds						31						(2)						29						25						3						28
Debt securities						1						1						2						2						—						2
Marketable securities						$	464					$	(5)					$	459					$	474					$	(2)					$	472
(1) Unrealized gains and losses for debt securities are recorded in other comprehensive income while unrealized gains and losses for equity securities are recorded in our Condensed Consolidated Statements of Net Income.

All debt securities are classified as available-for-sale. All marketable securities presented use a Level 2 fair value measure. The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 securities, and there were no transfers between Level 2 or 3 during the three months ended March 31, 2023, or the year ended December 31, 2022.

A description of the valuation techniques and inputs used for our Level 2 fair value measures is as follows:

*•*Certificates of deposit — These investments provide us with a contractual rate of return and generally range in maturity from three months to five years. The counterparties to these investments are reputable financial institutions with investment grade credit ratings. Since these instruments are not tradable and must be settled directly by us with the respective financial institution, our fair value measure is the financial institution's month-end statement.

*•*Debt mutual funds — The fair value measures for the vast majority of these investments are the daily net asset values published on a regulated governmental website. Daily quoted prices are available from the issuing brokerage and are used on a test basis to corroborate this Level 2 input measure.

• Equity mutual funds — The fair value measures for these investments are the net asset values published by the issuing brokerage. Daily quoted prices are available from reputable third-party pricing services and are used on a test basis to corroborate this Level 2 input measure.

*•*Debt securities — The fair value measures for these securities are broker quotes received from reputable firms. These securities are infrequently traded on a national exchange and these values are used on a test basis to corroborate our Level 2 input measure.

The proceeds from sales and maturities of marketable securities were as follows:

																		Three months ended
												March 31,
In millions																		2023						2022
Proceeds from sales of marketable securities																		$	276					$	195
Proceeds from maturities of marketable securities																		69						59
Investments in marketable securities - liquidations																		$	345					$	254

NOTE 7. INVENTORIES

Inventories are stated at the lower of cost or net realizable value. Inventories included the following:

In millions						March 31, 2023						December 31, 2022
Finished products						$	3,089					$	2,917
Work-in-process and raw materials						3,019						2,926
Inventories at FIFO cost						6,108						5,843
Excess of FIFO over LIFO						(230)						(240)
Inventories						$	5,878					$	5,603

NOTE 8. SUPPLEMENTAL BALANCE SHEET DATA

Other assets included the following:

			In millions						March 31, 2023						December 31, 2022
			Deferred income taxes						$	688					$	625
			Operating lease assets						489						492
			Corporate owned life insurance						409						390
			Other						528						633
			Other assets						$	2,114					$	2,140

Other accrued expenses included the following:

In millions						March 31, 2023						December 31, 2022
Income taxes payable						$	341					$	173
Marketing accruals						339						316
Other taxes payable						226						224
Current portion of operating lease liabilities						133						132
Other						609						620
Other accrued expenses						$	1,648					$	1,465

Other liabilities included the following:

In millions						March 31, 2023						December 31, 2022
Accrued product warranty						$	753					$	744
Deferred income taxes						662						649
Pensions						442						445
Operating lease liabilities						364						368
Long-term income taxes						192						192
Accrued compensation						172						184
Other postretirement benefits						138						141
Mark-to-market valuation on interest rate derivatives						118						151
Other long-term liabilities						442						437
Other liabilities						$	3,283					$	3,311

NOTE 9. DEBT

Loans Payable and Commercial Paper

Loans payable, commercial paper and the related weighted-average interest rates were as follows:

In millions						March 31, 2023												December 31, 2022
Loans payable (1)						$	229											$	210
Commercial paper (2)						2,545												2,574
(1) Loans payable consist primarily of notes payable to various domestic and international financial institutions. It is not practicable to aggregate these notes and calculate a quarterly weighted-average interest rate.
(2) The weighted-average interest rate, inclusive of all brokerage fees, was 4.82 percent and 4.27 percent at March 31, 2023 and December 31, 2022, respectively.

We can issue up to $4.0 billion of unsecured, short-term promissory notes (commercial paper) pursuant to the Board of Directors (the Board) authorized commercial paper programs. These programs facilitate the private placement of unsecured short-term debt through third-party brokers. We intend to use the net proceeds from the commercial paper borrowings for acquisitions and general corporate purposes.

Revolving Credit Facilities

We have access to committed credit facilities totaling $4.0 billion, including the $1.5 billion 364-day facility that expires August 16, 2023, $500 million incremental 364-day facility that expires August 16, 2023, and our $2.0 billion five-year facility that expires on August 18, 2026. We intend to maintain credit facilities at the current or higher aggregate amounts by renewing or replacing these facilities at or before expiration. These revolving credit facilities are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes. There were no outstanding borrowings under these facilities at March 31, 2023 and December 31, 2022. At March 31, 2023, the $2.5 billion of outstanding commercial paper effectively reduced the $4.0 billion of revolving credit capacity to $1.5 billion.

At March 31, 2023, we also had an additional $215 million available for borrowings under our international and other domestic credit facilities.

Long-term Debt

A summary of long-term debt was as follows:

In millions						Interest Rate						March 31, 2023						December 31, 2022
Long-term debt
Senior notes, due 2023(1)						3.65%						$	500					$	500
Term loan, due 2025(2)						Variable						1,450						1,550
Senior notes, due 2025(3)						0.75%						500						500
Debentures, due 2027						6.75%						58						58
Debentures, due 2028						7.125%						250						250
Senior notes, due 2030(3)						1.50%						850						850
Senior notes, due 2043						4.875%						500						500
Senior notes, due 2050						2.60%						650						650
Debentures, due 2098(4)						5.65%						165						165
Other debt												109						121
Unamortized discount and deferred issuance costs												(63)						(64)
Fair value adjustments due to hedge on indebtedness												(102)						(122)
Finance leases												111						113
Total long-term debt												4,978						5,071
Less: Current maturities of long-term debt												569						573
Long-term debt												$	4,409					$	4,498
(1) Senior notes, due 2023, are classified as current maturities of long-term debt.
(2) During the first quarter of 2023, we paid down $100 million of the term loan.
(3) In 2021, we entered into a series of interest rate swaps to effectively convert from a fixed rate to floating rate. See "Interest Rate Risk" in NOTE 14, "DERIVATIVES," to our Condensed Consolidated Financial Statements for additional information.
(4) The effective interest rate is 7.48 percent.

Principal payments required on long-term debt during the next five years are as follows:

In millions						2023						2024						2025						2026						2027
Principal payments						$	559					$	46					$	1,962					$	56					$	65

Fair Value of Debt

Based on borrowing rates currently available to us for bank loans with similar terms and average maturities, considering our risk premium, the fair values and carrying values of total debt, including current maturities, were as follows:

In millions						March 31, 2023						December 31, 2022
Fair value of total debt (1)						$	7,386					$	7,400
Carrying value of total debt						7,752						7,855
(1) The fair value of debt is derived from Level 2 input measures.

Filtration Contingent Debt Agreement

On February 15, 2023, certain of our subsidiaries entered into an amendment to the $1.0 billion credit agreement (Credit Agreement), consisting of a $400 million revolving credit facility and a $600 million term loan facility (Facilities), in anticipation of the separation of our filtration business, which extended the date on which the Credit Agreement terminates from March 30, 2023 to June 30, 2023. Borrowings under the Credit Agreement will not become available under the Credit Agreement unless and until, among other things, there is a sale to the public of shares in our subsidiary that holds the filtration business (Parent Borrower). The Credit Agreement will automatically terminate if no such public sale of shares of Parent Borrower occurs on or prior to June 30, 2023. Borrowings under the Credit Agreement would be available to Parent Borrower and one or more of its subsidiaries (Borrower). If borrowings become available under the Credit Agreement, the Facilities would mature on September 30, 2027.

Borrowings under the Credit Agreement would bear interest at varying rates, depending on the type of loan and, in some cases, the rates of designated benchmarks and the applicable Borrower’s election. Generally, U.S. dollar-denominated loans would bear interest at adjusted term Secured Overnight Financing Rate (SOFR) (which includes a 0.10 percent credit spread adjustment to term SOFR) for the applicable interest period plus a rate ranging from 1.125 percent to 1.75 percent depending on Parent Borrower's net leverage ratio.

NOTE 10. PRODUCT WARRANTY LIABILITY

A tabular reconciliation of the product warranty liability, including the deferred revenue related to our extended warranty coverage and accrued product campaigns, was as follows:

						Three months ended
						March 31,
In millions						2023						2022
Balance, beginning of year						$	2,477					$	2,425
Provision for base warranties issued						146						123
Deferred revenue on extended warranty contracts sold						102						70
Provision for product campaigns issued						6						42
Payments made during period						(143)						(132)
Amortization of deferred revenue on extended warranty contracts						(75)						(73)
Changes in estimates for pre-existing product warranties and campaigns						10						(26)
Acquisition(1)						—						95
Foreign currency translation adjustments and other						7						(1)
Balance, end of period						$	2,530					$	2,523
(1) See NOTE 16, "ACQUISITION," to our Condensed Consolidated Financial Statements for additional information.

We recognized supplier recoveries of $10 million for the three months ended March 31, 2023, compared with $13 million for the comparable period in 2022.

Warranty related deferred revenues and warranty liabilities on our Condensed Consolidated Balance Sheets were as follows:

In millions						March 31, 2023						December 31, 2022						Balance Sheet Location
Deferred revenue related to extended coverage programs
Current portion						$	289					$	290					Current portion of deferred revenue
Long-term portion						742						717						Deferred revenue
Total						$	1,031					$	1,007
Product warranty
Current portion						$	746					$	726					Current portion of accrued product warranty
Long-term portion						753						744						Other liabilities
Total						$	1,499					$	1,470
Total warranty accrual						$	2,530					$	2,477

NOTE 11. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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; environmental matters; and asbestos claims. 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 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 June 28, 2022, KAMAZ Publicly Traded Company (KAMAZ) was designated to the List of Specially Designated Nationals and Blocked Persons by the U.S. Department of the Treasury’s Office of Foreign Assets Control. We filed blocked property reports for relevant assets and are seeking relevant authorizations to extricate ourselves from our relationship with KAMAZ and its subsidiaries, including our unconsolidated joint venture with KAMAZ, in compliance with U.S. law.

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 Environmental Protection Agency (EPA) and California Air Resources Board (CARB) regarding certification of our engines in model year 2019 RAM 2500 and 3500 trucks. This review is being conducted with external advisors as we strive 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. 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 ongoing discussions, the regulators turned their attention to other model years and other engines, most notably our pick-up truck applications for RAM 2500 and 3500 trucks for model years 2013 through 2018 and Titan trucks for model years 2016 through 2019. Most recently, the regulators

have also raised concerns regarding the completeness of our disclosures in our certification applications for RAM 2500 and 3500 trucks for model years 2013 through 2023. We have also been in communication with Environmental and Climate Change Canada regarding similar issues relating to some of these very same platforms. In connection with these and other ongoing discussions with the EPA and CARB, we are developing a new software calibration and will recall model years 2013 through 2018 RAM 2500 and 3500 trucks. We accrued $30 million for the RAM recall during the first quarter of 2022, an amount that reflected our current estimate of the cost of that recall. We are also developing a new software calibration and hardware fix and will recall model years 2016 through 2019 Titan trucks. We accrued $29 million for the Titan recall during the third quarter of 2022, an amount that reflected our current estimate of the cost of that recall.

We will continue to work together closely with the relevant regulators to develop and implement recommendations for improvements and seek to reach further resolutions as part of our ongoing commitment to compliance. Based upon our discussions to date with the regulators which are continuing, such resolutions may involve our agreeing to one or more consent decrees and paying civil penalties. Due to the presence of many unknown facts and circumstances, we are not yet able to estimate any further financial impact of these matters. The consequences resulting from our formal review and these regulatory processes likely will have a material adverse impact on our results of operations and cash flows, however we cannot yet reasonably estimate a loss or range of loss.

Guarantees and Commitments

Periodically, we enter into guarantee arrangements, including guarantees of non-U.S. distributor financings, residual value guarantees on equipment under operating leases and other miscellaneous guarantees of joint ventures or third-party obligations. At March 31, 2023, the maximum potential loss related to these guarantees was $42 million.

We have arrangements with certain suppliers that require us to purchase minimum volumes or be subject to monetary penalties. At March 31, 2023, if we were to stop purchasing from each of these suppliers, the aggregate amount of the penalty would be approximately $161 million. These arrangements enable us to secure supplies of critical components and IT services. We do not currently anticipate paying any penalties under these contracts.

We enter into physical forward contracts with suppliers of platinum and palladium to purchase certain volumes of the commodities at contractually stated prices for various periods, which generally fall within two years. At March 31, 2023, the total commitments under these contracts were $38 million. These arrangements enable us to guarantee the prices of these commodities, which otherwise are subject to market volatility.

We have guarantees with certain customers that require us to satisfactorily honor contractual or regulatory obligations, or compensate for monetary losses related to nonperformance. These performance bonds and other performance-related guarantees were $126 million at March 31, 2023.

Indemnifications

Periodically, we enter into various contractual arrangements where we agree to indemnify a third-party against certain types of losses. Common types of indemnities include:

• product liability and license, patent or trademark indemnifications;

• asset sale agreements where we agree to indemnify the purchaser against future environmental exposures related to the asset sold; and

• any contractual agreement where we agree to indemnify the counterparty for losses suffered as a result of a misrepresentation in the contract.

We regularly evaluate the probability of having to incur costs associated with these indemnities and accrue for expected losses that are probable. Because the indemnifications are not related to specified known liabilities and due to their uncertain nature, we are unable to estimate the maximum amount of the potential loss associated with these indemnifications.

NOTE 12. REDEEMABLE NONCONTROLLING INTERESTS

A 19 percent minority shareholder in one of our businesses, Hydrogenics Corporation (Hydrogenics), has, among other rights and subject to related obligations and restrictive covenants, rights that are exercisable between September 2022 and September 2026 to require us to (1) purchase such shareholder's shares (put option) at an amount up to the fair market value (calculated pursuant to a process outlined in the shareholders' agreement) and (2) sell to such shareholder Hydrogenics' electrolyzer business at an amount up to the fair market value of the electrolyzer business (calculated pursuant to a process outlined in the shareholders’ agreement). We recorded the estimated fair value of the put option as redeemable noncontrolling interests in our Condensed Consolidated Financial Statements with an offset to additional paid-in capital. The redeemable noncontrolling interest balance was $261 million and $258 million at March 31, 2023 and December 31, 2022, respectively.

NOTE 13. ACCUMULATED OTHER COMPREHENSIVE LOSS

Following are the changes in accumulated other comprehensive income (loss) by component for the three months ended:

In millions						Change in pensions and other postretirement defined benefit plans						Foreign currency translation adjustment												Unrealized gain (loss) on derivatives						Total attributable to Cummins Inc.						Noncontrolling interests						Total
Balance at December 31, 2022						$	(427)					$	(1,552)											$	89					$	(1,890)
Other comprehensive income (loss) before reclassifications
Before-tax amount						(13)						75												(3)						59						$	3					$	62
Tax benefit						2						4												1						7						—						7
After-tax amount						(11)						79												(2)						66						3						69
Amounts reclassified from accumulated other comprehensive income (loss)(1)						2						—												(1)						1						—						1
Net current period other comprehensive (loss) income						(9)						79												(3)						67						$	3					$	70
Balance at March 31, 2023						$	(436)					$	(1,473)											$	86					$	(1,823)
Balance at December 31, 2021						$	(346)					$	(1,208)											$	(17)					$	(1,571)
Other comprehensive income (loss) before reclassifications
Before-tax amount						14						11												36						61						$	(8)					$	53
Tax (expense) benefit						(4)						1												(7)						(10)						—						(10)
After-tax amount						10						12												29						51						(8)						43
Amounts reclassified from accumulated other comprehensive income (loss)(1)						6						—												(1)						5						—						5
Net current period other comprehensive income (loss)						16						12												28						56						$	(8)					$	48
Balance at March 31, 2022						$	(330)					$	(1,196)											$	11					$	(1,515)
(1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure.

NOTE 14. DERIVATIVES

We are exposed to financial risk resulting from volatility in foreign exchange rates, interest rates and commodity prices. This risk is closely monitored and managed through the use of physical forward contracts (which are not considered derivatives), and financial derivative instruments including foreign currency forward contracts, commodity swap contracts and interest rate swaps and locks. Financial derivatives are used expressly for hedging purposes and under no circumstances are they used for speculative purposes. When material, we adjust the estimated fair value of our derivative contracts for counterparty or our credit risk. None of our derivative instruments are subject to collateral requirements. Substantially all of our derivative contracts are subject to master netting arrangements, which provide us with the option to settle certain contracts on a net basis when they settle on the same day with the same currency. In addition, these arrangements provide for a net settlement of all contracts with a given counterparty in the event that the arrangement is terminated due to the occurrence of default or a termination event.

Foreign Currency Exchange Rate Risk

We had foreign currency forward contracts with notional amounts of $4.4 billion and $3.6 billion at March 31, 2023 and December 31, 2022, respectively. The following currencies comprise 86 percent and 88 percent of outstanding foreign currency forward contracts at March 31, 2023 and December 31, 2022, respectively: British pound, Chinese renminbi, Euro, Canadian dollar and Australian dollar.

We are further exposed to foreign currency exchange risk as many of our subsidiaries are subject to fluctuations as the functional currencies of the underlying entities are not our U.S. dollar reporting currency. To help minimize movements for certain investments, in the third quarter of 2022 we began entering into foreign exchange forwards designated as net investment hedges for certain of our investments. Under the current terms of our foreign exchange forwards, we agreed with third parties to sell British pound in exchange for U.S. dollar currency at a specified rate at the maturity of the contract. The notional amount of these hedges at March 31, 2023, was $724 million.

The following table summarizes the net investment hedge activity in AOCL:

						Three months ended
						March 31,
In millions						2023
Type of Derivative						Gain (Loss) Recognized in AOCL												Gain (Loss) Reclassified from AOCL into Earnings
Foreign exchange forwards						$	(15)											$	—

Interest Rate Risk

In 2021, we entered into a series of interest rate swaps to effectively convert our $500 million senior notes, due in 2025, from a fixed rate of 0.75 percent to a floating rate equal to the three-month LIBOR plus a spread. We also entered into a series of interest rate swaps to effectively convert $765 million of our $850 million senior notes, due in 2030, from a fixed rate of 1.50 percent to a floating rate equal to the three-month LIBOR plus a spread. We designated the swaps as fair value hedges. The gain or loss on these derivative instruments, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk, are recognized in current income as interest expense. The net swap settlements that accrue each period are also reported in the Condensed Consolidated Financial Statements as interest expense. In March 2023, we settled a portion of our 2021 interest rate swaps with a notional amount of $100 million. The $7 million loss on settlement will be amortized over the remaining term of the related debt.

The following table summarizes the gains and losses:

						Three months ended
						March 31,
In millions						2023												2022
Type of Swap						Gain (Loss) on Swaps						Gain (Loss) on Borrowings						Gain (Loss) on Swaps						Gain (Loss) on Borrowings
Interest rate swaps(1)						$	27					$	(22)					$	(72)					$	80
(1) The difference between the gain (loss) on swaps and borrowings represents hedge ineffectiveness.

In 2019, we entered into $350 million of interest rate lock agreements, and in 2020 we entered into an additional $150 million of lock agreements to reduce the variability of the cash flows of the interest payments on a total of $500 million of fixed rate debt forecast to be issued in 2023 to replace our senior notes at maturity. The terms of the rate locks mirror the time period of the expected fixed rate debt issuance and the expected timing of interest payments on that debt. The gains and losses on these derivative instruments are initially recorded in other comprehensive income and will be released to earnings in interest expense in future periods to reflect the difference in (1) the fixed rates economically locked in at the inception of the hedge and (2) the actual fixed rates established in the debt instrument at issuance. In December 2022, we settled certain rate lock agreements with notional amounts totaling $150 million for $49 million. In February 2023, we settled certain rate lock agreements with notional amounts totaling $100 million for $34 million. The $83 million of gains on settlements will remain in other comprehensive income and will be amortized over the term of the anticipated new debt as discussed above.

The following table summarizes the interest rate lock activity in AOCL:

						Three months ended
						March 31,
In millions						2023												2022
Type of Swap						Gain (Loss) Recognized in AOCL						Gain (Loss) Reclassified from AOCL into Interest Expense						Gain (Loss) Recognized in AOCL						Gain (Loss) Reclassified from AOCL into Interest Expense
Interest rate locks						$	(9)					$	—					$	39					$	—

Cash Flow Hedging

The following table summarizes the effect on our Condensed Consolidated Statements of Net Income for derivative instruments classified as cash flow hedges. The table does not include amounts related to ineffectiveness as it was not material for the periods presented.

						Three months ended
						March 31,
In millions						2023						2022
Gain reclassified from AOCL into income - Net sales(1)						$	1					$	3
Loss reclassified from AOCL into income - Cost of sales(1)(2)						—						(2)
(1) Includes foreign currency forward contracts.
(2) Includes commodity swap contracts.

Derivatives Not Designated as Hedging Instruments

The following table summarizes the effect on our Condensed Consolidated Statements of Net Income for derivative instruments not classified as cash flow hedges:

						Three months ended
						March 31,
In millions						2023						2022
Loss recognized in income - Cost of sales(1)						$	(2)					$	(1)
Gain recognized in income - Other income (expense), net(1)						27						8
(1) Includes foreign currency forward contracts.

Fair Value Amount and Location of Derivative Instruments

The following table summarizes the location and fair value of derivative instruments on our Condensed Consolidated Balance Sheets:

						Derivatives Designated as Hedging Instruments												Derivatives Not Designated as Hedging Instruments
In millions						March 31, 2023						December 31, 2022						March 31, 2023						December 31, 2022
Notional amount						$	2,898					$	3,051					$	3,688					$	2,900
Derivative assets
Prepaid expenses and other current assets						$	16					$	18					$	7					$	27
Other assets						35						80						—						—
Total derivative assets(1)						$	51					$	98					$	7					$	27
Derivative liabilities
Other accrued expenses						$	22					$	19					$	2					$	3
Other liabilities						118						151						—						—
Total derivative liabilities(1)						$	140					$	170					$	2					$	3
(1) Estimates of the fair value of all derivative assets and liabilities above are derived from Level 2 inputs, which are estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 input measures and there were no transfers into or out of Level 2 or 3 during the three months ended March 31, 2023, or the year ended December 31, 2022.

We elected to present our derivative contracts on a gross basis in our Condensed Consolidated Balance Sheets. Had we chosen to present on a net basis, we would have derivatives in a net asset position of $29 million and $52 million and derivatives in a net liability position of $113 million and $100 million at March 31, 2023 and December 31, 2022, respectively.

NOTE 15. RUSSIAN OPERATIONS

On March 17, 2022, the Board indefinitely suspended our operations in Russia due to the ongoing conflict in Ukraine. At the time of suspension, our Russian operations included a wholly-owned distributor in Russia, an unconsolidated joint venture with KAMAZ (a Russian truck manufacturer) and direct sales into Russia from our other business segments. As a result of the suspension of operations, we evaluated the recoverability of assets in Russia and assessed other potential liabilities. We experienced and expect to continue to experience an inability to collect customer receivables and may be the subject of litigation as a consequence of our suspension of commercial operations in Russia. The following summarizes the costs associated with the suspension of our Russian operations in our Condensed Consolidated Statements of Net Income:

						Three months ended
In millions						March 31, 2022												Statement of Net Income Location
Inventory write-downs						$	59											Cost of sales
Accounts receivable reserves						43												Other operating expense, net
Impairment and other joint venture costs						31												Equity, royalty and interest income from investees
Other						25												Other operating expense, net
Total						$	158

For the three month ended March 31, 2023, there were no material additional costs. We will continue to evaluate the situation as conditions evolve and may take additional actions as deemed necessary in future periods.

NOTE 16. ACQUISITION

On February 7, 2022, we purchased Westport Fuel System Inc.'s stake in Cummins Westport, Inc. We will continue to operate the business as the sole owner. The purchase price was $42 million and was allocated primarily to cash, warranty and deferred revenue related to extended coverage contracts. The results of the business were reported in our Engine segment. Pro forma financial information for the acquisition was not presented as the effects are not material to our Condensed Consolidated Financial Statements.

NOTE 17. OPERATING SEGMENTS

Operating segments under GAAP are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (CODM), or decision-making group, in deciding how to allocate resources and in assessing performance. Our CODM is the Chief Executive Officer.

Our reportable operating segments consist of Components, Engine, Distribution, Power Systems and Accelera. This reporting structure is organized according to the products and markets each segment serves. The Components segment sells filtration products, aftertreatment systems, turbochargers, electronics, fuel systems, automated transmissions, axles, drivelines, brakes and suspension systems. The Engine segment produces engines (15 liters and smaller) and associated parts for sale to customers in on-highway and various off-highway markets. Our engines are used in trucks of all sizes, buses and recreational vehicles, as well as in various industrial applications, including construction, agriculture, power generation systems and other off-highway applications. The Distribution segment includes wholly-owned and partially-owned distributorships engaged in wholesaling engines, generator sets and service parts, as well as performing service and repair activities on our products and maintaining relationships with various OEMs throughout the world. The Power Systems segment is an integrated power provider, which designs, manufactures and sells engines (16 liters and larger) for industrial applications (including mining, oil and gas, marine and rail), standby and prime power generator sets, alternators and other power components. The Accelera segment designs, manufactures, sells and supports hydrogen production solutions as well as electrified power systems with innovative components and subsystems, including battery, fuel cell and electric powertrain technologies. The Accelera segment is currently in the early stages of commercializing these technologies with efforts primarily focused on the development of our electrolyzers for hydrogen production and electrified power systems and related components and subsystems. We continue to serve all our markets as they adopt electrification and alternative power technologies, meeting the needs of our OEM partners and end customers.

We use segment earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests (EBITDA) as the primary basis for the CODM to evaluate the performance of each of our reportable operating segments. We believe EBITDA is a useful measure of our operating performance as it assists investors and debt holders in comparing our performance on a consistent basis without regard to financing methods, capital structure, income taxes or depreciation and amortization methods, which can vary significantly depending upon many factors. Segment amounts exclude certain expenses not specifically identifiable to segments.

The accounting policies of our operating segments are the same as those applied in our Condensed Consolidated Financial Statements. We prepared the financial results of our operating segments on a basis that is consistent with the manner in which we internally disaggregate financial information to assist in making internal operating decisions. We allocate certain common costs and expenses, primarily corporate functions, among segments differently than we would for stand-alone financial information prepared in accordance with GAAP. These include certain costs and expenses of shared services, such as information technology, human resources, legal, finance and supply chain management. We do not allocate gains or losses of corporate owned life insurance and certain filtration separation costs to individual segments. EBITDA may not be consistent with measures used by other companies.

As previously announced, in March 2023, we rebranded our New Power segment as "Accelera" to better represent our commitment to zero-emission technologies. In addition, we moved our NPROXX joint venture from the Accelera segment to the Engine segment, which adjusted both the equity, royalty and interest income from investees and segment EBITDA line items for the current and prior year. We started to report results for the changes within our operating segments effective January 1, 2023, and reflected these changes in the historical periods presented.

Summarized financial information regarding our reportable operating segments for the three months ended is shown in the table below:

			In millions																		Components						Engine						Distribution						Power Systems						Accelera						Total Segments
			Three months ended March 31, 2023
			External sales																		$	3,043					$	2,252					$	2,399					$	679					$	80					$	8,453
			Intersegment sales																		514						734						7						664						5						1,924
			Total sales																		3,557						2,986						2,406						1,343						85						10,377
			Research, development and engineering expenses																		91						134						14						63						48						350
			Equity, royalty and interest income (loss) from investees																		21						65						24						13						(4)						119
			Interest income																		6						3						7						2						—						18
			Segment EBITDA																		507			(1)			457						335						219						(94)						1,424
			Depreciation and amortization(2)																		123						51						28						29						14						245
			Three months ended March 31, 2022
			External sales																		$	1,517					$	2,049					$	2,111					$	683					$	25					$	6,385
			Intersegment sales																		471						704						6						477						6						1,664
			Total sales																		1,988						2,753						2,117						1,160						31						8,049
			Research, development and engineering expenses																		76						109						13						64						36						298
			Equity, royalty and interest income (loss) from investees																		28						42			(3)			16						11						(1)						96
			Interest income																		1						4						2						1						—						8
			Russian suspension costs(4)																		6						32			(5)			100						20						—						158
			Segment EBITDA																		320						390						110						90						(65)						845
			Depreciation and amortization(2)																		43						51						28						31						7						160
			(1) Includes $12 million of costs associated with the planned separation of our filtration business.
			(2) Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as interest expense. The amortization of debt discount and deferred costs was $1 million and $1 million for the three months ended March 31, 2023 and March 31, 2022, respectively. A portion of depreciation expense is included in research, development and engineering expenses.
			(3) Includes a $28 million impairment of our joint venture with KAMAZ and $3 million of royalty charges as part of our costs associated with the suspension of our Russian operations. See NOTE 15, "RUSSIAN OPERATIONS," to our Condensed Consolidated Financial Statements for additional information.
			(4) See NOTE 15, "RUSSIAN OPERATIONS," to our Condensed Consolidated Financial Statements for additional information.
			(5) Includes $31 million of Russian suspension costs reflected in the equity, royalty and interest income (loss) from investees line above.

A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Net Income is shown in the table below:

						Three months ended
						March 31,
In millions						2023						2022
TOTAL SEGMENT EBITDA						$	1,424					$	845
Intersegment eliminations and other(1)						(63)						(90)
Less:
Interest expense						87						17
Depreciation and amortization						245						160
INCOME BEFORE INCOME TAXES						$	1,029					$	578
(1)Intersegment eliminations and other included $6 million and $17 million of costs associated with the planned separation of our filtration business for the three months ended March 31, 2023 and 2022.

NOTE 18. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In September 2022, the Financial Accounting Standards Board issued a standard related to the disclosure of additional information about the use of supplier finance programs. Under the new standard, entities are required to disclose (1) key terms of the programs, (2) the amount outstanding that remains unpaid as of the end of the period, including where amounts are recorded in the balance sheets and (3) an annual rollforward of those obligations, including the amount of obligations confirmed and the amount of obligations subsequently paid. We adopted the new standard on January 1, 2023, on a retrospective basis other than the rollforward, which we currently plan to early adopt on a prospective basis beginning with our 2023 annual financial statements. The adoption did not have a material impact on our financial statements. See "Supply Chain Financing" section in NOTE 1, "NATURE OF OPERATIONS AND BASIS OF PRESENTATION," for additional information.

NOTE 19. SUBSEQUENT EVENT

On April 3, 2023, we purchased all of the equity ownership interest of Teksid Hierro de Mexico, S.A. de C.V. (Teksid MX) and Teksid, Inc. from Stellantis N.V. for approximately €138 million, subject to certain adjustments set forth in the agreement. Teksid MX operates a cast iron foundry located in Monclova, Mexico, which primarily forges blocks and heads used in our and other manufacturers’ engines. Teksid, Inc. facilitates the commercialization of Teksid MX products in North America. Since we are the primary customer of the foundry, the acquisition is not expected to result in material incremental sales to our business. The acquisition will be included in our Engine segment starting in the second quarter of 2023. Due to the timing of the acquisition, the initial purchase accounting is not yet complete and will follow in the second quarter Form 10-Q filing.