Cummins Inc.

08/04/2026 | Press release | Distributed by Public on 08/04/2026 09:27

Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Cummins Inc. and its consolidated subsidiaries are hereinafter sometimes referred to as "Cummins," "we," "our" or "us."
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
Certain parts of this quarterly report contain forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those that are based on current expectations, estimates and projections about the industries in which we operate and management's beliefs and assumptions. Forward-looking statements are generally accompanied by words such as "anticipates," "expects," "forecasts," "intends," "plans," "believes," "seeks," "estimates," "could," "should," "may" or words of similar meaning. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which we refer to as "future factors," which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some future factors that could cause our results to differ materially from the results discussed in such forward-looking statements are discussed below and shareholders, potential investors and other readers are urged to consider these future factors carefully in evaluating forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Future factors that could affect the outcome of forward-looking statements include the following:
GOVERNMENT REGULATION
•any adverse consequences resulting from entering into agreements with the U.S. Environmental Protection Agency (EPA), California Air Resources Board (CARB), the Environmental and Natural Resources Division of the U.S. Department of Justice (DOJ) and the California Attorney General's Office to resolve certain regulatory civil claims regarding our emissions certification and compliance process for certain engines primarily used in pick-up truck applications in the U.S., which became final and effective in April 2024, (collectively, the Settlement Agreements), including required additional mitigation projects, adverse reputational impacts and potential resulting legal actions;
•increased scrutiny from regulatory agencies, as well as unpredictability in the adoption, implementation and enforcement of emission standards around the world;
•evolving environmental and climate change legislation and regulatory initiatives;
•any adverse consequences from changes in tariffs and other trade disruptions;
•changes in international, national and regional trade laws, regulations and policies;
•emissions deregulation;
•changes in taxation;
•global legal and ethical compliance costs and risks;
•future bans or limitations on the use of diesel-powered products;
BUSINESS CONDITIONS / DISRUPTIONS
•raw material, transportation and labor price fluctuations and supply shortages;
•aligning our capacity and production with our demand;
•the actions of, and income from, joint ventures and other investees that we do not directly control;
•large truck manufacturers' and original equipment manufacturers' customers discontinuing outsourcing their engine supply needs or experiencing financial distress, or change in control;
PRODUCTS AND TECHNOLOGY
•product recalls;
•variability in material and commodity costs;
•the development of new technologies that reduce demand for our current products and services or not successfully developing new technologies and products to effectively address the energy transition;
•lower than expected acceptance of new or existing products or services;
•product liability claims;
•our sales mix of products;
GENERAL
•climate change, global warming, more stringent climate change regulations, accords, mitigation efforts, greenhouse gas regulations or other legislation designed to address climate change;
•our plan to reposition our portfolio of product offerings through exploration of strategic acquisitions, divestitures or exiting the production of certain product lines or product categories and related uncertainties of such decisions;
•increasing interest rates;
•challenging markets for talent and ability to attract, develop and retain key personnel;
•exposure to potential security breaches or other disruptions to our information technology (IT) environment and data security;
•the use of artificial intelligence (AI) in our business and in our products, services and features, and challenges with properly managing its use;
•political, economic and other risks from operations among, between and within numerous countries including political, economic and social uncertainty and the evolving globalization of our business;
•competitor activity;
•increasing competition, including increased global competition among our customers in emerging markets;
•failure to meet sustainability expectations or standards, or achieve our sustainability goals;
•labor relations or work stoppages;
•foreign currency exchange rate changes;
•the performance of our pension plan assets and volatility of discount rates;
•the price and availability of energy;
•continued availability of financing, financial instruments and financial resources in the amounts, at the times and on the terms required to support our future business; and
•other risk factors described in Part II, Item 1A in this quarterly report and our 2025 Form 10-K, Part I, Item 1A, under the caption "Risk Factors."
Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this quarterly report and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
ORGANIZATION OF INFORMATION
The following Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) was prepared to provide the reader with a view and perspective of our business through the eyes of management and should be read in conjunction with our Management's Discussion and Analysis of Financial Condition and Results of Operations section of our 2025 Form 10-K. Our MD&A is presented in the following sections:
•EXECUTIVE SUMMARY AND FINANCIAL HIGHLIGHTS
•RESULTS OF OPERATIONS
•REPORTABLE SEGMENT RESULTS
•OUTLOOK
•LIQUIDITY AND CAPITAL RESOURCES
•APPLICATION OF CRITICAL ACCOUNTING ESTIMATES
•RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
EXECUTIVE SUMMARY AND FINANCIAL HIGHLIGHTS
Overview
We are a global power leader committed to powering a more prosperous world. Since 1919, we have delivered innovative solutions that move people, goods and economies forward. Our five reportable segments - Engine, Components, Distribution, Power Systems and Accelera - offer a broad portfolio, including advanced diesel, electric and hybrid powertrains; integrated power generation systems; critical components such as aftertreatment, turbochargers, fuel systems, controls, transmissions, axles and brakes; and zero emissions technologies like battery and electric powertrain systems. With a global footprint, deep technical expertise and an extensive service network, we deliver dependable, cutting-edge solutions tailored to our customers' needs, supporting them through the energy transition with our Destination Zero strategy. We sell our products to original equipment manufacturers (OEMs), distributors, dealers and other customers worldwide. We have long-standing relationships with many of the leading manufacturers in the markets we serve, including PACCAR Inc., Traton Group, Daimler Trucks AG and Stellantis N.V. We serve our customers through a service network of approximately 640 wholly-owned, joint venture and independent distributor locations and more than 13,000 Cummins certified dealer locations in approximately 190 countries and territories.
Our segment reporting structure is organized according to the products and markets each segment serves. 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 Components segment sells axles, drivelines, brakes and suspension systems for commercial diesel and natural gas applications, aftertreatment systems, turbochargers, fuel systems, valvetrain technologies, automated transmissions and electronics. 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, maintaining relationships with various OEMs throughout the world and providing selected sales and aftermarket support for our Accelera business. The Power Systems segment is an integrated power provider, which designs, manufactures and sells standby and prime power generators, engines (16 liters and larger) for standby and prime power generator sets and industrial applications (including mining, oil and gas, marine, rail and defense), alternators and other power components. The Accelera segment designs, manufactures, sells and supports electrified power systems with innovative components and subsystems, including battery 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 electrified power systems and related components and subsystems. We continue to serve all our markets as they adopt electrification, meeting the needs of our OEM partners and end customers.
Our financial performance depends, in large part, on varying conditions in the markets we serve, particularly the on-highway, off-highway, power generation and general industrial markets. Demand in these markets tends to fluctuate in response to overall economic conditions. Our sales may also be impacted by OEM inventory levels, production schedules, stoppages and supply chain challenges. Economic downturns in markets we serve generally result in reduced sales of our products and can result in price reductions in certain products and/or markets. As a worldwide business, our operations are also affected by geopolitical risks, currency fluctuations, political and economic uncertainty, tariffs and related trade disruptions, public health crises (epidemics or pandemics) and regulatory matters, including adoption and enforcement of environmental and emission standards. As part of our growth strategy, we invest in businesses in certain countries that carry higher levels of these risks such as China, Brazil, India, Mexico and other countries in Europe, the Middle East and Africa. At the same time, our geographic diversity and broad product and service offerings have helped
limit the impact from a drop in demand in any one industry, region, customer or the economy of any single country on our consolidated results.
Global Trade Environment
As disclosed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025, we operate our business on a global basis and changes in international, national and regional trade laws, regulations and policies affecting and/or restricting international trade, including higher tariffs, trade disruptions (such as embargoes, sanctions and export controls) and broader geopolitical tensions, could adversely impact the demand for our products and our competitive position. In 2025, the U.S. imposed tariffs on certain countries and products, which was followed by retaliatory tariffs and other trade actions against U.S. goods and services. On February 20, 2026, the U.S. Supreme Court ruled that U.S. tariffs imposed under the International Emergency Economic Powers Act (IEEPA) on goods imported into the U.S. were unauthorized. After this ruling, new tariffs were subsequently imposed under different statutes. The global trade environment has contributed to ongoing market volatility and heightened concerns about potential economic impacts. Our primary risks include reduced global movement of goods impacting freight activity, increased costs for suppliers and end-users and uncertainty around supply availability. These factors could lead to a decline in business confidence, reduced demand for our products and increased product costs. We continue to pursue mitigation strategies, including engaging with our suppliers, exploring alternative sourcing and negotiating agreements with our customers to recover tariff-related costs. The financial impact of tariffs, net of mitigation actions and U.S. government tariff refunds (net of amounts to be returned to customers), was immaterial to our profitability and operating cash flows during the three and six months ended June 30, 2026. However, continued and increasing tariff costs, the effectiveness of our mitigation efforts and ongoing market volatility could materially and adversely affect our results of operations, financial condition and cash flows in the future. We continue to monitor developments and take actions to minimize the related impacts to our business to the extent possible. See the "OUTLOOK" section for a discussion of the potential tariff impacts for the remainder of 2026.
2026 Second Quarter Results
A summary of our results is as follows:
Three months ended Six months ended
June 30, June 30,
In millions, except per share amounts 2026 2025 2026 2025
Net sales $ 9,457 $ 8,643 $ 17,855 $ 16,817
Net income attributable to Cummins Inc. 932 890 1,586 1,714
Earnings per common share attributable to Cummins Inc.
Basic $ 6.76 $ 6.46 $ 11.48 $ 12.45
Diluted 6.73 6.43 11.44 12.38
Net income attributable to Cummins Inc. was $932 million, or $6.73 per diluted share, on sales of $9.5 billion for the three months ended June 30, 2026, versus the comparable prior year period net income attributable to Cummins Inc. of $890 million, or $6.43 per diluted share, on sales of $8.6 billion. The increases in net income attributable to Cummins Inc. and earnings per diluted share were primarily driven by higher sales leading to improved gross margin, partially offset by higher compensation costs. Diluted earnings per common share for the three months ended June 30, 2026, benefited $0.01 from fewer weighted-average shares outstanding due to the stock repurchase program.
Net income attributable to Cummins Inc. was $1.6 billion, or $11.44 per diluted share, on sales of $17.9 billion for the six months ended June 30, 2026, versus the comparable prior year period net income attributable to Cummins Inc. of $1.7 billion, or $12.38 per diluted share, on sales of $16.8 billion. The decreases in net income attributable to Cummins Inc. and earnings per diluted share were primarily driven by the loss on sale of business and settlement of current and future customer obligations as well as higher compensation costs, partially offset by higher sales leading to improved gross margin and favorable currency fluctuations (mainly in the Euro and Brazilian real). Diluted earnings per common share for the six months ended June 30, 2026, benefited $0.03 from fewer weighted-average shares outstanding due to stock repurchase programs. See NOTE 14, "REPORTABLE SEGMENTS," to our Condensed Consolidated Financial Statements for additional information on loss on sale of business and settlement of current and future customer obligations.
The table below presents our consolidated net sales by geographic area based on the location of the customer:
Three months ended Favorable/ Six months ended Favorable/
June 30, (Unfavorable) June 30, (Unfavorable)
In millions 2026 2025 Amount Percent 2026 2025 Amount Percent
United States and Canada $ 5,596 $ 5,189 $ 407 8 % $ 10,368 $ 10,243 $ 125 1 %
International 3,861 3,454 407 12 % 7,487 6,574 913 14 %
Total net sales $ 9,457 $ 8,643 $ 814 9 % $ 17,855 $ 16,817 $ 1,038 6 %
Worldwide revenues increased by 9 percent in the three months ended June 30, 2026, compared to the same period in 2025, primarily due to higher demand for power generation equipment, especially in data center applications, and in international construction markets. International sales (excludes the U.S. and Canada) improved 12 percent mainly due to higher sales in China and Asia Pacific. The increase in international sales was primarily due to higher demand for power generation equipment and in construction markets as well as favorable foreign currency fluctuations of 2 percent (primarily the Chinese renminbi and Euro). Net sales in the U.S. and Canada improved 8 percent driven by higher demand for power generation equipment and medium-duty trucks.
Worldwide revenues increased by 6 percent in the six months ended June 30, 2026, compared to the same period in 2025, mainly due to higher demand for power generation equipment, especially in data center and commercial applications, and in international construction markets, partially offset by lower demand in most on-highway markets. International sales (excludes the U.S. and Canada) improved 14 percent primarily due to higher sales in China, Europe and Asia Pacific. The increase in international sales was driven by higher demand for power generation equipment and in construction markets as well as favorable foreign currency fluctuations of 4 percent (primarily the Euro and Chinese renminbi). Net sales in the U.S. and Canada improved 1 percent mainly due to higher demand for power generation equipment, partially offset by lower demand in most on-highway markets.
The following tables contain sales and EBITDA (defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests) by reportable segment for the three and six months ended June 30, 2026 and 2025. See NOTE 14, "REPORTABLE SEGMENTS," to our Condensed Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Condensed Consolidated Statements of Net Income.
Three months ended June 30,
Reportable Segments 2026 2025 Percent change
Percent Percent 2026 vs. 2025
In millions Sales of Total EBITDA Sales of Total EBITDA Sales EBITDA
Engine $ 3,084 26 % $ 386 $ 2,899 27 % $ 400 6 % (4) %
Components 2,891 25 % 381 2,705 25 % 397 7 % (4) %
Distribution 3,326 29 % 451 3,041 29 % 445 9 % 1 %
Power Systems 2,255 19 % 552 1,889 18 % 430 19 % 28 %
Accelera 145 1 % (69) 105 1 % (100) 38 % 31 %
Total segments 11,701 100 % 1,701 10,639 100 % 1,572 10 % 8 %
Intersegment eliminations (2,244) (48) (1,996) 15 12 % NM
Total $ 9,457 $ 1,653 $ 8,643 $ 1,587 9 % 4 %
"NM" - not meaningful information
Six months ended June 30,
Reportable Segments 2026 2025 Percent change
Percent Percent 2026 vs. 2025
In millions Sales of Total EBITDA Sales of Total EBITDA Sales EBITDA
Engine $ 5,756 26 % $ 665 $ 5,670 27 % $ 858 2 % (22) %
Components 5,421 25 % 718 5,375 26 % 779 1 % (8) %
Distribution 6,442 29 % 895 5,948 29 % 821 8 % 9 %
Power Systems 4,211 19 % 1,129 3,538 17 % 819 19 % 38 %
Accelera 246 1 % (346)
(1)
208 1 % (186) 18 % (86) %
Total segments 22,076 100 % 3,061 20,739 100 % 3,091 6 % (1) %
Intersegment eliminations (4,221) (118) (3,922) (44) 8 % NM
Total $ 17,855 $ 2,943 $ 16,817 $ 3,047 6 % (3) %
"NM" - not meaningful information
(1) In the first quarter of 2026, we sold our low pressure fuel cell business to a customer, cancelled future commitments and resolved certain claims against us with that customer resulting in a net payment by us of $175 million. These transactions resulted in a net charge of $199 million which is reflected in other operating expense, net in our Condensed Consolidated Statements of Net Income.
2026 Highlights
We generated $1,808 million in cash from operations for the six months ended June 30, 2026, compared to $782 million for the comparable period in 2025. See the section titled "Cash Flows" in the "LIQUIDITY AND CAPITAL RESOURCES" section for a discussion of items impacting cash flows.
Our debt to capital ratio (total capital defined as debt plus equity) at June 30, 2026, was 35.6 percent, compared to 36.0 percent at December 31, 2025. The decrease was primarily due to an increased equity balance from strong earnings since December 31, 2025, partially offset by a higher total debt balance at June 30, 2026. At June 30, 2026, we had $3.9 billion in cash and marketable securities on hand and access to our $4.0 billion credit facilities (net of $348 million of commercial paper outstanding), if necessary, to meet working capital, investment, acquisition and funding needs.
In July 2026, the Board of Directors (the Board) authorized an increase to our quarterly dividend of 10 percent from $2.00 per share to $2.20 per share.
In the first half of 2026, we repurchased $468 million, or 0.8 million shares, of common stock.
In the first half of 2026, we entered into a series of interest rates swaps to convert $350 million of our senior notes, due in 2054, from a fixed rate of 5.45 percent to a floating rate equal to the daily Secured Overnight Financing Rate (SOFR) plus a spread. See NOTE 13, "DERIVATIVES," to our Condensed Consolidated Financial Statements.
On March 31, 2026, we sold our low pressure fuel cell business to a customer, cancelled future commitments and resolved certain claims against us with that customer resulting in a net payment by us of $175 million. These transactions resulted in a net charge of $199 million, which is reflected in other operating expense, net in our Condensed Consolidated Statements of Net Income.
As of the date of this filing, our credit ratings and outlooks from the credit rating agencies remain unchanged. See the section titled "Credit Ratings" in the "LIQUIDITY AND CAPITAL RESOURCES" section for our current ratings.
RESULTS OF OPERATIONS
Three months ended Favorable/ Six months ended Favorable/
June 30, (Unfavorable) June 30, (Unfavorable)
In millions, except per share amounts 2026 2025 Amount Percent 2026 2025 Amount Percent
NET SALES $ 9,457 $ 8,643 $ 814 9 % $ 17,855 $ 16,817 $ 1,038 6 %
Cost of sales 6,992 6,362 (630) (10) % 13,147 12,381 (766) (6) %
GROSS MARGIN 2,465 2,281 184 8 % 4,708 4,436 272 6 %
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses 893 779 (114) (15) % 1,738 1,550 (188) (12) %
Research, development and engineering expenses 385 357 (28) (8) % 743 701 (42) (6) %
Equity, royalty and interest income from investees 154 118 36 31 % 302 249 53 21 %
Other operating expense, net 62 37 (25) (68) % 301 74 (227) NM
OPERATING INCOME 1,279 1,226 53 4 % 2,228 2,360 (132) (6) %
Interest expense 80 87 7 8 % 156 164 8 5 %
Other income, net 94 86 8 9 % 155 146 9 6 %
INCOME BEFORE INCOME TAXES 1,293 1,225 68 6 % 2,227 2,342 (115) (5) %
Income tax expense 325 297 (28) (9) % 579 564 (15) (3) %
CONSOLIDATED NET INCOME 968 928 40 4 % 1,648 1,778 (130) (7) %
Less: Net income attributable to noncontrolling interests 36 38 2 5 % 62 64 2 3 %
NET INCOME ATTRIBUTABLE TO CUMMINS INC. $ 932 $ 890 $ 42 5 % $ 1,586 $ 1,714 $ (128) (7) %
Diluted Earnings Per Common Share Attributable to Cummins Inc. $ 6.73 $ 6.43 $ 0.30 5 % $ 11.44 $ 12.38 $ (0.94) (8) %
"NM" - not meaningful information
Three months ended Favorable/
(Unfavorable) 		Six months ended Favorable/
(Unfavorable)
June 30, June 30,
Percent of sales 2026 2025 Percentage Points 2026 2025 Percentage Points
Gross margin 26.1 % 26.4 % (0.3) 26.4 % 26.4 % -
Selling, general and administrative expenses 9.4 % 9.0 % (0.4) 9.7 % 9.2 % (0.5)
Research, development and engineering expenses 4.1 % 4.1 % - 4.2 % 4.2 % -
Net Sales
Net sales for the three months ended June 30, 2026, increased by $814 million versus the comparable period in 2025. The primary drivers were as follows:
•Power Systems segment sales increased 19 percent primarily due to higher demand for power generation equipment, especially in China and North America.
•Distribution segment sales increased 9 percent principally due to higher demand for power generation equipment, especially in North America.
•Components segment sales increased 7 percent mainly due to higher emission solutions demand, primarily in China and North America, and increased demand in components and software markets, especially in China and North America.
•Engine segment sales increased 6 percent largely due to higher demand in construction markets in China and medium-duty truck markets in North America.
Net sales for the six months ended June 30, 2026, increased $1.0 billion versus the comparable period in 2025. The primary drivers were as follows:
•Power Systems segment sales increased 19 percent primarily due to higher demand for power generation equipment, especially in China and North America.
•Distribution segment sales increased 8 percent principally due to higher demand for power generation equipment, especially in North America.
•Engine segment sales increased 2 percent largely due to increased demand in construction markets in China, partially offset by lower heavy-duty truck demand in North America.
•Components segment sales increased 1 percent mainly due to higher demand in emission solutions and components and software markets in China and India, partially offset by lower drivetrain and braking demand in North America and India.
•Favorable foreign currency fluctuations of 2 percent of total sales, primarily in the Euro and Chinese renminbi.
Sales to international markets (excludes the U.S. and Canada), based on location of customers, for the three and six months ended June 30, 2026, were 41 percent and 42 percent of total net sales compared with 40 percent and 39 percent of total net sales for the comparable periods in 2025. A more detailed discussion of sales by segment is presented in the "REPORTABLE SEGMENT RESULTS" section.
Cost of Sales
The types of expenses included in cost of sales are the following: parts and material consumption, including direct and indirect materials; compensation and related expenses, including variable compensation, salaries and fringe benefits; depreciation on production equipment and facilities and amortization of technology intangibles; estimated costs of warranty programs and campaigns; production utilities; production-related purchasing; warehousing, including receiving and inspection; freight costs; engineering support costs; repairs and maintenance; production and warehousing facility property insurance and rent for production facilities and other production overhead.
Gross Margin
Gross margin increased $184 million for the three months ended June 30, 2026, and decreased 0.3 points as a percentage of net sales versus the comparable period in 2025. The increase in gross margin was primarily due to higher volumes and favorable pricing, partially offset by increased compensation expenses. Gross margin as a percentage of sales decreased due to higher compensation expenses. The net impact of tariff costs and related recoveries was immaterial for the three month period ended June 30, 2026.
Gross margin increased $272 million for the six months ended June 30, 2026, and remained flat as a percentage of sales versus the comparable period in 2025. The increase in gross margin was primarily due to higher volumes and favorable pricing, partially offset by increased compensation expenses. The net impact of tariff costs and related recoveries was immaterial for the six month period ended June 30, 2026.
The provision for base warranties issued as a percentage of sales for the three and six months ended June 30, 2026, was 1.9 percent and 1.9 percent, respectively, compared to 1.9 percent and 1.9 percent for the comparable periods in 2025.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $114 million and $188 million and increased 0.4 points and 0.5 points as a percentage of net sales, respectively, for the three and six months ended June 30, 2026, versus the comparable periods in 2025. The increases were primarily due to higher compensation expenses and increased consulting costs. Compensation and related expenses included salaries, fringe benefits and variable compensation.
Research, Development and Engineering Expenses
Research, development and engineering expenses increased $28 million and $42 million for the three and six months ended June 30, 2026, respectively, versus the comparable periods in 2025, primarily due to higher compensation expenses. Compensation and related expenses included salaries, fringe benefits and variable compensation. Overall research, development and engineering expenses as a percentage of net sales remained flat for both the three and six months ended June 30, 2026 versus the comparable periods in 2025.
Research activities continue to focus on development of new products and improvements of current technologies to meet future emission standards around the world, improvements in fuel economy performance of diesel and natural gas-powered engines and related components, as well as development activities around electrified power systems with innovative components and systems including battery and electric power technologies.
Equity, Royalty and Interest Income from Investees
Equity, royalty and interest income from investees increased $36 million for the three months ended June 30, 2026, versus the comparable period in 2025, primarily due to increased earnings at Dongfeng Cummins Engine Co., Ltd., Chongqing Cummins Engine Co., Ltd., Beijing Foton Cummins Engine Co., Ltd., Komatsu Cummins Chile, Ltda. and higher royalty and interest income from investees.
Equity, royalty and interest income from investees increased $53 million for the six months ended June 30, 2026, versus the comparable period in 2025, mainly due to increased earnings at Chongqing Cummins Engine Co., Ltd., Beijing Foton Cummins Engine Co., Ltd. and Dongfeng Cummins Engine Co., Ltd.
Other Operating Expense, Net
Other operating expense, net for the six months ended June 30, 2026, increased by $227 million, primarily due to the loss on sale of business and settlement of current and future customer obligations. See NOTE 14, "REPORTABLE SEGMENTS," to our Condensed Consolidated Financial Statements for additional information.
Income Tax Expense
Our effective tax rate for 2026 is expected to approximate 23.0 percent, excluding any discrete items that may arise.
Our effective tax rates for the three and six months ended June 30, 2026, were 25.1 percent and 26.0 percent, respectively. Our effective tax rates for the three and six months ended June 30, 2025, were 24.2 percent and 24.1 percent, respectively.
The three months ended June 30, 2026, contained net unfavorable discrete items of $29 million, primarily due to $17 million of unfavorable return to provision adjustments and $12 million of other net unfavorable discrete tax items.
The six months ended June 30, 2026, had an unfavorable discrete tax impact due to the $199 million loss on sale of business and settlement of current and future customer obligations for which no tax benefit was recognized. Other discrete items were net unfavorable $22 million, primarily due to $23 million of unfavorable return to provision adjustments, partially offset by $1 million of other net favorable discrete tax items. See NOTE 14, "REPORTABLE SEGMENTS," to our Condensed Consolidated Financial Statements for additional information on loss on sale of business and settlement of current and future customer obligations.
The three months ended June 30, 2025, contained net favorable discrete tax items of $3 million, primarily due to $4 million of favorable adjustments for uncertain tax positions, partially offset by $1 million of other unfavorable adjustments.
The six months ended June 30, 2025, contained net favorable discrete tax items of $10 million, primarily due to $8 million of favorable adjustments for share-based compensation tax benefits and $5 million of favorable adjustments for uncertain tax positions, partially offset by $3 million of other unfavorable tax items.
Comprehensive Income - Foreign Currency Translation Adjustment
The foreign currency translation adjustment was a net gain of $23 million and a net loss of $86 million for the three and six months ended June 30, 2026, respectively, compared to a net gain of $197 million and $314 million for the three and six months ended June 30, 2025, respectively, driven by the following:
Three months ended
June 30,
2026 2025
In millions Translation adjustment Primary currency driver vs. U.S. dollar Translation adjustment Primary currency driver vs. U.S. dollar
Wholly-owned subsidiaries $ 9 Brazilian real and Chinese renminbi, partially offset by Euro $ 180 Euro, British pound and Brazilian real
Equity method investments 12 Chinese renminbi 15 Chinese renminbi
Consolidated subsidiaries with a noncontrolling interest 2 Chinese renminbi and Euro 2 Euro
Total $ 23 $ 197
Six months ended
June 30,
2026 2025
In millions Translation adjustment Primary currency driver vs. U.S. dollar Translation adjustment Primary currency driver vs. U.S. dollar
Wholly-owned subsidiaries $ (70) Indian rupee, Euro and British pound, partially offset by Brazilian real $ 290 Euro, British pound and Brazilian real
Equity method investments 10 Chinese renminbi, partially offset by Indian rupee 20 Chinese renminbi
Consolidated subsidiaries with a noncontrolling interest (26) Indian rupee 4 Euro and Indian rupee
Total $ (86) $ 314
REPORTABLE SEGMENT RESULTS
Our reportable segments consist of the Engine, Components, Distribution, Power Systems and Accelera segments. This reporting structure is organized according to the products and markets each segment serves. We use segment EBITDA as the basis for the Chief Operating Decision Maker to evaluate the performance of each of our reportable 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. See NOTE 14, "REPORTABLE SEGMENTS," to our Condensed Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Condensed Consolidated Statements of Net Income.
Tariff related costs and recoveries were evaluated independently of all other drivers included in the disclosures below and all references to "price" and "material cost" variances exclude these separately evaluated tariff costs and recoveries. The net impact of tariff costs and related recoveries were immaterial to each reportable segment's EBITDA, unless specifically noted.
Following is a discussion of results for each of our reportable segments.
Engine Segment Results
Financial data for the Engine segment was as follows:
Three months ended Favorable/ Six months ended Favorable/
June 30, (Unfavorable) June 30, (Unfavorable)
In millions 2026 2025 Amount Percent 2026 2025 Amount Percent
External sales $ 2,349 $ 2,162 $ 187 9 % $ 4,315 $ 4,202 $ 113 3 %
Intersegment sales 735 737 (2) - % 1,441 1,468 (27) (2) %
Total sales 3,084 2,899 185 6 % 5,756 5,670 86 2 %
Research, development and engineering expenses 181 151 (30) (20) % 345 306 (39) (13) %
Equity, royalty and interest income from investees 79 60 19 32 % 159 133 26 20 %
Interest income 10 8 2 25 % 20 18 2 11 %
Segment EBITDA 386 400 (14) (4) % 665 858 (193) (22) %
Percentage Points Percentage Points
Segment EBITDA as a percentage of total sales 12.5 % 13.8 % (1.3) 11.6 % 15.1 % (3.5)
Sales for our Engine segment by market were as follows:
Three months ended Favorable/ Six months ended Favorable/
June 30, (Unfavorable) June 30, (Unfavorable)
In millions 2026 2025 Amount Percent 2026 2025 Amount Percent
Heavy-duty truck $ 968 $ 976 $ (8) (1) % $ 1,767 $ 1,897 $ (130) (7) %
Medium-duty truck and bus 1,030 950 80 8 % 1,901 1,936 (35) (2) %
Light-duty automotive 491 486 5 1 % 939 907 32 4 %
Total on-highway 2,489 2,412 77 3 % 4,607 4,740 (133) (3) %
Off-highway 595 487 108 22 % 1,149 930 219 24 %
Total sales $ 3,084 $ 2,899 $ 185 6 % $ 5,756 $ 5,670 $ 86 2 %
Percentage Points Percentage Points
On-highway sales as percentage of total sales 81 % 83 % (2) 80 % 84 % (4)
Total engine shipments by engine classification, including on and off-highway units, were as follows:
Three months ended Favorable/ Six months ended Favorable/
June 30, (Unfavorable) June 30, (Unfavorable)
2026 2025 Amount Percent 2026 2025 Amount Percent
Heavy-duty 30,100 29,600 500 2 % 54,800 56,300 (1,500) (3) %
Medium-duty 86,100 73,400 12,700 17 % 165,200 148,600 16,600 11 %
Light-duty 45,000 44,000 1,000 2 % 85,500 83,100 2,400 3 %
Total unit shipments (1)
161,200 147,000 14,200 10 % 305,500 288,000 17,500 6 %
(1) Unit shipments exclude aftermarket parts.
Sales
Engine segment sales for the three months ended June 30, 2026, increased $185 million versus the comparable period in 2025. The following were the primary drivers by market:
•Off-highway sales increased $108 million primarily due to higher international construction demand, especially in China.
•Medium-duty truck and bus sales increased $80 million primarily due to higher truck demand, especially in North America, with shipments up 15 percent.
Engine segment sales for the six months ended June 30, 2026, increased $86 million versus the comparable period in 2025, primarily due to an increase in off-highway sales of $219 million mainly due to higher international construction demand, especially in China. The increase was partially offset by a decrease of $130 million in heavy-duty truck sales principally due to lower demand, especially in North America, with shipments down 10 percent.
Segment EBITDA
Engine segment EBITDA for the three months ended June 30, 2026, decreased $14 million versus the comparable period in 2025, primarily due to higher compensation expenses and increased freight costs, partially offset by improved tariff recovery.
Engine segment EBITDA for the six months ended June 30, 2026, decreased $193 million versus the comparable period in 2025, primarily due to higher compensation expenses and lower volumes.
Components Segment Results
Financial data for the Components segment was as follows:
Three months ended Favorable/ Six months ended Favorable/
June 30, (Unfavorable) June 30, (Unfavorable)
In millions 2026 2025 Amount Percent 2026 2025 Amount Percent
External sales $ 2,431 $ 2,295 $ 136 6 % $ 4,569 $ 4,565 $ 4 - %
Intersegment sales 460 410 50 12 % 852 810 42 5 %
Total sales 2,891 2,705 186 7 % 5,421 5,375 46 1 %
Research, development and engineering expenses 88 77 (11) (14) % 169 152 (17) (11) %
Equity, royalty and interest income from investees 10 10 - - % 20 17 3 18 %
Interest income 11 10 1 10 % 22 17 5 29 %
Segment EBITDA 381 397 (16) (4) % 718 779 (61) (8) %
Percentage Points Percentage Points
Segment EBITDA as a percentage of total sales 13.2 % 14.7 % (1.5) 13.2 % 14.5 % (1.3)
Sales for our Components segment by business were as follows:
Three months ended Favorable/ Six months ended Favorable/
June 30, (Unfavorable) June 30, (Unfavorable)
In millions 2026 2025 Amount Percent 2026 2025 Amount Percent
Drivetrain and braking systems $ 1,122 $ 1,095 $ 27 2 % $ 2,041 $ 2,151 $ (110) (5) %
Emission solutions 988 900 88 10 % 1,903 1,802 101 6 %
Components and software 657 587 70 12 % 1,265 1,182 83 7 %
Automated transmissions 124 123 1 1 % 212 240 (28) (12) %
Total sales $ 2,891 $ 2,705 $ 186 7 % $ 5,421 $ 5,375 $ 46 1 %
Sales
Components segment sales for the three months ended June 30, 2026, increased $186 million versus the comparable period in 2025. The following were the primary drivers by business:
•Emission solutions sales increased $88 million primarily due to higher demand in China, North America and Latin America.
•Components and software sales increased $70 million mainly due to increased demand in China and North America.
Components segment sales for the six months ended June 30, 2026, increased $46 million versus the comparable period in 2025. The following were the primary drivers by business:
•Emission solutions sales increased $101 million principally due to higher demand in China and India.
•Components and software sales increased $83 million mainly due to improved demand in China and India.
•Favorable foreign currency fluctuations, primarily in the Euro and Chinese renminbi.
These increases were offset by the following decreases:
•Drivetrain and braking systems sales decreased $110 million mainly due to lower demand in India and North America.
•Automated transmissions sales decreased $28 million primarily due to lower demand in North America and China.
Segment EBITDA
Components segment EBITDA for the three months ended June 30, 2026, decreased $16 million versus the comparable period in 2025, mainly due to increased product coverage costs and higher compensation expenses, partially offset by favorable pricing.
Components segment EBITDA for the six months ended June 30, 2026, decreased $61 million versus the comparable period in 2025, primarily due to increased compensation expenses and higher product coverage costs.
Distribution Segment Results
Financial data for the Distribution segment was as follows:
Three months ended Favorable/ Six months ended Favorable/
June 30, (Unfavorable) June 30, (Unfavorable)
In millions 2026 2025 Amount Percent 2026 2025 Amount Percent
External sales $ 3,320 $ 3,034 $ 286 9 % $ 6,429 $ 5,936 $ 493 8 %
Intersegment sales 6 7 (1) (14) % 13 12 1 8 %
Total sales 3,326 3,041 285 9 % 6,442 5,948 494 8 %
Research, development and engineering expenses 15 14 (1) (7) % 30 28 (2) (7) %
Equity, royalty and interest income from investees 34 26 8 31 % 62 54 8 15 %
Interest income 7 7 - - % 13 12 1 8 %
Segment EBITDA 451 445 6 1 % 895 821 74 9 %
Percentage Points Percentage Points
Segment EBITDA as a percentage of total sales 13.6 % 14.6 % (1.0) 13.9 % 13.8 % 0.1
Sales for our Distribution segment by region were as follows:
Three months ended Favorable/ Six months ended Favorable/
June 30, (Unfavorable) June 30, (Unfavorable)
In millions 2026 2025 Amount Percent 2026 2025 Amount Percent
North America $ 2,355 $ 2,077 $ 278 13 % $ 4,521 $ 4,177 $ 344 8 %
Asia Pacific 319 280 39 14 % 647 520 127 24 %
Europe 301 325 (24) (7) % 605 595 10 2 %
China 132 125 7 6 % 255 239 16 7 %
India 92 91 1 1 % 177 165 12 7 %
Africa and Middle East 71 60 11 18 % 130 119 11 9 %
Latin America 56 83 (27) (33) % 107 133 (26) (20) %
Total sales $ 3,326 $ 3,041 $ 285 9 % $ 6,442 $ 5,948 $ 494 8 %
Sales for our Distribution segment by product line were as follows:
Three months ended Favorable/ Six months ended Favorable/
June 30, (Unfavorable) June 30, (Unfavorable)
In millions 2026 2025 Amount Percent 2026 2025 Amount Percent
Power generation $ 1,378 $ 1,200 $ 178 15 % $ 2,653 $ 2,290 $ 363 16 %
Parts 1,080 1,015 65 6 % 2,144 2,046 98 5 %
Service 472 439 33 8 % 905 855 50 6 %
Engines 396 387 9 2 % 740 757 (17) (2) %
Total sales $ 3,326 $ 3,041 $ 285 9 % $ 6,442 $ 5,948 $ 494 8 %
Sales
Distribution segment sales for the three months ended June 30, 2026, increased $285 million versus the comparable period in 2025, primarily due to increased demand for power generation equipment in North America, especially in data center applications.
Distribution segment sales for the six months ended June 30, 2026, increased $494 million versus the comparable period in 2025, mainly due to increased demand in power generation equipment in North America, especially in data center and commercial applications.
Segment EBITDA
Distribution segment EBITDA for the three months ended June 30, 2026, increased $6 million versus the comparable period in 2025, primarily due to favorable mix and increased volumes, partially offset by higher compensation expenses, increased product coverage costs and higher freight costs.
Distribution segment EBITDA for the six months ended June 30, 2026, increased $74 million versus the comparable period in 2025, primarily due to favorable mix and increased volumes, partially offset by higher compensation expenses.
Power Systems Segment Results
Financial data for the Power Systems segment was as follows:
Three months ended Favorable/ Six months ended Favorable/
June 30, (Unfavorable) June 30, (Unfavorable)
In millions 2026 2025 Amount Percent 2026 2025 Amount Percent
External sales $ 1,217 $ 1,054 $ 163 15 % $ 2,310 $ 1,926 $ 384 20 %
Intersegment sales 1,038 835 203 24 % 1,901 1,612 289 18 %
Total sales 2,255 1,889 366 19 % 4,211 3,538 673 19 %
Research, development and engineering expenses 79 69 (10) (14) % 145 126 (19) (15) %
Equity, royalty and interest income from investees 34 27 7 26 % 70 56 14 25 %
Interest income 5 4 1 25 % 10 8 2 25 %
Segment EBITDA 552 430 122 28 % 1,129 819 310 38 %
Percentage Points Percentage Points
Segment EBITDA as a percentage of total sales 24.5 % 22.8 % 1.7 26.8 % 23.1 % 3.7
Sales for our Power Systems segment by product line were as follows:
Three months ended Favorable/ Six months ended Favorable/
June 30, (Unfavorable) June 30, (Unfavorable)
In millions 2026 2025 Amount Percent 2026 2025 Amount Percent
Power generation $ 1,536 $ 1,205 $ 331 27 % $ 2,819 $ 2,206 $ 613 28 %
Industrial 538 506 32 6 % 1,044 1,004 40 4 %
Generator technologies 181 178 3 2 % 348 328 20 6 %
Total sales $ 2,255 $ 1,889 $ 366 19 % $ 4,211 $ 3,538 $ 673 19 %
Sales
Power Systems segment sales for the three and six months ended June 30, 2026, increased $366 million and $673 million, respectively, versus the comparable periods in 2025, primarily due to increased power generation sales resulting from higher demand in China and North America.
Segment EBITDA
Power Systems segment EBITDA for the three months ended June 30, 2026, increased $122 million versus the comparable period in 2025, mainly due to higher volumes.
Power Systems segment EBITDA for the six months ended June 30, 2026, increased $310 million versus the comparable period in 2025, mainly due to higher volumes and improved operational leverage.
Accelera Segment Results
Financial data for the Accelera segment was as follows:
Three months ended Favorable/ Six months ended Favorable/
June 30, (Unfavorable) June 30, (Unfavorable)
In millions 2026 2025 Amount Percent 2026 2025 Amount Percent
External sales $ 140 $ 98 $ 42 43 % $ 232 $ 188 $ 44 23 %
Intersegment sales 5 7 (2) (29) % 14 20 (6) (30) %
Total sales 145 105 40 38 % 246 208 38 18 %
Research, development and engineering expenses 22 46 24 52 % 54 89 35 39 %
Equity, royalty and interest loss from investees (3) (5) 2 40 % (9) (11) 2 18 %
Segment EBITDA (69) (100) 31 31 % (346) (186) (160) (86) %
Accelera segment sales for the three months ended June 30, 2026, increased $40 million versus the comparable period in 2025, mainly due to higher sales for electrified powertrains and electrolyzers.
Accelera segment sales for the six months ended June 30, 2026, increased $38 million versus the comparable period in 2025, primarily due to improved sales of electrolyzers and favorable foreign currency fluctuations related mainly to the Euro.
In the first quarter of 2026, we sold our low pressure fuel cell business to a customer, cancelled future commitments and resolved certain claims against us with that customer resulting in a net payment by us of $175 million. These transactions resulted in a net charge of $199 million which is reflected in other operating expense, net in our Condensed Consolidated Statements of Net Income.
OUTLOOK
The global trade environment, characterized by tariffs, export controls and broader geopolitical tensions, has created significant market volatility while introducing uncertainty around future demand for capital goods as well as potential impacts to our supply chain and our related product costs. Given the breadth, severity and uncertain duration of these global trade measures, our outlook presented below could be negatively impacted by policy-driven volatility. We are proactively taking steps in our supply chain to mitigate impacts where possible and we are working with our customers to pass through incremental costs.
2026 Outlook
Our outlook reflects the following positive trends and challenges to our business that could impact our revenue and earnings potential in 2026.
Positive Trends
•We expect demand within markets served by our Power Systems business to remain strong, including the power generation and industrial markets.
•We anticipate our aftermarket business will remain stable, driven primarily by demand in our Engine and Power Systems businesses.
•We expect strong demand for medium-duty and heavy-duty trucks in North America to continue for the remainder of 2026.
Challenges
•Increases in costs, tariffs, as well as other inflationary pressures, could negatively impact earnings.
•The potential for trade disruptions (including embargoes, sanctions, export controls and the ongoing conflict in Iran) could cause disruptions in production, further increases in the price of oil and other inputs and could negatively impact earnings.
•The slower adoption of zero-emission solutions reduced Accelera's near-term revenue outlook, prompting significant restructuring actions in 2024 and 2025 and a refined strategic investment approach. While we anticipate these actions will gradually improve the cost structure, we expect ongoing investments in priority technologies to result in continued near-term operating losses.
Current Regulatory Challenges For 2026 and Beyond
•Changes in government policies (such as reduced incentives, delayed infrastructure mandates or revised emissions standards) may impact Accelera's ability to compete, scale or recover investments in zero-emission technologies.
•Our engines are subject to extensive statutory and regulatory requirements governing emissions, including greenhouse gas (GHG) standards set by the EPA and fuel consumption standards set by the National Highway Traffic Safety Administration (NHTSA). To comply with these regulations, we utilize banking and trading of regulatory compliance credits. In June 2025, NHTSA published an interpretive rule questioning the current regulatory framework of allowing credits as a compliance vehicle. In July 2025, the EPA published a proposed rule that would repeal GHG emissions standards and thus remove the requirement for vehicle and engine manufacturers to measure, control and report these emissions from vehicles. In February 2026, the EPA finalized the rescission of the 2009 Greenhouse Gas Endangerment Finding and repealed all GHG emission standards for on-highway vehicles and engines with an effective date of April 20, 2026. NHTSA rules currently still allow credits as a compliance vehicle. Depending on NHTSA's future rulemaking as indicated by the June 2025 interpretive rule, we may no longer utilize emission compliance credits on future engines sales and the credits could have a minimal, if any value to us. While the rules will likely be subject to legal challenges, in the period NHTSA finalizes a rule, we could be required to incur a non-cash expense up to the value of our existing credits. At June 30, 2026, we had $89 million of GHG emission compliance credits.
•We are navigating a dynamic regulatory environment in the U.S. that could impact future product launches and we are actively engaged with customers, regulators and suppliers to ensure product development and certification requirements are met while delivering high-quality, dependable products that align with customer needs.
•On July 1, 2026, the U.S. declined to extend the United States-Mexico-Canada Agreement (USMCA). The U.S. is reportedly negotiating new terms with Canada and Mexico that would either maintain the current tri-lateral agreement structure or form new, bi-lateral agreements with each country. We are actively monitoring negotiations, but are currently unable to determine how future agreement revisions may impact our business.
LIQUIDITY AND CAPITAL RESOURCES
Key Working Capital and Balance Sheet Data
We fund our working capital with cash from operations and short-term borrowings, including commercial paper, when necessary. Various assets and liabilities, including short-term debt, can fluctuate significantly from month-to-month depending on short-term liquidity needs. As a result, working capital is a prime focus of management's attention. Working capital and balance sheet measures are provided in the following table:
Dollars in millions June 30,
2026 		December 31,
2025
Working capital (1)
$ 7,761 $ 7,315
Current ratio 1.73 1.76
Accounts and notes receivable, net $ 6,585 $ 5,818
Days' sales in receivables 63 60
Inventories $ 6,397 $ 5,822
Inventory turnover 4.2 4.2
Accounts payable (principally trade) $ 4,654 $ 3,800
Days' payable outstanding 58 58
Total debt $ 7,695 $ 7,552
Total debt as a percent of total capital 35.6 % 36.0 %
(1) Working capital included cash and cash equivalents.
Cash Flows
Cash and cash equivalents were impacted as follows:
Six months ended
June 30,
In millions 2026 2025 Change
Net cash provided by operating activities $ 1,808 $ 782 $ 1,026
Net cash used in investing activities (429) (615) 186
Net cash (used in) provided by financing activities (1,041) 424 (1,465)
Effect of exchange rate changes on cash and cash equivalents (4) 57 (61)
Net increase in cash and cash equivalents $ 334 $ 648 $ (314)
Net cash provided by operating activities increased $1,026 million for the six months ended June 30, 2026, versus the comparable period in 2025, primarily due to lower working capital requirements of $970 million. The lower working capital requirements resulted in a cash outflow of $377 million compared to a cash outflow of $1,347 million in the comparable period of 2025, mainly due to favorable changes in accounts payable and accrued expenses, partially offset by unfavorable changes in inventories.
Net cash used in investing activities decreased $186 million for the six months ended June 30, 2026, versus the comparable period in 2025, primarily due to lower net investments in marketable securities.
Net cash used in financing activities increased $1,465 million for the six months ended June 30, 2026, versus the comparable period in 2025, primarily due to lower proceeds from borrowings of $1,826 million and higher repurchases of common stock of $468 million, partially offset by lower payments of commercial paper of $901 million.
The effect of exchange rate changes on cash and cash equivalents for the six months ended June 30, 2026, versus the comparable period in 2025, declined $61 million primarily due to unfavorable fluctuations in the British pound and Euro.
Sources of Liquidity
We typically generate significant ongoing cash flow and cash provided by operations is generally our principal source of liquidity. Our sources of liquidity include the following:
June 30, 2026
In millions Total U.S. International Primary location of international balances
Cash and cash equivalents $ 3,179 $ 1,028 $ 2,151 Singapore, China, Australia, Mexico, United Kingdom, Belgium, Romania, India and France
Marketable securities (1)
745 88 657 India
Total $ 3,924 $ 1,116 $ 2,808
Available credit capacity
Revolving credit facilities (2)
$ 3,652
International and other uncommitted domestic credit facilities $ 781
(1) The majority of marketable securities could be liquidated into cash within a few days.
(2) The 5-year credit facility for $2.0 billion and the 3-year credit facility for $2.0 billion, maturing June 2030 and June 2028, respectively, are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes. At June 30, 2026, we had $348 million of commercial paper outstanding, which effectively reduced our available capacity under our revolving credit facilities to $3.7 billion.
Cash, Cash Equivalents and Marketable Securities
A significant portion of our cash flow is generated outside the U.S. We manage our worldwide cash requirements considering available funds among the many subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed. As a result, we do not anticipate any local liquidity restrictions to preclude us from funding our operating needs with local resources.
If we distribute our foreign cash balances to the U.S. or to other foreign subsidiaries, we could be required to accrue and pay withholding taxes, for example, if we repatriated cash from certain foreign subsidiaries whose earnings we asserted are completely or partially permanently reinvested. Foreign earnings for which we assert permanent reinvestment outside the U.S. consist primarily of earnings of our China, India, Canada (including underlying subsidiaries) and Netherlands domiciled subsidiaries. At present, we do not foresee a need to repatriate any earnings for which we assert permanent reinvestment. However, to help fund cash needs of the U.S. or other international subsidiaries as they arise, we repatriate available cash from certain foreign subsidiaries whose earnings are not completely permanently reinvested when cost effective to do so.
Debt Facilities and Other Sources of Liquidity
Our committed credit facilities provide access up to $4.0 billion from our $2.0 billion 3-year credit facility and our $2.0 billion 5-year facility. These revolving credit facilities are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes. We intend to maintain credit facilities at the current or higher aggregate amounts by renewing or replacing these facilities at or before expiration. There were no outstanding borrowings under these facilities at June 30, 2026.
Our committed credit facilities also provide access up to $4.0 billion of unsecured, short-term promissory notes (commercial paper) pursuant to 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 general corporate purposes. The total combined borrowing capacity under the revolving credit facilities and commercial paper programs should not exceed $4.0 billion. At June 30, 2026, we had $348 million of commercial paper outstanding, which effectively reduced our available capacity under our revolving credit facilities to $3.7 billion. See NOTE 9, "DEBT," to our Condensed Consolidated Financial Statements for additional information.
In the first half of 2026, we entered into a series of interest rates swaps to convert $350 million of our senior notes, due in 2054, from a fixed rate of 5.45 percent to a floating rate equal to the daily SOFR plus a spread. See NOTE 13, "DERIVATIVES," to our Condensed Consolidated Financial Statements for additional information.
As a well-known seasoned issuer, we filed an automatic shelf registration for an undetermined amount of debt and equity securities with the Securities and Exchange Commission (SEC) on February 13, 2025. Under this shelf registration we may offer, from time-to-time, debt securities, common stock, preferred and preference stock, depositary shares, warrants, stock purchase contracts and stock purchase units.
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 these programs was $564 million at June 30, 2026. 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. The amount due to the financial intermediaries reflected in accounts payable at June 30, 2026, was $171 million.
Accounts Receivable Sales Program
In May 2024, we entered into an accounts receivable sales agreement with Wells Fargo Bank, N.A., to sell certain accounts receivable up to the Board approved limit of $500 million. There was no activity under the program during the six months ended June 30, 2026. This agreement expired in July 2026 and was not renewed.
Uses of Cash
Dividends
We paid dividends of $552 million during the six months ended June 30, 2026. In July 2026, the Board authorized an increase to our quarterly dividend of 10 percent from $2.00 per share to $2.20 per share.
Capital Expenditures
Capital expenditures for the six months ended June 30, 2026, were $438 million versus $393 million in the comparable period in 2025. We continue to invest in new product lines and targeted capacity expansions. We plan to spend an estimated $1.35 billion to $1.45 billion in 2026 on capital expenditures with approximately 60 percent of these expenditures expected to be invested in North America.
Current Maturities of Short and Long-Term Debt
We had $348 million of commercial paper outstanding at June 30, 2026, that matures in less than one year. Required annual long-term debt principal payments range from $63 million to $864 million over the next five years (including the remainder of 2026). See NOTE 9, "DEBT," to our Condensed Consolidated Financial Statements for additional information.
Stock Repurchases
In December 2021, the Board authorized the acquisition of up to $2.0 billion of additional common stock upon completion of the $2.0 billion repurchase plan authorized in 2019, which was completed in the first quarter of 2026. In the first six months of June 30, 2026, we made the following purchases under our stock repurchase programs:
In millions (except per share amounts)
For each quarter ended 		Shares
Purchased 		Average Cost
Per Share 		Total Cost of
Repurchases
Remaining
Authorized
Capacity
December 2019, $2 billion repurchase program
March 31 0.4 $ 539.09 $ 218 $ -
December 2021, $2 billion repurchase program
March 31 0.1 519.00 25 1,975
June 30 0.3 623.69 225 1,750
Subtotal 0.4 611.49 250
Total 0.8 575.54 $ 468
We intend to repurchase outstanding shares from time to time during 2026 to enhance shareholder value.
Settlement of Current and Future Customer Obligations
In the first quarter of 2026, we sold our low pressure fuel cell business to a customer, cancelled future commitments and resolved certain claims against us with that customer resulting in a net payment by us of $175 million. See NOTE 14, "REPORTABLE SEGMENTS," to our Condensed Consolidated Financial Statements for additional information.
Pensions
Our global pension plans, including our unfunded and non-qualified plans, were 112 percent funded at December 31, 2025. Our U.S. defined benefit plans (qualified and non-qualified), which represented approximately 70 percent of the worldwide pension obligation, were 115 percent funded, and our U.K. defined benefit plans were 105 percent funded at December 31, 2025. The funded status of our pension plans is dependent upon a variety of variables and assumptions including return on invested assets, market interest rates and levels of voluntary contributions to the plans. In the first six months of 2026, the investment gain on our U.S. pension trust was 4.3 percent, while our U.K. pension trusts' gain was 0.7 percent. We anticipate making additional defined benefit pension contributions during the remainder of 2026 of $23 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 2026 annual net periodic pension cost to approximate $75 million.
Credit Ratings
Our rating and outlook from each of the credit rating agencies as of the date of filing are shown in the table below:
Long-Term Short-Term
Credit Rating Agency (1)
Senior Debt Rating Debt Rating Outlook
Standard and Poor's Rating Services A A1 Stable
Moody's Investors Service, Inc. A2 P1 Stable
(1) Credit ratings are not recommendations to buy, are subject to change, and each rating should be evaluated independently of any other rating. In addition, we undertake no obligation to update disclosures concerning our credit ratings, whether as a result of new information, future events or otherwise.
Management's Assessment of Liquidity
Our financial condition and liquidity remain strong. Our solid balance sheet and credit ratings enable us to have ready access to credit and the capital markets. We assess our liquidity in terms of our ability to generate adequate cash to fund our operating, investing and financing activities in combination with access to our revolving credit facilities and commercial paper programs as noted above. We believe our access to the capital markets, our existing cash and marketable securities, operating cash flow and revolving credit facilities provide us with the financial flexibility needed to fund dividend payments, targeted capital expenditures, debt service obligations, common stock repurchases, projected pension obligations, joint venture contributions and acquisitions through 2026 and beyond.
APPLICATION OF CRITICAL ACCOUNTING ESTIMATES
A summary of our significant accounting policies is included in NOTE 1, "SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES," of the Notes to the Consolidated Financial Statements of our 2025 Form 10-K, which discusses accounting policies that we have selected from acceptable alternatives.
Our Condensed Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles that often require management to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts presented and disclosed in the financial statements. Management reviews these estimates and assumptions based on historical experience, changes in business conditions and other relevant factors they believe to be reasonable under the circumstances. In any given reporting period, our actual results may differ from the estimates and assumptions used in preparing our Condensed Consolidated Financial Statements.
Critical accounting estimates are defined as follows: the estimate requires management to make assumptions about matters that were highly uncertain at the time the estimate was made; different estimates reasonably could have been used; or if changes in the estimate are reasonably likely to occur from period to period and the change would have a material impact on our financial condition or results of operations. Our senior management has discussed the development and selection of our accounting policies, related accounting estimates and the disclosures set forth below with the Audit Committee of the Board. Our critical accounting estimates disclosed in the Form 10-K address estimating liabilities for warranty programs, assessing goodwill impairment and accounting for income taxes and pension benefits.
A discussion of our critical accounting estimates may be found in the "Management's Discussion and Analysis" section of our 2025 Form 10-K under the caption "APPLICATION OF CRITICAL ACCOUNTING ESTIMATES." Within the context of these critical accounting estimates, we are not currently aware of any reasonably likely events or circumstances that would result in different policies or estimates being reported in the first six months of 2026.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
See NOTE 15, "RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS," in our Notes to our Condensed Consolidated Financial Statements for additional information.
Cummins Inc. published this content on August 04, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on August 04, 2026 at 15:27 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]