Item 1. Condensed Consolidated Financial Statements

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Item 1. Condensed Consolidated Financial Statements

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited)



	Three months ended				Nine months ended
	September 30,				September 30,
In millions, except per share amounts	2023		2022		2023		2022
NET SALES (Notes 1 and 2)	$	8,431	$	7,333	$	25,522	$	20,304
Cost of sales	6,360		5,691		19,274		15,404
GROSS MARGIN	2,071		1,642		6,248		4,900

OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses	831		708		2,457		1,945
Research, development and engineering expenses	376		348		1,110		945
Equity, royalty and interest income from investees (Note 4)	118		70		370		261



Other operating expense, net	32		30		78		144
OPERATING INCOME	950		626		2,973		2,127


Interest expense	97		61		283		112
Other income, net	25		43		166		26
INCOME BEFORE INCOME TAXES	878		608		2,856		2,041

Income tax expense (Note 5)	188		199		623		502
CONSOLIDATED NET INCOME	690		409		2,233		1,539

Less: Net income attributable to noncontrolling interests	34		9		67		19
NET INCOME ATTRIBUTABLE TO CUMMINS INC.	$	656	$	400	$	2,166	$	1,520

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic	$	4.63	$	2.83	$	15.29	$	10.74
Diluted	$	4.59	$	2.82	$	15.19	$	10.68

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
Basic	141.8		141.1		141.7		141.5
Dilutive effect of stock compensation awards	1.0		0.9		0.9		0.8
Diluted	142.8		142.0		142.6		142.3

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				Nine months ended
	September 30,				September 30,
In millions	2023		2022		2023		2022
CONSOLIDATED NET INCOME	$	690	$	409	$	2,233	$	1,539
Other comprehensive income (loss), net of tax (Note 12)
Change in pension and other postretirement defined benefit plans	3		6		(4)		28
Foreign currency translation adjustments	(163)		(379)		(191)		(620)

Unrealized gain on derivatives	19		41		28		112
Total other comprehensive loss, net of tax	(141)		(332)		(167)		(480)
COMPREHENSIVE INCOME	549		77		2,066		1,059
Less: Comprehensive income (loss) attributable to noncontrolling interests	27		(6)		61		(19)
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC.	$	522	$	83	$	2,005	$	1,078

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	September 30, 2023		December 31, 2022
ASSETS
Current assets
Cash and cash equivalents	$	2,387	$	2,020
Restricted cash	225		81
Marketable securities (Note 6)	452		472
Total cash, cash equivalents, restricted cash and marketable securities	3,064		2,573
Accounts and notes receivable, net	5,662		5,202


Inventories (Note 7)	5,906		5,603
Prepaid expenses and other current assets	1,280		1,073
Total current assets	15,912		14,451
Long-term assets
Property, plant and equipment	11,098		10,507
Accumulated depreciation	(5,297)		(4,986)
Property, plant and equipment, net	5,801		5,521
Investments and advances related to equity method investees	1,785		1,759
Goodwill	2,379		2,343
Other intangible assets, net	2,518		2,687
Pension assets (Note 3)	1,500		1,398
Other assets (Note 8)	2,202		2,140
Total assets	$	32,097	$	30,299

LIABILITIES
Current liabilities
Accounts payable (principally trade)	$	4,262	$	4,252
Loans payable (Note 9)	231		210
Commercial paper (Note 9)	1,710		2,574
Current maturities of long-term debt (Note 9)	573		573
Accrued compensation, benefits and retirement costs	884		617
Current portion of accrued product warranty (Note 10)	731		726
Current portion of deferred revenue (Note 2)	1,029		1,004

Other accrued expenses (Note 8)	1,706		1,465
Total current liabilities	11,126		11,421
Long-term liabilities
Long-term debt (Note 9)	4,950		4,498


Deferred revenue (Note 2)	1,011		844
Other liabilities (Note 8)	3,332		3,311
Total liabilities	$	20,419	$	20,074

Commitments and contingencies (Note 11)

Redeemable noncontrolling interests (Note 16)	$	—	$	258

EQUITY
Cummins Inc. shareholders’ equity
Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.5 shares issued	$	2,558	$	2,243
Retained earnings	19,520		18,037
Treasury stock, at cost, 80.8 and 81.2 shares	(9,369)		(9,415)

Accumulated other comprehensive loss (Note 12)	(2,051)		(1,890)



Total Cummins Inc. shareholders’ equity	10,658		8,975
Noncontrolling interests	1,020		992
Total equity	$	11,678	$	9,967
Total liabilities, redeemable noncontrolling interests and equity	$	32,097	$	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)


	Nine months ended
	September 30,
In millions	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income	$	2,233	$	1,539
Adjustments to reconcile consolidated net income to net cash provided by operating activities
Depreciation and amortization	760		544



Deferred income taxes	(238)		(194)
Equity in income of investees, net of dividends	(100)		(30)
Pension and OPEB expense (Note 3)	4		23
Pension contributions and OPEB payments (Note 3)	(115)		(71)





Russian suspension costs, net of recoveries (Note 14)	—		112




Changes in current assets and liabilities, net of acquisitions
Accounts and notes receivable	(447)		(333)
Inventories	(318)		(597)
Other current assets	(191)		(18)
Accounts payable	43		353
Accrued expenses	543		(124)


Other, net	333		(59)
Net cash provided by operating activities	2,507		1,145

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(694)		(453)




Acquisitions of businesses, net of cash acquired (Note 16)	(127)		(3,008)

Investments in marketable securities—acquisitions	(976)		(738)
Investments in marketable securities—liquidations (Note 6)	1,002		819



Other, net	(65)		(116)
Net cash used in investing activities	(860)		(3,496)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings	779		2,076
Net (payments) borrowings of commercial paper	(566)		2,080
Payments on borrowings and finance lease obligations	(391)		(1,070)


Dividend payments on common stock	(683)		(633)
Repurchases of common stock	—		(370)



Payments for purchase of redeemable noncontrolling interests (Note 16)	(175)		—
Other, net	(33)		28
Net cash (used in) provided by financing activities	(1,069)		2,111
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(67)		147
Net increase (decrease) in cash, cash equivalents and restricted cash	511		(93)
Cash, cash equivalents and restricted cash at beginning of year	2,101		2,592
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	2,612	$	2,499

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 JUNE 30, 2023	$	—	$	556	$	1,976	$	19,102	$	(9,380)	$	(1,917)	$	10,337	$	1,019	$	11,356

Net income							656						656		34		690
Other comprehensive loss, net of tax (Note 12)											(134)		(134)		(7)		(141)
Issuance of common stock					1								1		—		1


Cash dividends on common stock, $1.68 per share							(238)						(238)		—		(238)
Distributions to noncontrolling interests													—		(26)		(26)
Share-based awards					3				10				13		—		13




Other shareholder transactions					22				1				23		—		23
BALANCE AT SEPTEMBER 30, 2023	$	—	$	556	$	2,002	$	19,520	$	(9,369)	$	(2,051)	$	10,658	$	1,020	$	11,678

BALANCE AT JUNE 30, 2022	$	226	$	556	$	1,668	$	17,450	$	(9,439)	$	(1,696)	$	8,539	$	890	$	9,429

Net income	(7)						400						400		16		416
Other comprehensive loss, net of tax (Note 12)											(317)		(317)		(15)		(332)
Issuance of common stock					7								7		—		7

Repurchases of common stock									(23)				(23)		—		(23)
Cash dividends on common stock, $1.57 per share							(222)						(222)		—		(222)
Distributions to noncontrolling interests													—		(24)		(24)
Share-based awards					4				13				17		—		17
Acquisition of business													—		111		111
Fair value adjustment of redeemable noncontrolling interests	33				(33)								(33)		—		(33)
Other shareholder transactions					12								12		—		12
BALANCE AT SEPTEMBER 30, 2022	$	252	$	556	$	1,658	$	17,628	$	(9,449)	$	(2,013)	$	8,380	$	978	$	9,358

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


	Nine 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	(20)						2,166						2,166		87		2,253
Other comprehensive loss, net of tax (Note 12)											(161)		(161)		(6)		(167)
Issuance of common stock					3								3		—		3


Cash dividends on common stock, $4.82 per share							(683)						(683)		—		(683)
Distributions to noncontrolling interests													—		(50)		(50)
Share-based awards					(1)				42				41		—		41

Fair value adjustment of redeemable noncontrolling interests	33				(33)								(33)		—		(33)
Acquisition of redeemable noncontrolling interests (Note 16)	(271)												—		—		—
Sale of Atmus stock (Note 15)					285								285		(3)		282
Other shareholder transactions					61				4				65		—		65
BALANCE AT SEPTEMBER 30, 2023	$	—	$	556	$	2,002	$	19,520	$	(9,369)	$	(2,051)	$	10,658	$	1,020	$	11,678

BALANCE AT DECEMBER 31, 2021	$	366	$	556	$	1,543	$	16,741	$	(9,123)	$	(1,571)	$	8,146	$	889	$	9,035

Net income	(18)						1,520						1,520		37		1,557
Other comprehensive loss, net of tax (Note 12)											(442)		(442)		(38)		(480)
Issuance of common stock					8								8		—		8

Repurchases of common stock									(370)				(370)		—		(370)
Cash dividends on common stock, $4.47 per share							(633)						(633)		—		(633)
Distributions to noncontrolling interests													—		(38)		(38)
Share-based awards					(3)				39				36		—		36
Acquisition of business													—		111		111
Fair value adjustment of redeemable noncontrolling interests	(96)				96								96		—		96
Other shareholder transactions					14				5				19		17		36
BALANCE AT SEPTEMBER 30, 2022	$	252	$	556	$	1,658	$	17,628	$	(9,449)	$	(2,013)	$	8,380	$	978	$	9,358

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 technologies and fuel cell products. We sell our products to original equipment manufacturers (OEMs), distributors, dealers and other customers worldwide. We serve our customers through a service network of approximately 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 consolidated financial statements should be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022. Our interim period financial results for the three and nine 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		Nine months ended
	September 30,		September 30,
	2023	2022	2023	2022
Options excluded	7,267	22,307	8,770	25,290

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				Nine months ended
	September 30,				September 30,
In millions	2023		2022		2023		2022
Sales to nonconsolidated equity investees	$	315	$	295	$	1,011	$	920
Purchases from nonconsolidated equity investees	602		515		1,993		1,270

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


In millions	September 30, 2023		December 31, 2022		Balance Sheet Location
Accounts receivable from nonconsolidated equity investees	$	458	$	376	Accounts and notes receivable, net
Accounts payable to nonconsolidated equity investees	296		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, which generally have 60 to 90 day payment terms. The maximum amount that we could have outstanding under the program was $482 million at September 30, 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 September 30, 2023 and December 31, 2022, were $220 million and $331 million, respectively.

NOTE 2. REVENUE FROM CONTRACTS WITH CUSTOMERS

Long-term Contracts

We have certain arrangements, primarily long-term maintenance agreements, construction contracts, product sales with associated performance obligations extending beyond a year 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 September 30, 2023, was $795 million. We expect to recognize the related revenue of $334 million over the next 12 months and $461 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	September 30, 2023		December 31, 2022
Unbilled revenue	$	296	$	257
Deferred revenue	2,040		1,848

We recognized revenue of $126 million and $510 million for the three and nine months ended September 30, 2023, compared with $123 million and $539 million for the comparable periods 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 and nine months ended September 30, 2023 or 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				Nine months ended
	September 30,				September 30,
In millions	2023		2022		2023		2022
United States (1)	$	4,886	$	4,226	$	14,625	$	11,471

China	721		601		2,273		1,774


India	374		358		1,198		978

Other international (1)	2,450		2,148		7,426		6,081
Total net sales	$	8,431	$	7,333	$	25,522	$	20,304

(1) We revised $110 million from other international to United States for both the three and nine months ended September 30, 2022.

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 fuel 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. On May 26, 2023, with the Atmus Filtration Technologies Inc. (Atmus) initial public offering (IPO), we changed the name of our Components' filtration business to Atmus. See NOTE 15, "FORMATION OF ATMUS AND IPO," to our Condensed Consolidated Financial Statements for additional information.

Components segment external sales by business were as follows:


	Three months ended				Nine months ended
	September 30,				September 30,
In millions	2023		2022		2023		2022
Axles and brakes	$	1,177	$	732	$	3,698	$	732
Emission solutions	803		748		2,584		2,323
Atmus	324		322		1,007		949
Engine components	263		239		838		702
Automated transmissions	187		159		545		436
Software and electronics	26		20		75		72
Total sales	$	2,780	$	2,220	$	8,747	$	5,214

Engine segment external sales by market were as follows:


	Three months ended				Nine months ended
	September 30,				September 30,
In millions	2023		2022		2023		2022
Heavy-duty truck	$	885	$	751	$	2,601	$	2,232
Medium-duty truck and bus	656		583		1,960		1,794
Light-duty automotive	451		465		1,336		1,377
Total on-highway	1,992		1,799		5,897		5,403
Off-highway	244		264		854		801
Total sales	$	2,236	$	2,063	$	6,751	$	6,204

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				Nine months ended
	September 30,				September 30,
In millions	2023		2022		2023		2022
North America	$	1,719	$	1,512	$	5,195	$	4,374
Asia Pacific	292		258		796		744
Europe	200		181		607		702
China	110		89		323		270
Africa and Middle East	77		79		219		190
India	66		55		186		155
Latin America	55		58		168		155

Total sales	$	2,519	$	2,232	$	7,494	$	6,590

Distribution segment external sales by product line were as follows:


	Three months ended				Nine months ended
	September 30,				September 30,
In millions	2023		2022		2023		2022
Parts	$	991	$	942	$	3,054	$	2,855
Power generation	601		428		1,701		1,266
Engines	507		449		1,490		1,315
Service	420		413		1,249		1,154
Total sales	$	2,519	$	2,232	$	7,494	$	6,590

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


	Three months ended				Nine months ended
	September 30,				September 30,
In millions	2023		2022		2023		2022
Power generation	$	420	$	425	$	1,247	$	1,232
Industrial	263		226		670		627
Generator technologies	115		122		354		331
Total sales	$	798	$	773	$	2,271	$	2,190

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				Nine months ended
	September 30,				September 30,
In millions	2023		2022		2023		2022



Defined benefit pension contributions	$	8	$	7	$	102	$	46


OPEB payments, net	4		9		13		25


Defined contribution pension plans	29		26		102		82

We anticipate making additional defined benefit pension contributions during the remainder of 2023 of $13 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 September 30,
In millions	2023		2022		2023		2022		2023		2022
Service cost	$	29	$	35	$	4	$	7	$	—	$	—
Interest cost	42		27		18		10		2		2
Expected return on plan assets	(69)		(60)		(27)		(22)		—		—
Amortization of prior service cost	—		1		1		—		—		—
Recognized net actuarial loss (gain)	2		5		—		1		(1)		—
Net periodic benefit expense (income)	$	4	$	8	$	(4)	$	(4)	$	1	$	2


	Pension
	U.S. Plans				U.K. Plans				OPEB
	Nine months ended September 30,
In millions	2023		2022		2023		2022		2023		2022
Service cost	$	87	$	103	$	12	$	23	$	—	$	—
Interest cost	126		71		53		28		6		4
Expected return on plan assets	(207)		(164)		(79)		(62)		—		—
Amortization of prior service cost	1		1		1		—		—		—
Recognized net actuarial loss (gain)	6		17		—		2		(2)		—
Net periodic benefit expense (income)	$	13	$	28	$	(13)	$	(9)	$	4	$	4

NOTE 4. EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES

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


	Three months ended				Nine months ended
	September 30,				September 30,
In millions	2023		2022		2023		2022
Manufacturing entities
Dongfeng Cummins Engine Company, Ltd.	$	15	$	8	$	52	$	35
Beijing Foton Cummins Engine Co., Ltd.	8		6		33		34
Chongqing Cummins Engine Company, Ltd.	7		7		29		23
Tata Cummins, Ltd.	6		5		21		19
All other manufacturers	18		11		69		14		(1)


Distribution entities
Komatsu Cummins Chile, Ltda.	13		13		40		32
All other distributors	3		3		10		8


Cummins share of net income	70		53		254		165
Royalty and interest income	48		17		116		96
Equity, royalty and interest income from investees	$	118	$	70	$	370	$	261


(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 indefinite suspension of our Russian operations. See NOTE 14, "RUSSIAN OPERATIONS," to our Condensed Consolidated Financial Statements for additional information.

In September 2023, our Accelera business signed an agreement to form a joint venture with Daimler Trucks and Buses US Holding LLC (Daimler Truck), PACCAR Inc. (PACCAR) and EVE Energy to accelerate and localize battery cell production and the battery supply chain in the U.S., including building a 21-gigawatt hour battery production facility. The joint venture will manufacture battery cells for electric commercial vehicles and industrial applications. Accelera, Daimler Truck and PACCAR will each own 30 percent of the joint venture, while EVE Energy will own 10 percent. Total investment by the partners is expected to be in the range of $2 billion to $3 billion for the 21-gigawatt hour facility. The transaction is subject to closing conditions and receipt of applicable merger control and regulatory approvals including submission of a voluntary notice to the Committee on Foreign Investment in the U.S., which is currently expected in late 2023 or early 2024.

NOTE 5. INCOME TAXES

Our effective tax rates for the three and nine months ended September 30, 2023, were 21.4 percent and 21.8 percent, respectively. Our effective tax rates for the three and nine months ended September 30, 2022, were 32.7 percent and 24.6 percent, respectively.

The three months ended September 30, 2023, contained net favorable discrete tax items of $5 million, primarily due to $13 million of favorable return to provision adjustments and $1 million of favorable share-based compensation tax benefits, partially offset by $9 million of unfavorable adjustments for uncertain tax positions.

The nine months ended September 30, 2023, contained net favorable discrete tax items of $5 million, primarily due to $15 million of favorable return to provision adjustments and $5 million of favorable share-based compensation tax benefit, partially offset by $11 million of unfavorable adjustments for uncertain tax positions and $4 million of other unfavorable adjustments.

The three months ended September 30, 2022, contained unfavorable discrete tax items of $57 million, primarily due to $51 million of unfavorable tax costs associated with internal restructuring ahead of the planned separation of Atmus and $10 million of unfavorable return to provision adjustments, partially offset by $4 million of net favorable other discrete tax items.

The nine months ended September 30, 2022, contained unfavorable net discrete tax items of $52 million, primarily due to $69 million of unfavorable tax costs associated with internal restructuring ahead of the planned separation of Atmus and $10 million of unfavorable return to provision adjustments, partially offset by $27 million of favorable changes in tax reserves.

NOTE 6. MARKETABLE SECURITIES

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


	September 30, 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






Debt mutual funds	$	236	$	(7)	$	229	$	238	$	(5)	$	233
Certificates of deposit	191		—		191		209		—		209


Equity mutual funds	24		4		28		25		3		28

Debt securities	4		—		4		2		—		2







Marketable securities	$	455	$	(3)	$	452	$	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 nine months ended September 30, 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:

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

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

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

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

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


	Nine months ended
	September 30,
In millions		2023		2022
Proceeds from sales of marketable securities		$	812	$	576
Proceeds from maturities of marketable securities		190		243
Investments in marketable securities - liquidations		$	1,002	$	819

NOTE 7. INVENTORIES

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


In millions	September 30, 2023		December 31, 2022
Finished products	$	3,168	$	2,917
Work-in-process and raw materials	2,988		2,926
Inventories at FIFO cost	6,156		5,843
Excess of FIFO over LIFO	(250)		(240)
Inventories	$	5,906	$	5,603

NOTE 8. SUPPLEMENTAL BALANCE SHEET DATA

Other assets included the following:



In millions	September 30, 2023		December 31, 2022
Deferred income taxes	$	865	$	625
Operating lease assets	500		492
Corporate owned life insurance	383		390

Other	454		633
Other assets	$	2,202	$	2,140

Other accrued expenses included the following:



In millions	September 30, 2023		December 31, 2022
Marketing accruals	$	403	$	316
Income taxes payable	239		173
Other taxes payable	238		224
Current portion of operating lease liabilities	133		132
Other	693		620
Other accrued expenses	$	1,706	$	1,465

Other liabilities included the following:



In millions	September 30, 2023		December 31, 2022

Accrued product warranty (1)	$	806	$	744
Deferred income taxes	607		649
Pensions	438		445
Operating lease liabilities	373		368
Accrued compensation	192		184
Mark-to-market valuation on interest rate derivatives	155		151
Other postretirement benefits	135		141
Long-term income taxes	120		192
Other long-term liabilities	506		437
Other liabilities	$	3,332	$	3,311

(1) See NOTE 10, "PRODUCT WARRANTY LIABILITY," to our Condensed Consolidated Financial Statements for additional information.

NOTE 9. DEBT

Loans Payable and Commercial Paper

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


In millions	September 30, 2023		December 31, 2022


Loans payable (1)	$	231	$	210

Commercial paper (2)	1,710		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 5.48 percent and 4.27 percent at September 30, 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

On June 5, 2023, we entered into an amended and restated 364-day credit agreement that allows us to borrow up to $2.0 billion of unsecured funds at any time prior to June 3, 2024. This credit agreement amended and restated the prior $1.5 billion 364-day credit facility that matured on August 16, 2023. In connection with the 364-day credit agreement, effective June 5, 2023, we terminated our $500 million incremental 364-day credit agreement dated August 17, 2022.

We have access to committed credit facilities totaling $4.0 billion, including our $2.0 billion 364-day facility that expires June 3, 2024, 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 September 30, 2023 and December 31, 2022. At September 30, 2023, the $1.7 billion of outstanding commercial paper effectively reduced the $4.0 billion of revolving credit capacity to $2.3 billion.

At September 30, 2023, we also had an additional $356 million available for borrowings under our international and other domestic credit facilities.

At September 30, 2023, Atmus had no outstanding borrowings under its $400 million revolving credit facility. See "Atmus Credit Agreement" section below for additional details.

Long-term Debt

A summary of long-term debt was as follows:


In millions	Interest Rate	September 30, 2023		December 31, 2022
Long-term debt
Senior notes, due 2023 (1)	3.65%	$	500	$	500
Hydrogenics promissory notes, due 2024 and 2025 (2)	—%	160		—
Term loan, due 2025 (3) (4)	Variable	1,350		1,550
Senior notes, due 2025 (5)	0.75%	500		500

Atmus term loan, due 2027 (6)	Variable	600		—
Debentures, due 2027	6.75%	58		58
Debentures, due 2028	7.125%	250		250
Senior notes, due 2030 (5)	1.50%	850		850
Senior notes, due 2043	4.875%	500		500
Senior notes, due 2050	2.60%	650		650
Debentures, due 2098 (7)	5.65%	165		165

Other debt		56		121

Unamortized discount and deferred issuance costs		(75)		(64)
Fair value adjustments due to hedge on indebtedness		(141)		(122)
Finance leases		100		113
Total long-term debt		5,523		5,071
Less: Current maturities of long-term debt		573		573
Long-term debt		$	4,950	$	4,498

(1) Senior notes, due 2023, are classified as current maturities of long-term debt. On October 2, 2023, we repaid the $500 million senior notes. See NOTE 19, "SUBSEQUENT EVENTS," to our Condensed Consolidated Financial Statements for additional information.
(2) See NOTE 16, "ACQUISITIONS," to our Condensed Consolidated Financial Statements for additional information.
(3) During the first nine months of 2023, we paid down $200 million of the term loan, and on October 31, 2023, we repaid an additional $150 million of the term loan.
(4) In September 2023, we entered into a series of interest rate swaps in order to trade a portion of the floating rate debt into fixed rate. See "Interest Rate Risk" in NOTE 13, "DERIVATIVES," to our Condensed Consolidated Financial Statements for additional information.
(5) In 2021, we entered into a series of interest rate swaps to effectively convert debt from a fixed rate to floating rate. See "Interest Rate Risk" in NOTE 13, "DERIVATIVES," to our Condensed Consolidated Financial Statements for additional information.
(6) See "Atmus Credit Agreement" section below for additional information.
(7) 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	$	523	(1)	$	106	$	1,989	$	50	$	604

(1) On October 2, 2023, we repaid our $500 million senior notes, due 2023. See NOTE 19, "SUBSEQUENT EVENTS," to our Condensed Consolidated Financial Statements for additional information.

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	September 30, 2023		December 31, 2022
Fair value of total debt (1)	$	6,939	$	7,400
Carrying value of total debt	7,464		7,855

(1) The fair value of debt is derived from Level 2 input measures.

Atmus Credit 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, in anticipation of the separation of Atmus, which extended the date on which the Credit Agreement terminated from March 30, 2023, to June 30, 2023. On May 26, 2023, Atmus drew down the entire $600 million term loan facility and borrowed $50 million under the revolving credit facility. Borrowings under the Credit Agreement mature in September 2027 (with quarterly payments on the term loan beginning in September 2024) and 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 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. The Credit Agreement contains customary events of default and financial and other covenants, including maintaining a net leverage ratio of 4.0 to 1.0 and a minimum interest coverage ratio of 3.0 to 1.0. At September 30, 2023, they had no outstanding borrowings under the revolving credit facility and $600 million outstanding under the term loan facility. See NOTE 15, "FORMATION OF ATMUS AND IPO," to our Condensed Consolidated Financial Statements for additional information.

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:


	Nine months ended
	September 30,
In millions	2023		2022
Balance, beginning of year	$	2,477	$	2,425
Provision for base warranties issued	458		395
Deferred revenue on extended warranty contracts sold	244		215
Provision for product campaigns issued	17		132
Payments made during period	(429)		(476)

Amortization of deferred revenue on extended warranty contracts	(226)		(220)
Changes in estimates for pre-existing product warranties and campaigns	19		(80)
Acquisitions	—		144
Foreign currency translation adjustments and other	(2)		19

Balance, end of period	$	2,558	$	2,554

We recognized supplier recoveries of $7 million and $19 million for the three and nine months ended September 30, 2023, compared with $10 million and $33 million for the comparable periods in 2022.

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


In millions	September 30, 2023		December 31, 2022		Balance Sheet Location
Deferred revenue related to extended coverage programs
Current portion	$	282	$	290	Current portion of deferred revenue
Long-term portion	739		717		Deferred revenue
Total	$	1,021	$	1,007

Product warranty
Current portion	$	731	$	726	Current portion of accrued product warranty
Long-term portion	806		744		Other liabilities
Total	$	1,537	$	1,470

Total warranty accrual	$	2,558	$	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 (OFAC). We filed blocked property reports for relevant assets and sought 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. and other applicable laws. We received OFAC authorization on May 26, 2023, and from the U.K. Office of Financial Sanctions Implementation on September 15, 2023, which will allow us to finalize the exit of our unconsolidated joint venture with KAMAZ.

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 September 30, 2023, the maximum potential loss related to these guarantees was $47 million.

We have arrangements with certain suppliers that require us to purchase minimum volumes or be subject to monetary penalties. At September 30, 2023, if we were to stop purchasing from each of these suppliers, the aggregate amount of the penalty would be approximately $252 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 September 30, 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 $154 million at September 30, 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. 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 pension and OPEB plans		Foreign currency translation adjustment		Unrealized gain (loss) on derivatives		Total attributable to Cummins Inc.		Noncontrolling interests		Total
Balance at June 30, 2023	$	(434)	$	(1,581)	$	98	$	(1,917)
Other comprehensive income (loss) before reclassifications
Before-tax amount	1		(154)		34		(119)		$	(7)	$	(126)
Tax expense	—		(2)		(9)		(11)		—		(11)
After-tax amount	1		(156)		25		(130)		(7)		(137)
Amounts reclassified from accumulated other comprehensive income (loss) (1)	2		—		(6)		(4)		—		(4)

Net current period other comprehensive income (loss)	3		(156)		19		(134)		$	(7)	$	(141)
Balance at September 30, 2023	$	(431)	$	(1,737)	$	117	$	(2,051)

Balance at June 30, 2022	$	(324)	$	(1,426)	$	54	$	(1,696)
Other comprehensive income (loss) before reclassifications
Before-tax amount	—		(365)		51		(314)		$	(15)	$	(329)
Tax benefit (expense)	—		1		(13)		(12)		—		(12)
After-tax amount	—		(364)		38		(326)		(15)		(341)
Amounts reclassified from accumulated other comprehensive income (1)	6		—		3		9		—		9
Net current period other comprehensive income (loss)	6		(364)		41		(317)		$	(15)	$	(332)
Balance at September 30, 2022	$	(318)	$	(1,790)	$	95	$	(2,013)

(1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure.

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


In millions	Change in pension and OPEB 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	(12)		(190)		49		(153)		$	(6)	$	(159)
Tax benefit (expense)	2		5		(10)		(3)		—		(3)
After-tax amount	(10)		(185)		39		(156)		(6)		(162)
Amounts reclassified from accumulated other comprehensive income (loss) (1)	6		—		(11)		(5)		—		(5)

Net current period other comprehensive (loss) income	(4)		(185)		28		(161)		$	(6)	$	(167)
Balance at September 30, 2023	$	(431)	$	(1,737)	$	117	$	(2,051)

Balance at December 31, 2021	$	(346)	$	(1,208)	$	(17)	$	(1,571)
Other comprehensive income (loss) before reclassifications
Before-tax amount	14		(589)		146		(429)		$	(38)	$	(467)
Tax (expense) benefit	(3)		7		(35)		(31)		—		(31)
After-tax amount	11		(582)		111		(460)		(38)		(498)
Amounts reclassified from accumulated other comprehensive income (1)	17		—		1		18		—		18
Net current period other comprehensive income (loss)	28		(582)		112		(442)		$	(38)	$	(480)
Balance at September 30, 2022	$	(318)	$	(1,790)	$	95	$	(2,013)

(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 13. 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 $4.7 billion and $3.6 billion at September 30, 2023, and December 31, 2022, respectively. The following currencies comprise 87 percent and 88 percent of outstanding foreign currency forward contracts at September 30, 2023, and December 31, 2022, respectively: British pound, Chinese renminbi, Canadian dollar, Euro 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 September 30, 2023, was $776 million.

The following table summarizes the net investment hedge activity in accumulated other comprehensive loss (AOCL):


	Three months ended									Nine months ended
	September 30,									September 30,
In millions	2023				2022					2023			2022
Type of Derivative	Gain (Loss) Recognized in AOCL		Gain (Loss) Reclassified from AOCL into Earnings			Gain (Loss) Recognized in AOCL		Gain (Loss) Reclassified from AOCL into Earnings			Gain (Loss) Recognized in AOCL		Gain (Loss) Reclassified from AOCL into Earnings		Gain (Loss) Recognized in AOCL		Gain (Loss) Reclassified from AOCL into Earnings

Foreign exchange forwards	$	22	$	—		$	29	$	—		$	(6)	$	—	$	29	$	—

Interest Rate Risk

In September 2023, we entered into a series of interest rate swaps with a total notional value of $500 million in order to trade a portion of the floating rate into a fixed rate on our term loan, due in 2025. The maturity date of the interest rate swaps is August 1, 2025. The weighted-average interest rate of the interest rate swaps is 5.72 percent. We designated the swaps as cash flow hedges. The gains and losses on these derivative instruments are initially recorded in other comprehensive income and reclassified into earnings as interest expense in the Condensed Consolidated Financial Statements as each interest payment is accrued. The interest rate swap activity in AOCL was immaterial for the three and nine months ended September 30, 2023.

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. The fallback protocol in our derivative agreements allowed for a transition from LIBOR to SOFR in the third quarter of 2023. 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								Nine months ended
	September 30,								September 30,
In millions	2023				2022				2023				2022
Type of Swap	Gain (Loss) on Swaps		Gain (Loss) on Borrowings		Gain (Loss) on Swaps		Gain (Loss) on Borrowings		Gain (Loss) on Swaps		Gain (Loss) on Borrowings		Gain (Loss) on Swaps		Gain (Loss) on Borrowings
Interest rate swaps (1)	$	(17)	$	19	$	(47)	$	45	$	(10)	$	13	$	(158)	$	159

(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. In August 2023, we settled all remaining rate lock agreements with notional amounts totaling $250 million for $67 million. The $150 million of gains on settlements will remain in other comprehensive income and will be amortized over the term of the anticipated new debt.

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


	Three months ended								Nine months ended
	September 30,								September 30,
In millions	2023				2022				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		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	$	15	$	—	$	21	$	—	$	16	$	—	$	103	$	—

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				Nine months ended
	September 30,				September 30,
In millions	2023		2022		2023		2022
Gain (loss) reclassified from AOCL into income - Net sales (1)	$	7	$	(4)	$	12	$	(2)
Gain reclassified from AOCL into income - Cost of sales (1)(2)	1		1		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 designated as hedging instruments:


	Three months ended				Nine months ended
	September 30,				September 30,
In millions	2023		2022		2023		2022
Gain (loss) recognized in income - Cost of sales (1)	$	1	$	5	$	(2)	$	7
Loss recognized in income - Other income (expense), net (1)	(60)		(84)		(77)		(107)


(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	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Notional amount	$	2,824	$	3,051	$	3,968	$	2,900

Derivative assets
Prepaid expenses and other current assets	$	42	$	18	$	5	$	27

Other assets	—		80		—		—
Total derivative assets (1)	$	42	$	98	$	5	$	27

Derivative liabilities
Other accrued expenses	$	5	$	19	$	21	$	3
Other liabilities	155		151		—		—
Total derivative liabilities (1)	$	160	$	170	$	21	$	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 nine months ended September 30, 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 $9 million and $52 million and derivatives in a net liability position of $143 million and $100 million at September 30, 2023, and December 31, 2022, respectively.

NOTE 14. 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 indefinite suspension of operations, we evaluated the recoverability of assets in Russia and assessed other potential liabilities. We experienced an inability to collect customer receivables and may be the subject of litigation as a consequence of our indefinite suspension of commercial operations in Russia. The following summarizes the costs (recoveries) associated with the suspension of our Russian operations in our Condensed Consolidated Statements of Net Income:


	Three months ended		Nine months ended
In millions	September 30, 2022		September 30, 2022		Statement of Net Income Location
Inventory write-downs	$	(2)	$	17	Cost of sales
Accounts receivable reserves	(1)		42		Other operating expense, net
Impairment and other joint venture costs	—		31		Equity, royalty and interest income from investees

Other	4		22		Other operating expense, net
Total	$	1	$	112

For the three and nine months ended September 30, 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 15. FORMATION OF ATMUS AND IPO

On May 23, 2023, in connection with the Atmus IPO, Cummins issued approximately $350 million of commercial paper with certain lenders. On May 26, 2023, Atmus shares began trading on the New York Stock Exchange under the symbol "ATMU." The IPO was completed on May 30, 2023, whereby Cummins exchanged 19.5 percent (approximately 16 million shares) of its ownership in Atmus, at $19.50 per share, to retire $299 million of the commercial paper as proceeds from the offering through a non-cash transaction.

In connection with the completion of the IPO, through a series of asset and equity contributions, we transferred the filtration business to Atmus. In exchange, Atmus transferred consideration of $650 million to Cummins, which consisted primarily of the net proceeds from a term loan facility and revolver executed by Atmus during May 2023. The commercial paper issued and retired through the IPO proceeds, coupled with the $650 million received, is intended to be used for the retirement of our historical debt, dividends and share repurchases. The difference between the commercial paper retired from the IPO, other IPO related fees and the net book value of our divested interest was $285 million and was recorded as an offset to additional paid-in capital. Of our consolidated cash and cash equivalents at September 30, 2023, $130 million is retained by Atmus for its working capital purposes. See NOTE 9*, "DEBT,"* to our Condensed Consolidated Financial Statements for additional information.

We will continue to consolidate the financial position and results of Atmus, so long as we retain control. The earnings attributable to the divested, noncontrolling interest for the three and nine months ended September 30, 2023, were $7 million and $10 million, respectively. At September 30, 2023, the noncontrolling interest associated with Atmus is reflected in noncontrolling interests in our Condensed Consolidated Balance Sheets.

Subject to market conditions, we intend to make a tax-free split-off of Atmus, pursuant to which Cummins will offer its stockholders the option to exchange their shares of Cummins common stock for shares of Atmus common stock in an exchange offer.

NOTE 16. ACQUISITIONS

Acquisitions for the nine months ended September 30, 2023 and 2022, were as follows:


Entity Acquired (Dollars in millions)	Date of Acquisition	Additional Percent Interest Acquired	Payments to Former Owners		Acquisition Related Debt Retirements		Total Purchase Consideration			Type of Acquisition(1)	Goodwill Acquired		Intangibles Recognized(2)
2023
Hydrogenics Corporation (Hydrogenics)	06/29/23	19%	$	287	$	48	$	335	(3)	EQUITY	$	—	$	—
Teksid Hierro de Mexico, S.A. de C.V. (Teksid MX)	04/03/23	100%	143		—		143		(4)	COMB	18		—
2022 (5)
Meritor, Inc. (Meritor)	08/03/22	100%	$	2,613	$	248	$	2,861		COMB	$	926	$	1,610
Jacobs Vehicle Systems (Jacobs)	04/08/22	100%	345		—		345			COMB	108		164
Cummins Westport, Inc. (Westport JV)	02/07/22	50%	42		—		42			COMB	—		20














(1) All results from acquired entities were included in segment results subsequent to the acquisition date. Previously consolidated entities were accounted for as equity transactions (EQUITY). Newly consolidated entities were accounted for as business combinations (COMB).
(2) Intangible assets acquired in the business combination were mostly customer, technology and trade name related.
(3) Hydrogenics entered into three non-interest-bearing promissory notes with $175 million paid on July 31, 2023, and the remaining $160 million due in three installments through 2025.
(4) Total purchase consideration included $32 million for the settlement of accounts payable.
(5) See N OTE 2, "ACQUISITIONS," of the Notes to the Consolidated Financial Statements of our 2022 Form 10-K for additional information on prior year acquisitions.

Hydrogenics Corporation - Redeemable Noncontrolling Interest

On June 29, 2023, a share purchase agreement was executed with a 19 percent minority shareholder in one of our businesses, Hydrogenics Corporation (Hydrogenics), whereby we agreed to pay the minority shareholder $335 million for their 19 percent ownership, including the settlement of shareholder loans of $48 million. As part of the share purchase agreement, Hydrogenics entered into three non-interest-bearing promissory notes with $175 million paid on July 31, 2023, and the remaining $160 million due in three installments through 2025. We recorded the non-interest-bearing promissory notes at their present value in our Condensed Consolidated Financial Statements. The long-term amount, net of unamortized debt discount, was $145 million and reflected in long-term debt at September 30, 2023.

Prior to the execution of this transaction, the minority shareholder had, among other rights and subject to related obligations and restrictive covenants, rights that were 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). The estimated fair value of the put option was recorded as redeemable noncontrolling interests in our Condensed Consolidated Financial Statements with an offset to additional paid-in capital, and at December 31, 2022, the balance was $258 million. The redeemable noncontrolling interest balance was reduced to zero as of the acquisition date.

Teksid Hierro de Mexico, S.A. de C.V.

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 $143 million (including $32 million for the settlement of accounts payable), 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. Approximately $90 million of the purchase price was allocated to property, plant and equipment. The remainder was allocated primarily to working capital assets and liabilities (including approximately $16 million of cash and cash equivalents) and resulted in approximately $18 million of goodwill, none of which is deductible for tax purposes. In the third quarter we finalized the purchase price and made certain other adjustments, which resulted in a $7 million decrease in goodwill. The values assigned to individual assets acquired and liabilities assumed are preliminary based on management’s current best estimate and subject to change as certain matters are finalized. The primary areas that remain open are related to deferred taxes and other tax contingencies. 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.

Meritor, Inc.

During the second quarter of 2023, we finalized our accounting for the Meritor, Inc. acquisition. The primary components of the change were to increase contingent liabilities by $62 million offset by finalization of deferred taxes and tax reserves, with a net increase to goodwill of $26 million. There was no impact to the Condensed Consolidated Statements of Net Income for any of the changes.

The following table presents the supplemental consolidated results of the Company for the three and nine months ended September 30, 2022, on an unaudited pro-forma basis as if the acquisition had been consummated on January 1, 2021. The primary adjustments reflected in the pro-forma results related to (1) increase in interest expense for debt used to fund the acquisition, (2) removal of acquisition related costs from 2022 and (3) changes related to purchase accounting primarily related to amortization of intangibles, fixed assets and joint ventures. The unaudited pro forma financial information presented below does not purport to represent the actual results of operations that Cummins and Meritor would have achieved had the companies been combined during the periods presented and was not intended to project the future results of operations that the combined company could achieve after the acquisition. The unaudited pro forma financial information does not reflect any potential cost savings, operating efficiencies, long-term debt pay down estimates, financial synergies or other strategic benefits as a result of the acquisition or any restructuring costs to achieve those benefits.


(Unaudited)	Three months ended		Nine months ended
In millions	September 30, 2022		September 30, 2022
Net sales	$	7,734	$	23,071
Net income	397		1,565

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 technologies 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 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 Atmus 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 and nine months ended September 30, 2023 and 2022 is shown in the table below:



In millions	Components			Engine			Distribution		Power Systems		Accelera		Total Segments
Three months ended September 30, 2023
External sales	$	2,780		$	2,236		$	2,519	$	798	$	98	$	8,431
Intersegment sales	456			695			16		646		5		1,818
Total sales	3,236			2,931			2,535		1,444		103		10,249
Research, development and engineering expenses	93			159			14		60		50		376
Equity, royalty and interest income (loss) from investees	26			62			22		11		(3)		118
Interest income	8			4			9		3		—		24
Segment EBITDA	441		(1)	395			306		234		(114)		1,262
Depreciation and amortization (2)	120			59			28		30		18		255

Three months ended September 30, 2022
External sales	$	2,220		$	2,063		$	2,232	$	773	$	45	$	7,333
Intersegment sales	483			716			7		576		5		1,787
Total sales	2,703			2,779			2,239		1,349		50		9,120
Research, development and engineering expenses	87			140			13		62		46		348
Equity, royalty and interest income (loss) from investees	17			27			20		10		(4)		70
Interest income	4			3			4		3		—		14
Russian suspension costs (3)	1			—			—		—		—		1
Segment EBITDA	297		(4)	362			225		193		(95)		982
Depreciation and amortization (2)	95			51			29		30		10		215

Nine months ended September 30, 2023
External sales	$	8,747		$	6,751		$	7,494	$	2,271	$	259	$	25,522
Intersegment sales	1,471			2,154			42		1,973		14		5,654
Total sales	10,218			8,905			7,536		4,244		273		31,176
Research, development and engineering expenses	287			441			43		189		150		1,110
Equity, royalty and interest income (loss) from investees	71			198			70		42		(11)		370
Interest income	21			14			24		7		1		67
Segment EBITDA	1,434		(1)	1,277			940		654		(322)		3,983
Depreciation and amortization (2)	368			166			84		91		47		756

Nine months ended September 30, 2022
External sales	$	5,214		$	6,204		$	6,590	$	2,190	$	106	$	20,304
Intersegment sales	1,427			2,103			19		1,522		17		5,088
Total sales	6,641			8,307			6,609		3,712		123		25,392
Research, development and engineering expenses	236			365			39		184		121		945
Equity, royalty and interest income (loss) from investees	54			127		(5)	57		31		(8)		261
Interest income	7			8			9		5		—		29
Russian suspension costs (3)	5			33		(6)	55		19		—		112
Segment EBITDA	969		(4)	1,173			632		411		(239)		2,946
Depreciation and amortization (2)	187			151			86		92		25		541


(1) Includes $20 million and $50 million of costs associated with the IPO and separation of Atmus for the three and nine months ended September 30, 2023, respectively. See NOTE 15, "FORMATION OF ATMUS AND IPO," to our Condensed Consolidated Financial Statements for additional information.
(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 $4 million and $3 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. A portion of depreciation expense is included in research, development and engineering expenses.
(3) See NOTE 14, "RUSSIAN OPERATIONS," to our Condensed Consolidated Financial Statements for additional information.
(4) Includes $45 million and $56 million of costs related to the acquisition and integration of Meritor and $10 million and $15 million of costs associated with the separation of Atmus for three and nine months ended September 30, 2022, respectively. See NOTE 15, "FORMATION OF ATMUS AND IPO," and NOTE 16 "ACQUISITIONS," to our Condensed Consolidated Financial Statements for additional information.
(5) 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 indefinite suspension of our Russian operations. See NOTE 14, "RUSSIAN OPERATIONS," to our Condensed Consolidated Financial Statements for additional information.
(6) 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				Nine months ended
	September 30,				September 30,
In millions	2023		2022		2023		2022
TOTAL SEGMENT EBITDA	$	1,262	$	982	$	3,983	$	2,946

Intersegment eliminations and other (1)	(32)		(98)		(88)		(252)

Less:
Interest expense	97		61		283		112
Depreciation and amortization	255		215		756		541
INCOME BEFORE INCOME TAXES	$	878	$	608	$	2,856	$	2,041





(1) Intersegment eliminations and other included $6 million and $17 million of costs associated with the IPO and separation of Atmus for the three and nine month periods ended September 30, 2023, respectively and $6 million and $47 million for the comparable periods in 2022, respectively. See NOTE 15, "FORMATION OF ATMUS AND IPO," to our Condensed Consolidated Financial Statements for additional information.

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 EVENTS

On October 2, 2023, we purchased from the Forvia Group all of the equity ownership of Faurecia's U.S. and Europe commercial vehicle exhaust business for approximately €199 million, subject to certain adjustments set forth in the agreement. This business provides canning and assembly operations for full exhaust systems primarily for the on-highway applications. This acquisition will be included in our Components segment starting in the fourth quarter of 2023. Due to the timing of the acquisition, the initial purchase accounting is not yet complete and will be included in the fourth quarter Form 10-K filing.

On October 2, 2023, we repaid our $500 million senior notes, due 2023, using a combination of cash on hand and additional commercial paper borrowings. On October 31, 2023, we repaid $150 million of our term loan, due 2025, using cash on hand.

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