Meritor Acquisition and 2022 Financial Results
Table of Contents
The fair value of each option grant was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions:
2022
2021
2020
Expected life (years)
Risk-free interest rate
Expected volatility
6
6
6
2.32 %
1.15%
28.40%
Dividend yield
2.85 %
28.68 %
2.95%
0.62 %
27.05 %
2.88 %
Expected life-The expected life of employee stock options represents the weighted-average period the stock options are expected to remain outstanding based upon our
historical data.
Risk-free interest rate-The risk-free interest rate assumption is based upon the observed U.S. treasury security rate appropriate for the expected life of our employee stock
options.
Expected volatility-The expected volatility assumption is based upon the weighted-average historical daily price changes of our common stock over the most recent period
equal to the expected option life of the grant, adjusted for activity which is not expected to occur in the future.
Dividend yield-The dividend yield assumption is based on our history and expectation of dividend payouts.
NOTE 21. EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
We calculate basic earnings per share (EPS) of common stock by dividing net income attributable to Cummins Inc. by the weighted-average number of common shares
outstanding for the period. The calculation of diluted EPS assumes the issuance of common stock for all potentially dilutive share equivalents outstanding. We excluded shares
of common stock held in the Employee Benefits Trust (EBT) from the calculation of the weighted-average common shares outstanding until those shares are distributed from
the EBT to the Retirement Savings Plan. The EBT was fully depleted at December 31, 2021. Following are the computations for basic and diluted earnings per share:
In millions, except per share amounts
Net income attributable to Cummins Inc.
Weighted-average common shares outstanding
Basic
Dilutive effect of stock compensation awards
Diluted
Earnings per common share attributable to Cummins Inc.
Basic
Diluted
Years ended December 31,
2022
2021
2020
2,151 $
2,131
$
1,789
141.5
0.8
144.6
142.3
1.3
145.9
148.2
0.8
149.0
15.20
15.12
$
14.74 $
14.61
12.07
12.01
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:
Options excluded
117
2022
20,595
Years ended December 31,
2021
2020
6,463
645,334View entire presentation