cmi-20230930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2023

Commission File Number 1-4949

CUMMINS INC.

(Exact name of registrant as specified in its charter)


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

500 Jackson Street

Box 3005

Columbus, Indiana 47202-3005

(Address of principal executive offices)

Telephone (812) 377-5000

(Registrant’s telephone number, including area code)

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

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common stock, $2.50 par value

CMI

New York Stock Exchange

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

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

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

Large Accelerated Filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of September 30, 2023, there were 141,744,863 shares of common stock outstanding with a par value of $2.50 per share.

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CUMMINS INC. AND SUBSIDIARIES

TABLE OF CONTENTS

QUARTERLY REPORT ON FORM 10-Q


		Page
	PART I. FINANCIAL INFORMATION
ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Statements of Net Income for the three and nine months ended September 30, 2023 and September 30, 2022	3
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 and September 30, 2022	4

	Condensed Consolidated Balance Sheets at September 30, 2023 and December 31, 2022	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and September 30, 2022	6
	Condensed Consolidated Statements of Changes in Redeemable Noncontrolling Interests and Equity for the three and nine months ended September 30, 2023 and September 30, 2022	7
	Notes to Condensed Consolidated Financial Statements	9
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	58
ITEM 4.	Controls and Procedures	58
	PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	59
ITEM 1A.	Risk Factors	59
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
ITEM 3.	Defaults Upon Senior Securities	60
ITEM 4.	Mine Safety Disclosures	60
ITEM 5.	Other Information	60
ITEM 6.	Exhibits	61
	Signatures	62

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PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited)



	Three months ended				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.

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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.

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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.

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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.

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CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

(Unaudited)


	Three months ended
In millions, except per share amounts	Redeemable Noncontrolling Interests		Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Cummins Inc. Shareholders’ Equity		Noncontrolling Interests		Total Equity
BALANCE AT 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.

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	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.

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CUMMINS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Overview

Cummins Inc. (“Cummins,” “we,” “our” or “us”) was founded in 1919 as Cummins Engine Company, a corporation in Columbus, Indiana, and one of the first diesel engine manufacturers. In 2001, we changed our name to Cummins Inc. We are a global power 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

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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

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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

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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

Table of Contents

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