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Item 7. Management’s Discussion and Analysis

2026-02-10 compared with 2025-02-11 · 249 added, 239 removed, 619 unchanged (44% of the section changed)

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• RESULTS OF OPERATIONS

• OPERATING SEGMENT RESULTS

• REPORTABLE SEGMENT RESULTS

• 2026 OUTLOOK

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EXECUTIVE SUMMARY AND FINANCIAL HIGHLIGHTS

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 are a global power leader committed to powering a more prosperous world.

Since 1919, we have delivered innovative solutions that move people, goods and economies forward.

Our five reportable segments - Engine, Components, Distribution, Power Systems and Accelera - offer a broad portfolio, including advanced diesel, electric and hybrid powertrains;

integrated power generation systems;

critical components such as aftertreatment, turbochargers, fuel systems, controls, transmissions, axles and brakes;

and zero emissions technologies like battery and electric powertrain systems.

With a global footprint, deep technical expertise and an extensive service network, we deliver dependable, cutting-edge solutions tailored to our customers' needs, supporting them through the energy transition with our Destination Zero strategy.

We sell our products to original equipment manufacturers (OEMs), distributors, dealers and other customers worldwide.

We have long-standing relationships with many of the leading manufacturers in the markets we serve, including PACCAR Inc, Traton Group, Daimler Trucks North America and Stellantis N.V.

We have long-standing relationships with many of the leading manufacturers in the markets we serve, including PACCAR Inc., Traton Group, Daimler Trucks AG and Stellantis N.V.

We serve our customers through a service network of approximately 640 wholly-owned, joint venture and independent distributor locations and more than 13,000 Cummins certified dealer locations in approximately 190 countries and territories.

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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.

The Accelera segment designs, manufactures, sells and supports electrified power systems with innovative components and subsystems, including battery and electric powertrain technologies.

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

Our financial performance depends, in large part, on varying conditions in the markets we serve, particularly the on-highway, off-highway, power generation and general industrial markets.

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Economic downturns in markets we serve generally result in reduced sales of our products and can result in price reductions in certain products and/or markets.

As a worldwide business, our operations are also affected by geopolitical risks, currency fluctuations, political and economic uncertainty, public health crises (epidemics or pandemics) and regulatory matters, including adoption and enforcement of environmental and emission standards, in the countries we serve.

As a worldwide business, our operations are also affected by geopolitical risks, currency fluctuations, political and economic uncertainty, tariffs and related trade disruptions, public health crises (epidemics or pandemics) and regulatory matters, including adoption and enforcement of environmental and emission standards.

As part of our growth strategy, we invest in businesses in certain countries that carry higher levels of these risks such as China, Brazil, India, Mexico and other countries in Europe, the Middle East and Africa.

At the same time, our geographic diversity and broad product and service offerings have helped limit the impact from a drop in demand in any one industry, region, the economy of any single country or customer on our consolidated results.

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.

At the same time, our geographic diversity and broad product and service offerings have helped limit the impact from a drop in demand in any one industry, region, customer or the economy of any single country on our consolidated results.

Uncertain Global Trade Environment

We operate our business on a global basis and changes in international, national and regional trade laws, regulations and policies affecting and/or restricting international trade, including higher tariffs, trade disruptions (such as embargoes, sanctions and export controls) and broader geopolitical tensions, could adversely impact the demand for our products and our competitive position.

The uncertain global trade environment, marked by the U.S.

imposition of tariffs on certain countries, followed by the imposition of retaliatory tariffs and other actions against U.S.

goods and services by certain countries has introduced significant market volatility and raised concerns about potential economic impacts.

Our primary risks include reduced global movement of goods impacting freight activity, increased costs for suppliers and end-users and uncertainty around the availability of supply, all of which could contribute to a decline in business confidence, a reduction in demand for our products and increased product costs.

We have and continue to look for ways to mitigate these costs including discussions with our suppliers, sourcing alternatives and agreements with our customers to recover these costs.

The financial impact of tariffs, net of mitigation actions, was immaterial to our profitability and operating cash flows during 2025.

Continued and increasing tariff costs, the effectiveness of our mitigation efforts and the resulting market volatility could materially and adversely affect our results of operations, financial condition and cash flows in the future.

We will continue work to minimize the related impacts to our business to the extent possible.

See the "OUTLOOK" section for a discussion of the potential tariff impacts for 2026.

Accelera Actions

During 2025, due to the continued rapid deterioration in our electrolyzer markets and overall hydrogen markets, along with significant uncertainty in the alternative power markets resulting from reductions in government incentives, we fully impaired all of the goodwill for our electrolyzer business and wrote off certain inventory in the third quarter of 2025, totaling $240 million.

These conditions prompted a further strategic review of this business in the fourth quarter of 2025.

As a result of market conditions and the current business outlook, we intend to stop new commercial activity in the electrolyzer space, subject to information and consultation in accordance with local legal requirements.

We will continue to fulfill existing customer commitments.

As a result of these actions, we recorded several additional charges in the fourth quarter of 2025 related to inventory write-downs, intangible and fixed asset impairments, lease impairments, contract terminations and severance, totaling $218 million.

Total charges for all Accelera actions in 2025 were $458 million.

This review resulted in strategic reorganization actions, including 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.

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Total charges for these strategic reorganization actions were $312 million.

See NOTE 22, "ACCELERA STRATEGIC REORGANIZATION ACTIONS," to our Consolidated Financial Statements for additional information.

See NOTE 22, “ACCELERA ACTIONS,” to our Consolidated Financial Statements for additional information.

Divestiture of Atmus

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The exchange resulted in a reduction of shares of our common stock outstanding by 5.6 million shares and a gain of approximately $1.3 billion.

See NOTE 21, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," to our Consolidated Financial Statements for additional information.

See NOTE 21, “ATMUS DIVESTITURE,” to our Consolidated Financial Statements for additional information.

Settlement Agreements

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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).

April 2024 (collectively, the Settlement Agreements).

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

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Diluted 20.50 28.37 5.15

(1) Net income and earnings per common share included the $1.3 billion non-taxable gain associated with the divestiture of Atmus for the year ended December 31, 2024.

See NOTE 21, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," to our Consolidated Financial Statements for additional information.

(1) Net income and earnings per common share included $458 million of charges for Accelera actions for the year ended December 31, 2025.

See NOTE 22, “ACCELERA ACTIONS,” to our Consolidated Financial Statements for additional information.

(2) Net income and earnings per common share included the $1.3 billion non-taxable gain associated with the divestiture of Atmus and $312 million of charges related to the Accelera strategic reorganization for the year ended December 31, 2024.

See NOTE 21, “ATMUS DIVESTITURE,” and NOTE 22, “ACCELERA ACTIONS,” to our Consolidated Financial Statements for additional information.

(3) Net income and earnings per common share included a $2.0 billion charge related to the Settlement Agreements for the year ended December 31, 2023.

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of $3.9 billion, or $28.37 per diluted share, on sales of $34.1 billion.

The increases in net income attributable to Cummins Inc.

and earnings per diluted share were driven by the absence of the $2.0 billion charge related to the Settlement Agreements in 2023 and the $1.3 billion gain recognized on the divestiture of Atmus in 2024.

Diluted earnings per common share for 2024 benefited $0.87 per share from fewer weighted-average shares outstanding due to treasury shares reacquired in the Atmus divestiture.

The table below presents our consolidated net sales by geographic area based on the location of the customer:

The decreases in net income attributable to Cummins Inc.

and earnings per diluted share were driven by the absence of the $1.3 billion gain recognized on the divestiture of Atmus in the first quarter of 2024, lower demand in on-highway commercial truck markets and Accelera actions in the second half of 2025, partially offset by the strong growth in power generation markets, especially data center and commercial markets, favorable non-tariff pricing mainly related to the launch of updated engine products in light-duty automotive markets and lower compensation expenses.

See NOTE 22, “ACCELERA ACTIONS,” to our Consolidated Financial Statements for additional information.

The table below presents our consolidated net sales by country based on the location of the customer:

Favorable/(Unfavorable)

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Total net sales $ 33,670 $ 34,102 $ 34,065 $ (432) (1) % $ 37 — %

Worldwide revenues were flat in 2024 compared to 2023, as increased global power generation demand (mostly data center markets) and higher demand in North American medium-duty truck and bus markets were offset by the divestiture of Atmus, lower emission solutions demand (mainly in China), lower demand in North American heavy-duty truck and pick-up truck markets and weaker demand in global construction markets.

Worldwide revenues decreased by 1 percent in 2025 compared to 2024, mainly due to weaker demand in on-highway commercial truck markets and the divestiture of Atmus in the first quarter of 2024, partially offset by higher demand in power generation markets, especially data center and commercial markets, non-tariff pricing mainly related to the launch of updated engine products in light-duty automotive markets and customer tariff recoveries.

Net sales in the U.S.

and Canada improved by 1 percent primarily due to higher demand in power generation markets and medium-duty truck and bus markets, partially offset by the divestiture of Atmus and lower demand in North American pick-up truck and heavy-duty truck markets.

and Canada declined by 3 percent mainly due to lower demand in heavy-duty and medium-duty truck markets and the divestiture of Atmus, partially offset by higher sales in power generation markets and non-tariff pricing mainly related to the launch of updated engine products in light-duty automotive markets.

International sales (excludes the U.S.

and Canada) declined by 1 percent, primarily due to lower sales in China and Europe which were mostly offset with higher sales in Latin America and India.

The decrease in international sales was primarily due to the divestiture of Atmus and lower emission solutions demand (mainly in China), largely offset by increased demand in power generation markets (mainly Europe, China, Asia Pacific and India).

Unfavorable foreign currency fluctuations impacted international sales by 1 percent (mainly the Brazilian real and Chinese renminbi).

The following table contains sales and EBITDA (defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests) by operating segment for the years ended December 31, 2024 and 2023.

See NOTE 25, "OPERATING SEGMENTS," to our Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Consolidated Statements of Net Income .

Operating Segments

and Canada) improved by 2 percent, primarily due to higher sales in China and Europe, partially offset by lower sales in Latin America.

The increase in international sales was primarily due to higher demand in power generation markets and increased off-highway demand (primarily construction), partially offset by weaker demand in on-highway commercial truck markets and the divestiture of Atmus.

See NOTE 21, “ATMUS DIVESTITURE,” to our Consolidated Financial Statements for additional information.

The following table contains sales and EBITDA (defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests) by reportable segment for the years ended December 31, 2025 and 2024.

See NOTE 24, “REPORTABLE SEGMENTS,” to our Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Consolidated Statements of Net Income .

Reportable Segments

2025 2024 Percent change

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Intersegment eliminations (7,682) (1) (7,495) 1,288 (3)

(7,304) (2,055) (3)

Total $ 33,670 $ 5,385 $ 34,102 $ 6,326 (3)

$ 34,065 $ 3,017 (3)

“NM” - not meaningful information

(1) Accelera EBITDA included $458 million of charges for Accelera actions for the year ended December 31, 2025.

See NOTE 22, “ACCELERA ACTIONS,” to our Consolidated Financial Statements for additional information.

(2) Accelera EBITDA included $312 million of strategic reorganization action charges in the fourth quarter of 2024.

See NOTE 22, "ACCELERA STRATEGIC REORGANIZATION ACTIONS," to our Consolidated Financial Statements for additional information.

See NOTE 22, “ACCELERA ACTIONS,” to our Consolidated Financial Statements for additional information.

(3) Intersegment eliminations and total EBITDA included a $1.3 billion gain recognized on the divestiture of Atmus, and total EBITDA included $35 million of costs associated with the divestiture of Atmus.

See NOTE 21, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," to our Consolidated Financial Statements for additional information.

(3) Intersegment eliminations and total EBITDA included a $2.0 billion charge related to the Settlement Agreements, and total EBITDA included $100 million of costs associated with the divestiture of Atmus.

See NOTE 14, "COMMITMENTS AND CONTINGENCIES," to our Consolidated Financial Statements for additional information.

See NOTE 21, “ATMUS DIVESTITURE,” to our Consolidated Financial Statements for additional information.

2025 Highlights

We generated $1.5 billion of operating cash flows in 2024, compared to $4.0 billion in 2023.

We generated $3.6 billion in cash from operations for the year ended December 31, 2025, compared to $1.5 billion in 2024.

The $2.1 billion increase was mainly due to the absence of $1.9 billion of payments in 2024 required by the Settlement Agreements.

See the section titled “Cash Flows” in the “LIQUIDITY AND CAPITAL RESOURCES” section for a discussion of items impacting cash flows.

See NOTE 14, “COMMITMENTS AND CONTINGENCIES,” to our Consolidated Financial Statements for additional information on the Settlement Agreements.

Our debt to capital ratio (total capital defined as debt plus equity) at December 31, 2025, was 36.0 percent, compared to 38.4 percent at December 31, 2024.

The decrease was primarily due to the increased equity balance from stronger earnings since December 31, 2023, partially offset by higher debt balances at December 31, 2024.

At December 31, 2024, we had $2.3 billion in cash and marketable securities on hand and access to our $4.0 billion credit facilities (net of $1.3 billion commercial paper outstanding), if necessary, to meet working capital, investment, acquisition and funding needs.

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.

In the second and third quarters of 2024, we settled the remaining $500 million of interest rate swaps associated with the term loan, due in 2025, and repaid the outstanding balance of the term loan.

See NOTE 12, “DEBT,” and NOTE 20, "DERIVATIVES," to our Consolidated Financial Statements for additional information.

The decrease was primarily due to increased equity balances from strong earnings since December 31, 2024, partially offset by higher debt balances at December 31, 2025.

At December 31, 2025, we had $3.6 billion in cash and marketable securities on hand and access to our $4.0 billion credit facilities (net of $353 million of commercial paper outstanding), if necessary, to meet working capital, investment, acquisition and funding needs.

In the second half of 2025, we recorded $458 million of charges for Accelera actions.

See NOTE 22, “ACCELERA ACTIONS,” to our Consolidated Financial Statements for additional information.

In December 2025, we entered into a series of interest rate swaps to effectively convert $150 million of our senior notes, due in 2054, from a fixed rate of 5.45 percent to a floating rate equal to the daily United States Dollar Secured Overnight Financing Rate (USD SOFR) plus a spread through February 2041.

See NOTE 20, “DERIVATIVES,” to our Consolidated Financial Statements for additional information.

In September 2025, we repaid our $500 million 0.75 percent senior notes, due in 2025, using cash on hand.

See NOTE 12, “DEBT,” to our Consolidated Financial Statements for additional information.

In July 2025, the Board of Directors (Board) authorized an increase to our quarterly dividend of approximately 10 percent from $1.82 per share to $2.00 per share.

On July 4, 2025, the One Big Beautiful Bill Act (The Act) was signed into law, enacting significant changes to U.S.

federal income tax rules affecting corporations, such as the ability to immediately deduct domestic research and development costs, restoration of elective 100 percent bonus depreciation for qualified property and changes to the international tax provisions.

See NOTE 4, “INCOME TAXES,” to our Consolidated Financial Statements for additional information.

On June 2, 2025, 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 2, 2030.

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.

See NOTE 12, “DEBT,” to our Consolidated Financial Statements for additional information.

In May 2024, we entered into an accounts receivable sales agreement with Wells Fargo Bank, N.A., to sell certain accounts receivable up to $500 million.

See NOTE 1, "SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES," to our Consolidated Financial Statements for additional information.

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

See NOTE 14, “COMMITMENTS AND CONTINGENCIES,” to our Consolidated Financial Statements for additional information.

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 credit agreement amended and restated the prior $2.0 billion 5-year credit agreement that would have matured on June 3, 2029.

We also entered into a new 3-year credit agreement that allows us to borrow up to $2.0 billion of unsecured funds at any time prior to June 2, 2028.

The credit agreement replaced the prior $2.0 billion 364-day credit facility that matured on June 2, 2025.

On May 9, 2025, we issued $2.0 billion aggregate principal amount of senior unsecured notes consisting of $300 million aggregate principal amount of 4.25 percent senior unsecured notes due in 2028, $700 million aggregate principal amount of 4.70 percent senior unsecured notes due in 2031 and $1.0 billion aggregate principal amount of 5.30 percent senior unsecured notes due in 2035.

Net of the discount and underwriter fees, we received net proceeds of $1.99 billion.

See NOTE 12, “DEBT,” to our Consolidated Financial Statements for additional information.

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As of the date of this filing, our credit ratings and outlooks from the credit rating agencies remain unchanged.

See the section titled “Credit Ratings” in the “LIQUIDITY AND CAPITAL RESOURCES” section for our current ratings.

RESULTS OF OPERATIONS

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Equity, royalty and interest income from investees 469 395 483 74 19 % (88) (18) %

Other operating expense, net 346 2,138 174 1,792 84 % (1,964) NM

Other operating expense, net 439 346 2,138 (93) (27) % 1,792 84 %

OPERATING INCOME 4,025 3,750 1,761 275 7 % 1,989 NM

Interest expense 329 370 375 41 11 % 5 1 %

Other income, net 1,523 240 89 1,283 NM 151 NM

Other income, net 267 1,523 240 (1,256) (82) % 1,283 NM

INCOME BEFORE INCOME TAXES 3,963 4,903 1,626 (940) (19) % 3,277 NM

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CONSOLIDATED NET INCOME 2,957 4,068 840 (1,111) (27) % 3,228 NM

Net income attributable to noncontrolling interests 122 105 32 (17) (16) % (73) NM

Net income attributable to noncontrolling interests 114 122 105 8 7 % (17) (16) %

NET INCOME ATTRIBUTABLE TO CUMMINS INC .

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Research, development and engineering expenses 4.1 % 4.3 % 4.4 % 0.2 0.1

Net sales increased $37 million, primarily driven by the following:

• Distribution segment sales increased 11 percent primarily due to higher demand in power generation markets, especially in North America and Europe.

Net sales decreased $432 million, primarily driven by the following:

• Component segment sales decreased 13 percent mainly due to lower demand in North American heavy-duty and medium-duty truck markets and the divestiture of Atmus on March 18, 2024.

See NOTE 21, “ATMUS DIVESTITURE,” to our Consolidated Financial Statements for additional information.

• Engine segment sales decreased 7 percent mainly due to lower demand in North American heavy-duty and medium-duty truck markets.

These decreases were partially offset by the following:

• Power Systems segment sales increased 16 percent primarily due to higher demand in power generation markets, especially in North America and China.

• Engine segment sales were flat as stronger demand in North American medium-duty truck markets was offset by lower demand in North American pick-up truck and heavy-duty truck markets and weaker demand in global construction markets.

These increases were partially offset by decreased Components segment sales of 13 percent mainly due to the divestiture of Atmus on March 18, 2024.

• Distribution segment sales increased 9 percent primarily due to higher demand in power generation markets, especially in North America.

Sales to international markets (excluding the U.S.

and Canada), based on location of customers, were 40 percent of total net sales in 2025, compared with 39 percent of total net sales in 2024.

A more detailed discussion of sales by segment is presented in the "OPERATING SEGMENT RESULTS" section.

A more detailed discussion of sales by segment is presented in the “REPORTABLE SEGMENT RESULTS” section.

Cost of Sales

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production and warehousing facility property insurance and rent for production facilities and other production overhead.

Cost of sales in 2024 included $112 million of inventory write-downs and severance in our Accelera segment.

See NOTE 22, "ACCELERA STRATEGIC REORGANIZATION ACTIONS," to our Consolidated Financial Statements for additional information.

Cost of sales in 2025 and 2024 included $157 million and $112 million, respectively of inventory write-downs, contract termination costs and severance in our Accelera segment.

See NOTE 22, “ACCELERA ACTIONS,” to our Consolidated Financial Statements for additional information.

Gross margin increased $77 million and increased 0.6 points as a percentage of sales.

The increases were mainly due to favorable pricing and higher volumes, partially offset by the divestiture of Atmus, higher compensation expenses and increased product coverage.

The increases were mainly due to strong growth in power generation markets, especially data center and commercial markets, as well as favorable non-tariff related pricing mainly due to the launch of updated engine products in light-duty automotive markets, partially offset by lower demand in on-highway commercial truck markets and the absence of Atmus sales.

The net impact of tariff costs and related recoveries was immaterial for the year ended December 31, 2025.

The provision for base warranties issued as a percentage of sales was 1.9 percent in 2025 and 1.9 percent in 2024.

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Research, development and engineering expenses decreased $67 million and decreased 0.2 points as a percentage of sales.

The decreases were mainly due to lower spending on prototypes and decreased compensation expenses.

The decreases were mainly due to lower compensation expenses.

Compensation and related expenses include salaries, fringe benefits and variable compensation.

Research activities continue to focus on development of new products and improvements of current technologies to meet future emission standards around the world, improvements in fuel economy performance of diesel and natural gas-powered engines and related components, as well as development activities around electrified power systems with innovative components and systems including battery and electric power technologies and hydrogen production technologies.

Equity, Royalty and Interest Income From Investees

Equity, royalty and interest income from investees decreased $88 million, primarily due to lower royalty and interest income from investees, start-up costs at Amplify Cell Technologies LLC, the absence of earnings from joint ventures associated with the divestiture of Atmus and $17 million of write-downs related to the Accelera segment, partially offset by higher earnings at Chongqing Cummins Engine Co., Ltd.

See NOTE 3, "INVESTMENTS IN EQUITY INVESTEES," and NOTE 22, "ACCELERA STRATEGIC REORGANIZATION ACTIONS," to our Consolidated Financial Statements for additional information.

Equity, royalty and interest income from investees increased $74 million, primarily due to increased earnings at Chongqing Cummins Engine Co., Ltd.

and Beijing Foton Cummins Engine Co., Ltd.

and the absence of a joint venture consolidated in the first quarter of 2025 with prior year losses, partially offset by lower earnings at Sistemas Automotrices de Mexico S.A.

See NOTE 3, “INVESTMENTS IN EQUITY INVESTEES,” to our Consolidated Financial Statements for additional information.

Other Operating Expense, Net

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In millions 2025 2024

Accelera strategic reorganization actions (1)

Accelera actions (1)

$ (292) $ (171)

Amortization of intangible assets (133) (129)

Loss on write-off of assets (17) (17)

Flood damage expenses (10) —

Royalty income, net 11 8

Settlement Agreements (2)

Other, net (8) (37)

Total other operating expense, net $ (439) $ (346)

(1) See NOTE 22, "ACCELERA STRATEGIC REORGANIZATION ACTIONS," to our Consolidated Financial Statements for additional information.

(2) See NOTE 14, "COMMITMENTS AND CONTINGENCIES," to our Consolidated Financial Statements for additional information.

(1) See NOTE 22, “ACCELERA ACTIONS,” to our Consolidated Financial Statements for additional information.

Interest Expense

Interest expense decreased $5 million, primarily due to lower average debt balances.

Interest expense decreased $41 million, primarily due to lower weighted-average interest rates, partially offset by higher average debt balances.

Other Income, Net

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In millions 2025 2024

Gain related to divestiture of Atmus (1)

Non-service pension and OPEB income 112 125

Interest income $ 106 $ 87

Gain on sale of marketable securities, net 8 15

Non-service pension and OPEB income 66 112

Gain on corporate owned life insurance 38 6

Foreign currency loss, net (41) (30)

Gain on sale of marketable securities, net 22 8

Foreign currency gain (loss), net 5 (41)

Gain related to divestiture of Atmus (1)

Other, net 30 18

Total other income, net $ 267 $ 1,523

(1) See NOTE 21, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," to our Consolidated Financial Statements for additional information.

(1) See NOTE 21, “ATMUS DIVESTITURE,” to our Consolidated Financial Statements for additional information.

Income Tax Expense

On July 4, 2025, The Act was signed into law, enacting significant changes to U.S.

Implementation of The Act resulted in an increase to tax expense of $39 million in the second half of 2025, primarily due to a reduction in the foreign income deduction and changes to the research and development tax credit.

Additionally, certain provisions of The Act resulted in lower U.S.

tax-related cash payments in 2025 and should result in lower U.S.

tax-related payments for the next several fiscal years.

Our effective tax rate for 2025 was 25.4 percent compared to 17.0 percent for 2024.

The year ended December 31, 2025, contained net favorable discrete tax items of $75 million, primarily due to $51 million of favorable adjustments for uncertain tax positions, $15 million of favorable adjustments for share-based compensation tax benefits, $7 million of favorable return to provision adjustments and $2 million of other favorable adjustments.

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 a net $6 million of other unfavorable adjustments.

See NOTE 21, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," and NOTE 22, "ACCELERA STRATEGIC REORGANIZATION ACTIONS" to our Consolidated Financial Statements 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.

The change in the effective tax rate for the year ended December 31, 2024, versus year ended December 31, 2023, was primarily due to the absence of the Settlement Agreements charge and the non-taxable gain on the Atmus split-off.

See NOTE 21, "ATMUS DIVESTITURE," and NOTE 22, "ACCELERA ACTIONS" to our Consolidated Financial Statements for additional information.

The change in the effective tax rate for the year ended December 31, 2025, versus year ended December 31, 2024, was primarily due to the absence of the non-taxable gain on the Atmus split-off, the impact of the Act and additional tax expense from the Accelera actions.

See NOTE 22, "ACCELERA ACTIONS" to our Consolidated Financial Statements for additional information.

Our effective tax rate for 2026 is expected to approximate 24.0 percent, excluding any discrete tax items that may arise.

1 unchanged sentence

Noncontrolling interests eliminate the income or loss attributable to non-Cummins ownership interests in our consolidated entities.

Noncontrolling interests in income of consolidated subsidiaries increased $17 million principally due to higher earnings at Cummins India Limited and the absence of losses at Hydrogenics Corporation resulting from the June 2023 acquisition, partially offset by lower earnings at Eaton Cummins Joint Venture and the divestiture of Atmus.

Noncontrolling interests in income of consolidated subsidiaries decreased $8 million primarily due to losses from a former joint venture consolidated in the first quarter of 2025, the divestiture of Atmus and lower earnings at our other joint ventures, partially offset by higher earnings at Cummins India Limited.

For all prior year segment results comparisons to 2023 see the Results of Operations section of our 2024 Form 10-K .

Comprehensive Income - Foreign Currency Translation Adjustment

The foreign currency translation adjustment was a net loss of $276 million and net gain of $92 million for the years ended December 31, 2024 and 2023, respectively.

The foreign currency translation adjustment was a net gain of $244 million and net loss of $276 million for the years ended December 31, 2025 and 2024, respectively.

The details were as follows:

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dollar Translation adjustment Primary currency driver vs.

Wholly-owned subsidiaries $ (245) Brazilian real, Chinese renminbi, Euro and Indian rupee $ 118 British pound and Brazilian real, partially offset by Chinese renminbi

Equity method investments (15) Chinese renminbi and Brazilian real, partially offset by Indian rupee (23) Chinese renminbi, partially offset by Brazilian real

Consolidated subsidiaries with a noncontrolling interest (16) Indian rupee (3) Chinese renminbi

Wholly-owned subsidiaries $ 227 Euro, British pound and Brazilian real $ (245) Brazilian real, Chinese renminbi, Euro and Indian rupee

Equity method investments 30 Chinese renminbi, partially offset by Indian rupee (15) Chinese renminbi and Brazilian real, partially offset by Indian rupee

Consolidated subsidiaries with a noncontrolling interest (13) Indian rupee, partially offset by Euro (16) Indian rupee

Total $ 244 $ (276)

For all prior year foreign currency translation adjustment results comparisons to 2023 see the Results of Operations section of our 2024 Form 10-K .

OPERATING SEGMENT RESULTS

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

REPORTABLE SEGMENT RESULTS

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

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

We use segment EBITDA as the basis for the Chief Operating Decision Maker to evaluate the performance of each of our reportable operating segments.

We use segment EBITDA as the basis for the Chief Operating Decision Maker to evaluate the performance of each of our reportable segments.

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

Segment amounts exclude certain expenses not specifically identifiable to segments.

Following is a discussion of results for each of our operating segments.

Tariff related costs and recoveries in 2025 were evaluated independently of all other drivers included in the disclosures below and all references to "price" and "material cost" variances exclude these separately evaluated tariff costs and recoveries.

The net impact of tariff costs and related recoveries were immaterial to each reportable segment's EBITDA, unless specifically noted.

Following is a discussion of results for each of our reportable segments.

For all prior year segment results comparisons to 2023 see the Results of Operations section of our 2024 Form 10-K .

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Equity, royalty and interest income from investees 254 212 251 42 20 % (39) (16) %

(39) (16) % 91 57 %

Interest income 17 19 14 (2) (11) % 5 36 %

Russian suspension costs

— — % 33 100 %

Interest income 37 17 19 20 NM (2) (11) %

Segment EBITDA 1,382 1,653 1,630 (271) (16) % 23 1 %

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Segment EBITDA as a percentage of total sales 12.7 % 14.1 % 14.0 % (1.4) 0.1

(1) 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," to our Consolidated Financial Statements for additional information.

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

See NOTE 24, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information.

"NM" - not meaningful information

Sales for our Engine segment by market were as follows:

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Total unit shipments 554,200 632,600 647,500 (78,400) (12) % (14,900) (2) %

Engine segment sales increased $28 million.

The primary driver by market was an increase in medium-duty truck and bus sales of $496 million mainly due to higher demand, especially in North America with medium-duty truck engine shipments up 16 percent, and favorable pricing.

The increase was partially offset by the following:

• Light-duty automotive sales decreased $167 million primarily due to lower demand in North American pick-up truck markets with shipments down 15 percent, partially offset by favorable pricing.

• Heavy-duty truck sales decreased $155 million principally due to weaker demand in North America with shipments down 8 percent.

• Off-highway sales decreased $146 million primarily due to lower demand in global construction markets, especially in China and Western Europe.

Engine segment sales decreased $837 million.

The following were the primary drivers by market:

• Heavy-duty truck sales decreased $755 million principally due to lower demand, especially in North America with shipments down 27 percent.

• Medium-duty truck and bus sales decreased $553 million primarily due to lower truck demand, especially in North America with shipments down 31 percent.

These decreases were partially offset by the following increases:

• Light-duty automotive sales increased $335 million primarily due to non-tariff pricing mainly related to the launch of updated engine products.

• Off-highway sales increased $136 million primarily due to higher international construction demand, especially in China.

Segment EBITDA

Engine segment EBITDA increased $23 million, primarily due to favorable pricing, partially offset by lower volumes, increased product coverage, higher compensation expenses, higher supply chain related costs and lower joint venture technology fees.

Engine segment EBITDA decreased $271 million primarily due to lower volumes, unfavorable mix, increased product coverage costs and higher material costs, partially offset by favorable pricing.

Unfavorable material costs and favorable pricing were primarily related to the launch of updated products in light-duty automotive markets.

Components Segment Results

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.

See NOTE 21, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," to our Consolidated Financial Statements for additional information.

See NOTE 21, “ATMUS DIVESTITURE,” to our Consolidated Financial Statements for additional information.

Financial data for the Components segment was as follows:

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Equity, royalty and interest income from investees 31 64 97 (33) (52) % (33) (34) %

Interest income 25 31 12 (6) (19) % 19 NM

Russian suspension costs (1)

— — 5 — — % 5 100 %

Interest income 29 25 31 4 16 % (6) (19) %

Segment EBITDA 1,398 1,591 (1)

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Segment EBITDA as a percentage of total sales 13.8 % 13.6 % 13.7 % 0.2 (0.1)

"NM" - not meaningful information

(1) See NOTE 24, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information.

(1) Included $21 million and $78 million of costs associated with the divestiture of Atmus for the years ended December 31, 2024 and 2023, respectively.

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

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.

Sales for our Components segment by business were as follows:

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In millions 2025 2024 2023 Amount Percent Amount Percent

Drivetrain and braking systems $ 4,733 $ 4,822 $ 1,879 $ (89) (2) % $ 2,943 NM

Drivetrain and braking systems $ 3,986 $ 4,733 $ 4,822 $ (747) (16) % $ (89) (2) %

Emission solutions 3,457 3,601 3,835 (144) (4) % (234) (6) %

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Total sales $ 10,149 $ 11,679 $ 13,409 $ (1,530) (13) % $ (1,730) (13) %

"NM" - not meaningful information

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

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The following were the primary drivers by business:

• Sales decreased $1.3 billion due to the Atmus divestiture on March 18, 2024.

• Emission solutions sales decreased $234 million principally due to lower demand in China.

• Drivetrain and braking systems sales decreased $747 million primarily due to lower demand in North America and lower sales in India due to changes in the business model.

• Sales decreased $353 million due to the Atmus divestiture on March 18, 2024.

Segment EBITDA

Components segment EBITDA decreased $249 million, primarily due to the divestiture of Atmus.

Components segment EBITDA decreased $193 million, primarily due to lower volumes, partially offset by decreased compensation expenses, lower product coverage costs and reduced material costs.

Distribution Segment Results

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Equity, royalty and interest income from investees 105 90 97 15 17 % (7) (7) %

Interest income 37 34 16 3 9 % 18 NM

Russian suspension costs (1)

— — 54 — — % 54 100 %

Interest income 23 37 34 (14) (38) % 3 9 %

Segment EBITDA 1,808 1,378 1,209 430 31 % 169 14 %

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Segment EBITDA as a percentage of total sales 14.6 % 12.1 % 11.8 % 2.5 0.3

"NM" - not meaningful information

(1) See NOTE 24, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information.

Sales for our Distribution segment by region, were as follows:

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North America $ 8,629 $ 7,625 $ 7,081 $ 1,004 13 % $ 544 8 %

Asia Pacific 1,245 1,096 1,016 149 14 % 80 8 %

Europe 1,186 1,184 853 2 — % 331 39 %

Asia Pacific 1,152 1,245 1,096 (93) (7) % 149 14 %

China 514 478 430 36 8 % 48 11 %

India 365 317 270 48 15 % 47 17 %

Africa and Middle East 268 294 251 (26) (9) % 43 17 %

Latin America 291 267 225 24 9 % 42 19 %

Africa and Middle East 268 268 294 — — % (26) (9) %

Total sales $ 12,405 $ 11,384 $ 10,249 $ 1,021 9 % $ 1,135 11 %

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In millions 2025 2024 2023 Amount Percent Amount Percent

Parts $ 3,980 $ 4,071 $ 3,818 $ (91) (2) % $ 253 7 %

Power generation $ 4,932 $ 3,972 $ 2,509 $ 960 24 % $ 1,463 58 %

Parts 4,083 3,980 4,071 103 3 % (91) (2) %

Service 1,798 1,753 1,672 45 3 % 81 5 %

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Total sales $ 12,405 $ 11,384 $ 10,249 $ 1,021 9 % $ 1,135 11 %

Distribution segment sales increased $1.1 billion and increased across most regions.

The following were the primary drivers by regions:

• North American sales increased $544 million principally due to higher demand in power generation markets, especially data center and commercial markets, partially offset by lower demand for engines and aftermarket products.

• European sales increased $331 million mainly due to favorable demand in power generation markets.

• Asia Pacific sales increased $149 million primarily due to strong demand in power generation markets, especially data center markets and service volume.

Distribution segment sales increased $1.0 billion, due to increased sales in North America of $1.0 billion principally from higher demand in power generation markets, especially data center and commercial markets.

Segment EBITDA

Distribution segment EBITDA increased $169 million, primarily due to favorable pricing, partially offset by higher compensation expenses.

Distribution segment EBITDA increased $430 million, primarily due to increased power generation volumes in North America, improved mix, favorable pricing, decreased compensation expenses, lower material costs and improved operational leverage.

Power Systems Segment Results

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Equity, royalty and interest income from investees 109 79 53 30 38 % 26 49 %

Interest income 7 9 7 (2) (22) % 2 29 %

Russian suspension costs (1)

— — 19 — — % 19 100 %

Interest income 16 7 9 9 NM (2) (22) %

Segment EBITDA 1,694 1,180 836 514 44 % 344 41 %

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Segment EBITDA as a percentage of total sales 22.7 % 18.4 % 14.7 % 4.3 3.7

(1) See NOTE 24, "RUSSIAN OPERATIONS," to our Consolidated Financial Statements for additional information.

"NM" - not meaningful information

Sales for our Power Systems segment by product line were as follows:

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Total sales $ 7,463 $ 6,408 $ 5,673 $ 1,055 16 % $ 735 13 %

Power Systems segment sales increased $735 million, primarily due to improved global power generation sales of $645 million, especially in data center markets.

Power Systems segment sales increased $1.1 billion, primarily due to higher power generation sales of $746 million, mainly from improved demand in North America and China.

Segment EBITDA

Power Systems segment EBITDA increased $344 million, primarily due to favorable pricing and higher volumes, partially offset by higher compensation expenses and increased product coverage.

Power Systems segment EBITDA increased $514 million, primarily due to favorable pricing and higher volumes, partially offset by net tariff costs.

Accelera Segment Results

Total charges for these strategic reorganization actions were $312 million.

See NOTE 22, "ACCELERA STRATEGIC REORGANIZATION ACTIONS," to our Consolidated Financial Statements for additional information.

These conditions prompted a further strategic review of this business in the fourth quarter of 2025.

We will continue to fulfill existing customer commitments.

As a result of these actions, we recorded several additional charges in the fourth quarter of 2025, totaling $218 million.

Total charges for all Accelera actions in 2025 were $458 million.

See NOTE 22, “ACCELERA ACTIONS,” to our Consolidated Financial Statements for additional information.

Financial data for the Accelera segment was as follows:

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Equity, royalty and interest loss from investees (30) (50) (2)

(15) (2) (35) NM (13) NM

Interest income 1 2 — (1) (50) % 2 NM

(15) 20 40 % (35) NM

Interest income 1 1 2 — — % (1) (50) %

Segment EBITDA (896) (1)

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“NM” - not meaningful information

(1) Included $7 million of charges in research, development and engineering expenses and $458 million of charges in EBITDA for 2025 Accelera actions.

See NOTE 22, “ACCELERA ACTIONS,” to our Consolidated Financial Statements for additional information.

(2) Included $2 million of charges in research, development and engineering expenses, $17 million of charges in equity, royalty and interest loss from investees and $312 million of charges in EBITDA, all related to strategic reorganization actions in the fourth quarter of 2024.

See NOTE 22, "ACCELERA STRATEGIC REORGANIZATION ACTIONS," to our Consolidated Financial Statements for additional information.

Accelera segment sales increased $60 million mainly due to improved sales of electrolyzers, partially offset by lower electrified powertrain sales.

See NOTE 22, “ACCELERA ACTIONS,” to our Consolidated Financial Statements for additional information.

Accelera segment sales increased $46 million mainly due to improved sales of electrified powertrains.

The uncertain global trade environment, characterized by tariffs, export controls and broader geopolitical tensions, has created significant market volatility while introducing uncertainty around future demand for capital goods as well as potential impacts to our supply chain and our related product costs.

Given the breadth, severity and uncertain duration of these global trade measures, our outlook presented below could be negatively impacted by policy-driven volatility.

We are proactively taking steps in our supply chain to mitigate impacts where possible and we are working with our customers to pass through incremental costs.

Our outlook reflects the following positive trends and challenges to our business that could impact our revenue and earnings potential in 2026.

Positive Trends

• We expect demand within our Power Systems business to remain strong, including the power generation and mining markets.

• We expect North American pick-up truck demand to improve.

• We believe market demand for trucks in India will continue to be strong.

• We anticipate demand in our aftermarket business will continue to be robust, driven primarily by strong demand in our Engine and Power Systems businesses.

• We expect demand for trucks in China to remain stable in 2025.

• We expect demand for medium-duty and heavy-duty trucks in North America to remain relatively weak in the first half of 2025.

• We expect demand within markets served by our Power Systems business to remain strong, including the power generation and industrial markets.

• We anticipate our aftermarket business will remain stable, driven primarily by demand in our Engine and Power Systems businesses.

• We expect demand for medium-duty and heavy-duty trucks in North America to remain weak in the first half of 2026.

• Increases in costs, tariffs, as well as other inflationary pressures, could negatively impact earnings.

• The potential for trade disruption, including embargoes, sanctions and export controls could negatively impact earnings.

• The potential for trade disruption, including embargoes, sanctions and export controls, could cause production disruptions and negatively impact earnings.

• The slower adoption of zero-emission solutions reduced Accelera’s near-term revenue outlook, prompting significant restructuring actions and a refined strategic investment approach.

While we anticipate these actions will gradually improve the cost structure, we expect ongoing investments in priority technologies to result in continued near-term operating losses.

Current Regulatory Challenges for 2026 and Beyond

• Changes in government policies (such as reduced incentives, delayed infrastructure mandates or revised emissions standards) may impact Accelera’s ability to compete, scale or recover investments in zero-emission technologies including:

◦ The reduction of government incentives in the U.S.

to support the adoption of hydrogen fuel, along with slower than expected market development in some international markets, has contributed to lower expectations for demand for our electrolyzer products.

In the third quarter, we recorded non-cash charges for goodwill impairment and inventory write-downs related to the electrolyzer business, and in the fourth quarter of 2025 we recorded an additional $218 million of charges for Accelera actions.

See NOTE 22, “ACCELERA ACTIONS,” to our Consolidated Financial Statements for additional information.

◦ The Board for our Amplify Cell Technologies LLC joint venture is reviewing the timing of investments as the result of changing market adoption projections.

• Our engines are subject to extensive statutory and regulatory requirements governing emissions, including greenhouse gas (GHG) standards set by the EPA and fuel consumption standards set by the National Highway Traffic Safety Administration (NHTSA).

To comply with these regulations, we utilize banking and trading of regulatory compliance credits.

In June 2025, NHTSA published an interpretive rule questioning the current regulatory framework of allowing credits as a compliance vehicle.

In July 2025, the EPA published a proposed rule that would repeal GHG emissions standards and thus remove the requirement for vehicle and engine manufacturers to measure, control and report these emissions from vehicles.

If both regulatory agencies finalize their indicated proposals, we will no longer utilize emission compliance credits on future engines sales and the credits would have minimal, if any, value to us.

While the rules will likely be subject to legal challenges, in the period the rule is finalized, we could be required to incur a non-cash expense up to the value of our existing credits, which was $127 million at December 31, 2025.

LIQUIDITY AND CAPITAL RESOURCES

24 unchanged sentences

Net cash used in investing activities (1,731) (1,782) (1,643) 51 (139)

Net cash (used in) provided by financing activities (173) (2,177) 1,669 2,004 (3,846)

Net cash used in financing activities (772) (173) (2,177) (599) 2,004

Effect of exchange rate changes on cash and cash equivalents 56 (40) (68) 96 28

Net (decrease) increase in cash and cash equivalents $ (508) $ 78 $ (491) $ (586) $ 569

Net cash provided by operating activities decreased $2.5 billion, primarily due to higher working capital requirements of $4.6 billion, partially offset by higher net income of $3.2 billion.

The higher working capital requirements resulted in a cash outflow of $2.2 billion compared to a cash inflow of $2.4 billion in the comparable period in 2023, mainly due to $1.9 billion of payments required by the Settlement Agreements which were accrued in 2023.

Net income included a $1.3 billion non-cash gain on the divestiture of Atmus.

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

Net cash used in investing activities increased $139 million, primarily due to higher investments in equity investees of $228 million and cash associated with the Atmus divestiture of $174 million, partially offset by lower acquisition activity of $234 million.

Net cash used in financing activities decreased $2.0 billion, primarily due to higher proceeds from borrowings of $1.9 billion (principally related to our 2024 note issuance) and lower net payments of commercial paper of $542 million, partially offset by higher payments on borrowings and finance lease obligations of $432 million.

The effect of exchange rate changes on cash and cash equivalents increased $28 million, primarily due to favorable fluctuations in the British pound, partially offset by the Brazilian real.

Net increase (decrease) in cash and cash equivalents $ 1,174 $ (508) $ 78 $ 1,682 $ (586)

Net cash provided by operating activities increased $2.1 billion, primarily due to lower working capital requirements of $1.3 billion and strong earnings.

The lower working capital requirements resulted in a cash outflow of $0.9 billion compared to a cash outflow of $2.2 billion in the comparable period in 2024, mainly due to the absence of $1.9 billion of payments in 2024 required by the Settlement Agreements, partially offset by unfavorable changes in accounts and notes receivable.

See NOTE 14, “COMMITMENTS AND CONTINGENCIES,” to our Consolidated Financial Statements for additional information on the Settlement Agreements.

Net cash used in investing activities decreased $51 million, primarily due to the absence of cash associated with the Atmus divestiture of $174 million partially offset by higher net investments in marketable securities of $137 million.

Net cash used in financing activities increased $599 million, primarily due to increased commercial paper payments of $669 million and lower borrowing proceeds of $385 million, partially offset by lower payments on borrowings and finance lease obligations of $593 million, largely related to the absence of early payments of $1.1 billion on our term loan, due 2025, during 2024, partially offset by repayment of $500 million of our senior notes in 2025.

The effect of exchange rate changes on cash and cash equivalents increased $96 million, primarily due to favorable fluctuations in the Chinese renminbi, Euro and British pound.

For prior year liquidity comparisons see the Liquidity and Capital Resources section of our 2024 Form 10-K .

Sources of Liquidity

We generate significant ongoing operating cash flow.

Cash provided by operations is our principal source of liquidity with $1.5 billion provided in 2024.

In February, we issued $2.25 billion in long-term debt to pay down higher cost debt, finance the Settlement Agreements payments and improve our overall liquidity.

We typically generate significant ongoing cash flow and cash provided by operations is generally our principal source of liquidity.

Our sources of liquidity include the following:

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International Primary location of international balances

Cash and cash equivalents $ 1,671 $ 604 $ 1,067 Singapore, Australia, Mexico, China, United Kingdom, Belgium

Cash and cash equivalents $ 2,845 $ 1,280 $ 1,565 Singapore, China, Australia, Mexico, Belgium, Romania, France, Germany

Marketable securities (1)

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(1) The majority of marketable securities could be liquidated into cash within a few days.

(2) The 5-year credit facility for $2.0 billion and the 364-day credit facility for $2.0 billion, maturing June 2029 and June 2025, respectively, are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes.

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

(2) The 5-year credit facility for $2.0 billion and the 3-year credit facility for $2.0 billion, maturing June 2030 and June 2028, respectively, are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes.

At December 31, 2025, we had $353 million of commercial paper outstanding, which effectively reduced our available capacity under our revolving credit facilities to $3.6 billion.

Cash, Cash Equivalents and Marketable Securities

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On June 2, 2025, 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 2, 2030.

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

On June 3, 2024, 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 2, 2025.

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

We received net proceeds of $2.2 billion.

See NOTE 12, "DEBT," to our Consolidated Financial Statements for additional information.

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.

The credit agreement amended and restated the prior $2.0 billion 5-year credit agreement that would have matured on June 3, 2029.

We also entered into a new 3-year credit agreement that allows us to borrow up to $2.0 billion of unsecured funds at any time prior to June 2, 2028.

The credit agreement replaced the prior $2.0 billion 364-day credit facility that matured on June 2, 2025.

Our committed credit facilities provide access up to $4.0 billion from our $2.0 billion 3-year credit facility and our $2.0 billion 5-year facility.

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

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The total combined borrowing capacity under the revolving credit facilities and commercial paper programs should not exceed $4.0 billion.

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

At December 31, 2025, we had $353 million of commercial paper outstanding, which effectively reduced our available capacity under our revolving credit facilities to $3.6 billion.

See NOTE 12, “DEBT,” to our Consolidated Financial Statements for additional information .

As a well-known seasoned issuer, we filed an automatic shelf registration for an undetermined amount of debt and equity securities with the Securities and Exchange Commission (SEC) on February 8, 2022, which expired on February 9, 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.

See NOTE 20, “DERIVATIVES,” to our Consolidated Financial Statements for additional information.

As a well-known seasoned issuer, we filed an automatic shelf registration for an undetermined amount of debt and equity securities with the SEC on February 13, 2025.

Under this shelf registration we may offer, from time-to-time, debt securities, common stock, preferred and preference stock, depositary shares, warrants, stock purchase contracts and stock purchase units.

Supply Chain Financing

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We do not reimburse vendors for any costs they incur for participation in the program, their participation is completely voluntary and there are no assets pledged as security or other forms of guarantees provided for the committed payment to the finance provider or intermediary.

As a result, all amounts owed

to the financial intermediaries are presented as accounts payable in our Consolidated Balance Sheets .

As a result, all amounts owed to the financial intermediaries are presented as accounts payable in our Consolidated Balance Sheets .

Amounts due to the financial intermediaries reflected in accounts payable at December 31, 2025, were $153 million.

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See NOTE 1, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,” to our Consolidated Financial Statements for additional information.

Settlement Agreements

In December 2023, we announced that we reached an agreement in principle with the EPA, CARB, 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).

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

See NOTE 14, "COMMITMENTS AND CONTINGENCIES," to our Consolidated Financial Statements for additional information.

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

Total dividends paid to common shareholders in 2025, 2024 and 2023 were $1.1 billion, $1.0 billion and $0.9 billion, respectively.

Declaration and payment of dividends in the future depends upon our income and liquidity position, among other factors, and is subject to declaration by the Board, who meets quarterly to consider our dividend payment.

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Capital Expenditures

Capital expenditures were $1.2 billion, $1.2 billion and $916 million in 2024, 2023 and 2022, respectively.

Capital expenditures were $1.2 billion each year in 2025, 2024 and 2023.

We continue to invest in new product lines and targeted capacity expansions.

We plan to spend an estimated $1.35 billion to $1.45 billion in 2026 on capital expenditures with over 65 percent of these expenditures expected to be invested in North America.

Debt Payments

In September 2025, we repaid our $500 million 0.75 percent senior notes, due in 2025, using cash on hand.

See NOTE 12, “DEBT,” to our Consolidated Financial Statements for additional information.

Current Maturities of Short and Long-Term Debt

We had $1.3 billion of commercial paper outstanding at December 31, 2024, that matures in less than one year.

The maturity schedule of our existing long-term debt includes $500 million of cash outflows in 2025 when our 0.75 percent senior notes are due.

We had $353 million of commercial paper outstanding at December 31, 2025, that matures in less than one year.

Required annual long-term debt principal payments range from $94 million to $863 million over the next five years.

21 unchanged sentences

For the year ended December 31, 2025, we did not make any repurchases of common stock.

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

The dollar value remaining available for future purchases under the 2019 program at December 31, 2025, was $218 million, leaving a total of $2.2 billion available under all plans.

We intend to repurchase outstanding shares from time to time to enhance shareholder value.

Amplify Cell Technologies LLC Joint Venture

In September 2023, our Accelera business signed an agreement to form a joint venture, Amplify Cell Technologies LLC, with Daimler Truck, 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.

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

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.

As of December 31, 2025, we contributed $412 million to our Amplify Cell Technologies LLC joint venture and our maximum remaining required contribution was $418 million, which could be reduced by future government incentives received by the joint venture.

The majority of the contribution is expected to be made by the end of 2028.

10 unchanged sentences

Other purchase commitments 581 331

Transitional tax liability 103 —

What changed 10-K

Item 7. Management’s Discussion and Analysis