What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-11 compared with 2024-02-12 · 409 added, 411 removed, 1831 unchanged (31% of the section changed)

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 AGREEMENT IN PRINCIPLE

NOTE 2 REVENUE FROM CONTRACTS WITH CUSTOMERS

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NOTE 20 DERIVATIVES

NOTE 22 RUSSIAN OPERATIONS

NOTE 23 FORMATION OF ATMUS AND IPO

NOTE 21 ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE

NOTE 22 ACCELERA STRATEGIC REORGANIZATION ACTIONS

NOTE 23 ACQUISITIONS

NOTE 24 RUSSIAN OPERATIONS

NOTE 25 OPERATING SEGMENTS

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Annual Goodwill Impairment Tests – Automated Transmissions and Axles and Brakes Reporting Units

As described in Notes 1 and 10 to the consolidated financial statements, the Company’s consolidated goodwill balance was $2,499 million as of December 31, 2023, and as disclosed by management, the goodwill associated with the automated transmissions reporting unit and axles and brakes reporting unit (collectively, the “reporting units”) was $544 million and $764 million, respectively.

Management performs the goodwill impairment tests as of the end of the fiscal third quarter, or on an interim basis in certain circumstances where impairment may be indicated.

Goodwill Impairment Test as of the End of the Fiscal Third Quarter – Drivetrain and Braking Systems Reporting Unit

As described in Notes 1 and 9 to the consolidated financial statements, the Company’s consolidated goodwill balance was $ 2,370 million as of December 31, 2024, of which 31 percent relates to the drivetrain and braking systems reporting unit.

Effective October 31, 2024, management changed the annual goodwill impairment testing date for all reporting units from the last day of the fiscal third quarter to October 31.

To ensure that no lapse greater than twelve months occurred, management performed an impairment test as of the end of the fiscal third quarter.

Management performs the annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

In estimating the fair value of each reporting unit, management used an income approach using a discounted cash flow model.

The discounted cash flow model requires projections of revenue, gross margin, operating expenses, working capital investment and fixed asset additions for the reporting units over a multi-year period, and a discount rate based upon a weighted-average cost of capital.

The principal considerations for our determination that performing procedures relating to the annual goodwill impairment tests for the reporting units is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the reporting units;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to projections of revenue and gross margin for the reporting units and the discount rate for the axles and brakes reporting unit;

In estimating the fair value of the reporting unit, management used an income approach using a discounted cash flow model.

The discounted cash flow model requires projections of revenue, gross margin, operating expenses, working capital investment and fixed asset additions for the reporting unit over a multi-year period, and a discount rate based upon a weighted-average cost of capital.

The principal considerations for our determination that performing procedures relating to the goodwill impairment test as of the end of the fiscal third quarter for the drivetrain and braking systems reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the reporting unit;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to projections of revenue and gross margin;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment tests, including controls over the valuation of the reporting units.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the reporting units;

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment test, including controls over the valuation of the reporting unit.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the reporting unit;

(ii) evaluating the appropriateness of the discounted cash flow model used by management;

(iii) testing the completeness and accuracy of underlying data used in the discounted cash flow model;

and (iv) evaluating the reasonableness of significant assumptions used by management related to projections of revenue and gross margin for the reporting units and the discount rate for the axles and brakes reporting unit.

Evaluating management’s assumptions related to projections of revenue and gross margin involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting units;

and (iv) evaluating the reasonableness of significant assumptions used by management related to projections of revenue and gross margin.

(ii) the consistency with external market and industry data;

and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow model and (ii) the reasonableness of the discount rate assumption for the axles and brakes reporting unit.

Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the discounted cash flow model.

/s/ PricewaterhouseCoopers LLP

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Equity, royalty and interest income from investees (Note 3) 395 483 349

Other operating expense, net (Note 2) 2,138 174 31

Other operating expense, net 346 2,138 174

OPERATING INCOME 3,750 1,761 2,929

Interest expense 370 375 199

Other income, net 240 89 156

Other income, net (Note 21) 1,523 240 89

INCOME BEFORE INCOME TAXES 4,903 1,626 2,819

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CONSOLIDATED NET INCOME $ 4,068 $ 840 $ 2,183

Other comprehensive (loss) income, net of tax (Note 17)

Other comprehensive income (loss), net of tax (Note 16)

Change in pension and other postretirement defined benefit plans 5 ( 421 ) ( 81 )

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Unrealized gain on derivatives 16 10 106

Total other comprehensive (loss) income, net of tax ( 319 ) ( 359 ) 406

Total other comprehensive loss, net of tax ( 255 ) ( 319 ) ( 359 )

COMPREHENSIVE INCOME 3,813 521 1,824

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Commitments and contingencies (Note 14)

Redeemable noncontrolling interests (Note 24) $ — $ 258

shareholders’ equity (Note 15)

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Total equity $ 11,308 $ 9,904

Total liabilities, redeemable noncontrolling interests and equity $ 32,005 $ 30,299

Total liabilities and equity $ 31,540 $ 32,005

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

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Adjustments to reconcile consolidated net income to net cash provided by operating activities

Gain related to divestiture of Atmus (Note 21) ( 1,333 ) — —

Depreciation and amortization 1,065 1,024 784

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Russian suspension costs, net of recoveries (Note 24) — — 111

Changes in current assets and liabilities, net of acquisitions

Changes in current assets and liabilities, net of acquisitions and divestiture

Accounts and notes receivable 298 ( 330 ) ( 697 )

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Accounts payable ( 183 ) ( 66 ) 538

Accrued expenses (Note 2) 2,934 ( 170 ) 541

Accrued expenses ( 1,573 ) 2,934 ( 170 )

Other, net 100 348 160

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Capital expenditures ( 1,208 ) ( 1,213 ) ( 916 )

Acquisitions of businesses, net of cash acquired (Note 24) ( 292 ) ( 3,191 ) —

Investments in and net advances (to) from equity investees ( 214 ) 14 ( 54 )

Acquisition of businesses, net of cash acquired (Note 23) ( 58 ) ( 292 ) ( 3,191 )

Investments in marketable securities—acquisitions ( 1,500 ) ( 1,409 ) ( 1,073 )

Investments in marketable securities—liquidations (Note 5) 1,460 1,334 1,151

Cash associated with Atmus divestiture ( 174 ) — —

Other, net ( 88 ) ( 77 ) ( 89 )

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EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ( 40 ) ( 68 ) 50

Net increase (decrease) in cash and cash equivalents 78 ( 491 ) ( 809 )

Net (decrease) increase in cash and cash equivalents ( 508 ) 78 ( 491 )

Cash and cash equivalents at beginning of year 2,179 2,101 2,592

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Net income ( 24 ) 2,151 2,151 56 2,207

Other comprehensive income (loss), net of tax (Note 17) 411 411 ( 5 ) 406

Other comprehensive loss, net of tax (Note 16) ( 319 ) ( 319 ) ( 40 ) ( 359 )

Issuance of common stock 8 8 — 8

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Share-based awards 3 77 80 — 80

Acquisition of business (Note 23) — 111 111

Fair value adjustment of redeemable noncontrolling interests ( 104 ) 104 104 — 104

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Issuance of common stock 3 3 — 3

Repurchases of common stock (Note 16) ( 374 ) ( 374 ) — ( 374 )

Cash dividends on common stock (Note 15) ( 921 ) ( 921 ) — ( 921 )

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Share-based awards ( 4 ) 52 48 — 48

Acquisition of business (Note 24) — 111 111

Fair value adjustment of redeemable noncontrolling interests 33 ( 33 ) ( 33 ) — ( 33 )

Acquisition of redeemable noncontrolling interests (Note 23) ( 271 ) — — —

Sale of Atmus stock (Note 21) 285 285 ( 3 ) 282

Other shareholder transactions 70 4 74 — 74

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Issuance of common stock 7 7 — 7

Divestiture of Atmus (Note 21) ( 1,532 ) 61 ( 1,471 ) ( 19 ) ( 1,490 )

Cash dividends on common stock (Note 15) ( 969 ) ( 969 ) — ( 969 )

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Share-based awards ( 7 ) 140 133 — 133

Fair value adjustment of redeemable noncontrolling interests 33 ( 33 ) ( 33 ) — ( 33 )

Acquisition of redeemable noncontrolling interests (Note 24) ( 271 ) — — —

Sale of Atmus stock (Note 23) 285 285 ( 3 ) 282

Other shareholder transactions 72 3 75 ( 33 ) 42

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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, valvetrain technologies, controls systems, air handling systems, automated transmissions, axles, drivelines, brakes, suspension systems, electric power generation systems, batteries, electrified power systems, hydrogen production technologies and fuel cell products.

We are a global power solutions leader comprised of five business segments - Engine, Components, Distribution, Power Systems and Accelera - supported by our global manufacturing and extensive service and support network, skilled workforce and vast technical expertise.

Our products range from advanced diesel, natural gas, electric and hybrid powertrains and powertrain-related components including aftertreatment, turbochargers, fuel systems, valvetrain technologies, controls systems, air handling systems, automated transmissions, axles, drivelines, brakes, suspension systems, electric power generation systems, electrified power systems with innovative components and subsystems, including battery, fuel cell and electric power technologies and hydrogen production technologies.

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 650 wholly-owned, joint venture and independent distributor locations and more than 19,000 Cummins certified dealer locations in approximately 190 countries and territories.

Divestiture of Atmus

On March 18, 2024, we completed the divestiture of our remaining 80.5 percent ownership of Atmus Filtration Technologies Inc.

(Atmus) common stock through a tax-free split-off.

See NOTE 21, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," for additional information.

Settlement Agreements

In December 2023, we announced that we reached an agreement in principle with the U.S.

Environmental Protection Agency (EPA), the 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).

In the second quarter of 2024, we made $ 1.9 billion of payments required by the Settlement Agreements.

See NOTE 14, “COMMITMENTS AND CONTINGENCIES,” for additional information.

Meritor Acquisition

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Our consolidated results and segment results include Meritor's activity since the date of acquisition.

Meritor was split into the newly formed axles and brakes business and electric powertrain.

The results for the axles and brakes business are included in our Components segment while the electric powertrain portion is included in our Accelera segment.

Meritor was split into the newly formed drivetrain and braking systems business and electric powertrain.

The results for the drivetrain and braking systems are included in our Components segment while the electric powertrain portion is included in our Accelera segment.

See NOTE 23, "ACQUISITIONS," for additional information.

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Preparation of financial statements requires management to make estimates and assumptions that affect reported amounts presented and disclosed in our Consolidated Financial Statements .

Significant estimates and assumptions in these Consolidated Financial Statements require the exercise of judgement and are used for, but not limited to, estimates of future cash flows and other assumptions associated with the valuation of intangible assets and goodwill and long-lived asset impairment tests, useful lives for depreciation and amortization, warranty programs, determination of discount rate and other assumptions for pensions and other postretirement benefit obligations (OPEB) and related costs, income taxes, deferred tax valuation allowances, contingencies and allowances for doubtful accounts.

Significant estimates and assumptions in these Consolidated Financial Statements require the exercise of judgment and are used for, but not limited to, estimates of future cash flows and other assumptions associated with the valuation of intangible assets and goodwill and long-lived asset impairment tests, useful lives for depreciation and amortization, warranty programs, determination of discount rate and other assumptions for pensions and other postretirement benefit obligations (OPEB) and related costs, income taxes, deferred tax valuation allowances and contingencies.

Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates.

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Our long-term arrangements generally do not include committed volumes until underlying purchase orders are issued.

Our performance obligations vary by contract, but may include 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, valvetrain technologies, suspension systems, electric power generation systems and construction related projects, batteries, electrified power systems, electric powertrains, hydrogen production technologies, fuel cell products, parts, maintenance services and extended warranty coverage.

Our performance obligations vary by contract, but may include advanced diesel, natural gas, electric and hybrid powertrains and powertrain-related components including aftertreatment, turbochargers, fuel systems, valvetrain technologies, controls systems, air handling systems, automated transmissions, axles, drivelines, brakes, suspension systems, electric power generation systems, electrified power systems with innovative components and subsystems including battery, fuel cell, electric power technologies and parts, hydrogen production technologies, construction related projects, maintenance services, commissioning and installation services and extended warranty coverage.

Typically, we recognize revenue on the products we sell at a point in time, generally in accordance with shipping terms, which reflects the transfer of control to the customer.

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Rights of return do not exist for the majority of our sales other than for quality issues.

We do offer certain return rights in our aftermarket business, where some aftermarket customers are permitted to return small amounts of parts and filters each year, and in our power generation business, which sells portable generators to retail customers.

We do offer certain return rights in our aftermarket business, where some aftermarket customers are permitted to return small amounts of parts each year, and in our power generation business, which sells portable generators to retail customers.

An estimate of future returns is accounted for at the time of sale as a reduction in the overall contract transaction price based on historical return rates.

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Unbilled and deferred revenue are discussed in more detail below.

Long-term Contracts

Long-term Maintenance Agreements

Our long-term maintenance agreements often include a variable component of the transaction price.

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Unbilled revenue relates to our right to consideration for our completed performance under a contract.

Unbilled revenue generally arises from contractual provisions that delay a portion of the

billings on genset deliveries until commissioning occurs.

Unbilled revenue generally arises from contractual provisions that delay a portion of the billings on genset deliveries until commissioning occurs.

Unbilled revenue may also occur when billings trail the provision of service in construction and long-term maintenance contracts.

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This estimate of expected losses reflects those losses expected to occur over the contractual life of the unbilled amount through the time of collection.

We did not record any impairment losses on our unbilled revenues during the years ended December 31, 2023, 2022 and 2021.

Impairment losses on our unbilled revenues were immaterial during the years ended December 31, 2024, 2023 and 2022.

Contract Costs

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dollar is the functional currency, including those operating in highly inflationary economies when applicable, we remeasure non-monetary balances and the related income statement amounts using historical exchange rates.

We include the resulting gains and losses in income, including the effect of derivatives in our Consolidated Statements of Net Income , which combined with transaction gains and losses amounted to a net loss of $ 30 million and $ 8 million and a net gain of $ 2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

We include the resulting gains and losses in income, including the effect of derivatives in our Consolidated Statements of Net Income , which combined with transaction gains and losses amounted to net losses of $ 41 million, $ 30 million and $ 8 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Fair Value Measurements

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We make use of derivative instruments in foreign exchange, commodity price and interest rate hedging programs.

Derivatives currently in use are foreign currency forward contracts, commodity swaps and interest rate swaps and locks.

Derivatives currently in use are foreign currency forward contracts, commodity swaps and interest rate swaps.

These contracts are used strictly for hedging and not for speculative purposes.

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We are exposed to market risk from fluctuations in interest rates.

We manage our exposure to interest rate fluctuations through the use of interest rate swaps and locks.

We manage our exposure to interest rate fluctuations through the use of interest rate swaps.

The objective is to more effectively balance our borrowing costs and interest rate risk for current and future exposure.

The gain or loss on the swaps as well as the offsetting gain or loss on the hedged item are recognized in current income as interest expense.

The gain or loss on the locks is deferred and reported as a component of AOCL.

For more detail on our interest rate swaps, see NOTE 20, "DERIVATIVES."

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These audits can involve complex issues, which may require an extended period of time to resolve.

We accrue for the

estimated additional tax and interest that may result from tax authorities disputing uncertain tax positions.

We accrue for the estimated additional tax and interest that may result from tax authorities disputing uncertain tax positions.

We believe we made adequate provisions for income taxes for all years that are subject to audit based upon the latest information available.

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We have elected this option on certain reporting units.

The quantitative impairment test is only required if an entity determines through this qualitative analysis that it is more likely than not that the fair value of the reporting unit is less than its carrying value.

The quantitative impairment test is only required if an entity determines through this qualitative analysis that it is more likely than not that the fair value of the reporting unit is less than its

carrying value.

In addition, the carrying value of goodwill must be tested for impairment on an interim basis in certain circumstances where impairment may be indicated.

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An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.

When we are required or opt to perform the quantitative impairment test, the fair value of each reporting unit is estimated with either the market approach or the income approach.

When we are required or opt to perform the quantitative impairment test, the fair value of each reporting unit is estimated with either the income approach or the market approach.

Our income approach method uses a discounted cash flow model in which cash flows anticipated over several periods, plus a terminal value at the end of that time horizon, are discounted to their present value using an appropriate rate of return.

Our reporting units are generally defined as one level below an operating segment.

However, there are four situations where we have aggregated two or more reporting units which share similar economic characteristics and thus are aggregated into a single reporting unit for testing purposes.

These four situations are described further below:

• Within our Components segment, our emission solutions and Atmus businesses were aggregated into a single reporting unit,

• Within our Accelera segment, our fuel cell and electrolyzer businesses were aggregated into a single reporting unit and our epowertrain and traction systems businesses were aggregated into a single reporting unit and

However, there are two situations where we have aggregated two or more reporting units which share similar economic characteristics and thus are aggregated into a single reporting unit for testing purposes.

These two situations are described further below:

• Within our Accelera segment, our fuel cell and electrolyzer businesses were aggregated into a single reporting unit and

• Our Distribution segment is considered a single reporting unit as it is managed geographically and all regions share similar economic characteristics and provide similar products and services.

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An increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect our financial statements in any given year.

We perform the goodwill impairment assessment as of the end of our fiscal third quarter.

At December 31, 2023, our recorded goodwill was $ 2.5 billion, of which approximately 31 percent resided in the axles and brakes reporting unit, 22 percent in the automated transmissions reporting unit and 19 percent in the aggregated emission solutions and filtration reporting unit.

While none of the reporting units recorded a goodwill impairment in 2023, the estimated fair value of two of these reporting units did not significantly exceed the carrying value in our annual impairment testing.

Our automated transmissions reporting unit had an estimated fair value that exceeded its carrying value by approximately 7 percent and our axles and brakes reporting unit had an estimated fair value that exceeded its carrying value by approximately 12 percent.

Effective October 31, 2024, we changed our annual goodwill impairment testing date for all reporting units from the last day of our fiscal third quarter to October 31 to better align with the timing of our annual long-term planning process.

Accordingly, management determined that the change in accounting principle is preferable.

This change was applied prospectively from October 31, 2024.

We determined that it is impracticable to objectively ascertain projected cash flows and related valuation estimates that would have been used as of each October 31 of prior reporting periods without the use of hindsight.

This change was not material to our Consolidated Financial Statements as it did not delay, accelerate or avoid any potential goodwill impairment charges.

To ensure that no lapse greater than twelve months occurred, we performed an impairment test, for all reporting units, as of the end of our 2024 fiscal third quarter and noted no impairment.

We completed our annual impairment testing as of October 31, 2024, and noted no impairment.

At December 31, 2024, our recorded goodwill was $ 2.4 billion, of which approximately 31 percent resided in the drivetrain and braking systems reporting unit.

Changes in our projections or estimates, a deterioration of our operating results and the related cash flow effect or a significant increase in the discount rate could decrease the estimated fair value of our reporting units and result in a future impairment of goodwill.

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We estimate and record a liability for base warranty programs at the time our products are sold.

Our estimates are based on historical experience and reflect management's best estimates of expected costs at the time products are sold and subsequent adjustment to those expected costs when actual costs differ.

Our estimates are based on historical experience and reflect management's best estimates of expected costs at the time products are sold and subsequent adjustment to those

expected costs when actual costs differ.

Factors considered in developing these estimates included component failure rates, repair costs and the point of failure within the product life cycle.

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We record an accrual for contingent liabilities when the amounts are probable and estimable.

As the cash flow associated with most of our contingent liabilities can not be reasonably predicted, we record our estimated obligations on an undiscounted basis.

As the cash flow associated with most of our contingent liabilities cannot be reasonably predicted, we record our estimated obligations on an undiscounted basis.

In addition, our accrual does not include amounts for estimated legal defense costs as those are expensed in the period in which they are incurred.

Environmental Credits

From time to time, we purchase certain forms of environmental credits from third parties to satisfy obligations with various regulatory agencies when we do not generate enough credits internally to satisfy those obligations.

Purchased credits are initially recorded at cost and expensed when utilized to satisfy the related regulatory obligation.

Amounts expected to be utilized in the next twelve months are reflected as current assets.

As of December 31, 2024, we had $ 120 million of credits of which $ 56 million was recorded in other current assets and $ 64 million was recorded in other intangible assets, net in our Consolidated Balance Sheets.

Research and Development

Our research and development programs are focused on product improvements, product extensions, innovations and cost reductions for our customers.

Research and development expenditures include salaries, contractor fees, building costs, utilities, testing, technical information technology expenses, administrative expenses and allocation of corporate costs and are expensed, net of contract reimbursements, when incurred.

Research and development expenditures include salaries, contractor fees, building costs, utilities, testing, technical IT expenses, administrative expenses and allocation of corporate costs and are expensed, net of contract reimbursements, when incurred.

From time to time, we enter into agreements with customers and government agencies to fund a portion of the research and development costs of a particular project.

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

In millions December 31,

2023 December 31,

2022 Balance Sheet Location

In millions 2024 2023 Balance Sheet Location

Accounts receivable from nonconsolidated equity investees $ 432 $ 530 Accounts and notes receivable, net

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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 $ 512 million at December 31, 2023.

The maximum amount that we could have outstanding under these programs was $ 551 million at December 31, 2024.

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.

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Amounts due to the financial intermediaries reflected in accounts payable at December 31, 2024, and 2023, were $ 142 million and $ 199 million, respectively.

The following table summarizes the changes in amounts due to financial intermediaries reflected in accounts payable for the year ended December 31, 2023:

Balance at December 31, 2022 $ 331

The following table summarizes the changes in amounts due to financial intermediaries reflected in accounts payable:

In millions 2024 2023

Balance at the beginning of year $ 199 $ 331

Additional invoices presented for payment 794 1,141

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Foreign currency translation adjustments and other ( 1 ) 1

Balance at December 31, 2023 $ 199

Balance at end of period $ 142 $ 199

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 of Directors (Board) approved limit of $ 500 million.

We will classify proceeds received from the sales of accounts receivable as an operating cash flow in our Consolidated Statements of Cash Flows , and will we record the discount in other income, net in our Consolidated Statements of Net Income when the program is active .

There was no activity under the program during the year ended December 31, 2024.

Government Assistance

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Accounting Pronouncements Recently Adopted

In September 2022, the Financial Accounting Standards Board (FASB) issued a standard related to the disclosure of additional information about the use of supplier finance programs.

Under the new standard, entities are required to disclose (1) key terms of the programs, (2) the amount outstanding that remains unpaid as of the end of the period, including where amounts are recorded in the balance sheets and (3) an annual rollforward of those obligations, including the amount of obligations confirmed and the amount of obligations subsequently paid.

We adopted the new standard on January 1, 2023, on a retrospective basis other than the rollforward, which we adopted on a prospective basis beginning with our 2023 annual financial statements.

The adoption did not have a material impact on our financial statements.

See "Supply Chain Financing" section above for additional information.

Accounting Pronouncements Issued But Not Yet Effective

In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07, "Segment Reporting (Topic 280):

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures," to enhance disclosures for significant segment expenses for all public entities required to report segment information in accordance with ASC 280.

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Retrospective adoption is required for all prior periods presented in the financial statements.

We plan to adopt the standard beginning with our 2024 Form 10-K.

The adoption is not expected to have a material impact to our financial statements or disclosures.

We adopted the new standard in the fourth quarter of 2024.

The new required disclosures are included in NOTE 25, "OPERATING SEGMENTS."

Accounting Pronouncements Issued But Not Yet Effective

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740):

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The new rules are effective for annual periods beginning after December 15, 2024.

We will adopt this standard on a prospective basis as allowed by the standard.

The adoption of this standard is not expected to have a material impact on our Consolidated Financial Statements.

AGREEMENT IN PRINCIPLE

In December 2023, we announced that we reached an agreement in principle with the Environmental Protection Agency (EPA), the 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 (CA AG) 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 (collectively, the Agreement in Principle).

As part of the Agreement in Principle, among other things, we agreed to pay civil penalties, complete recall requirements, undertake mitigation projects, provide extended warranties, undertake certain testing, take certain corporate compliance measures and make certain payments.

Failure to comply with the terms and conditions of the Agreement in Principle will subject us to further stipulated penalties.

We recorded a charge of $ 2.036 billion in the fourth quarter of 2023 to resolve the matters addressed by the Agreement in Principle involving approximately one million of our pick-up truck applications in the U.S.

The charge is included in other operating expense, net, in our Consolidated Statements of Net Income .

See NOTE 15, "COMMITMENTS AND CONTINGENCIES," for further information.

The majority of the amount is expected to be paid in 2024 after final regulatory and judicial approvals are obtained.

As a result, $ 1.938 billion is included in other current liabilities in our Consolidated Balance Sheets with the remainder included in other long-

term liabilities.

Of the total charge, $ 1.732 billion (primarily related to penalties) will be non-deductible for U.S.

federal income tax purposes.

The remaining amount, related to emissions mitigation projects and payments, extended warranties and other related compliance expenses is deductible for U.S.

federal income tax purposes.

In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)", which requires public business entities to disclose in the notes to the financial statements more detailed information about the types of expenses included in certain expense captions in the consolidated financial statements, including purchases of inventory, employee compensation, and depreciation and amortization.

The amendments are effective for us beginning with our 2027 annual period and in interim periods beginning in 2028.

Early adoption is permitted.

The ASU may be adopted prospectively or retrospectively.

We are currently evaluating the impact of ASU 2024-03 on our Consolidated Financial Statements and related disclosures.

REVENUE FROM CONTRACTS WITH CUSTOMERS

Long-term Contracts

Long-term Maintenance Agreements

We have certain arrangements, primarily long-term maintenance agreements, construction contracts, product sales with associated performance obligations extending beyond a year, product sales with lead times extending beyond one year that are non-cancellable or for which the customer incurs a penalty for cancellation and extended warranty coverage arrangements that span a period in excess of one year.

The aggregate amount of the transaction price for these contracts, excluding extended warranty coverage arrangements, as of December 31, 2023, was $ 2.1 billion.

The aggregate amount of the transaction price for these contracts, excluding extended warranty coverage arrangements, at December 31, 2024, was $ 5.4 billion.

We expect to recognize the related revenue of $ 2.5 billion over the next 12 months and $ 2.9 billion over periods up to 10 years.

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We recognized revenue of $ 850 million and $ 733 million in 2024 and 2023, respectively, 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 2023 or 2022.

Disaggregation of Revenue

Consolidated Revenue

The table below presents our consolidated sales by geographic area.

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United States $ 19,422 $ 19,302 $ 15,833

$ 19,302 $ 15,833 $ 12,489

China 2,948 3,115 2,390

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Other international 9,953 9,970 8,459

9,970 8,459 7,230

Total net sales $ 34,102 $ 34,065 $ 28,074

(1) We revised $ 281 million from other international to United States for the year ended December 31, 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 23, "FORMATION OF ATMUS AND IPO," for additional information.

Components segment external sales by business were as follows:

Years ended December 31,

In millions 2023 2022 2021

Axles and brakes $ 4,822 $ 1,879 $ —

Emission solutions 3,425 3,086 3,142

Atmus 1,345 1,259 1,171

Engine components 1,119 946 1,019

Automated transmissions 714 593 481

Software and electronics 106 84 119

Total sales $ 11,531 $ 7,847 $ 5,932

Engine segment external sales by market were as follows:

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Total sales $ 8,987 $ 8,874 $ 8,199

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.

Components segment external sales by business were as follows:

Years ended December 31,

In millions 2024 2023 2022

Drivetrain and braking systems $ 4,731 $ 4,822 $ 1,879

Emission solutions 3,180 3,425 3,086

Components and software 1,106 1,225 1,030

Automated transmissions 588 714 593

Atmus 289 (1)

Total sales $ 9,894 $ 11,531 $ 7,847

(1) Included sales through the March 18, 2024, divestiture.

See NOTE 21, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," for additional information.

Beginning in the second quarter of 2024, we realigned certain businesses within our Components segment to be consistent with how our segment leader now monitors performance.

We reorganized the businesses to combine the engine components and software and electronics businesses into the newly formed components and software business.

In addition, we rebranded our axles and brakes business as drivetrain and braking systems.

We began reporting results for these changes within our Components segment effective April 1, 2024, and reflected these changes in the historical periods presented.

The change had no impact on our consolidated results.

Distribution segment external sales by region were as follows:

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China 469 424 351

Africa and Middle East 294 250 278

India 310 264 217

Africa and Middle East 268 294 250

Latin America 266 224 210

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Power generation 3,961 2,496 1,767

Engines 1,987 1,770 1,493

Service 1,747 1,664 1,555

Engines 1,678 1,987 1,770

Total sales $ 11,352 $ 10,199 $ 8,901

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Komatsu alliances 20 - 50 %

Amplify Cell Technologies, LLC 30 % 187 —

Beijing Foton Cummins Engine Co., Ltd.

Sisamex 50 % 149 144

Sistemas Automotrices de Mexico S.A.

Dongfeng Cummins Engine Company, Ltd.

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$ 66 $ 65 $ 45

Beijing Foton Cummins Engine Co., Ltd.

Chongqing Cummins Engine Company, Ltd.

Beijing Foton Cummins Engine Co., Ltd.

Tata Cummins, Ltd.

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Equity, royalty and interest income from investees $ 395 $ 483 $ 349

(1) Includes a $ 28 million impairment of our joint venture with KAMAZ and $ 3 million of royalty charges as part of our costs associated with the indefinite suspension of our Russian operations.

In addition, on February 7, 2022, we purchased Westport Fuel System Inc.'s stake in Westport JV.

See NOTE 24, "ACQUISITIONS," and NOTE 22, "RUSSIAN OPERATIONS," for additional information.

(1) Included a $ 17 million impairment of our joint ventures in the fourth quarter of 2024 related to Accelera strategic reorganization actions.

See NOTE 22, "ACCELERA STRATEGIC REORGANIZATION ACTIONS," for additional information

(2) Included a $ 28 million impairment of our joint venture with KAMAZ and $ 3 million of royalty charges as part of our costs associated with the indefinite suspension of our Russian operations.

See NOTE 24, "RUSSIAN OPERATIONS," for additional information.

Manufacturing Entities

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Our engine manufacturing joint ventures are supplied by our Components segment in the same manner as it supplies our wholly-owned Engine segment and Power Systems segment manufacturing facilities.

Our Components segment joint ventures and wholly-owned entities provide axles, drivelines, brakes and suspension systems for commercial diesel and natural gas applications, aftertreatment systems, turbochargers, fuel systems, filtration products, automated transmissions and electronics that are used with our engines as well as some competitors' products.

Our Components segment joint ventures and wholly-owned entities provide axles, drivelines, brakes and suspension systems for commercial diesel and natural gas applications, aftertreatment systems, turbochargers, fuel systems, valvetrain technologies, automated transmissions and electronics that are used with our engines as well as some competitors' products.

The results and investments in our joint ventures in which we have 50 percent or less ownership interest (except for Eaton Cummins Automated Transmission Technologies joint venture, which is consolidated due to our majority voting interest) are included in equity, royalty and interest income from investees and investments and advances related to equity method investees in our Consolidated Statements of Net Income and Consolidated Balance Sheets , respectively.

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Off-highway engines are used in a variety of construction, power generation, marine and agriculture markets in China.

• Chongqing Cummins Engine Company, Ltd.

- Chongqing Cummins Engine Company, Ltd.

is a joint venture in China with Chongqing Machinery and Electric Co.

This joint venture manufactures several models of our heavy-duty and high-horsepower diesel engines primarily serving the industrial and stationary power markets in China.

• Beijing Foton Cummins Engine Co., Ltd.

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Certain types of construction equipment and industrial applications are also served by these engine families.

• Chongqing Cummins Engine Company, Ltd.

- Chongqing Cummins Engine Company, Ltd.

is a joint venture in China with Chongqing Machinery and Electric Co.

This joint venture manufactures several models of our heavy-duty and high-horsepower diesel engines primarily serving the industrial and stationary power markets in China.

• Tata Cummins, Ltd.

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This joint venture manufactures Cummins' 3.8 to 8.9 liter diesel and natural gas engines in India with a power range from 75 to 400 horsepower for use in trucks and buses manufactured by Tata Motors, as well as for various on-highway, industrial and power generation applications for Cummins.

In September 2023, our Accelera business signed an agreement to form a joint venture with Daimler Trucks and Buses US Holding LLC (Daimler Truck), PACCAR Inc.

In September 2023, our Accelera business signed an agreement to form a joint venture, Amplify Cell Technologies LLC, with Daimler Trucks and Buses US Holding LLC (Daimler Truck), PACCAR Inc.

(PACCAR) and EVE Energy to accelerate and localize battery cell production and the battery supply chain in the U.S., including building a 21-gigawatt hour battery production facility in Marshall County, Mississippi.

The joint venture will manufacture battery cells for electric commercial vehicles and industrial applications.

Accelera, Daimler Truck and PACCAR will each own 30 percent of the joint venture, while EVE Energy will own 10 percent.

Total investment by the partners is expected to be in the range of $ 2 billion to $ 3 billion for the 21-gigawatt hour facility.

The transaction is subject to closing conditions and receipt of applicable merger control and regulatory approvals including submission of a voluntary notice to the Committee on Foreign Investment in the U.S.

The joint venture received all government approvals and began operations in May 2024, but is not expected to begin production until 2027.

The joint venture meets the definition of a variable interest entity since the equity-at-risk is not currently sufficient to support the future operations of the joint venture.

Accelera, Daimler Truck and PACCAR each own 30 percent of the joint venture and have two board positions, while EVE Energy owns 10 percent and has one board position.

All significant decisions require majority or super-majority approval of the board.

As a result, we are not the primary beneficiary of the joint venture, and the joint venture is not consolidated.

We account for the joint venture using the equity method.

As of December 31, 2024, we had contributed $ 211 million, and our maximum remaining required contribution to the joint venture was $ 619 million, which could be reduced by future government incentives received by the joint venture.

In addition, we are required to purchase 33 percent of the joint venture's output in the future or be subject to certain penalties.

Distribution Entities

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In millions 2024 2023 2022

(loss) income $ ( 541 ) $ 1,336 $ 1,251

income (loss) $ 2,857 $ ( 541 ) $ 1,336

Foreign income 2,046 2,167 1,483

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Foreign 32 11 ( 45 )

Total deferred income tax (benefit) expense ( 457 ) ( 274 ) 7

Total deferred income tax benefit ( 209 ) ( 457 ) ( 274 )

Income tax expense $ 835 $ 786 $ 636

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Foreign derived intangible income ( 1.3 ) ( 4.2 ) ( 2.0 )

Agreement in Principle, federal impact (2)

Agreement in Principle, state impact (2)

Settlement Agreements, federal impact (2)

Settlement Agreements, state impact (2)

Non-taxable Atmus gain (3)

Other, net ( 0.5 ) 0.2 1.0

Effective tax rate 17.0 % 48.3 % 22.6 %

(1) Includes the jurisdictional mix of pre-tax income and impact of actual and planned repatriation of earnings back to the U.S.

(2) See NOTE 2, "AGREEMENT IN PRINCIPLE," for additional information.

The year ended December 31, 2023, contained unfavorable net discrete items of $ 397 million, primarily due to $ 398 million in the fourth quarter related to the $ 2.0 billion charge from the Agreement in Principle, $ 22 million of unfavorable adjustments for uncertain tax positions and $ 3 million of net unfavorable other discrete tax items, partially offset by $ 21 million of favorable return to provision adjustments and $ 5 million of favorable share-based compensation tax benefit.

See NOTE 2, "AGREEMENT IN PRINCIPLE," for additional information.

(1) Included the jurisdictional mix of pre-tax income and impact of actual and planned repatriation of earnings back to the U.S.

(2) See NOTE 14, "COMMITMENTS AND CONTINGENCIES," for additional information.

(3) See NOTE 21, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," for additional information.

The year ended December 31, 2024, contained net favorable discrete tax items primarily due to the $ 1.3 billion non-taxable gain on the Atmus split-off.

Other discrete tax items were net favorable by $ 59 million, primarily due to $ 52 million of favorable return to provision adjustments, $ 22 million of favorable share-based compensation tax benefits, $ 21 million of favorable adjustments related to audit settlements and $ 20 million of favorable adjustments from tax return amendments, partially offset by $ 50 million of unfavorable adjustments related to Accelera strategic reorganization actions and net $ 6 million of other unfavorable adjustments.

See NOTE 21, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," and NOTE 22, "ACCELERA STRATEGIC REORGANIZATION ACTIONS," for additional information.

The year ended December 31, 2023, contained unfavorable net discrete items of $ 397 million, primarily due to $ 398 million in the fourth quarter related to the $ 2.0 billion charge from the Settlement Agreements, $ 22 million of unfavorable adjustments for uncertain tax positions and $ 3 million of net unfavorable other discrete tax items, partially offset by $ 21 million of favorable return to provision adjustments and $ 5 million of favorable share-based compensation tax benefits .

See NOTE 14, “COMMITMENTS AND CONTINGENCIES,” for additional information.

The year ended December 31, 2022, contained discrete tax items that netted to zero , primarily due to $ 31 million of favorable changes in accrued withholding taxes, $ 29 million of favorable changes in tax reserves, $ 15 million of favorable valuation allowance adjustments and $ 9 million of favorable other net discrete items, offset by $ 69 million of unfavorable tax costs associated with internal restructuring ahead of the planned separation of Atmus and $ 15 million of unfavorable return to provision adjustments related to the 2021 filed tax returns.

The year ended December 31, 2021, contained $ 9 million of unfavorable net discrete tax items, primarily due to $ 12 million of unfavorable provision to return adjustments related to the 2020 filed tax returns, partially offset by $ 3 million of favorable other discrete tax items.

At December 31, 2024, $ 5.6 billion of non-U.S.

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Total deferred tax liabilities ( 1,418 ) ( 1,417 )

Net deferred tax (liabilities) assets $ 552 $ ( 24 )

Net deferred tax assets $ 730 $ 552

Our 2024 U.S.

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A valuation allowance is recorded to reduce the gross deferred tax assets to an amount we believe is more likely than not to be realized.

The valuation allowance is $ 789 million and increased in 2023 by a net $ 85 million.

The valuation allowance at December 31, 2024 was $ 872 million and increased by a net $ 83 million.

The valuation allowance at December 31, 2023 was $ 789 million and increased by a net $ 85 million.

The valuation allowance at December 31, 2022 was $ 704 million and increased by a net $ 344 million, primarily due to the Meritor acquisition.

The valuation allowance is primarily attributable to the uncertainty regarding the realization of a portion of the U.S.

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Equity securities

Publicly-traded shares $ 7 $ ( 6 ) $ 1 $ — $ — $ —

Debt mutual funds 262 1 263 272 — 272

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(1) Unrealized gains and losses for debt securities are recorded in other comprehensive income while unrealized gains and losses for equity securities are recorded in our Consolidated Statements of Net Income .

All debt securities are classified as available-for-sale.

All marketable securities presented use a Level 2 fair value measure.

The fair value of Level 1 securities is derived from the market price at the end of the period.

The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors.

We do not currently have any Level 3 securities, and there were no transfers between Level 2 or 3 during 2024 or 2023.

All debt securities are classified as available-for-sale.

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

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Inventories $ 5,742 $ 5,677

In the fourth quarter of 2024, we wrote-off $ 107 million of inventory in our Accelera segment, mostly in work-in-process and raw materials.

See NOTE 22, "ACCELERA STRATEGIC REORGANIZATION ACTIONS," for additional information.

PROPERTY, PLANT AND EQUIPMENT

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Property, plant and equipment, net $ 6,356 $ 6,249

In the fourth quarter of 2024, we impaired $ 61 million of long-lived assets in our Accelera segment.

See NOTE 22, "ACCELERA STRATEGIC REORGANIZATION ACTIONS," for additional information.

Our lease portfolio consists primarily of real estate and equipment leases.

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Foreign currency translation and other ( 48 ) ( 2 ) — — — ( 50 )

Divestiture (1)

( 114 ) — — — — ( 114 )

Balance at December 31, 2024 $ 1,724 $ 494 $ 83 $ 44 $ 25 $ 2,370

(1) See NOTE 21, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," for additional information.

Intangible assets that have finite useful lives are amortized over their estimated useful lives.

The following table summarizes our other intangible assets with finite useful lives that are subject to amortization:

The following table summarizes our other intangible assets:

In millions 2024 2023

Amortizable intangible assets

Software $ 793 $ 622

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Trademarks, patents, customer relationships and other, net 1,866 2,200

Unamortizable other intangible assets 64 20

Other intangible assets, net $ 2,351 $ 2,519

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Projected amortization expense $ 320 $ 308 $ 293 $ 266 $ 232

In the fourth quarter of 2024, we impaired $ 84 million of other intangible assets in our Accelera segment.

See NOTE 22, "ACCELERA STRATEGIC REORGANIZATION ACTIONS," for additional information.

PENSIONS AND OTHER POSTRETIREMENT BENEFITS

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Interest cost 167 168 71 70

Actuarial loss (gain) 172 ( 643 ) 47 ( 702 )

Actuarial (gain) loss ( 163 ) 172 ( 133 ) 47

Benefits paid from fund ( 328 ) ( 223 ) ( 108 ) ( 87 )

1 unchanged sentence

Plan amendment — 1 — —

Assumption of Meritor's benefit obligation — 786 — 418

Foreign currency translation adjustments — — ( 23 ) 80

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Benefits paid from fund ( 328 ) ( 223 ) ( 108 ) ( 87 )

Assumption of Meritor's plan assets — 699 — 565

Foreign currency translation adjustments — — ( 25 ) 98

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Incurred prior service cost — 1 3

Incurred actuarial loss (gain) 432 173 ( 368 )

Foreign currency translation adjustments — — 5

Total recognized in other comprehensive loss (income) $ 422 $ 148 $ ( 444 )

Total recognized in net periodic pension cost and other comprehensive loss (income) $ 423 $ 167 $ ( 366 )

Incurred actuarial loss 46 432 173

Total recognized in other comprehensive loss $ 18 $ 422 $ 148

Total recognized in net periodic pension cost and other comprehensive loss $ 52 $ 423 $ 167

The table below presents various assumptions used in determining the PBO for each year and reflects weighted-average percentages for the various plans as follows:

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Our strategy with respect to our investments in these assets is to be invested in a suitable mixture of return-seeking assets such as equities, real estate and liability matching assets such as group annuity insurance contracts and duration matched bonds.

Therefore, the risk and return balance of our U.K.

asset portfolio should reflect a long-term horizon.

To achieve these objectives, we established the following targets:

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Net cash equivalents (1)

Diversified strategies 14 — — 14

Private markets and real assets (2)

Net plan assets subject to leveling $ 576 $ 817 $ 604 $ 1,997

Pending trade/purchases/sales ( 16 )

Investments measured at net asset value 1,835

Net plan assets $ 3,826

(1) Cash equivalents include commercial paper, short-term government/agency, mortgage and credit instruments.

(1) Cash equivalents included commercial paper, short-term government/agency, mortgage and credit instruments.

(2) The instruments in private markets and real assets, for which quoted market prices are not available, are valued at their estimated fair value as determined by applicable investment managers or by audited financial statements of the funds.

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Corporate Debt ($ 912 million and $ 915 million at December 31, 2024 and 2023, respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

• Asset/Mortgage Backed Securities ($ 327 million and $ 307 million at December 31, 2024 and 2023, respectively) - This asset type represents investments in fixed- and floating-rate loans.

These funds are valued using NAVs and allow quarterly or more frequent redemptions.

Equities ($ 260 million and $ 222 million at December 31, 2024 and 2023, respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

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These funds are valued using NAVs and allow quarterly or more frequent redemptions.

• Asset/Mortgage Backed Securities ($ 307 million and $ 277 million at December 31, 2023 and 2022, respectively) - This asset type represents investments in fixed- and floating-rate loans.

These funds are valued using NAVs and allow quarterly or more frequent redemptions.

• Diversified Strategies ($ 0 million and $ 18 million at December 31, 2023 and 2022, respectively) - These commingled funds invest in commodities, fixed income and equity securities.

They have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

The reconciliation of Level 3 assets was as follows:

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Actual return on plan assets

Unrealized gains on assets still held at the reporting date 6 19 25

Unrealized gains (losses) on assets still held at the reporting date 6 ( 13 ) ( 7 )

Purchases, sales and settlements, net ( 28 ) ( 2 ) ( 30 )

Assumption of Meritor's plan assets 94 — 94

Balance at December 31, 2023 537 67 604

Actual return on plan assets

Unrealized gains on assets still held at the reporting date 6 ( 13 ) ( 7 )

Unrealized losses on assets still held at the reporting date ( 3 ) ( 6 ) ( 9 )

Purchases, sales and settlements, net ( 93 ) ( 2 ) ( 95 )

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(Level 3) Total

$ 12 $ — $ — $ 12

Government debt $ — $ 204 $ — $ 204

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The fair value of each such investment category was as follows:

Corporate Debt ($ 71 million and $ 77 million at December 31, 2023 and 2022, respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

• Government Debt ($ 434 million and $ 572 million at December 31, 2024 and 2023, respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

Corporate Debt ($ 96 million and $ 71 million at December 31, 2024 and 2023, respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

• Asset/Mortgage Backed Securities ($ 92 million and $ 117 million at December 31, 2024 and 2023, respectively) - This asset type represents investments in fixed- and floating-rate loans.

7 unchanged sentences

Actual return on plan assets

Unrealized (losses) gains on assets still held at the reporting date ( 178 ) ( 2 ) 39 ( 141 )

Unrealized gains (losses) on assets still held at the reporting date 8 — ( 35 ) ( 27 )

Purchases, sales and settlements, net — ( 1 ) ( 251 ) ( 252 )

Assumption of Meritor's plan assets 92 — — 92

Balance at December 31, 2023 436 7 96 539

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Benefits paid directly by employer ( 27 ) ( 37 )

Assumption of Meritor's benefit obligation — 22

Benefit obligation at end of year $ 120 $ 150

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Incurred actuarial gain ( 19 ) ( 2 ) ( 25 )

Total recognized in other comprehensive loss (income) $ — $ ( 25 ) $ ( 8 )

Total recognized in net periodic OPEB cost and other comprehensive loss (income) $ 7 $ ( 20 ) $ ( 3 )

Total recognized in other comprehensive (income) loss $ ( 16 ) $ — $ ( 25 )

Total recognized in net periodic OPEB cost and other comprehensive (income) loss $ ( 12 ) $ 7 $ ( 20 )

The table below presents assumptions used in determining the OPEB obligation for each year and reflects weighted-average percentages for our other OPEB plans as follows:

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In millions 2024 2023

Agreement in Principle (1)

Marketing accruals $ 335 $ 399

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Current portion of operating lease liabilities 130 138

Settlement Agreements (1)

Other 874 741

Other accrued expenses $ 1,898 $ 3,754

(1) See NOTE 2, "AGREEMENT IN PRINCIPLE," for additional information.

(1) See NOTE 14, "COMMITMENTS AND CONTINGENCIES," for additional information.

Other liabilities included the following:

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Pensions 503 530

Deferred income taxes 530 649

Operating lease liabilities 409 374

Deferred income taxes 389 530

Accrued compensation 193 213

2 unchanged sentences

Long-term income taxes 5 111

Other long-term liabilities 647 437

Other 614 647

Other liabilities $ 3,149 $ 3,430

(1) See NOTE 13, "PRODUCT WARRANTY LIABILITY," for additional information.

Loans Payable

Loans payable at December 31, 2023 and 2022 were $ 280 million and $ 210 million, respectively, and consisted primarily of notes payable to financial institutions.

The weighted-average interest rate for notes payable, bank overdrafts and current maturities of long-term debt at December 31 was as follows:

Loans payable at December 31, 2024 and 2023 were $ 356 million and $ 280 million, respectively, and consisted primarily of loans payable to financial institutions.

The weighted-average interest rate of loans payable at December 31 was as follows:

Weighted-average interest rate 2.85 % 3.92 %

Commercial Paper

Our committed credit facilities provide access up to $ 4.0 billion of unsecured, short-term promissory notes (commercial paper) pursuant to the Board of Directors (the Board) authorized commercial paper programs.

Our committed credit facilities 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 acquisitions and general corporate purposes.

We intend to use the net proceeds from the commercial paper borrowings for general corporate purposes.

We had $ 1.3 billion and $ 1.5 billion in outstanding borrowings under our commercial paper programs at December 31, 2024 and 2023, respectively.

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Revolving Credit Facilities

On June 5, 2023, we entered into an amended and restated 364 -day credit agreement that allows us to borrow up to $ 2.0 billion of unsecured funds at any time prior to June 3, 2024.

This credit agreement amended and restated the prior $ 1.5 billion 364 -day credit facility that was scheduled to mature on August 16, 2023.

In connection with the 364 -day credit agreement, effective June 5, 2023, we terminated our $ 500 million incremental 364-day credit agreement dated August 17, 2022.

On August 18, 2021, we entered into an amended and restated 5 -year revolving credit agreement, which allows us to borrow up to $ 2 billion of unsecured funds at any time prior to August 18, 2026.

In connection with the new credit agreements, on August 17, 2022, we entered into an amendment to our $ 2.0 billion five-year facility to replace LIBOR with Secured Overnight Financing Rate (SOFR) as an interest rate benchmark and to make other conforming changes to interest rate determinations.

On June 3, 2024, we entered into an amended and restated 5 -year credit agreement that allows us to borrow up to $ 2.0 billion of unsecured funds at any time prior to June 3, 2029.

The credit agreement amended and restated the prior $ 2.0 billion 5 -year credit agreement that would have matured on August 18, 2026.

We also entered into an amended and restated 364 -day credit agreement that allows us to borrow up to $ 2.0 billion of unsecured funds at any time prior to June 2, 2025.

This credit agreement amended and restated the prior $ 2.0 billion 364 -day credit facility that matured on June 3, 2024.

Our committed credit facilities provide access up to $ 4.0 billion from our $ 2.0 billion 364 -day credit facility that expires on June 2, 2025 and our $ 2.0 billion 5 -year facility that expires on June 3, 2029.

We intend to maintain credit facilities at the current or higher aggregate amounts by renewing or replacing these facilities at or before expiration.

Amounts payable under our revolving credit facility rank pro rata with all of our unsecured, unsubordinated indebtedness.

Up to $ 300 million under this credit facility is available for swingline loans.

Based on our current long-term debt ratings, the applicable margin on SOFR rate loans was 0.85 percent per annum.

Based on our current long-term debt ratings, the applicable margin on Secured Overnight Financing Rate ( SOFR ) rate loans for the 364 -day facility was 0.85 percent per annum and 0.975 percent for the 5 -year facility.

Advances under the facility may be prepaid without premium or penalty, subject to customary breakage costs.

Our committed credit facilities provide access up to $ 4.0 billion, including our $ 2.0 billion 364-day facility that expires June 3, 2024, and our $ 2.0 billion five-year facility that expires on August 18, 2026.

We intend to maintain credit facilities at the current or higher aggregate amounts by renewing or replacing these facilities at or before expiration.

These revolving credit facilities are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes.

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At December 31, 2024, our $ 1.3 billion of commercial paper outstanding effectively reduced the $ 4.0 billion available capacity under our revolving credit facilities to $ 2.7 billion.

At December 31, 2023, we also had an additional $ 393 million available for borrowings under our international and other domestic credit facilities.

At December 31, 2023, Atmus had no outstanding borrowings under its $ 400 million revolving credit facility.

See "Atmus Credit Agreement" section below for additional details.

At December 31, 2024, we also had an additional $ 628 million available for borrowings under our uncommitted international and other domestic credit facilities.

Long-term Debt

2 unchanged sentences

Long-term debt

Senior notes, due 2023 3.65 % $ — $ 500

Hydrogenics promissory notes, due 2024 and 2025 — % 110 160

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Senior notes, due 2029 4.90 % 500 —

Senior notes, due 2030 (3)

1.50 % 850 850

1 unchanged sentence

Senior notes, due 2043 4.875 % 500 500

Senior notes, due 2050 2.60 % 650 650

Senior notes, due 2054 5.45 % 1,000 —

Debentures, due 2098 (5)

7 unchanged sentences

Long-term debt $ 4,784 $ 4,802

(1) See NOTE 24, "ACQUISITIONS," for additional information.

(2) During 2023, we paid down $ 400 million of the term loan.

(1) During 2024, we repaid the outstanding balance of the term loan.

(2) In September 2023, we entered into a series of interest rate swaps in order to trade a portion of the floating rate into fixed rate.

2 unchanged sentences

See "Interest Rate Risk" in NOTE 20, "DERIVATIVES," for additional information.

(5) See "Atmus Credit Agreement" section below for additional information.

(4) See NOTE 21, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," for additional information.

(5) The effective interest rate is 7.48 percent.

(6) The weighted-average interest rates for the years ended December 31, 2024 and 2023, were 1.01 percent and 1.87 percent, respectively.

On February 20, 2024, we issued $ 2.25 billion aggregate principal amount of senior unsecured notes consisting of $ 500 million aggregate principal amount of 4.90 percent senior unsecured notes due in 2029, $ 750 million aggregate principal amount of 5.15 percent senior unsecured notes due in 2034 and $ 1.0 billion aggregate principal amount of 5.45 percent senior unsecured notes due in 2054.

We received net proceeds of $ 2.2 billion.

The senior unsecured notes pay interest semi-annually on February 20 and August 20, commencing on August 20, 2024.

The indenture governing the senior unsecured notes contains covenants that, among other matters, limit (i) our ability to consolidate or merge into, or sell, assign, convey, lease, transfer or otherwise dispose of all or substantially all of our and our subsidiaries' assets to another person, (ii) our and certain of our subsidiaries' ability to create or assume liens and (iii) our and certain of our subsidiaries' ability to engage in sale and leaseback transactions.

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

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Principal payments $ 660 $ 66 $ 102 $ 291 $ 534

On July 13, 2022, we entered into a loan agreement under which we may obtain delayed-draw loans in an amount up to $ 2.0 billion in the aggregate prior to October 13, 2022.

We drew down the entire $ 2.0 billion balance on August 2, 2022, to help fund the acquisition of Meritor.

The interest rate is based on SOFR for the one-month interest period plus the relevant spread.

The loan will mature on August 1, 2025.

As of December 31, 2023 we repaid $ 850 million of this term loan.

The agreement contains customary events of default and financial and other covenants, including maintaining a net debt to capital ratio of no more than 0.65 to 1.0.

The $ 250 million 7.125 percent debentures and $ 165 million 5.65 percent debentures are unsecured and are not subject to any sinking fund requirements.

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Shelf Registration

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 8, 2022.

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.

Our current shelf is scheduled to expire in February 2025.

Under this shelf registration we were able to offer debt securities, common stock, preferred and preference stock, depositary shares, warrants, stock purchase contracts and stock purchase units.

We plan to file a new shelf registration statement shortly after the filing of this annual report on Form 10-K to replace the expired automatic shelf registration statement.

Interest Expense

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

Atmus Credit Agreement

On February 15, 2023, certain of our subsidiaries entered into an amendment to the $ 1.0 billion credit agreement (Credit Agreement), consisting of a $ 400 million revolving credit facility and a $ 600 million term loan facility, in anticipation of the separation of Atmus, extending the Credit Agreement termination date from March 30, 2023, to June 30, 2023.

On May 26, 2023, Atmus drew down the entire $ 600 million term loan facility and borrowed $ 50 million under the revolving credit facility.

Borrowings under the Credit Agreement mature in September 2027 (with quarterly payments on the term loan beginning in September 2024) and bear interest at varying rates, depending on the type of loan and, in some cases, the rates of designated benchmarks and the applicable borrower’s election.

Generally, U.S.

dollar-denominated loans bear interest at adjusted-term (SOFR) (which includes a 0.10 percent credit spread adjustment to term SOFR) for the applicable interest period plus a rate ranging from 1.125 percent to 1.75 percent.

The Credit Agreement contains customary events of default and financial and other covenants, including maintaining a net leverage ratio of 4.0 to 1.0 and a minimum interest coverage ratio of 3.0 to 1.0.

At December 31, 2023, there were no outstanding borrowings under the revolving credit facility and $ 600 million outstanding under the term loan facility.

See NOTE 23, "FORMATION OF ATMUS AND IPO," for additional information .

PRODUCT WARRANTY LIABILITY

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Foreign currency translation adjustments and other ( 21 ) 8 ( 16 )

Balance at end of year $ 2,497 $ 2,477 $ 2,425

Balance at end of period $ 2,623 $ 2,497 $ 2,477

(1) See NOTE 23, "ACQUISITIONS," for additional information.

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workplace safety;

environmental matters;

environmental and regulatory matters, including the enforcement of environmental and emissions standards;

and asbestos claims.

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We do not believe that these lawsuits are material individually or in the aggregate.

While we believe we have also established adequate accruals for our expected future liability with respect to pending lawsuits, claims and proceedings, where the nature and extent of any such liability can be reasonably estimated based upon then presently available information, there can be no assurance that the final resolution of any existing or future lawsuits, claims or proceedings will not have a material adverse effect on our business, results of operations, financial condition or cash flows.

While we believe we have also established adequate accruals for our expected future liability with respect to pending lawsuits, claims and proceedings, where the nature and extent of any such liability is probable and can be reasonably estimated based upon presently available information, there can be no assurance that the final resolution of any existing or future lawsuits, claims or proceedings will not have a material adverse effect on our business, results of operations, financial condition or cash flows.

We conduct significant business operations in Brazil that are subject to the Brazilian federal, state and local labor, social security, tax and customs laws.

While we believe we comply with such laws, they are complex, subject to varying interpretations and we are often engaged in litigation regarding the application of these laws to particular circumstances.

On June 28, 2022, KAMAZ Publicly Traded Company (KAMAZ) was designated to the List of Specially Designated Nationals and Blocked Persons by the U.S.

Department of the Treasury’s Office of Foreign Assets Control (OFAC).

We filed blocked property reports for relevant assets and sought relevant authorizations to extricate ourselves from our relationship with KAMAZ and its subsidiaries, including our unconsolidated joint venture with KAMAZ, in compliance with U.S.

and other applicable laws.

We received OFAC authorization on May 26, 2023, and from the U.K.

Office of Financial Sanctions Implementation on September 15, 2023, which allowed us to finalize the exit of our unconsolidated joint venture with KAMAZ.

On April 29, 2019, we announced that we were conducting a formal internal review of our emissions certification process and compliance with emission standards for our pick-up truck applications, following conversations with the EPA and CARB regarding certification of our engines in model year 2019 RAM 2500 and 3500 trucks.

This review was conducted with external advisors as we continue to strive to ensure the certification and compliance processes for all of our pick-up truck applications are consistent with our internal policies, engineering standards and applicable laws.

In December 2023, we announced that we reached the Agreement in Principle with EPA, CARB, the Environmental and Natural Resources Division of the DOJ and the CA AG 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.

Failure to comply with the Agreement in Principle will subject us to further stipulated penalties.

In December 2023, we announced that we reached the agreement in principle with EPA, CARB, the Environmental and Natural Resources Division of the 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).

As part of the Settlement Agreements, among other things, we agreed to pay civil penalties, complete recall requirements, undertake mitigation projects, provide extended warranties, undertake certain testing, take certain corporate compliance measures and make other payments.

Failure to comply with the terms and conditions of the Settlement Agreements will subject us to further stipulated penalties.

We recorded a charge of $ 2.0 billion in the fourth quarter of 2023, in other operating expense, net in our Consolidated Statements of Income, to resolve the matters addressed by the Settlement Agreements involving approximately one million of our pick-up truck applications in the U.S.

Of the $ 2.0 billion charge, $ 1.7 billion (primarily related to penalties) was non-deductible for U.S.

federal income tax purposes.

The remaining amount, related to emissions mitigation projects and payments, extended warranties and other related compliance expenses was deductible for U.S.

federal income tax purposes.

This charge was in addition to the previously announced charges of $ 59 million for the recalls of model years 2013 through 2018 RAM 2500 and 3500 trucks and model years 2016 through 2019 Titan trucks.

The Agreement in Principle remains subject to final regulatory and judicial approvals, and we cannot be certain that the Agreement in Principle will be approved, in its current form, or at all.

See NOTE 2, "AGREEMENT IN PRINCIPLE," for additional information.

We made $ 1.9 billion of payments required by the Settlement Agreements in the second quarter of 2024.

Subsequent to the second quarter of 2024, we have recorded immaterial amounts related to stipulated penalties we determined to be probable and estimable.

Any further non-compliance with the Settlement Agreements will likely subject us to further stipulated penalties and other adverse consequences.

We have also been in communication with other non-U.S.

regulators regarding matters related to the emission systems in our engines and may also become subject to additional regulatory review in connection with these matters.

In connection with our announcement of our entry into the Agreement in Principle, we have become subject to shareholder, consumer and third-party litigation regarding the matters covered by the Agreement in Principle and we may become subject to additional litigation in connection with these matters.

In connection with our announcement of our entry into the agreement in principle, we became subject to shareholder, consumer and third-party litigation regarding the matters covered by the Settlement Agreements, and we may become subject to additional litigation in connection with these matters.

The consequences resulting from the resolution of the foregoing matters are uncertain and the related expenses and reputational damage could have a material adverse impact on our results of operations, financial condition and cash flows.

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At December 31, 2024 and 2023, there was no preferred or preference stock outstanding.

Changes in shares of common stock, treasury stock and common stock held in trust for employee benefit plans were as follows:

Changes in shares of common stock and treasury stock were as follows:

In millions Common

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Balance at December 31, 2022 222.5 81.2

Shares acquired — 1.9

Shares issued — ( 0.5 )

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Shares issued — ( 1.2 )

Atmus divestiture share exchange (1)

Balance at December 31, 2024 222.5 85.1

(1) On March 18, 2024, we completed the divestiture of our remaining 80.5 percent ownership of Atmus Filtration Technologies Inc.

(Atmus) common stock through a tax-free split-off.

The exchange resulted in a reduction of shares of our common stock outstanding by 5.6 million shares.

See NOTE 21, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," for additional information.

Treasury Stock

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The dollar value remaining available for future purchases under the 2019 program at December 31, 2024, was $ 218 million.

We did not make any repurchases of common stock during 2023.

We repurchased $ 374 million and $ 1,402 million of our common stock in the years ended December 31, 2022 and 2021, respectively.

On March 18, 2024, we completed the divestiture of our remaining 80.5 percent ownership of Atmus Filtration Technologies Inc.

(Atmus) common stock through a tax-free split-off.

The exchange resulted in a reduction of shares of our common stock outstanding by 5.6 million shares.

See NOTE 21, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," for additional information.

We did not make any repurchases of common stock during 2024 or 2023.

We repurchased $ 374 million of our common stock in the year ended December 31, 2022.

Total dividends paid to common shareholders in 2024, 2023 and 2022 were $ 969 million, $ 921 million and $ 855 million, respectively.

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In July 2024, the Board authorized an increase to our quarterly dividend of 8.3 percent from $ 1.68 per share to $ 1.82 per share.

In July 2022, the Board authorized an 8.3 percent increase to our quarterly cash dividend on our common stock from $ 1.45 per share to $ 1.57 per share.

In July 2021, the Board approved a 7.4 percent increase to our quarterly dividend on our common stock from $ 1.35 per share to $ 1.45 per share.

In July 2023, the Board authorized a 7.0 percent increase to our quarterly cash dividend on our common stock from $ 1.57 per share to $ 1.68 per share.

In July 2022, the Board approved an 8.3 percent increase to our quarterly dividend on our common stock from $ 1.45 per share to $ 1.57 per share.

Cash dividends per share paid to common shareholders for the last three years were as follows:

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Before-tax amount ( 123 ) ( 350 ) 136 ( 337 ) $ ( 40 ) $ ( 377 )

Tax (expense) benefit ( 103 ) 1 ( 12 ) ( 114 ) — ( 114 )

Tax benefit (expense) 19 6 ( 32 ) ( 7 ) — ( 7 )

After-tax amount ( 104 ) ( 344 ) 104 ( 344 ) ( 40 ) ( 384 )

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23 — 2 25 — 25

Net current period other comprehensive income (loss) 389 ( 4 ) 26 411 $ ( 5 ) $ 406

Net current period other comprehensive (loss) income ( 81 ) ( 344 ) 106 ( 319 ) $ ( 40 ) $ ( 359 )

Balance at December 31, 2022 $ ( 427 ) $ ( 1,552 ) $ 89 $ ( 1,890 )

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7 — ( 18 ) ( 11 ) — ( 11 )

Net current period other comprehensive income (loss) ( 81 ) ( 344 ) 106 ( 319 ) $ ( 40 ) $ ( 359 )

Net current period other comprehensive (loss) income ( 421 ) 95 10 ( 316 ) $ ( 3 ) $ ( 319 )

Balance at December 31, 2023 $ ( 848 ) $ ( 1,457 ) $ 99 $ ( 2,206 )

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Before-tax amount ( 14 ) ( 313 ) 47 ( 280 ) $ ( 16 ) $ ( 296 )

Tax benefit (expense) 113 ( 1 ) ( 7 ) 105 — 105

Tax expense ( 2 ) ( 8 ) ( 12 ) ( 22 ) — ( 22 )

After-tax amount ( 16 ) ( 321 ) 35 ( 302 ) ( 16 ) ( 318 )

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( 19 ) 63 — 63

Net current period other comprehensive (loss) income ( 421 ) 95 10 ( 316 ) $ ( 3 ) $ ( 319 )

Net current period other comprehensive income (loss) 5 ( 260 ) 16 ( 239 ) $ ( 16 ) $ ( 255 )

Balance at December 31, 2024 $ ( 843 ) $ ( 1,717 ) $ 115 $ ( 2,445 )

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

(2) See NOTE 21, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," for additional information.

NONCONTROLLING INTERESTS

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The total intrinsic value of options exercised during the years ended December 31, 2024, 2023 and 2022, was approximately $ 160 million, $ 35 million and $ 53 million, respectively.

Cash received from option exercises under share-based payment arrangements for the years ended December 31, 2024, 2023 and 2022, was $ 133 million, $ 48 million and $ 80 million, respectively.

The share-based activity and weighted-average grant date fair value of performance and restricted shares was as follows:

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The total vesting date fair value of performance shares vested during the years ended December 31, 2024, 2023 and 2022, was $ 63 million, $ 25 million and $ 24 million, respectively.

The total fair value of restricted shares vested was $ 17 million, $ 1 million and $ 0 for the years ended December 31, 2023, 2022 and 2021, respectively.

The total fair value of restricted shares vested was $ 24 million, $ 17 million and $ 1 million for the years ended December 31, 2024, 2023 and 2022, respectively.

The fair value of each option grant was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions:

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We are exposed to financial risk resulting from volatility in foreign exchange rates, interest rates and commodity prices.

This risk is closely monitored and managed through the use of physical forward contracts (which are not considered derivatives) and financial derivative instruments including foreign currency forward contracts, commodity swap contracts and interest rate swaps and locks.

Financial derivatives are used expressly for hedging purposes and under no circumstances are they used for speculative purposes.

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We had foreign currency forward contracts with notional amounts of $ 3.6 billion at December 31, 2024, with the following currencies comprising 86 percent of outstanding foreign currency forward contracts:

British pound, Chinese renminbi, Canadian dollar, Australian dollar and Swedish kronor.

British pound, Chinese renminbi, Australian dollar, Canadian dollar and Euro.

We had foreign currency forward contracts with notional amounts of $ 4.5 billion at December 31, 2023, with the following currencies comprising 85 percent of outstanding foreign currency forward contracts:

Chinese renminbi, British pound, Canadian dollar, Australian dollar and Euro.

British pound, Chinese renminbi, Canadian dollar, Australian dollar and Swedish krona.

We are further exposed to foreign currency exchange risk as many of our subsidiaries are subject to fluctuations as the functional currencies of the underlying entities are not our U.S.

dollar reporting currency.

To help minimize movements for certain investments, in the third quarter of 2022 we began entering into foreign exchange forwards designated as net investment hedges for certain of our investments.

Under the current terms of our foreign exchange forwards, we agreed with third parties to sell British pound in exchange for U.S.

To help reduce volatility in the equity value of our subsidiaries, we enter into foreign exchange forwards designated as net investment hedges for certain of our investments.

Under the current terms of our foreign exchange forwards, we agreed with third parties to sell British pounds, Chinese renminbi and Euros in exchange for U.S.

dollar currency at a specified rate at the maturity of the contract.

The notional amount of these hedges at December 31, 2023, was $ 808 million.

The notional amount of these hedges at December 31, 2024, was $ 1.5 billion.

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

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In September 2023, we entered into a series of interest rate swaps with a total notional value of $ 500 million in order to trade a portion of the floating rate into a fixed rate on our term loan, due in 2025.

The maturity date of the interest rate swaps is August 1, 2025.

The weighted-average interest rate of the interest rate swaps is 5.72 percent.

The weighted-average interest rate of the interest rate swaps was 5.72 percent.

We designated the swaps as cash flow hedges.

The gains and losses on these derivative instruments are initially recorded in other comprehensive income and reclassified into earnings as interest expense in the Consolidated Financial Statements as each interest payment is accrued.

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

Year ended December 31,

In millions 2023

Type of Swap Gain (Loss)

Recognized in AOCL Gain (Loss) Reclassified from AOCL into Interest Expense

Interest rate swaps $ ( 4 ) $ —

We also entered into a series of interest rate swaps to effectively convert $ 765 million of our $ 850 million senior notes, due in 2030, from a fixed rate of 1.50 percent to a floating rate equal to the three-month LIBOR plus a spread.

The fallback protocol in our derivative agreements allowed for a transition from LIBOR to SOFR in the third quarter of 2023.

The gains and losses on these derivative instruments were initially recorded in other comprehensive income and reclassified into earnings as interest expense in the Consolidated Financial Statements as each interest payment was accrued.

In 2024, we settled all $ 500 million of these interest rate swaps.

The losses recognized on settlements were immaterial.

The interest rate swap activity in AOCL was immaterial for these swaps for the years ended December 31, 2024 and 2023.

In 2021, we entered into a series of interest rate swaps to effectively convert our $ 500 million senior notes, due in 2025, from a fixed rate of 0.75 percent to a floating rate equal to the three-month London Interbank Offered Rate ( LIBOR ) plus a spread (subsequently adjusted to SOFR under a fallback protocol in our derivative agreements).

We designated the swaps as fair value hedges.

The gain or loss on these derivative instruments, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk, are recognized in current income

as interest expense.

The gain or loss on these derivative instruments, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk, are recognized in current income as interest expense.

The net swap settlements that accrue each period are also reported in the Consolidated Financial Statements as interest expense.

In March 2023, we settled a portion of our 2021 interest rate swaps with a notional amount of $ 100 million.

The $ 7 million loss on settlement will be amortized over the remaining term of the related debt.

The $ 7 million loss on settlement is being amortized over the remaining term of the related debt.

In November 2024, we settled a portion of our interest rate swaps related to our 2025 and 2030 bonds with a combined notional amount of $ 135 million.

The $ 12 million loss on settlement is being amortized over the remaining term of the related debt.

The interest rate swaps on our 2025 and 2030 debt had $ 350 million and $ 680 million, respectively, of notional amounts outstanding at December 31, 2024.

The following table summarizes the gains and losses:

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In 2019, we entered into $ 350 million of interest rate lock agreements, and in 2020 we entered into an additional $ 150 million of lock agreements to reduce the variability of the cash flows of the interest payments on a total of $ 500 million of fixed rate debt originally forecast to be issued in 2023 to replace our senior notes at maturity.

The terms of the rate locks mirror the time period of the expected fixed rate debt issuance and the expected timing of interest payments on that debt.

The gains and losses on these derivative instruments are initially recorded in other comprehensive income and will be released to earnings in interest expense in future periods to reflect the difference in (1) the fixed rates economically locked in at the inception of the hedge and (2) the actual fixed rates established in the debt instrument at issuance.

The terms of the rate locks mirrored the time period of the expected fixed rate debt issuance and the expected timing of interest payments on that debt.

The gains and losses on these derivative instruments were initially recorded in other comprehensive income and will be released to earnings in interest expense in future periods to reflect the difference in (1) the fixed rates economically locked in at the inception of the hedge and (2) the actual fixed rates established in the debt instrument at issuance.

In 2022, we settled certain rate lock agreements with notional amounts totaling $ 150 million for $ 49 million in cash.

In 2023, we settled all remaining rate lock agreements with notional amounts totaling $ 350 million for $ 101 million.

The majority of the $ 150 million of gains on settlements will remain in other comprehensive income and will be amortized over the term of the debt anticipated to be issued in early 2024.

The majority of the $ 150 million of gains on settlements remained in other comprehensive income and is being amortized over the remaining term of the related debt issued in early 2024.

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

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Interest rate locks $ ( 4 ) $ 4 $ 14 $ 2 $ 112 $ —

Cash Flow Hedging

The following table summarizes the effect on our Consolidated Statements of Net Income for derivative instruments classified as cash flow hedges.

The table does not include amounts related to ineffectiveness as it was not material for the periods presented.

Years ended December 31,

In millions 2023 2022 2021

Gain (loss) reclassified from AOCL into income - Net sales (1)

$ 17 $ (4) $ (4)

Gain reclassified from AOCL into income - Cost of sales (1)(2)

(1) Includes foreign currency forward contracts.

(2) Includes commodity swap contracts.

Derivatives Not Designated as Hedging Instruments

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In millions 2024 2023 2022

(Loss) gain recognized in income - Cost of sales (1)

Gain (loss) recognized in income - Cost of sales (1)

$ 3 $ ( 3 ) $ 2

(Loss) gain recognized in income - Other income, net (1)

Loss recognized in income - Other expense, net (1)

( 65 ) ( 21 ) ( 5 )

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Had we chosen to present on a net basis, we would have derivatives in a net asset position of $ 37 million and $ 4 million and derivatives in a net liability position of $ 131 million and $ 148 million at December 31, 2024, and 2023, respectively.

RUSSIAN OPERATIONS

On March 17, 2022, the Board indefinitely suspended our operations in Russia due to the ongoing conflict in Ukraine.

At the time of suspension, our Russian operations included a wholly-owned distributor in Russia, an unconsolidated joint venture with KAMAZ (a Russian truck manufacturer) and direct sales into Russia from our other business segments.

As a result of the indefinite suspension of operations, we evaluated the recoverability of assets in Russia and assessed other potential liabilities.

The following summarizes the costs associated with the suspension of our Russian operations in our Consolidated Statements of Net Income:

In millions December 31,

2022 Statement of Net Income Location

Inventory write-downs $ 17 Cost of sales

Accounts receivable reserves 41 Other operating expense, net

Impairment and other joint venture costs 31 Equity, royalty and interest income from investees

Other 22 Other operating expense, net

Russian suspension costs, net of recoveries $ 111

For the year ended December 31, 2023, there were no material additional costs.

FORMATION OF ATMUS AND IPO

ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE

On May 23, 2023, in connection with the Atmus IPO, Cummins issued approximately $ 350 million of commercial paper with certain lenders.

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The commercial paper issued and retired through the IPO proceeds, coupled with the $ 650 million received, was used for the retirement of our historical debt and payment of dividends.

The difference between the commercial paper retired from the IPO, other IPO related fees and the net book value of our divested interest was $ 285 million and was recorded as an offset to additional paid-in capital.

Of our consolidated cash and cash equivalents at December 31, 2023, $ 166 million is retained by Atmus for its working capital purposes.

See NOTE 13 , " DEBT ," for additional information.

We will continue to consolidate the financial position and results of Atmus, so long as we retain control.

The earnings attributable to the divested, noncontrolling interest for the year ended December 31, 2023, were $ 17 million.

At December 31, 2023, the noncontrolling interest associated with Atmus is reflected in noncontrolling interests in our Consolidated Balance Sheets.

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

Acquisitions for the years ended December 31, 2023 and 2022, were as follows:

The difference between the commercial paper retired from the IPO, other IPO related fees and the net book value of our divested interest was $ 285 million and recorded as an offset to additional paid-in capital.

Of our consolidated cash and cash equivalents at December 31, 2023, $ 166 million was retained by Atmus for its working capital purposes.

On March 18, 2024, we completed the divestiture of our remaining 80.5 percent ownership of Atmus common stock through a tax-free split-off.

The transaction involved the exchange of our shares in Atmus for shares of Cummins stock with a 7.0 percent discount on the exchange ratio for Atmus shares.

The exchange ratio was determined based on each entity's respective stock price using the daily volume weighted-average stock price for three days preceding the final exchange offer date.

Based on the final exchange ratio, we exchanged all 67 million of our Atmus shares for 5.6 million shares of Cummins stock, which was recorded as treasury stock based on the fair value of the Cummins shares obtained.

We evaluated the full divestiture of Atmus and determined the transaction did not qualify for discontinued operation presentation.

We recognized a gain related to the divestiture of approximately $ 1.3 billion (based on the difference between the fair value of the Cummins shares obtained less the carrying value of our Atmus investment), which was recorded in other income, net in our Consolidated Statements of Net Income for the year ended December 31, 2024.

Approximately $ 114 million of goodwill was included in the carrying value of the Atmus investment for purposes of calculating the gain.

The operating results of Atmus were reported in the Consolidated Financial Statements through March 18, 2024, the date of divestiture.

As part of the divestiture, the $ 600 million term loan remained with Atmus after the split.

In addition, a net $ 61 million of other comprehensive income and $ 19 million of noncontrolling interests related to Atmus were written-off and netted against the gain recognized upon the split.

We entered into a transitional services agreement (TSA) with Atmus that is designed to facilitate the orderly transfer of various services to Atmus.

The TSA relates primarily to administrative services, which are generally to be provided over the next 2 years after the divestiture date.

This agreement is not material and does not confer upon us the ability to influence the operating and/or financial policies of Atmus subsequent to March 18, 2024 .

ACCELERA STRATEGIC REORGANIZATION ACTIONS

In the fourth quarter of 2024, our Accelera segment underwent a strategic review to better streamline operations as well as pace and re-focus investments on the most promising paths as the adoption of certain zero emission solutions slows.

This review resulted in decisions to consolidate certain manufacturing efforts, focus internal development efforts towards areas of differentiation while continuing to leverage partners and reduce our investments in certain technologies, joint ventures and markets.

In addition, declining customer demand in certain key product lines caused us to re-evaluate the recoverability of certain inventory items.

As a result of these actions, we recorded several non-cash charges in the fourth quarter related to inventory write-downs, intangible and fixed asset impairments and joint venture impairments.

We also recorded severance of approximately $ 7 million.

The following table presents the impact of asset write-downs and impairments on our Consolidated Statements of Net Income:

In millions December 31,

2024 Statement of Net Income Location

Inventory write-downs $ 107 Cost of sales

Impairment of other intangible assets 84 Other operating expense, net

Impairment of property, plant and equipment 61 Other operating expense, net

Impairment of investments in equity method investees 17 Equity, royalty and interest income from investees

Severance 7 Cost of sales and research, development and engineering expenses

Other 36 Other operating expense, net and selling, general and administrative expenses

The majority of the $ 305 million non-cash charge is reflected in net cash provided by operating activities, as a change in inventory of $ 107 million and other, net of $ 171 million.

Of the total charges, approximately $ 243 million occurred in jurisdictions where we receive no tax benefits because of valuation allowances, resulting in a $ 50 million unfavorable discrete tax item.

In addition, these actions were considered a triggering event under GAAP which required us to perform an interim impairment test of our fuel cell and electrolyzer reporting unit.

The results of this testing indicated that goodwill of this reporting unit was not impaired.

Acquisitions for the for the years ended December 31, 2024, 2023 and 2022, were as follows:

Entity Acquired (Dollars in millions) Date of Acquisition Additional Percent Interest Acquired Payments to Former Owners Acquisition Related Debt Retirements Total Purchase Consideration Type of Acquisition (1)

Goodwill Acquired Intangibles Recognized (2)

Engendren Corporation 02/16/24 100 % $ 65 $ — $ 65 COMB $ 33 $ 8

Cummins France SA 10/31/23 100 % $ 25 $ 5 $ 30 COMB $ 4 $ —

Faurecia 10/02/23 100 % 208 — 208 (3)

Hydrogenics Corporation (Hydrogenics) 06/29/23 19 % 287 48 335 (4)

Hydrogenics Corporation 06/29/23 19 % 287 48 335 (4)

Teksid Hierro de Mexico, S.A.

(Teksid MX) 04/03/23 100 % 143 — 143 (5)

Siemens Commercial Vehicles Propulsion (Siemens CVP) 11/30/22 100 % $ 187 $ — $ 187 COMB $ 70 $ 106

04/03/23 100 % 143 $ — 143 (5)

Siemens Commercial Vehicles Propulsion 11/30/22 100 % $ 187 $ — $ 187 COMB $ 70 $ 106

Meritor, Inc.

(Meritor) 08/03/22 100 % 2,613 248 2,861 COMB 926 1,610

Jacobs Vehicle Systems (Jacobs) 04/08/22 100 % 345 — 345 COMB 108 164

08/03/22 100 % 2,613 248 2,861 COMB 926 1,610

Jacobs Vehicle Systems 04/08/22 100 % 345 — 345 COMB 108 164

Cummins Westport, Inc.

(Westport JV) 02/07/22 50 % 42 — 42 COMB — 20

02/07/22 50 % 42 — 42 COMB — 20

(1) All results from acquired entities were included in segment results subsequent to the acquisition date.

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(3) Total purchase consideration included $ 30 million for the settlement of accounts payable that were treated as an operating cash outflow.

(4) Hydrogenics entered into three non-interest-bearing promissory notes with $ 175 million paid on July 31, 2023, and the remaining $ 160 million due in three installments through 2025.

(5) Total purchase consideration included $ 32 million for the settlement of accounts payable that were treated as an operating cash outflow.

(4) Hydrogenics entered into three non-interest-bearing promissory notes with $ 175 million paid on July 31, 2023, $ 50 million paid on December 31, 2024 and the remaining $ 110 million due in two installments in 2025.

(5) Total purchase consideration included $ 32 million for the settlement of accounts payable that was treated as an operating cash outflow.

On October 2, 2023, we purchased, from the Forvia Group, all of the equity ownership of Faurecia's U.S.

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The acquisition provides canning and assembly operations for full exhaust systems primarily for on-highway applications, ensures the long-term supply of aftertreatment components, minimizes opportunities for supply disruptions, adds significant technical and manufacturing resources and enhances our existing portfolio.

The values assigned to individual assets acquired and liabilities assumed are preliminary based on management's current best estimate and subject to change as certain matters are finalized.

The primary areas that remain open are related to contingent liabilities and deferred taxes.

The preliminary purchase price allocation was as follows:

In the third quarter of 2024, we finalized the purchase accounting and made certain other adjustments.

The primary adjustments were to reduce property, plant and equipment by $ 3 million, offset by the finalization of purchase price, with a net increase to goodwill of $ 2 million.

The final purchase price allocation has been updated as follows:

Cash and cash equivalents $ 8

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Total purchase price $ 208

(1) Includes $ 30 million of Cummins receivables that were eliminated against payables at other Cummins entities.

(1) Included $ 30 million of Cummins receivables that were eliminated against payables at other Cummins entities.

Goodwill was determined based on the residual difference between the fair value of consideration transferred and the value assigned to tangible assets and liabilities.

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On June 29, 2023, a share purchase agreement was executed with a 19 percent minority shareholder in one of our businesses, Hydrogenics Corporation (Hydrogenics), whereby we agreed to pay the minority shareholder $ 335 million for their 19 percent ownership, including the settlement of shareholder loans of $ 48 million.

As part of the share purchase agreement, Hydrogenics entered into three non-interest-bearing promissory notes with $ 175 million paid on July 31, 2023, and the remaining $ 160 million due in three installments through 2025.

As part of the share purchase agreement, Hydrogenics entered into three non-interest-bearing promissory notes with $ 175 million paid in 2023, $ 50 million paid in 2024 and the remaining $ 110 million due in two installments in 2025.

We recorded the non-interest-bearing promissory notes at their present value in our Consolidated Financial Statements.

The debt amount, net of unamortized debt discount, was $ 148 million and reflected in current maturities of long-term debt and long-term debt at December 31, 2023.

Prior to the execution of this transaction, the minority shareholder had, among other rights and subject to related obligations and restrictive covenants, rights that were exercisable between September 2022 and September 2026 to require us to (1) purchase such shareholder's shares (put option) at an amount up to the fair market value (calculated pursuant to a process outlined in the shareholders' agreement) and (2) sell to such shareholder Hydrogenics' electrolyzer business at an amount up to the fair market value of the electrolyzer business (calculated pursuant to a process outlined in the shareholders’ agreement).

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The redeemable noncontrolling interest balance was reduced to zero as of the acquisition date.

Teksid Hierro de Mexico, S.A.

On April 3, 2023, we purchased all of the equity ownership interest of Teksid Hierro de Mexico, S.A.

(Teksid MX) and Teksid, Inc.

from Stellantis N.V.

for approximately $ 143 million (including $ 32 million for the settlement of accounts payable), subject to certain adjustments set forth in the agreement.

Teksid MX operates a cast iron foundry located in Monclova, Mexico, which primarily forges blocks and heads used in our and other manufacturers’ engines.

facilitates the commercialization of Teksid MX products in North America.

Since we are the primary customer of the foundry, the acquisition is not expected to result in material incremental sales to our business.

Approximately $ 90 million of the purchase price was allocated to property, plant and equipment.

The remainder was allocated primarily to working capital assets and liabilities (including approximately $ 16 million of cash and cash equivalents) and resulted in approximately $ 18 million of goodwill, none of which is deductible for tax purposes.

In the third quarter we finalized the purchase accounting and made certain other adjustments, which resulted in a $ 7 million decrease in goodwill.

The results of the business were reported in our Engine segment.

Pro forma financial information for the acquisition was not presented as the effects were not material to our Consolidated Financial Statements .

On November 30, 2022, we acquired Siemens' Commercial Vehicles Propulsion business for approximately $ 187 million, subject to working capital and other customary adjustments, and was allocated primarily to intangible assets, goodwill and inventories.

This business develops, designs and produces electric drive systems including electric motors, inverters, software and related services for the commercial vehicle markets.

This acquisition is included in our Accelera segment.

This acquisition added key capabilities in direct drive and transmission-based remote mount electric motors, inverters, software and related services that are critical elements in the next generation of electric powertrain, which will accelerate our ability to offer global customers a wider array of electrified product solutions across commercial vehicle applications.

Final purchase accounting adjustments did not significantly impact goodwill.

Meritor, Inc.

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The integration of Meritor’s people, technology and capabilities position us as one of the few companies able to provide integrated powertrain solutions across combustion and electric power applications at a time when demand for decarbonized solutions is continuing to accelerate.

The majority of this business was be included within our Components segment with the exception of the electric powertrain business, which was included in our Accelera segment.

The final purchase price allocation has been updated as follows:

The majority of this business was included within our Components segment with the exception of the electric powertrain business, which was included in our Accelera segment.

The final purchase price allocation was as follows:

Cash and cash equivalents $ 98

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Total purchase price $ 2,861

During 2023, we finalized our accounting for the Meritor, Inc.

The primary components of the change were to increase contingent liabilities by $ 70 million offset by finalization of deferred taxes and tax reserves, with a net increase to goodwill of $ 32 million.

There was no impact to the Consolidated Statements of Net Income for any of the changes.

The estimated fair values (all considered Level 3 measurements) of the identifiable intangible assets acquired, their weighted-average useful lives, the related valuation methodology and key assumptions are as follows:

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In addition, in 2022 we incurred acquisition related costs of $ 30 million included in selling, general and administrative expenses in our Consolidated Statements of Net Income .

The following table presents the supplemental consolidated results of the Company for the years ended December 2022 and 2021, on an unaudited pro-forma basis as if the acquisition had been consummated on January 1, 2021.

The primary adjustments reflected in the pro-forma results related to (1) increase in interest expense for debt used to fund the acquisition, (2) removal of acquisition related costs from 2022 (and included in 2021) and (3) changes related to purchase accounting primarily related to amortization of intangibles, fixed assets and joint ventures.

The unaudited pro forma financial information presented below does not purport to represent the actual results of operations that Cummins and Meritor would have achieved had the companies been combined during the periods presented and was not intended to project the future results of operations that the combined company could achieve after the acquisition.

The following table presents the supplemental consolidated results of the company for the year ended December 2022, on an unaudited pro-forma basis, as if the acquisition had been consummated on January 1, 2021.

The primary adjustments reflected in the pro-forma results related to (1) increase in interest expense for debt used to fund the acquisition, (2) removal of acquisition related costs from 2022 and (3) changes related to purchase accounting primarily related to amortization of intangibles, fixed assets and joint ventures.

The unaudited pro forma financial information presented below does not purport to represent the actual results of operations that Cummins and Meritor would have achieved had the companies been combined during the period presented and was not intended to project the future results of operations that the combined company could achieve after the acquisition.

The unaudited pro forma financial information does not reflect any potential cost savings, operating efficiencies, long-term debt pay down estimates, financial synergies or other strategic benefits as a result of the acquisition or any restructuring costs to achieve those benefits.

(Unaudited) Years ended December 31,

(Unaudited) Year ended December 31,

In millions 2022

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The Meritor acquisition increased net assets in the Components segment by $ 3.8 billion and Accelera segment by $ 0.3 billion in 2022.

Jacobs Vehicle Systems

On April 8, 2022, we completed the acquisition of Jacobs Vehicle Systems business (Jacobs) from Altra Industrial Motion Corp.

The purchase price was $ 345 million in cash and does not contain any contingent consideration.

Jacobs is a supplier of engine braking, cylinder deactivation and start and stop thermal management technologies (valvetrain technologies).

The acquisition furthers our investment in key technologies and capabilities to drive growth, while securing our supply base.

The final purchase price allocation was as follows:

Cash and cash equivalents $ 18

Accounts and notes receivable, net 24

Inventories 15

Property, plant and equipment 70

Intangible assets 164

Accounts payable (principally trade) ( 21 )

Net deferred taxes ( 27 )

Other, net ( 6 )

Total purchase price $ 345

Fair Value (in millions) Weighted-Average Useful Life (in years) Valuation Methodology Key Assumptions

Customer relationships $ 108 9 Multi-period excess earnings Discount rate, customer renewal rates

Technology 31 7 Relief-from-royalty Royalty rate, rate of return, obsolescence factor

Trade name 25 14 Relief-from-royalty Royalty rate, discount

Annual amortization of the intangible assets for the next five years is expected to approximate $ 18 million per year.

Goodwill was determined based on the residual difference between the fair value of consideration transferred and the value assigned to tangible and intangible assets and liabilities.

Approximately $ 9 million of the goodwill is deductible for tax purposes.

Among the factors contributing to a purchase price resulting in the recognition of goodwill are Jacobs' expected future customers, new versions of technologies, an acquired workforce and other economic benefits that are anticipated to arise from future product sales and operational synergies from combining the business with Cummins.

Included in our results for the year ended December 31, 2022, were revenues of $ 118 million and loss of $ 1 million related to this business.

The results of this business were reported in our Components segment.

Pro forma financial information for the acquisition was not presented as the effects were not material to our Consolidated Financial Statements.

On February 7, 2022, we purchased Westport Fuel System Inc.'s stake in Westport JV.

We will continue to operate the business as the sole owner.

The purchase price was $ 42 million and was allocated primarily to cash, warranty and deferred revenue related to extended coverage contracts.

The results of the business were reported in our Engine segment.

Pro forma financial information for the acquisition was not presented as the effects were not material to our Consolidated Financial Statements.

RUSSIAN OPERATIONS

On March 17, 2022, the Board indefinitely suspended our operations in Russia due to the ongoing conflict in Ukraine.

As a result of the indefinite suspension of operations, we evaluated the recoverability of assets in Russia and assessed other potential liabilities.

The following summarizes the costs associated with the suspension of our Russian operations in our Consolidated Statements of Net Income:

In millions December 31,

2022 Statement of Net Income Location

Inventory write-downs $ 17 Cost of sales

Accounts receivable reserves 41 Other operating expense, net

Impairment and other joint venture costs 31 Equity, royalty and interest income from investees

Other 22 Other operating expense, net

Russian suspension costs, net of recoveries $ 111

For the years ended December 31, 2024 and 2023, there were no material additional costs.

OPERATING SEGMENTS

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Our CODM is the Chief Executive Officer.

Our reportable operating segments consist of Components, Engine, Distribution, Power Systems and Accelera.

Our reportable operating segments consist of Engine, Components, Distribution, Power Systems and Accelera.

This reporting structure is organized according to the products and markets each segment serves.

The Components segment sells axles, drivelines, brakes and suspension systems for commercial diesel and natural gas applications, aftertreatment systems, turbochargers, fuel systems, valvetrain technologies, filtration products, automated transmissions and electronics.

The Engine segment produces engines (15 liters and smaller) and associated parts for sale to customers in on-highway and various off-highway markets.

Our engines are used in trucks of all sizes, buses and recreational vehicles, as well as in various industrial applications, including construction, agriculture, power generation systems and other off-highway applications.

The Distribution segment includes wholly-owned and partially-owned

distributorships engaged in wholesaling engines, generator sets and service parts, as well as performing service and repair activities on our products and maintaining relationships with various OEMs throughout the world.

The Power Systems segment is an integrated power provider, which designs, manufactures and sells engines (16 liters and larger) for industrial applications (including mining, oil and gas, marine and rail), standby and prime power generator sets, alternators and other power components.

The Accelera segment designs, manufactures, sells and supports hydrogen production technologies as well as electrified power systems with innovative components and subsystems, including battery, fuel cell and electric powertrain technologies.

The Accelera segment is currently in the early stages of commercializing these technologies with efforts primarily focused on the development of our electrolyzers for hydrogen production and electrified power systems and related components and subsystems.

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, fuel cell and electric powertrain technologies as well as hydrogen production 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 and our electrolyzers for hydrogen production.

We continue to serve all our markets as they adopt electrification and alternative power technologies, meeting the needs of our OEM partners and end customers.

We use segment earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests (EBITDA) as the basis for the CODM to evaluate the performance of each of our reportable operating segments.

We believe EBITDA is a useful measure of our operating performance as it assists investors and debt holders in comparing our performance on a consistent basis without regard to financing methods, capital structure, income taxes or depreciation and amortization methods, which can vary significantly depending upon many factors.

Our CODM uses segment earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests (EBITDA) as the basis for the CODM to evaluate the performance of each of our reportable operating segments.

EBITDA provides our CODM with a full picture of the profitability of a segment to drive decisions and resource allocation.

EBITDA is used as the key profitability measure when we set our annual operating plan, is the metric with which our CODM assesses results and is a key component of our annual variable compensation plans.

Segment amounts exclude certain expenses not specifically identifiable to segments.

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We allocate certain common costs and expenses, primarily corporate functions, among segments differently than we would for stand-alone financial information prepared in accordance with GAAP.

These include certain costs and expenses of shared services, such as information technology, human resources, legal, finance and supply chain management.

We do not allocate gains or losses of corporate owned life insurance and certain Atmus separation costs to individual segments.

These include certain costs and expenses of shared services, such as IT, human resources, legal, finance and supply chain management.

We do not allocate gains or losses of corporate-owned life insurance, the Settlement Agreements charge and the gain and certain costs related to the divestiture of Atmus.

EBITDA may not be consistent with measures used by other companies.

As previously announced, in March 2023, we rebranded our New Power segment as "Accelera" to better represent our commitment to zero-emission technologies.

In addition, we moved our NPROXX joint venture from the Accelera segment to the Engine segment, which adjusted both the equity, royalty and interest income from investees and segment EBITDA line items for the current and prior year.

We started to report results for the changes within our operating segments effective January 1, 2023, and reflected these changes in the historical periods presented.

Summarized financial information regarding our reportable operating segments at December 31, is shown in the table below:

In millions Components Engine Distribution Power Systems Accelera Total Segments

In millions Engine Components Distribution Power Systems Accelera Total Segments

External sales $ 8,987 $ 9,894 $ 11,352 $ 3,500 $ 369 $ 34,102

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Total sales 11,712 11,679 11,384 6,408 414 41,597

Cost of goods sold (excluding warranty expenses) 8,707 9,346 9,185 4,506 643 (1)

Warranty expenses 420 173 23 101 34 751

Selling expenses 214 184 628 174 33 (1)

Administrative expenses 582 555 382 421 70 (1)

Research, development and engineering expenses 616 328 55 236 226 (1)

Equity, royalty and interest income (loss) from investees 212 64 90 79 ( 50 ) (1)

Interest income 31 19 34 9 2 95

Segment EBITDA 1,840 (1)

Other income (expense) (2)

23 ( 59 ) 54 — ( 183 ) (1)

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245 493 123 131 61 1,053

Segment EBITDA $ 1,653 $ 1,591 (4)

$ 1,378 $ 1,180 $ ( 764 ) (1)

Interest income (5)

$ 17 $ 25 $ 37 $ 7 $ 1 $ 87

Net assets 2,076 6,433 3,151 2,350 1,234 15,244

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Total sales 11,684 13,409 10,249 5,673 354 41,369

Cost of goods sold (excluding warranty expenses) 8,825 10,717 8,239 4,173 524 32,478

Warranty expenses 377 138 16 71 29 631

Selling expenses 199 227 642 168 33 1,269

Administrative expenses 587 634 354 399 57 2,031

Research, development and engineering expenses 614 387 57 237 203 1,498

Equity, royalty and interest income (loss) from investees 251 97 97 53 ( 15 ) 483

Other income (expense) (2)

72 ( 54 ) 56 36 1 111

Interest income 12 14 16 7 — 49

Russian suspension costs (4)

Depreciation and amortization (3)

225 491 115 122 63 1,016

Segment EBITDA $ 1,630 $ 1,840 (6)

$ 1,209 $ 836 $ ( 443 ) $ 5,072

Depreciation and amortization (2)

Interest income (5)

$ 19 $ 31 $ 34 $ 9 $ 2 $ 95

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Capital expenditures 538 373 103 115 84 1,213

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In millions Engine Components Distribution Power Systems Accelera Total Segments

External sales $ 8,199 $ 7,847 $ 8,901 $ 2,951 $ 176 $ 28,074

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Total sales 10,945 9,736 8,929 5,033 198 34,841

Cost of goods sold (excluding warranty expenses) 8,346 7,727 7,285 3,884 310 27,552

Warranty expenses 329 64 6 70 20 489

Selling expenses 165 158 550 147 18 1,038

Administrative expenses 462 513 304 269 47 1,595

Research, development and engineering expenses 506 309 52 240 171 1,278

Equity, royalty and interest income from investees 50 335 63 56 2 506

Interest income 5 8 7 5 — 25

Segment EBITDA 1,180 1,406 731 496 ( 218 ) 3,595

Equity, royalty and interest income (loss) from investees 160 (7)

71 77 43 ( 2 ) 349

Other income (expense) (2)

33 6 ( 35 ) 10 ( 2 ) 12

Russian suspension costs (8)

5 54 19 — 111

Depreciation and amortization (3)

205 304 114 120 38 781

Segment EBITDA $ 1,535 $ 1,346 (10)

$ 888 $ 596 $ ( 334 ) $ 4,031

Interest income (5)

$ 14 $ 12 $ 16 $ 7 $ — $ 49

Net assets 1,451 7,306 2,698 2,382 1,158 14,995

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Capital expenditures 368 264 114 96 74 916

(1) Includes $ 78 million of costs associated with the IPO and separation of Atmus for the year ended December 31, 2023.

(2) Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Consolidated Statements of Net Income as interest expense.

(1) Included $ 112 million of charges in cost of sales, $ 10 million of charges in selling, general and administrative expenses, $ 2 million of charges in research and development expenses, $ 17 million of charges in equity, royalty and interest income (loss) from investees, $ 171 million of charges in other operating expenses and $ 312 million of charges in EBITDA, all related to Accelera strategic reorganization actions in the fourth quarter of 2024.

See NOTE 22, "ACCELERA STRATEGIC REORGANIZATION ACTIONS," for additional information.

(2) Other income (expense) includes other operating expense, net and other income, net from our Consolidated Statements of Net Income.

(3) Depreciation and amortization are not considered significant segment expenses but are presented here to reconcile to EBITDA, the measure used by our CODM.

Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in our Consolidated Statements of Net Income as interest expense.

The amortization of debt discount and deferred costs were $ 12 million, $ 8 million and $ 3 million for the years ended 2024, 2023 and 2022, respectively.

A portion of depreciation expense is included in research, development and engineering expense.

(3) Includes a $ 28 million impairment of our joint venture with KAMAZ and $ 3 million of royalty charges as part of our costs associated with the indefinite suspension of our Russian operations.

(4) Included $ 21 million of costs associated with the divestiture of Atmus for the year ended December 31, 2024.

(5) Interest income is a component of other income (expense).

(6) Included $ 78 million of costs associated with the divestiture of Atmus for the year ended December 31, 2023.

(7) Included a $ 28 million impairment of our joint venture with KAMAZ and $ 3 million of royalty charges as part of our costs associated with the indefinite suspension of our Russian operations.

See NOTE 24, "RUSSIAN OPERATIONS," for additional information.

(8) See NOTE 24, "RUSSIAN OPERATIONS," for additional information.

(5) Includes $ 31 million of Russian suspension costs reflected in the equity, royalty and interest income (loss) from investees line above.

(6) Includes $ 83 million of costs related to the acquisition and integration of Meritor and $ 28 million of costs associated with the separation of Atmus.

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

(9) Included $ 31 million of Russian suspension costs reflected in the equity, royalty and interest income (loss) from investees line above.

(10) Included $ 83 million of costs related to the acquisition and integration of Meritor and $ 28 million of costs associated with the divestiture of Atmus.

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

Years ended December 31,

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INCOME BEFORE INCOME TAXES $ 4,903 $ 1,626 $ 2,819

(1) Intersegment eliminations and other included $ 2.0 billion related to the Agreement in Principle, $ 22 million of costs associated with the IPO and separation of Atmus and $ 21 million of voluntary retirement and voluntary separation charges for the year ended December 31, 2023.

The year ended December 31, 2022, included $ 53 million of costs associated with the planned separation of Atmus.

See NOTE 2, "AGREEMENT IN PRINCIPLE," for additional information.

(1) Intersegment eliminations and other included a $ 1.3 billion gain related to the divestiture of Atmus and $ 14 million of costs associated with the divestiture of Atmus for the year ended December 31, 2024.

The year ended December 31, 2023, included $ 2.0 billion related to the Settlement Agreements charge, $ 22 million of costs associated with the divestiture of Atmus and $ 21 million of voluntary retirement and voluntary separation charges.

The year ended December 31, 2022, included $ 53 million of costs associated with the divestiture of Atmus.

See NOTE 14, "COMMITMENTS AND CONTINGENCIES," and NOTE 21, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," for additional information.

A reconciliation of our segment net assets to the corresponding amounts in the Consolidated Balance Sheets is shown in the table below:

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India 566 681

Mexico 583 429

United Kingdom 489 431

Netherlands 437 334

Brazil 261 256

Canada 171 168

Other international countries 819 731

Other countries 2,426 2,760

Total long-lived assets $ 9,711 $ 9,484

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data