Item 8. Financial Statements and Supplementary Data

Index to Financial Statements

• Management's Report to Shareholders**

• Report of Independent Registered Public Accounting Firm (PCAOB ID 238)**

• Consolidated Statements of Net Income** for the years ended December 31, 2025, 2024 and 2023

• Consolidated Statements of Comprehensive Income** for the years ended December 31, 2025, 2024 and 2023

• Consolidated Balance Sheets** at December 31, 2025 and 2024

• Consolidated Statements of Cash Flows** for the years ended December 31, 2025, 2024 and 2023

• Consolidated Statements of Changes in Redeemable Noncontrolling Interests and Equity** for the years ended December 31, 2025, 2024 and 2023

• Notes to the Consolidated Financial Statements**

NOTE						1						SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NOTE						2						REVENUE FROM CONTRACTS WITH CUSTOMERS
NOTE						3						INVESTMENTS IN EQUITY INVESTEES
NOTE						4						INCOME TAXES
NOTE						5						MARKETABLE SECURITIES
NOTE						6						INVENTORIES
NOTE						7						PROPERTY, PLANT AND EQUIPMENT
NOTE						8						LEASES
NOTE						9						GOODWILL AND OTHER INTANGIBLE ASSETS
NOTE						10						PENSIONS AND OTHER POSTRETIREMENT BENEFITS
NOTE						11						SUPPLEMENTAL BALANCE SHEET DATA
NOTE						12						DEBT
NOTE						13						PRODUCT WARRANTY LIABILITY
NOTE						14						COMMITMENTS AND CONTINGENCIES
NOTE						15						CUMMINS INC. SHAREHOLDERS' EQUITY
NOTE						16						ACCUMULATED OTHER COMPREHENSIVE LOSS
NOTE						17						NONCONTROLLING INTERESTS
NOTE						18						STOCK INCENTIVE AND STOCK OPTION PLANS
NOTE						19						EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
NOTE						20						DERIVATIVES
NOTE						21						ATMUS DIVESTITURE
NOTE						22						ACCELERA ACTIONS
NOTE						23						ACQUISITIONS
NOTE						24						REPORTABLE SEGMENTS

MANAGEMENT'S REPORT TO SHAREHOLDERS

Management's Report on Financial Statements and Practices

The accompanying Consolidated Financial Statements of Cummins Inc. were prepared by management, which is responsible for their integrity and objectivity. The statements were prepared in accordance with generally accepted accounting principles and include amounts that are based on management's best judgments and estimates. The other financial information included in the annual report is consistent with that in the financial statements.

Management also recognizes its responsibility for conducting our affairs according to the highest standards of personal and corporate conduct. This responsibility is characterized and reflected in key policy statements issued from time to time regarding, among other things, conduct of its business activities within the laws of the host countries in which we operate, within the Foreign Corrupt Practices Act and potentially conflicting interests of its employees. We maintain a systematic program to assess compliance with these policies.

To comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, we designed and implemented a structured and comprehensive compliance process to evaluate our internal control over financial reporting across the enterprise.

Management's Report on Internal Control Over Financial Reporting

The management of Cummins Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of our Consolidated Financial Statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Management assessed the effectiveness of our internal control over financial reporting and concluded it was effective as of December 31, 2025. In making its assessment, management utilized the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013).

The effectiveness of our internal control over financial reporting as of December 31, 2025, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Officer Certifications

Please refer to Exhibits 31(a) and 31(b) attached to this report for certifications required under Section 302 of the Sarbanes-Oxley Act of 2002.

/s/ JENNIFER RUMSEY						/s/ MARK A. SMITH
Chair and Chief Executive Officer						Vice President and Chief Financial Officer

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Cummins Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Cummins Inc. and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of net income, comprehensive income, changes in redeemable noncontrolling interests and equity and cash flows for each of the three years in the period ended December 31, 2025, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. 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 Test – 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 $2,224 million as of December 31, 2025, of which 34 percent relates to the drivetrain and braking systems reporting unit. Management performs the annual goodwill impairment test as of October 31, or on an interim basis in certain circumstances where impairment may be indicated. 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 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 annual goodwill impairment test 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 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. 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 unit; (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 the appropriateness of the discounted cash flow model.

/s/ PricewaterhouseCoopers LLP

Indianapolis, Indiana

February 10, 2026

We have served as the Company’s auditor since 2002.

CUMMINS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF NET INCOME

						Years ended December 31,
In millions, except per share amounts						2025						2024						2023
NET SALES (Notes 1 and 2)						$	33,670					$	34,102					$	34,065
Cost of sales						25,154						25,663						25,816
GROSS MARGIN						8,516						8,439						8,249
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses						3,125						3,275						3,333
Research, development and engineering expenses						1,396						1,463						1,500
Equity, royalty and interest income from investees (Note 3)						469						395						483
Other operating expense, net						439						346						2,138
OPERATING INCOME						4,025						3,750						1,761
Interest expense						329						370						375
Other income, net (Note 21)						267						1,523						240
INCOME BEFORE INCOME TAXES						3,963						4,903						1,626
Income tax expense (Note 4)						1,006						835						786
CONSOLIDATED NET INCOME						2,957						4,068						840
Less: Net income attributable to noncontrolling interests						114						122						105
NET INCOME ATTRIBUTABLE TO CUMMINS INC.						$	2,843					$	3,946					$	735
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. (Note 19)
Basic						$	20.62					$	28.55					$	5.19
Diluted						$	20.50					$	28.37					$	5.15

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

						Years ended December 31,
In millions						2025						2024						2023
CONSOLIDATED NET INCOME						$	2,957					$	4,068					$	840
Other comprehensive income (loss), net of tax (Note 16)
Change in pension and other postretirement defined benefit plans						(69)						5						(421)
Foreign currency translation adjustments						244						(276)						92
Unrealized (loss) gain on derivatives						(21)						16						10
Total other comprehensive income (loss), net of tax						154						(255)						(319)
COMPREHENSIVE INCOME						3,111						3,813						521
Less: Comprehensive income attributable to noncontrolling interests						101						106						102
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC.						$	3,010					$	3,707					$	419

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

CUMMINS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

						December 31,
In millions, except par value						2025						2024
ASSETS
Current assets
Cash and cash equivalents						$	2,845					$	1,671
Marketable securities (Note 5)						764						593
Total cash, cash equivalents and marketable securities						3,609						2,264
Accounts and notes receivable, net						5,818						5,181
Inventories (Note 6)						5,822						5,742
Prepaid expenses and other current assets						1,676						1,565
Total current assets						16,925						14,752
Long-term assets
Property, plant and equipment, net (Note 7)						6,958						6,356
Investments and advances related to equity method investees (Note 3)						2,133						1,889
Goodwill (Note 9)						2,224						2,370
Other intangible assets, net (Note 9)						2,167						2,351
Pension assets (Note 10)						1,033						1,189
Other assets (Note 11)						2,552						2,633
Total assets						$	33,992					$	31,540
LIABILITIES
Current liabilities
Accounts payable (principally trade)						$	3,800					$	3,951
Loans payable (Note 12)						313						356
Commercial paper (Note 12)						353						1,259
Current maturities of long-term debt (Note 12)						94						660
Accrued compensation, benefits and retirement costs						825						1,084
Current portion of accrued product warranty (Note 13)						693						679
Current portion of deferred revenue (Note 2)						1,606						1,347
Other accrued expenses (Note 11)						1,926						1,898
Total current liabilities						9,610						11,234
Long-term liabilities
Long-term debt (Note 12)						6,792						4,784
Deferred revenue (Note 2)						1,054						1,065
Other liabilities (Note 11)						3,128						3,149
Total liabilities						$	20,584					$	20,232
Commitments and contingencies (Note 14)
EQUITY
Cummins Inc. shareholders’ equity (Note 15)
Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.5 shares issued						$	2,673					$	2,636
Retained earnings						22,616						20,828
Treasury stock, at cost, 84.4 and 85.1 shares						(10,662)						(10,748)
Accumulated other comprehensive loss (Note 16)						(2,278)						(2,445)
Total Cummins Inc. shareholders’ equity						12,349						10,271
Noncontrolling interests (Note 17)						1,059						1,037
Total equity						$	13,408					$	11,308
Total liabilities and equity						$	33,992					$	31,540

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

CUMMINS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

						Years ended December 31,
In millions						2025						2024						2023
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income						$	2,957					$	4,068					$	840
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						1,105						1,065						1,024
Deferred income taxes (Note 4)						86						(209)						(457)
Equity in income of investees, net of dividends						(55)						13						(81)
Pension and OPEB expense (Note 10)						79						38						8
Pension contributions and OPEB payments (Note 10)						(55)						(90)						(134)
Changes in current assets and liabilities, net of acquisitions and divestiture
Accounts and notes receivable						(612)						298						(330)
Inventories						(39)						(402)						—
Other current assets						(66)						(305)						(120)
Accounts payable						(148)						(183)						(66)
Accrued expenses						4						(1,573)						2,934
Other, net						365						100						348
Net cash provided by operating activities						3,621						1,487						3,966
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures						(1,235)						(1,208)						(1,213)
Investments in and net advances (to) from equity investees						(196)						(214)						14
Acquisition of businesses, net of cash acquired (Note 23)						(12)						(58)						(292)
Investments in marketable securities—acquisitions						(1,627)						(1,500)						(1,409)
Investments in marketable securities—liquidations (Note 5)						1,450						1,460						1,334
Cash associated with Atmus divestiture						—						(174)						—
Other, net						(111)						(88)						(77)
Net cash used in investing activities						(1,731)						(1,782)						(1,643)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings						2,335						2,720						861
Net payments of commercial paper						(906)						(237)						(779)
Payments on borrowings and finance lease obligations						(975)						(1,568)						(1,136)
Dividend payments on common stock (Note 15)						(1,055)						(969)						(921)
Payments for purchase of redeemable noncontrolling interests						(110)						(50)						(175)
Other, net						(61)						(69)						(27)
Net cash used in financing activities						(772)						(173)						(2,177)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS						56						(40)						(68)
Net increase (decrease) in cash and cash equivalents						1,174						(508)						78
Cash and cash equivalents at beginning of year						1,671						2,179						2,101
CASH AND CASH EQUIVALENTS AT END OF PERIOD						$	2,845					$	1,671					$	2,179

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

CUMMINS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

In millions						Redeemable Noncontrolling Interests						Common Stock						Additional Paid-in Capital						Retained Earnings						Treasury Stock												Accumulated Other Comprehensive Loss						Total Cummins Inc. Shareholders’ Equity						Noncontrolling Interests						Total Equity
BALANCE AT DECEMBER 31, 2022						$	258					$	556					$	1,687					$	18,037					$	(9,415)											$	(1,890)					$	8,975					$	992					$	9,967
Net income						(20)																		735																								735						125						860
Other comprehensive loss, net of tax (Note 16)																																										(316)						(316)						(3)						(319)
Issuance of common stock																		3																														3						—						3
Cash dividends on common stock (Note 15)																								(921)																								(921)						—						(921)
Distributions to noncontrolling interests																																																—						(57)						(57)
Share-based awards																		(4)												52																		48						—						48
Fair value adjustment of redeemable noncontrolling interests						33												(33)																														(33)						—						(33)
Acquisition of redeemable noncontrolling interests						(271)																																										—						—						—
Sale of Atmus stock (Note 21)																		285																														285						(3)						282
Other shareholder transactions																		70												4																		74						—						74
BALANCE AT DECEMBER 31, 2023						$	—					$	556					$	2,008					$	17,851					$	(9,359)											$	(2,206)					$	8,850					$	1,054					$	9,904
Net income																								3,946																								3,946						122						4,068
Other comprehensive loss, net of tax (Note 16)																																										(300)						(300)						(16)						(316)
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)
Distributions to noncontrolling interests																																																—						(71)						(71)
Share-based awards																		(7)												140																		133						—						133
Other shareholder transactions																		72												3																		75						(33)						42
BALANCE AT DECEMBER 31, 2024						$	—					$	556					$	2,080					$	20,828					$	(10,748)											$	(2,445)					$	10,271					$	1,037					$	11,308
Net income																								2,843																								2,843						114						2,957
Other comprehensive income (loss), net of tax (Note 16)																																										167						167						(13)						154
Issuance of common stock																		2																														2						—						2
Cash dividends on common stock (Note 15)																								(1,055)																								(1,055)						—						(1,055)
Distributions to noncontrolling interests																																																—						(86)						(86)
Share-based awards																		(12)												81																		69						—						69
Other shareholder transactions																		47												5																		52						7						59
BALANCE AT DECEMBER 31, 2025						$	—					$	556					$	2,117					$	22,616					$	(10,662)											$	(2,278)					$	12,349					$	1,059					$	13,408

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

CUMMINS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

We were founded in 1919 as Cummins Engine Company, a corporation in Columbus, Indiana, and one of the first diesel engine manufacturers. In 2001, we changed our name to Cummins Inc. We are a global power leader 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 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.

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 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.

Principles of Consolidation

Our Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles in the United States of America (GAAP). All intercompany balances and transactions are eliminated in consolidation.

We include the accounts of all wholly-owned and majority-owned domestic and foreign subsidiaries where our ownership is more than 50 percent of outstanding equity interests except for majority-owned subsidiaries that are considered variable interest entities (VIEs) where we are not deemed to have a controlling financial interest. In addition, we also consolidate, regardless of our ownership percentage, VIEs or joint ventures for which we are deemed to have a controlling financial interest. We have variable interests in several businesses accounted for under the equity method of accounting.

For consolidated entities where our ownership interest is less than 100 percent, the noncontrolling ownership interests are reported in our Consolidated Balance Sheets. The noncontrolling ownership interest in our income, net of tax, is classified as net income attributable to noncontrolling interests in our Consolidated Statements of Net Income.

Reclassifications

Certain amounts for 2024 and 2023 were reclassified to conform to the current year presentation.

Investments in Equity Investees

We use the equity method to account for our investments in joint ventures, affiliated companies and alliances in which we have the ability to exercise significant influence, generally represented by equity ownership or partnership equity of at least 20 percent but not more than 50 percent. Generally, under the equity method, original investments in these entities are recorded at cost and subsequently adjusted by our share of equity in income or losses after the date of acquisition. Investment amounts in excess of our share of an investee's net assets are amortized over the life of the related asset creating the excess, except goodwill which is not amortized. Equity in income or losses of each investee is recorded according to our level of ownership; if losses accumulate, we record our share of losses until our investment has been fully depleted. If our investment has been fully depleted, we recognize additional losses only when we are the primary funding source. We eliminate (to the extent of our ownership percentage) in our Consolidated Financial Statements the profit in inventory held by our equity method investees that has not yet been sold to a third-party. Dividends received from equity method investees reduce the amount of our investment when received and do not impact our earnings. Our investments are classified as Investments and advances related to equity method investees in our Consolidated Balance Sheets. Our share of the results from joint ventures, affiliated companies and alliances is reported in our Consolidated Statements of Net Income as equity, royalty and interest income from investees, and is reported net of all applicable income taxes.

Our share of the results from our foreign equity investees are presented net of applicable foreign income taxes in our Consolidated Statements of Net Income. Our remaining U.S. equity investees are partnerships (non-taxable), thus there is no difference between gross or net of tax presentation as the investees are not taxed. See NOTE 3, “INVESTMENTS IN EQUITY INVESTEES,” for additional information.

Use of Estimates in the Preparation of the Financial Statements

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 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.

Revenue From Contracts with Customers

Revenue Recognition

We sell to customers either through long-term arrangements or standalone purchase orders. 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 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, electric power technologies and parts, 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. Since control of construction projects transfer to the customer as the work is performed, revenue on these projects is recognized based on the percentage of inputs incurred to date compared to the total expected cost of inputs, which is reflective of the value transferred to the customer. Revenue is recognized under long-term maintenance and other service agreements over the term of the agreement as underlying services are performed based on the percentage of the cost of services provided to date compared to the total expected cost of services to be provided under the contract. Sales of extended coverage are recognized based on the pattern of expected costs over the extended coverage period or, if such a pattern is unknown, on a straight-line basis over the coverage period as the customer is considered to benefit from our stand ready obligation over the coverage period. In all cases, we believe cost incurred is the most representative depiction of the extent of service performed to date on a particular contract.

Our arrangements may include the act of shipping products to our customers after the performance obligation related to that product has been satisfied. We have elected to account for shipping and handling as activities to fulfill the promise to transfer goods and have not allocated revenue to the shipping activity. All related shipping and handling costs are accrued at the time the related performance obligation is satisfied.

Our sales arrangements may include the collection of sales and other similar taxes that are then remitted to the related taxing authority. We have elected to present the amounts collected for these taxes net of the related tax expense rather than presenting them as additional revenue.

We grant credit limits and terms to customers based upon traditional practices and competitive conditions. Typical terms vary by market, but payments are generally due in 90 days or less from invoicing for most of our product and service sales, while payments on construction and certain power generation contracts may be due on an installment basis.

For contracts where the time between cash collection and performance is less than one year, we have elected to use the practical expedient that allows us to ignore the possible existence of a significant financing component within the contract. For contracts where this time period exceeds one year, generally the timing difference is the result of business concerns other than financing. We do have a limited amount of customer financing for which we charge or impute interest, but such amounts are immaterial to our Consolidated Statements of Net Income.

Sales Incentives

We provide various sales incentives to both our distribution network and OEM customers. These programs are designed to promote the sale of our products in the channel or encourage the usage of our products by OEM customers. When there is uncertainty surrounding these sales incentives, we may limit the amount of revenue we recognize under a contract until the uncertainty has been resolved. Sales incentives primarily fall into three categories:

• Volume rebates;

• Market share rebates; and

• Aftermarket rebates.

For volume rebates, we provide certain customers with rebate opportunities for attaining specified volumes during a particular quarter or year. We consider the expected amount of these rebates at the time of the original sale as we determine the overall transaction price. We update our assessment of the amount of rebates that will be earned quarterly based on our best estimate of the volume levels the customer will reach during the measurement period. For market share rebates, we provide certain customers with rebate opportunities based on the percentage of their production that utilizes our product. These rebates are typically measured either quarterly or annually and we assess them at least quarterly to determine our current estimates of amounts expected to be earned. These estimates are considered in the determination of transaction price at the time of the original sale based on the current market shares, with adjustments made as the level changes. For aftermarket rebates, we provide incentives to promote sales to certain dealers and end-markets. These rebates are typically paid on a quarterly, or more frequent basis. At the time of the sales, we consider the expected amount of these rebates when determining the overall transaction price. Estimates are adjusted at the end of each quarter based on the amounts yet to be paid. These estimates are based on historical experience with the particular program.

Sales Returns

The initial determination of the transaction price may also be impacted by expected product returns. 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 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.

Multiple Performance Obligations

Our sales arrangements may include multiple performance obligations. We identify each of the material performance obligations in these arrangements and allocate the total transaction price to each performance obligation based on its relative selling price. In most cases, the individual performance obligations are also sold separately and we use that price as the basis for allocating revenue to the included performance obligations. When an arrangement includes multiple performance obligations and invoicing to the customer does not match the allocated portion of the transaction price, unbilled revenue or deferred revenue is recorded reflecting that difference. Unbilled and deferred revenue are discussed in more detail below.

Long-term Maintenance Agreements

Our long-term maintenance agreements often include a variable component of the transaction price. We are generally compensated under such arrangements on a cost per hour of usage basis. We typically can estimate the expected usage over the life of the contract, but reassess the transaction price each quarter and adjust our recognized revenue accordingly. Certain maintenance agreements apply to generators used to provide standby power, which have limited expectations of usage. These agreements may include monthly minimum payments, providing some certainty to the total transaction price. For these particular contracts that relate to standby power, we limit revenue recognized to date to an amount representing the total minimums earned to date under the contract plus any cumulative billings earned in excess of the minimums. We reassess the estimates of progress and transaction price on a quarterly basis. For prime power arrangements, revenue is not subject to such a constraint and is generally equal to the current estimate on a percentage of completion basis times the total expected revenue under the contract.

Deferred Revenue

The timing of our billing does not always match the timing of our revenue recognition. We record deferred revenue when we are entitled to bill a customer in advance of when we are permitted to recognize revenue. Deferred revenue may arise in construction and other power generation systems, where billings may occur in advance of performance or in accordance with specific milestones. Deferred revenue may also occur in long-term maintenance contracts, where billings are often based on usage of the underlying equipment, which generally follows a predictable pattern that often will result in the accumulation of collections in advance of our performance of the related maintenance services. Finally, deferred revenue exists in our extended coverage contracts, where the cash is collected prior to the commencement of the coverage period. Deferred revenue is included in our Consolidated Balance Sheets as a component of current liabilities for the amount expected to be recognized in revenue in a period of less than one year and long-term liabilities for the amount expected to be recognized as revenue in a period beyond one year. Deferred revenue is recognized as revenue when control of the underlying product, project or service passes to the customer under the related contract.

Unbilled Revenue

We recognize unbilled revenue when the revenue has been earned, but not yet billed. Unbilled revenue is included in our Consolidated Balance Sheets as a component of current assets for those expected to be collected in a period of less than one year and long-term assets for those expected to be collected in a period beyond one year. 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 may also occur when billings trail the provision of service in construction and long-term maintenance contracts. Our unbilled revenue is assessed for collection risks at the time the amounts are initially recorded. This estimate of expected losses reflects those losses expected to occur over the contractual life of the unbilled amount through the time of collection. Impairment losses on our unbilled revenues were immaterial during the years ended December 31, 2025, 2024 and 2023.

Contract Costs

We are required to record an asset for the incremental costs of obtaining a contract with a customer and other costs to fulfill a contract not otherwise required to be immediately expensed when we expect to recover those costs. The only material incremental cost we incur is commission expense, which is generally incurred in the same period as the underlying revenue. Costs to fulfill a contract are generally limited to customer-specific engineering expenses that do not meet the definition of research and development expenses. As a practical expedient, we have elected to recognize these costs of obtaining a contract as an expense when the related contract period is less than one year. When the period exceeds one year, this asset is amortized over the life of the contract. We did not have any material capitalized balances at December 31, 2025 or 2024.

Extended Warranty

We sell extended warranty coverage on most of our engines and on certain components. We consider a warranty to be extended coverage in any of the following situations:

• When a warranty is sold separately or is optional (extended coverage contracts, for example) or

• When a warranty provides additional services.

The consideration collected is initially deferred and is recognized as revenue in proportion to the costs expected to be incurred in performing services over the contract period. We compare the remaining deferred revenue balance quarterly to the estimated amount of future claims under extended warranty programs and provide an additional accrual when the deferred revenue balance is less than expected future costs.

Foreign Currency Transactions and Translation

We translate assets and liabilities of foreign entities to U.S. dollars, where the local currency is the functional currency, at month-end exchange rates. We translate income and expenses to U.S. dollars using weighted-average exchange rates. We record adjustments resulting from translation in a separate component of accumulated other comprehensive loss (AOCL) and include the adjustments in net income only upon sale, loss of controlling financial interest or liquidation of the underlying foreign investment.

Foreign currency transaction gains and losses are included in current net income. For foreign entities where the U.S. 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 gain of $5 million for the year ended December 31, 2025, and net losses of $41 million and $30 million for the years ended December 31, 2024 and 2023, respectively.

Fair Value Measurements

A three-level valuation hierarchy, based upon the observable and unobservable inputs, is used for fair value measurements. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions based on the best evidence available. These two types of inputs create the following fair value hierarchy:

• Level 1 - Quoted prices for identical instruments in active markets;

• Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose significant inputs are observable; and

• Level 3 - Instruments whose significant inputs are unobservable.

Derivative Instruments

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

Due to our international business presence, we are exposed to foreign currency exchange risk. We transact in foreign currencies and have assets, liabilities and investments in subsidiaries denominated in foreign currencies. Consequently, our income experiences some volatility related to movements in foreign currency exchange rates. In order to benefit from global diversification and after considering naturally offsetting currency positions, we enter into foreign currency forward contracts to minimize our existing exposures (recognized assets and liabilities) and hedge forecasted transactions. Foreign currency forward contracts are designated and qualify as foreign currency cash flow hedges. The unrealized gain or loss on the forward contract is deferred and reported as a component of AOCL. When the hedged forecasted transaction (sale or purchase) occurs, the unrealized gain or loss is reclassified into income in the same line item associated with the hedged transaction in the same period or periods during which the hedged transaction affects income. At December 31, 2025, 2024 and 2023, realized and unrealized gains and losses related to these hedges were not material to our financial statements.

To minimize the income volatility resulting from the remeasurement of net monetary assets and payables denominated in a currency other than the functional currency, we enter into foreign currency forward contracts, which are considered economic hedges. The objective is to offset the gain or loss from remeasurement with the gain or loss from the fair market valuation of the forward contract. These derivative instruments are not designated as hedges. Gains or losses are recorded directly to the Consolidated Statements of Net Income.

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. In order to minimize movements in certain investments, in 2022 we began entering into foreign exchange forwards designated as net investment hedges. These forwards are utilized to hedge portions of our net investments against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. The change in fair value related to the spot-to-forward rate difference is recorded as other income (expense) with all other changes in fair value deferred and reported as components of AOCL. The unrealized gain or loss is classified into income in the same period when the foreign subsidiary is sold or substantially liquidated.

We are exposed to fluctuations in commodity prices due to contractual agreements with component suppliers. In order to protect ourselves against future price volatility and, consequently, fluctuations in gross margins, we periodically enter into commodity swap and forward contracts with designated banks and other counterparties to fix the cost of certain raw material purchases with the objective of minimizing changes in inventory cost due to market price fluctuations. These commodity swaps are designated and qualify as cash flow hedges. At December 31, 2025, 2024 and 2023 realized and unrealized gains and losses related to these hedges were not material to our financial statements. We also enter into physical forward contracts, which qualify for the normal purchases scope exception and are treated as purchase commitments. Additional information on the physical forwards is included in NOTE 14, “COMMITMENTS AND CONTINGENCIES.”

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

We record all derivatives at fair value in our financial statements. Cash flows related to derivatives that are designated as hedges are classified in the same manner as the item being hedged, while cash flows related to derivatives that are not designated as hedges are included in cash flows from investing activities in our Consolidated Statements of Cash Flows.

Substantially all of our derivative contracts are subject to master netting arrangements, which provide us with the option to settle certain contracts on a net basis when they settle on the same day with the same currency. In addition, these arrangements provide for a net settlement of all contracts with a given counterparty in the event that the arrangement is terminated due to the occurrence of default or a termination event. When material, we adjust the value of our derivative contracts for counter-party or our credit risk. None of our derivative instruments are subject to collateral requirements.

Income Tax Accounting

We determine our income tax expense using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Future tax benefits of net operating loss and credit carryforwards are also recognized as deferred tax assets. We evaluate the recoverability of our deferred tax assets each quarter by assessing the likelihood of future profitability and available tax planning strategies that could be implemented to realize our net deferred tax assets. A valuation allowance is recorded to reduce the tax assets to the net value management believes is more likely than not to be realized. In the event our operating performance deteriorates, future assessments could conclude that a larger valuation allowance will be needed to further reduce the deferred tax assets. In addition, we operate within multiple taxing jurisdictions and are subject to tax audits in these jurisdictions. 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 believe we made adequate provisions for income taxes for all years that are subject to audit based upon the latest information available. A more complete description of our income taxes and the future benefits of our net operating loss and credit carryforwards is disclosed in NOTE 4, “INCOME TAXES.”

Cash and Cash Equivalents

Cash equivalents are defined as short-term, highly liquid investments with an original maturity of 90 days or less at the time of purchase. The carrying amounts reflected in our Consolidated Balance Sheets for cash and cash equivalents approximate fair value due to the short-term maturity of these investments.

Cash payments for income taxes and interest were as follows:

						Years ended December 31,
In millions						2025						2024						2023
Cash payments for income taxes, net of refunds						$	1,074					$	1,175					$	1,181
Cash payments for interest, net of capitalized interest						308						334						374

Marketable Securities

Debt securities are classified as “held-to-maturity,” “available-for-sale” or “trading.” We determine the appropriate classification of debt securities at the time of purchase and re-evaluate such classifications at each balance sheet date. At December 31, 2025 and 2024, all of our debt securities were classified as available-for-sale. Debt and equity securities are carried at fair value with the unrealized gain or loss, net of tax, reported in other comprehensive income and other income, respectively. For debt securities, unrealized losses considered to be "other-than-temporary" are recognized currently in other income. The cost of securities sold is based on the specific identification method. The fair value of most investment securities is determined by currently available market prices. Where quoted market prices are not available, we use the market price of similar types of securities that are traded in the market to estimate fair value. See NOTE 5, “MARKETABLE SECURITIES,” for a detailed description of our investments in marketable securities.

Accounts Receivable and Allowance for Doubtful Accounts

Trade accounts receivable represent amounts billed to customers and not yet collected or amounts that were earned, but may not be billed until the passage of time, and are recorded when the right to consideration becomes unconditional. Trade accounts receivable are recorded at the invoiced amount, which approximates net realizable value, and generally do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of expected credit losses in our existing accounts receivable. We determine the allowance based on our historical collection experience and by performing an analysis of our accounts receivable in light of the current economic environment. This estimate of expected losses reflects those losses expected to occur over the contractual life of the receivable. We review our allowance for doubtful accounts on a regular basis. In addition, when necessary, we provide an allowance for the full amount of specific accounts deemed to be uncollectible. Account balances are charged off against the allowance in the period in which we determine that it is probable the receivable will not be recovered. The allowance for doubtful accounts balances were $61 million and $66 million at December 31, 2025, and 2024, respectively, and bad debt write-offs were not material.

Inventories

Our inventories are stated at the lower of cost or net realizable value. For the years ended December 31, 2025 and 2024, approximately 12 percent and 12 percent, respectively, of our consolidated inventories (primarily heavy-duty and high-horsepower engines and parts) were valued using the last-in, first-out (LIFO) cost method. The cost of other inventories is generally valued using the first-in, first-out (FIFO) cost method. Our inventories at interim and year-end reporting dates include estimates for adjustments related to annual physical inventory results and for inventory cost changes under the LIFO cost method. Due to significant movements of partially-manufactured components and parts between manufacturing plants, we do not internally measure, nor do our accounting systems provide, a meaningful segregation between raw materials and work-in-process. See NOTE 6, “INVENTORIES,” for additional information.

Property, Plant and Equipment

We record property, plant and equipment at cost, inclusive of assets under finance leases. We depreciate the cost of the majority of our property, plant and equipment using the straight-line method with depreciable lives ranging from 20 to 40 years for buildings and 3 to 15 years for machinery, equipment and fixtures. Finance lease asset amortization is recorded in depreciation expense. We expense normal maintenance and repair costs as incurred. Depreciation expense totaled $768 million, $729 million and $691 million for the years ended December 31, 2025, 2024 and 2023, respectively. See NOTE 7, “PROPERTY, PLANT AND EQUIPMENT” and NOTE 8, “LEASES,” for additional information.

Impairment of Long-Lived Assets

We review our long-lived assets for possible impairment whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable. We assess the recoverability of the carrying value of the long-lived assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. An impairment of a long-lived asset or asset group exists when the expected future pre-tax cash flows (undiscounted and without interest charges) estimated to be generated by the asset or asset group is less than its carrying value. If these cash flows are less than the carrying value of such asset or asset group, an impairment loss is measured based on the difference between the estimated fair value and carrying value of the asset or asset group. Assumptions and estimates used to estimate cash flows in the evaluation of impairment and the fair values used to determine the impairment are subject to a degree of judgment and complexity. Any changes to the assumptions and estimates resulting from changes in actual results or market conditions from those anticipated may affect the carrying value of long-lived assets and could result in a future impairment charge. We impaired $47 million and $61 million of property, plant and equipment in our Accelera segment in 2025 and 2024, respectively. See NOTE 22, “ACCELERA ACTIONS,” for additional information.

Leases

We determine if an arrangement contains a lease in whole or in part at the inception of the contract. Right-of-use (ROU) assets represent our right to use an underlying asset for the lease term while lease liabilities represent our obligation to make lease payments arising from the lease. All leases greater than 12 months result in the recognition of a ROU asset and a liability at the lease commencement date based on the present value of the lease payments over the lease term. As most of our leases do not provide the information required to determine the implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. This rate is determined considering factors such as the lease term, our credit standing and the economic environment of the location of the lease. We use the implicit rate when readily determinable.

Our lease terms include all non-cancelable periods and may include options to extend (or to not terminate) the lease when it is reasonably certain that we will exercise that option. Leases that have a term of 12 months or less at the commencement date are expensed on a straight-line basis over the lease term and do not result in the recognition of an asset or a liability.

Lease expense for operating leases is recognized on a straight-line basis over the lease term. Lease expense for finance leases is generally front-loaded as the finance lease ROU asset is depreciated on a straight-line basis, but interest expense on the liability is recognized utilizing the interest method that results in more expense during the early years of the lease. We have lease agreements with lease and non-lease components, primarily related to real estate, vehicle and information technology (IT) assets. For vehicle and real estate leases, we account for the lease and non-lease components as a single lease component. For IT leases, we allocate the payment between the lease and non-lease components based on the relative value of each component. See NOTE 8, “LEASES,” for additional information.

Goodwill

We have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value as a basis for determining whether it is necessary to perform an annual quantitative goodwill impairment test. 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 or if we otherwise elect to perform the analysis. In addition, the carrying value of goodwill must be tested for impairment on an interim basis in certain circumstances where impairment may be indicated. We perform our annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. 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 using the income 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 a reportable segment. However, 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.

The discounted cash flow model requires us to make projections of revenue, gross margin, operating expenses, working capital investment and fixed asset additions for the reporting units over a multi-year period. Additionally, management must estimate a weighted-average cost of capital, which reflects a market rate, for each reporting unit for use as a discount rate. The discounted cash flows are compared to the carrying value of the reporting unit and, if less than the carrying value, the difference is recorded as a goodwill impairment loss. In addition, we also perform sensitivity analyses to determine how much our forecasts can fluctuate before the fair value of a reporting unit would be lower than its carrying amount. Future changes in the judgments, assumptions and estimates that are used in our goodwill impairment testing, including discount rates or future operating results and related cash flow projections, could result in significantly different estimates of the fair values in the future. 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 annual goodwill impairment assessment as of October 31 each year.

During the third quarter of 2025, in our Accelera segment, we observed the rapidly deteriorating conditions in our electrolyzer markets and overall hydrogen markets, along with significant uncertainty in the alternative power markets resulting from reductions in government incentives. As a result, we determined that a triggering event occurred for our electrolyzer reporting unit, warranting an interim impairment test of goodwill resulting in a charge of $210 million. See NOTE 22, “ACCELERA ACTIONS,” for additional information.

We completed our annual goodwill impairment assessment on October 31, 2025, and noted no additional impairments.

At December 31, 2025, our recorded goodwill was $2.2 billion, of which approximately 34 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. See NOTE 9, “GOODWILL AND OTHER INTANGIBLE ASSETS,” for additional information.

Other Intangible Assets

We capitalize other intangible assets, such as trademarks, patents and customer relationships, that were acquired either individually or with a group of other assets. These intangible assets are amortized on a straight-line basis over their estimated useful lives generally ranging from 3 to 25 years. Intangible assets are reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable over the remaining lives of the assets. We impaired $27 million and $84 million of other intangible assets in our Accelera segment in 2025 and 2024, respectively. See NOTE 9, “GOODWILL AND OTHER INTANGIBLE ASSETS,” and NOTE 22, “ACCELERA ACTIONS,” for additional information.

Software

We capitalize software that is developed or obtained for internal use. Software costs are amortized on a straight-line basis over their estimated useful lives generally ranging from 2 to 12 years. Software assets are reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable over the remaining lives of the assets. Upgrades and enhancements are capitalized if they result in significant modifications that enable the software to perform tasks it was previously incapable of performing. Software maintenance, training, data conversion and business process reengineering costs are expensed in the period in which they are incurred. See NOTE 9, “GOODWILL AND OTHER INTANGIBLE ASSETS,” for additional information.

Warranty

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. Factors considered in developing these estimates included component failure rates, repair costs and the point of failure within the product life cycle. As a result of the uncertainty surrounding the nature and frequency of

product campaigns, the liability for such campaigns is recorded when we commit to a recall action or when a recall becomes probable and estimable, which generally occurs when it is announced. The liability for these campaigns is reflected in the provision for product campaigns. We review and assess the liability for these programs on a quarterly basis. We also assess our ability to recover certain costs from our suppliers and record a receivable when we believe a recovery is probable. In addition to costs incurred on warranty and product campaigns, from time to time we also incur costs related to customer satisfaction programs for items not covered by warranty. We accrue for these costs when agreement is reached with a specific customer. These costs are not included in the provision for warranties, but are included in cost of sales. In addition, we sell extended warranty coverage on most of our engines. See Extended Warranty policy discussion above and NOTE 13, “PRODUCT WARRANTY LIABILITY,” for additional information.

Contingent Liabilities

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 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, 2025, we had $127 million of credits of which $105 million was recorded in other current assets and $22 million was recorded in other intangible assets, net in our Consolidated Balance Sheets.

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.

Research, Development and Engineering

Our research, development and engineering (RD&E) programs are focused on product improvements, product extensions, innovations and cost reductions for our customers. RD&E 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 RD&E costs of a particular project. When not associated with a sales contract, we generally account for these reimbursements as an offset to the related RD&E expenditure. RD&E expenses, net of contract reimbursements, were $1.4 billion, $1.4 billion and $1.4 billion for the years ended December 31, 2025, 2024 and 2023, respectively. Contract reimbursements were $54 million, $72 million and $81 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Related Party Transactions

In accordance with the provisions of various joint venture agreements, we may purchase products and components from our joint ventures, sell products and components to our joint ventures and our joint ventures may sell products and components to unrelated parties. Joint venture transfer prices may differ from normal selling prices. Certain joint venture agreements transfer product at cost, some transfer product on a cost-plus basis, and others transfer product at market value.

The following is a summary of sales to and purchases from nonconsolidated equity investees:

						Years ended December 31,
In millions						2025						2024						2023
Sales to nonconsolidated equity investees						$	1,679					$	1,392					$	1,548
Purchases from nonconsolidated equity investees						2,168						2,463						2,628

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

						December 31,
In millions						2025						2024						Balance Sheet Location
Accounts receivable from nonconsolidated equity investees						$	523					$	432					Accounts and notes receivable, net
Accounts payable to nonconsolidated equity investees						263						281						Accounts payable (principally trade)

Supply Chain Financing

We currently have supply chain financing programs with financial intermediaries, which provide certain vendors the option to be paid by financial intermediaries earlier than the due date on the applicable invoice. When a vendor utilizes the program and receives an early payment from a financial intermediary, they take a discount on the invoice. We then pay the financial intermediary the face amount of the invoice on the original due date, which generally have 60 to 90 day payment terms. The maximum amount that we could have outstanding under these programs was $574 million at December 31, 2025. 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. Amounts due to the financial intermediaries reflected in accounts payable at December 31, 2025, and 2024, were $153 million and $142 million, respectively.

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

						December 31,
In millions						2025						2024
Balance at the beginning of year						$	142					$	199
Additional invoices presented for payment						800						794
Payments to financial intermediaries						(793)						(850)
Foreign currency translation adjustments and other						4						(1)
Balance at end of period						$	153					$	142

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 we will 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 years ended December 31, 2025 and 2024.

Government Assistance

From time to time, we receive assistance from government agencies primarily related to two areas (1) expense reimbursement and funding grants in the form of cash in conjunction with research and development projects and (2) incentives primarily related to investments in new or existing facilities. The grants and related projects range in term from 1 to 6 years. Generally, the grant awards for research are payable to us when we achieve specific milestones or deliverables. Certain grant awards are subject to audit, whereby non-compliance may result in a refund to the government agency. Grants related to investments supporting facilities are typically in the form of reimbursement for capital assets or expenses such as training the employees at those facilities.

We recognize grant awards related to research and development as an offset of the related research and development expenditure when the awards become payable upon us meeting a specific milestone or deliverable. We recognize grant awards for reimbursement of capital as a reduction in value of the related fixed asset. We recognize grants for reimbursement of training or other expenses as an offset to the related expense. For the years ended December 31, 2025, 2024 and 2023, government grants did not have a material impact on our financial statements as a whole, and we did not have any individually material grant awards.

RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Recently Adopted

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, “Income Taxes (Topic 740): Improvements in Income Tax Disclosures,” to enhance the transparency and decision usefulness of income tax disclosures. This amendment requires public companies to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. Additionally, under the amendment, entities are required to disclose the amount of income taxes paid disaggregated by federal, state and foreign taxes, as well as disaggregated by material individual jurisdictions. Finally, the amendment requires entities to disclose income from continuing operations before income tax expense disaggregated between domestic and foreign and income tax expense from continuing operations disaggregated by federal, state and foreign. We adopted this standard prospectively in the fourth quarter of 2025. The new required disclosures are included in NOTE 4, “INCOME TAXES.”

Accounting Pronouncements Issued But Not Yet Effective

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.

In September 2025, the FASB issued ASU 2025-06, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)”, to modernize the accounting guidance for costs to develop software for internal use. The new guidance amends the existing standard to remove references to various stages of a software development project to better align with current software development methods such as agile programming. The types of costs required to be capitalized has not significantly changed. In addition, the new standard requires the capitalization of costs when (1) management has authorized and committed to funding the project and (2) it is probable that the project will be completed and the software will be used to perform its intended function. The new standard is effective for us beginning January 1, 2028, with early adoption permitted. The adoption of this standard is not expected to have a material impact on our Consolidated Financial Statements.

In December 2025, the FASB issued ASU 2025-10, “Accounting for Government Grants Received by Business Entities (Topic 832)”, which establishes accounting requirements for grants received by a business entity. A government grant is defined as a transfer of a monetary asset or a tangible non-monetary asset, other than in an exchange transaction. The scope does not include income taxes or guarantees. The amendments are effective for us beginning January 1, 2029. Early adoption is permitted. The ASU may be adopted prospectively or retrospectively. As the standard is largely consistent with our current policy on accounting for government grants (disclosed earlier in this note), we do not expect implementation of the new standard to have a material impact on our Consolidated Financial Statements.

NOTE 2. REVENUE FROM CONTRACTS WITH CUSTOMERS

Long-term Contracts

We have certain arrangements, primarily long-term maintenance agreements, construction contracts, product sales with associated performance obligations extending beyond a year, 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, at December 31, 2025, was $6.3 billion. We expect to recognize the related revenue of $3.6 billion over the next 12 months and $2.7 billion over periods up to 10 years. See NOTE 13, “PRODUCT WARRANTY LIABILITY,” for additional disclosures on extended warranty coverage arrangements. Our other contracts generally are for a duration of less than one year, include payment terms that correspond to the timing of costs incurred when providing goods and services to our customers or represent sales-based royalties.

Deferred and Unbilled Revenue

The following is a summary of our unbilled and deferred revenue and related activity:

						December 31,
In millions						2025						2024
Unbilled revenue						$	439					$	403
Deferred revenue						2,660						2,412

We recognized revenue of $1.1 billion and $850 million in 2025 and 2024, respectively, that was included in the deferred revenue balance at the beginning of each year.

Disaggregation of Revenue

Consolidated Revenue

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

						Years ended December 31,
In millions						2025						2024						2023
United States						$	18,974					$	19,422					$	19,302
China						3,298						2,948						3,115
India						1,721						1,779						1,678
Other international						9,677						9,953						9,970
Total net sales						$	33,670					$	34,102					$	34,065

Segment Revenue

Engine segment external sales by market were as follows:

						Years ended December 31,
In millions						2025						2024						2023
Heavy-duty truck						$	2,544					$	3,320					$	3,391
Medium-duty truck and bus						2,547						3,100						2,622
Light-duty automotive						1,930						1,585						1,748
Total on-highway						7,021						8,005						7,761
Off-highway						1,083						982						1,113
Total sales						$	8,104					$	8,987					$	8,874

Components segment external sales by business were as follows:

						Years ended December 31,
In millions						2025						2024						2023
Drivetrain and braking systems						$	3,983					$	4,731					$	4,822
Emission solutions						3,034						3,180						3,425
Components and software						1,203						1,106						1,225
Automated transmissions						423						588						714
Atmus						—						289			(1)			1,345
Total sales						$	8,643					$	9,894					$	11,531
(1) Included sales through the March 18, 2024, divestiture. See NOTE 21, “ATMUS DIVESTITURE,” for additional information.

Distribution segment external sales by region were as follows:

						Years ended December 31,
In millions						2025						2024						2023
North America						$	8,619					$	7,617					$	7,054
Europe						1,186						1,179						848
Asia Pacific						1,150						1,243						1,091
China						509						469						424
India						363						310						264
Latin America						293						266						224
Africa and Middle East						266						268						294
Total sales						$	12,386					$	11,352					$	10,199

Distribution segment external sales by product line were as follows:

						Years ended December 31,
In millions						2025						2024						2023
Power generation						$	4,928					$	3,961					$	2,496
Parts						4,073						3,966						4,052
Service						1,798						1,747						1,664
Engines						1,587						1,678						1,987
Total sales						$	12,386					$	11,352					$	10,199

Power Systems segment external sales by product line were as follows:

						Years ended December 31,
In millions						2025						2024						2023
Power generation						$	2,229					$	1,896					$	1,698
Industrial						1,238						1,130						970
Generator technologies						647						474						457
Total sales						$	4,114					$	3,500					$	3,125

NOTE 3. INVESTMENTS IN EQUITY INVESTEES

Investments and advances related to equity method investees and our ownership percentages were as follows:

						Ownership						December 31,
Dollars in millions						percentage						2025						2024
Amplify Cell Technologies, LLC						30%						$	359					$	187
Komatsu alliances						20-50%						321						322
Beijing Foton Cummins Engine Co., Ltd.						50%						220						185
Dongfeng Cummins Engine Company, Ltd.						50%						148						128
Chongqing Cummins Engine Company, Ltd.						50%						140						120
Sistemas Automotrices de Mexico S.A. de C.V.						50%						134						150
Automotive Axles Limited						36%						120						123
Tata Cummins, Ltd.						50%						115						96
Cummins-Scania XPI Manufacturing, LLC						50%						91						88
Freios Master						49%						79						78
Other						Various						406						412
Investments and advances related to equity method investees												$	2,133					$	1,889

We have approximately $960 million in our investment account at December 31, 2025, that represents cumulative undistributed income in our equity investees. Dividends received from our unconsolidated equity investees were $299 million, $308 million and $257 million in 2025, 2024 and 2023, respectively.

Equity, royalty and interest income from investees, net of applicable taxes, was as follows:

						Years ended December 31,
In millions						2025						2024						2023
Manufacturing entities
Chongqing Cummins Engine Company, Ltd.						$	89					$	60					$	36
Dongfeng Cummins Engine Company, Ltd.						70						66						65
Beijing Foton Cummins Engine Co., Ltd.						64						42						47
Tata Cummins, Ltd.						33						31						29
All other manufacturers						29						25			(1)			91
Distribution entities
Komatsu Cummins Chile, Ltda.						54						55						55
All other distributors						25						17						16
Cummins share of net income						364						296						339
Royalty and interest income						105						99						144
Equity, royalty and interest income from investees						$	469					$	395					$	483
(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 ACTIONS,” for additional information

Manufacturing Entities

Our manufacturing joint ventures were generally formed with customers and are primarily intended to allow us to increase our market penetration in geographic regions, reduce capital spending, streamline our supply chain management and develop technologies. Our largest manufacturing joint ventures are based in China and are included in the list below. 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 drivetrain and braking 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.

• Chongqing Cummins Engine Company, Ltd. - Chongqing Cummins Engine Company, Ltd. is a joint venture in China with Chongqing Machinery and Electric Co. Ltd. This joint venture manufactures several models of our heavy-duty and high-horsepower diesel engines primarily serving the industrial and power generation markets in China.

• Dongfeng Cummins Engine Company, Ltd. - Dongfeng Cummins Engine Company, Ltd. (DCEC) is a joint venture in China with Dongfeng Automotive Co. Ltd., a subsidiary of Dongfeng Motor Corporation and one of the largest medium-duty and heavy-duty truck manufacturers in China. DCEC produces 2.5 liter to 14.5 liter diesel engines with a power range from 80 to 770 horsepower, natural gas engines and automated transmissions. On-highway engines are used in multiple applications in light-duty and medium-duty trucks, special purpose vehicles, buses and heavy-duty trucks with a main market in China. Off-highway engines are used in a variety of construction, power generation, marine and agriculture markets in China.

• Beijing Foton Cummins Engine Co., Ltd. -** Beijing Foton Cummins Engine Co., Ltd. is a joint venture in China with Beiqi Foton Motor Co., Ltd., a commercial vehicle manufacturer, which has two distinct lines of business - a light-duty business and a heavy-duty business. The light-duty business produces our families of ISF 2.5 liter to 4.5 liter high performance light-duty diesel engines in Beijing, which are used in light-duty and medium-duty commercial trucks, pick-up trucks, buses, multipurpose and sport utility vehicles with the main market in China. Certain types of small construction equipment and industrial applications are also served by these engine families. The heavy-duty business produces 7.0 liter to 14.5 liter high performance medium-duty and heavy-duty diesel and natural gas engines, which are used in commercial trucks, certain types of construction equipment and industrial applications.

• Tata Cummins, Ltd. - Tata Cummins, Ltd. is a joint venture in India with Tata Motors Ltd., the largest automotive company in India and a member of the Tata group of companies. 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.

Our Amplify Cell Technologies LLC (Amplify) 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 US Holding LLC and PACCAR, Inc. 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 it is not consolidated. We account for the joint venture using the equity method. Our Amplify joint venture will manufacture battery cells for electric commercial vehicles and industrial applications. The joint venture was formed in May 2024, but is not expected to begin production until 2028. As of December 31, 2025, we contributed $412 million and our maximum remaining required contribution to the joint venture was $418 million, which could be reduced by future government incentives received by the joint venture.

Distribution Entities

We have an extensive worldwide distributor and dealer network through which we sell and distribute our products and services. Generally, our distributors are divided by geographic region with some of our distributors being wholly-owned by Cummins, some partially-owned and some independently owned. We consolidate all wholly-owned distributors and partially-owned distributors where we are the primary beneficiary and account for other partially-owned distributors using the equity method of accounting.

Komatsu Cummins Chile, Ltda. - Komatsu Cummins Chile, Ltda. is a joint venture with Komatsu America Corporation. The joint venture is a distributor that offers the full range of our products and services to customers and end-users in Chile and Peru.

In certain cases where we own a partial interest in a distributor, we may be obligated to purchase the other equity holders' interests if certain events occur (such as the death or resignation of the distributor principal or a change in control of Cummins Inc.). The purchase consideration of the equity interests may be determined based on the fair value of the distributor's assets. Repurchase obligations and practices vary by geographic region.

All distributors that are partially-owned are considered to be related parties in our Consolidated Financial Statements.

Equity Investee Financial Summary

Summary financial information for our equity investees was as follows:

						Years ended and at December 31,
In millions						2025						2024						2023
Net sales						$	11,588					$	11,190					$	9,998
Gross margin						1,847						1,760						1,597
Net income						968						860						677
Cummins share of net income						$	364					$	296					$	339
Royalty and interest income						105						99						144
Total equity, royalty and interest from investees						$	469					$	395					$	483
Current assets						$	7,794					$	6,626
Long-term assets						3,072						2,597
Current liabilities						(4,977)						(4,203)
Long-term liabilities						(555)						(549)
Net assets						$	5,334					$	4,471
Cummins share of net assets						$	2,165					$	1,866

NOTE 4. INCOME TAXES

The following table summarizes income before income taxes:

						Years ended December 31,
In millions						2025						2024						2023
U.S. income (loss)						$	1,781					$	2,857					$	(541)
Foreign income						2,182						2,046						2,167
Income before income taxes						$	3,963					$	4,903					$	1,626

Effective December 31, 2025, we adopted ASU 2023-09 on a prospective basis. See NOTE 1, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,” for additional details on the adoption of this standard. The tables below provide the prospective disclosures required by ASU 2023-09.

Income tax expense (benefit) consisted of the following:

						Year ended December 31,
In millions						2025
Current
U.S. federal						$	130
U.S. state and local						18
Foreign						772
Total current income tax expense						920
Deferred
U.S. federal						86
U.S. state and local						8
Foreign						(8)
Total deferred income tax expense						86
Income tax expense						$	1,006

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

During 2025, we responded to rapidly deteriorating conditions in our electrolyzer markets and overall hydrogen market in our Accelera segment by recording $458 million in charges related to inventory write-downs, asset impairments, severance and contract termination costs. These actions resulted in an increase in the effective tax rate of 2.6 percent in 2025. See NOTE 22, “ACCELERA ACTIONS,” for additional information.

Reconciliations of the statutory U.S. federal income tax expense and tax rate to the net expense and effective tax rate were as follows:

In millions						Year ended December 31, 2025
U.S. federal statutory tax expense/rate						$	832					21.0		%
Domestic federal
Effect of cross-border tax laws
Foreign derived intangible income						(42)						(1.1)
Other						15						0.4
Tax credits
Research tax credits						(69)						(1.7)
Other						(36)						(0.9)
Nontaxable or nondeductible items						1						—
Effect of changes in tax laws or rates enacted in the current period						14						0.3
Other						26						0.7
Domestic state and local taxes, net of federal income tax effect (1)						20						0.5
Foreign tax effects
Canada
Valuation allowance						63						1.6
Other						54						1.4
China
Withholding tax						55						1.4
Equity income or loss						(49)						(1.2)
Other						(7)						(0.2)
India						50						1.3
Netherlands
Nontaxable or nondeductible items						44						1.1
Other						(8)						(0.2)
United Kingdom
Tax incentives						(44)						(1.1)
Other						16						0.4
Other foreign jurisdictions						105						2.6
Worldwide changes in unrecognized tax benefits						(34)						(0.9)
Total tax expense/rate						$	1,006					25.4		%
(1) State and local taxes in California, Illinois, Pennsylvania, Georgia, Tennessee, Michigan, North Carolina, Wisconsin and Iowa comprise the majority of this category.

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.

Income taxes paid, net of refunds received, consisted of the following:

						Year ended December 31,
In millions						2025
U.S. federal						$	328
U.S. state and local						32
Foreign
India						182
China						184
Other						348
Total income taxes paid						$	1,074

The tables below provide the historical disclosures for the years ended December 31, 2024 and 2023. Income tax expense (benefit) under the previous standard was as follows:

									Years ended December 31,
In millions												2024						2023
Current
U.S. federal and state												$	433					$	611
Foreign												611						632
Total current income tax expense												1,044						1,243
Deferred
U.S. federal and state												$	(241)					$	(468)
Foreign												32						11
Total deferred income tax benefit												(209)						(457)
Income tax expense												$	835					$	786

A reconciliation of the statutory U.S. federal income tax rate to the effective tax rate was as follows:

						Years ended December 31,
						2024						2023
Statutory U.S. federal income tax rate						21.0		%				21.0		%
State income tax, net of federal effect						1.2						(0.4)
Differences in rates and taxability of foreign subsidiaries and joint ventures (1)						4.2						11.9
Research tax credits						(1.5)						(4.7)
Foreign derived intangible income						(1.3)						(4.2)
Settlement Agreements, federal impact (2)						—						22.4
Settlement Agreements, state impact (2)						—						2.1
Non-taxable Atmus gain (3)						(6.1)						—
Other, net						(0.5)						0.2
Effective tax rate						17.0		%				48.3		%
(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 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 DIVESTITURE,” and NOTE 22, “ACCELERA ACTIONS,” for additional information.

The year ended December 31, 2023, contained unfavorable net discrete tax 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.

At December 31, 2025, certain non-U.S. earnings are considered indefinitely reinvested in operations outside the U.S. for which deferred taxes were not provided. Determination of the related deferred tax liability, if any, is not practicable because of the complexities associated with the hypothetical calculation.

Carryforward tax benefits and the tax effect of temporary differences between financial and tax reporting that give rise to net deferred tax assets (liabilities) were as follows:

						December 31,
In millions						2025						2024
Deferred tax assets
U.S. and state carryforward benefits						$	258					$	254
Foreign carryforward benefits						784						653
Employee benefit plans						170						308
Warranty expenses						599						545
Lease liabilities						142						109
Capitalized research and development expenditures						676						805
Accrued expenses						230						207
Other						209						139
Gross deferred tax assets						3,068						3,020
Valuation allowance						(954)						(872)
Total deferred tax assets						2,114						2,148
Deferred tax liabilities
Property, plant and equipment						(439)						(371)
Unremitted income of foreign subsidiaries and joint ventures						(175)						(162)
Employee benefit plans						(242)						(289)
Lease assets						(135)						(109)
Intangible assets						(342)						(315)
Other						(106)						(172)
Total deferred tax liabilities						(1,439)						(1,418)
Net deferred tax assets						$	675					$	730

Our 2025 U.S. carryforward benefits include $258 million of state credit and net operating loss carryforward benefits that begin to expire in 2026. Our foreign carryforward benefits include $784 million of net operating loss carryforwards that begin to expire in 2026. 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 at December 31, 2025 was $954 million and increased by a net $82 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 is primarily attributable to the uncertainty regarding the realization of a portion of the U.S. state and foreign net operating loss and tax credit carryforward benefits.

Our Consolidated Balance Sheets contain the following tax related items:

						December 31,
In millions						2025						2024
Prepaid expenses and other current assets
Refundable income taxes						$	264					$	121
Other assets
Deferred income tax assets						1,063						1,119
Long-term refundable income taxes						20						47
Other accrued expenses
Income tax payable						156						244
Other liabilities
Long-term income taxes						8						5
Deferred income tax liabilities						388						389

A reconciliation of unrecognized tax benefits for the years ended December 31, 2025, 2024 and 2023 was as follows:

						December 31,
In millions						2025						2024						2023
Balance at beginning of year						$	304					$	330					$	283
Additions to tax positions due to acquisitions						—						—						8
Additions to current year tax positions						18						21						21
Additions to prior years' tax positions						12						9						19
Reductions to prior years' tax positions						(62)						(18)						(1)
Reductions for tax positions due to settlements with taxing authorities						—						(38)						—
Balance at end of year						$	272					$	304					$	330

Included in the December 31, 2025, 2024 and 2023, balances are $263 million, $289 million and $314 million, respectively, related to tax positions that, if recognized, would favorably impact the effective tax rate in future periods. We also accrued interest expense related to the unrecognized tax benefits of $27 million, $31 million and $33 million as of December 31, 2025, 2024 and 2023, respectively. We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.

As a result of our global operations, we file income tax returns in various jurisdictions including U.S. federal, state and foreign jurisdictions. We are routinely subject to examination by taxing authorities throughout the world, including Australia, Belgium, Brazil, Canada, China, France, India, Mexico, the U.K. and the U.S. With few exceptions, our U.S. federal, major state and foreign jurisdictions are no longer subject to income tax assessments for years before 2021.

Audit outcomes and the timing of audit settlements are subject to significant uncertainty. Although we believe that adequate provision has been made**,** there is the possibility that the ultimate resolution of any issues could have an adverse effect on our earnings. Conversely, if any issues are resolved favorably in the future, the related provision would be reduced, thus having a positive impact on earnings.

NOTE 5. MARKETABLE SECURITIES

A summary of marketable securities, all of which are classified as current, was as follows:

						December 31,
						2025																		2024
In millions						Cost						Gross unrealized gains/(losses) (1)						Estimated fair value						Cost						Gross unrealized gains/(losses) (1)						Estimated fair value
Equity securities
Level 1
Publicly-traded shares						$	7					$	(7)					$	—					$	7					$	(6)					$	1
Level 2
Debt mutual funds						416						10						426						262						1						263
Certificates of deposit						280						—						280						262						—						262
Equity mutual funds						13						11						24						19						7						26
Debt securities						34						—						34						41						—						41
Marketable securities						$	750					$	14					$	764					$	591					$	2					$	593
(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.

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 2025 or 2024. All debt securities are Level 2 and classified as available-for-sale.

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

*•*Debt mutual funds— The fair value measures for the vast majority of these investments are the daily net asset values published on a regulated governmental website. Daily quoted prices are available from the issuing brokerage and are used on a test basis to corroborate this Level 2 input measure.

*•*Certificates of deposit— These investments provide us with a contractual rate of return and generally range in maturity from three months to five years. The counterparties to these investments are reputable financial institutions with investment grade credit ratings. Since these instruments are not tradable and must be settled directly by us with the respective financial institution, our fair value measure is the financial institution's month-end statement.

*•*Equity mutual funds— The fair value measures for these investments are the net asset values published by the issuing brokerage. Daily quoted prices are available from reputable third-party pricing services and are used on a test basis to corroborate this Level 2 input measure.

*•*Debt securities— The fair value measures for these securities are broker quotes received from reputable firms. These securities are infrequently traded on a national exchange and these values are used on a test basis to corroborate our Level 2 input measure.

The proceeds from sales and maturities of marketable securities were as follows:

						Years ended December 31,
In millions						2025						2024						2023
Proceeds from sales of marketable securities						$	1,163					$	1,227					$	1,075
Proceeds from maturities of marketable securities						287						233						259
Investments in marketable securities - liquidations						$	1,450					$	1,460					$	1,334

NOTE 6. INVENTORIES

Inventories are stated at the lower of cost or net realizable value. Inventories included the following:

						December 31,
In millions						2025						2024
Finished products						$	3,091					$	2,875
Work-in-process and raw materials						2,987						3,086
Inventories at FIFO cost						6,078						5,961
Excess of FIFO over LIFO						(256)						(219)
Inventories						$	5,822					$	5,742

We wrote down $119 million and $107 million of inventory in our Accelera segment in 2025 and 2024, respectively, mostly in work-in-process and raw materials. See NOTE 22, “ACCELERA ACTIONS,” for additional information.

NOTE 7. PROPERTY, PLANT AND EQUIPMENT

Details of our property, plant and equipment balance were as follows:

						December 31,
In millions						2025						2024
Land and buildings						$	3,206					$	3,012
Machinery, equipment and fixtures						7,772						7,266
Construction in process						1,941						1,518
Property, plant and equipment, gross						12,919						11,796
Less: Accumulated depreciation						(5,961)						(5,440)
Property, plant and equipment, net						$	6,958					$	6,356

We impaired $47 million and $61 million of property, plant and equipment in our Accelera segment in 2025 and 2024, respectively. See NOTE 22, “ACCELERA ACTIONS,” for additional information.

NOTE 8. LEASES

Our lease portfolio consists primarily of real estate and equipment leases. Our real estate leases primarily consist of land, office, distribution, warehousing and manufacturing facilities. These leases typically range in term from 2 to 50 years and may contain renewal options for periods up to 10 years at our discretion. Our equipment lease portfolio consists primarily of vehicles (including service vehicles), fork trucks and IT equipment. These leases typically range in term from two to four years and may contain renewal options. Our leases generally do not contain variable lease payments other than (1) certain foreign real estate leases which have payments indexed to inflation and (2) certain real estate executory costs (such as taxes, insurance and maintenance), which are paid based on actual expenses incurred by the lessor during the year. Our leases generally do not include residual value guarantees other than our service vehicle fleet, which has a residual guarantee based on a percentage of the original cost declining over the lease term.

The components of our lease cost were as follows:

						Years ended December 31,
In millions						2025						2024						2023
Operating lease cost						$	184					$	187					$	165
Finance lease cost
Amortization of right-of-use asset						29						26						20
Interest expense						8						7						4
Short-term lease cost						33						41						24
Variable lease cost						18						17						14
Total lease cost						$	272					$	278					$	227

Supplemental balance sheet information related to leases:

						December 31,
In millions						2025						2024						Balance Sheet Location
Assets
Operating lease assets						$	537					$	532					Other assets
Finance lease assets (1)						126						121						Property, plant and equipment, net
Total lease assets						$	663					$	653
Liabilities
Current
Operating lease liabilities						$	138					$	130					Other accrued expenses
Finance lease liabilities						25						20						Current maturities of long-term debt
Long-term
Operating lease liabilities						424						409						Other liabilities
Finance lease liabilities						111						105						Long-term debt
Total lease liabilities						$	698					$	664
(1) Finance lease assets were recorded net of accumulated amortization of $100 million and $80 million at December 31, 2025 and 2024.

Supplemental cash flow and other information related to leases:

						Years ended December 31,
In millions						2025						2024						2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases						$	203					$	176					$	148
Operating cash flows from finance leases						8						7						4
Financing cash flows from finance leases						28						23						35
Right-of-use assets obtained in exchange for lease obligations
Operating leases						$	153					$	268					$	153
Finance leases						36						43						12

Additional information related to leases:

						December 31,
						2025						2024
Weighted-average remaining lease term (in years)
Operating leases						5.6						5.9
Finance leases						6.6						7.8
Weighted-average discount rate
Operating leases						4.8		%				4.6		%
Finance leases						6.1		%				6.0		%

Following is a summary of the future minimum lease payments related to finance and operating leases with terms of more than one year at December 31, 2025, together with the net present value of the minimum payments:

In millions						Finance Leases						Operating Leases
2026						$	33					$	163
2027						29						133
2028						25						105
2029						19						68
2030						16						48
After 2030						46						132
Total minimum lease payments						168						649
Interest						(32)						(87)
Present value of net minimum lease payments						$	136					$	562

NOTE 9. GOODWILL AND OTHER INTANGIBLE ASSETS

The following table summarizes the changes in the carrying amount of goodwill for the years ended December 31, 2025 and 2024:

In millions						Components						Accelera						Distribution						Power Systems						Engine																		Total
Balance at December 31, 2023						$	1,884					$	496					$	83					$	11					$	25																	$	2,499
Acquisitions						2						—						—						33						—																		35
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
Acquisitions						—						—						—						—						9																		9
Foreign currency translation and other						50						4						—						1						—																		55
Impairment (2)						—						(210)						—						—						—																		(210)
Balance at December 31, 2025						$	1,774					$	288					$	83					$	45					$	34																	$	2,224
(1) See NOTE 21, “ATMUS DIVESTITURE,” for additional information.
(2) See NOTE 22, “ACCELERA ACTIONS,” 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:

						December 31,
In millions						2025						2024
Amortizable intangible assets
Software						$	924					$	793
Less: Accumulated amortization						(469)						(372)
Software, net						455						421
Trademarks, patents, customer relationships and other						2,718						2,685
Less: Accumulated amortization						(1,028)						(819)
Trademarks, patents, customer relationships and other, net						1,690						1,866
Unamortizable other intangible assets						22						64
Other intangible assets, net						$	2,167					$	2,351

Amortization expense for software and other intangibles totaled $323 million, $324 million and $324 million for the years ended December 31, 2025, 2024 and 2023, respectively. The projected amortization expense of our intangible assets, assuming no further acquisitions or dispositions, is as follows:

In millions						2026						2027						2028						2029						2030
Projected amortization expense						$	312					$	303					$	280					$	246					$	204

We impaired $27 million and $84 million of other intangible assets in our Accelera segment in 2025 and 2024, respectively. See NOTE 22, “ACCELERA ACTIONS,” for additional information.

NOTE 10. PENSIONS AND OTHER POSTRETIREMENT BENEFITS

Pension Plans

We sponsor several pension plans covering substantially all employees. Generally, pension benefits for salaried employees are determined as a function of employee’s compensation. Pension benefits for most hourly employees are determined similarly and as a function of employee’s compensation, with the exception of a small group of hourly employees whose pension benefits were grandfathered in accordance with agreements with their union representation and are based on their years of service and compensation during active employment. The level of benefits and terms of vesting may vary among plans and are offered in accordance with applicable laws. Pension plan assets are administered by trustees and are principally invested in fixed income securities and equity securities. It is our policy to make contributions to our various qualified plans in accordance with statutory and contractual funding requirements, and any additional contributions we determine are appropriate.

Obligations, Assets and Funded Status

Benefit obligation balances presented below reflect the projected benefit obligation (PBO) for our pension plans. The changes in the benefit obligations, the various plan assets, the funded status of the plans and the amounts recognized in our Consolidated Balance Sheets for our significant pension plans at December 31 were as follows:

						Qualified and Non-Qualified Pension Plans
						U.S. Plans												U.K. Plans
In millions						2025						2024						2025						2024
Change in benefit obligation
Benefit obligation at the beginning of the year						$	3,167					$	3,381					$	1,350					$	1,525
Service cost						133						142						15						18
Interest cost						173						167						77						71
Actuarial loss (gain)						105						(163)						4						(133)
Benefits paid from fund						(247)						(328)						(98)						(108)
Benefits paid directly by employer						(31)						(32)						—						—
Foreign currency translation adjustments						—						—						100						(23)
Benefit obligation at end of year						$	3,300					$	3,167					$	1,448					$	1,350
Change in plan assets
Fair value of plan assets at beginning of year						$	3,706					$	3,826					$	1,468					$	1,720
Actual return on plan assets						330						178						19						(128)
Employer contributions						—						30						19						9
Benefits paid from fund						(247)						(328)						(98)						(108)
Foreign currency translation adjustments						—						—						110						(25)
Fair value of plan assets at end of year						$	3,789					$	3,706					$	1,518					$	1,468
Funded status (including unfunded plans) at end of year						$	489					$	539					$	70					$	118
Amounts recognized in consolidated balance sheets
Pension assets						$	963					$	1,071					$	70					$	118
Accrued compensation, benefits and retirement costs						(31)						(29)						—						—
Other liabilities						(443)						(503)						—						—
Net amount recognized						$	489					$	539					$	70					$	118
Amounts recognized in accumulated other comprehensive loss
Net actuarial loss						$	464					$	429					$	739					$	691
Prior service cost						4						6						6						7
Net amount recognized						$	468					$	435					$	745					$	698

In addition to the pension plans in the above table, we also maintain less significant defined benefit pension plans in 15 other countries outside of the U.S. and the U.K. that comprise approximately 6 percent and 7 percent of our pension plan assets and benefit obligations, respectively, at December 31, 2025. These plans are reflected in other liabilities on our Consolidated Balance Sheets. In 2025 and 2024, we made $23 million and $21 million of contributions to these plans, respectively.

The following table summarizes the total accumulated benefit obligation (ABO), the ABO and the fair value of plan assets for defined benefit pension plans with ABO in excess of plan assets and the PBO and fair value of plan assets for defined benefit pension plans with PBO in excess of plan assets:

						Qualified and Non-Qualified Pension Plans
						U.S. Plans												U.K. Plans
In millions						2025						2024						2025						2024
Total ABO						$	3,264					$	3,132					$	1,431					$	1,334
Plans with ABO in excess of plan assets
ABO						444						1,007						—						—
Fair value of plan assets						6						510						—						—
Plans with PBO in excess of plan assets
PBO						480						1,042						—						—
Fair value of plan assets						6						510						—						—

Components of Net Periodic Pension Cost (Income)

The following table presents the net periodic pension cost (income) under our plans for the years ended December 31:

						Qualified and Non-Qualified Pension Plans
						U.S. Plans																		U.K. Plans
In millions						2025						2024						2023						2025						2024						2023
Service cost						$	133					$	142					$	117					$	15					$	18					$	17
Interest cost						173						167						168						77						71						70
Expected return on plan assets						(268)						(290)						(277)						(91)						(102)						(105)
Amortization of prior service cost						2						2						2						1						1						1
Recognized net actuarial loss						9						13						8						27						12						—
Net periodic pension cost (income)						$	49					$	34					$	18					$	29					$	—					$	(17)

Other changes in benefit obligations and plan assets recognized in other comprehensive loss (income) for the years ended December 31 were as follows:

In millions						2025						2024						2023
Amortization of prior service cost						$	(3)					$	(3)					$	(3)
Recognized net actuarial loss						(36)						(25)						(8)
Incurred prior service cost						—						—						1
Incurred actuarial loss						119						46						432
Total recognized in other comprehensive loss						$	80					$	18					$	422
Total recognized in net periodic pension cost and other comprehensive loss						$	158					$	52					$	423

Assumptions

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:

						Qualified and Non-Qualified Pension Plans
						U.S. Plans												U.K. Plans
						2025						2024						2025						2024
Discount rate						5.60		%				5.69		%				5.58		%				5.62		%
Cash balance crediting rate						4.54		%				4.51		%				—						—
Compensation increase rate						5.37		%				5.32		%				3.50		%				3.75		%

The table below presents various assumptions used in determining the net periodic pension cost and reflects weighted-average percentages for the various plans as follows:

						Qualified and Non-Qualified Pension Plans
						U.S. Plans																		U.K. Plans
						2025						2024						2023						2025						2024						2023
Discount rate						5.69		%				5.15		%				5.55		%				5.62		%				4.72		%				4.99		%
Expected return on plan assets						7.00		%				7.25		%				7.00		%				5.00		%				5.00		%				5.00		%
Compensation increase rate						5.32		%				5.34		%				5.35		%				3.75		%				3.75		%				3.75		%

Plan Assets

Our investment policies in the U.S. and U.K. provide for the rebalancing of assets to maintain our long-term strategic asset allocation. We are committed to this long-term strategy and do not attempt to time the market. Given empirical evidence that asset allocation is critical, rebalancing of the assets has and continues to occur, maintaining the proper weighting of assets to achieve the expected total portfolio returns. We believe that our portfolio is highly diversified and does not have any significant exposure to concentration risk. The plan assets for our defined benefit pension plans do not include any of our common stock or corporate bonds.

U.S. Plan Assets

For the U.S. qualified pension plans, our assumption for the expected return is greatly influenced by our objective to match assets and liabilities and the increase in bond yields. Projected returns are based primarily on broad, publicly traded equity and fixed income indices and forward-looking estimates of active portfolio and investment management. We expect additional positive returns from this active investment management. Based on the historical returns and forward-looking return expectations, we elected an assumption of 7.50 percent in 2026.

To achieve these objectives, we established the following targets:

Asset Class						Plan Target
U.S. equities						10		%
Non-U.S. equities						2		%
Global equities						13		%
Total equities						25		%
Real assets						7		%
Private equity/venture capital						5		%
Opportunistic credit						3		%
Fixed income						60		%
Total						100		%

The fixed income component of the plans is structured to represent a custom bond benchmark that will closely hedge the change in the value of our liabilities. This component is structured in such a way that its benchmark covers approximately 100 percent of the plans' exposure to changes in its discount rate (AA corporate bond yields). In order to achieve a hedge on more than the targeted 60 percent of plan assets invested in fixed income securities, our Benefits Policy Committee (BPC) permits the fixed income managers, other managers or the custodian/trustee to utilize derivative securities, as part of a liability driven investment strategy to further reduce the plans' risk of changes in interest rates. However, all managers hired to manage assets for the trust are prohibited from using leverage unless approved by the BPC.

U.K. Plan Assets

The methodology used to determine the rate of return on the pension plan assets in the U.K. was based on establishing an equity-risk premium over current long-term bond yields adjusted based on target asset allocations. 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. To achieve these objectives, we established the following targets:

Asset Class						Plan Target
Equities						10		%
Private equity						7		%
Fixed income/insurance annuity						81		%
Cash						2		%
Total						100		%

As part of our strategy in the U.K. we have not prohibited the use of any financial instrument, including derivatives. As in the U.S. plans, derivatives may be used to better match liability duration and are not used in a speculative way. The fixed income component of our portfolio hedges approximately 90 percent of the plans' exposure to interest rates and 90 percent of the plans' exposure to inflation. Based on the above discussion, we elected an assumption of 5.60 percent in 2026.

Fair Value of U.S. Plan Assets

The fair values of U.S. pension plan assets by asset category were as follows:

						Fair Value Measurements at December 31, 2025
In millions						Quoted prices in active markets for identical assets (Level 1)						Significant other observable inputs (Level 2)						Significant unobservable inputs (Level 3)						Total
Equities
U.S.						$	68					$	—					$	—					$	68
Non-U.S.						37						—						—						37
Fixed income
Government debt						—						57						—						57
Corporate debt
U.S.						—						406						—						406
Non-U.S.						—						23						—						23
Asset/mortgaged backed securities						—						3						—						3
Net cash equivalents (1)						258						—						—						258
Private markets and real assets (2)						—						—						462						462
Net plan assets subject to leveling						$	363					$	489					$	462					$	1,314
Pending trade/purchases/sales																								(1)
Accruals (3)																								7
Investments measured at net asset value																								2,469
Net plan assets																								$	3,789

						Fair Value Measurements at December 31, 2024
In millions						Quoted prices in active markets for identical assets (Level 1)						Significant other observable inputs (Level 2)						Significant unobservable inputs (Level 3)						Total
Equities
U.S.						$	168					$	—					$	—					$	168
Non-U.S.						31						—						—						31
Fixed income
Government debt						—						105						—						105
Corporate debt
U.S.						—						600						—						600
Non-U.S.						—						36						—						36
Asset/mortgaged backed securities						—						13						—						13
Net cash equivalents (1)						388						—						—						388
Private markets and real assets (2)						—						—						500						500
Net plan assets subject to leveling						$	587					$	754					$	500					$	1,841
Pending trade/purchases/sales																								(2)
Accruals (3)																								12
Investments measured at net asset value																								1,855
Net plan assets																								$	3,706
(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. Private markets include equity, venture capital and private credit instruments and funds. Real assets include real estate and infrastructure.
(3) Accruals include interest or dividends that were not settled at December 31.

Certain of our assets are valued based on their respective net asset value (NAV) (or its equivalent), as an alternative to estimated fair value due to the absence of readily available market prices. The fair value of each such investment category was as follows:

• U.S. and Non-U.S. Corporate Debt ($912 million and $912 million at December 31, 2025 and 2024, respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

• U.S. and Non-U.S. Equities ($809 million and $260 million at December 31, 2025 and 2024, 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 ($338 million and $327 million at December 31, 2025 and 2024, 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.

*•*Government Debt ($282 million and $235 million at December 31, 2025 and 2024, respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

• Real Estate ($128 million and $121 million at December 31, 2025 and 2024, respectively) - This asset type represents different types of real estate including development property, industrial property, individual mortgages, office property, property investment companies and retail property. These funds are valued using NAVs and allow quarterly or more frequent redemptions.

The reconciliation of Level 3 assets was as follows:

						Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
In millions						Private Markets						Real Assets						Total
Balance at December 31, 2023						$	537					$	67					$	604
Actual return on plan assets
Unrealized losses on assets still held at the reporting date						(3)						(6)						(9)
Purchases, sales and settlements, net						(93)						(2)						(95)
Balance at December 31, 2024						441						59						500
Actual return on plan assets
Unrealized gains on assets still held at the reporting date						24						4						28
Purchases, sales and settlements, net						(63)						(3)						(66)
Balance at December 31, 2025						$	402					$	60					$	462

Fair Value of U.K. Plan Assets

The fair values of U.K. pension plan assets by asset category were as follows:

						Fair Value Measurements at December 31, 2025
In millions						Quoted prices in active markets for identical assets (Level 1)						Significant other observable inputs (Level 2)						Significant unobservable inputs (Level 3)						Total
Fixed income
Government debt						$	—					$	960					$	—					$	960
Corporate debt
U.S.						—						43						—						43
Non-U.S.						—						82						—						82
Net cash equivalents (1)						26						63						—						89
Derivative instruments (2)						—						(2)						—						(2)
Repurchase agreements						—						(666)						—						(666)
Insurance annuity						—						—						698						698
Private markets and real assets (3)						—						—						99						99
Net plan assets subject to leveling						$	26					$	480					$	797					$	1,303
Accruals (4)																								3
Investments measured at net asset value																								212
Net plan assets																								$	1,518

						Fair Value Measurements at December 31, 2024
In millions						Quoted prices in active markets for identical assets (Level 1)						Significant other observable inputs (Level 2)						Significant unobservable inputs (Level 3)						Total
Fixed income
Government debt						$	—					$	204					$	—					$	204
Corporate debt
U.S.						—						32						—						32
Non-U.S.						—						93						—						93
Net cash equivalents (1)						11						14						—						25
Insurance annuity						—						—						383						383
Private markets and real assets (3)						—						—						102						102
Net plan assets subject to leveling						$	11					$	343					$	485					$	839
Pending trade/purchases/sales																								1
Accruals (4)																								2
Investments measured at net asset value																								626
Net plan assets																								$	1,468
(1) Cash equivalents include commercial paper, short-term government/agency, mortgage and credit instruments.
(2) Derivative instruments include central counterparty swaps.
(3) 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. Private markets include equity, venture capital and private credit instruments and funds. Real assets include real estate and infrastructure.
(4) Accruals include interest or dividends that were not settled at December 31.

Certain of our assets are valued based on their respective NAV (or its equivalent), as an alternative to estimated fair value due to the absence of readily available market prices. The fair value of each such investment category was as follows:

*•*U.S. and Non-U.S. Equities ($141 million and $0 million at December 31, 2025 and 2024, respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

*•*U.S. and Non-U.S. Corporate Debt ($70 million and $96 million at December 31, 2025 and 2024, respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

• Re-insurance ($1 million and $4 million at December 31, 2025 and 2024, respectively) - This commingled fund has a NAV that is determined on a monthly basis and the investment may be sold at that value.

*•*Government Debt ($0 million and $434 million at December 31, 2025 and 2024, 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 ($0 million and $92 million at December 31, 2025 and 2024, 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.

The reconciliation of Level 3 assets was as follows:

						Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
In millions						Insurance Annuity						Real Assets						Private Markets						Total
Balance at December 31, 2023						$	436					$	7					$	96					$	539
Actual return on plan assets
Unrealized (losses) gains on assets still held at the reporting date						(53)						—						1						(52)
Purchases, sales and settlements, net						—						(1)						(1)						(2)
Balance at December 31, 2024						383						6						96						485
Actual return on plan assets
Unrealized losses on assets still held at the reporting date						(5)						(1)						—						(6)
Purchases, sales and settlements, net						320						—						(2)						318
Balance at December 31, 2025						$	698					$	5					$	94					$	797

Level 3 Assets

The investments in an insurance annuity contract, venture capital, private equity and real estate, for which quoted market prices are not available, are valued at their estimated fair value as determined by applicable investment managers or by quarterly financial statements of the funds. These financial statements are audited at least annually. In conjunction with our investment consultant and actuary, we monitor the fair value of the insurance contract as periodically reported by our insurer and their counterparty risk. The fair value of all real estate properties, held in the partnerships, are valued at least once per year by an independent professional real estate valuation firm. Fair value generally represents the fund's proportionate share of the net assets of the investment partnerships as reported by the general partners of the underlying partnerships. Some securities with no readily available market are initially valued at cost, utilizing independent professional valuation firms as well as market comparisons with subsequent adjustments to values which reflect either the basis of meaningful third-party transactions in the private market or the fair value deemed appropriate by the general partners of the underlying investment partnerships. In such instances, consideration is also given to the financial condition and operating results of the issuer, the amount that the investment partnerships can reasonably expect to realize upon the sale of the securities and any other factors deemed relevant. The estimated fair values are subject to uncertainty and therefore may differ from the values that would have been used had a ready market for such investments existed and such differences could be material.

Estimated Future Contributions and Benefit Payments

We plan to contribute approximately $51 million to our defined benefit pension plans in 2026. The table below presents expected future benefit payments under our pension plans:

						Qualified and Non-Qualified Pension Plans
In millions						2026						2027						2028						2029						2030						2031 - 2035
Expected benefit payments						$	373					$	377					$	375					$	379					$	380					$	1,920

Other Pension Plans

We also sponsor defined contribution plans for certain hourly and salaried employees. Our contributions to these plans were $125 million, $126 million and $130 million for the years ended December 31, 2025, 2024 and 2023.

Other Postretirement Benefits

Our OPEB plans provide various health care and life insurance benefits to eligible employees, who retire and satisfy certain age and service requirements, and their dependents. The plans are contributory and contain cost-sharing features such as caps, deductibles, coinsurance and spousal contributions. Employer contributions are limited by formulas in each plan. Retiree contributions for health care benefits are adjusted annually, and we reserve the right to change benefits covered under these plans. There were no plan assets for OPEB plans as our policy is to fund benefits and expenses for these plans as claims and premiums are incurred.

Obligations and Funded Status

Benefit obligation balances presented below reflect the accumulated postretirement benefit obligations for our OPEB plans. The changes in the benefit obligations, the funded status of the plans and the amounts recognized in our Consolidated Balance Sheets for our significant OPEB plans were as follows:

						December 31,
In millions						2025						2024
Change in benefit obligation
Benefit obligation at the beginning of the year						$	120					$	150
Interest cost						6						7
Plan participants' contributions						5						8
Actuarial gain						(13)						(18)
Benefits paid directly by employer						(10)						(27)
Benefit obligation at end of year						$	108					$	120
Funded status at end of year						$	(108)					$	(120)
Amounts recognized in consolidated balance sheets
Accrued compensation, benefits and retirement costs						$	(14)					$	(16)
Other liabilities						(94)						(104)
Net amount recognized						$	(108)					$	(120)
Amounts recognized in accumulated other comprehensive loss
Net actuarial gain						$	(68)					$	(60)
Prior service credit						(3)						(3)
Net amount recognized						$	(71)					$	(63)

In addition to the OPEB plans in the above table, we also maintain less significant OPEB plans in five other countries outside the U.S. that comprise approximately 20 percent and 17 percent of our OPEB obligations at December 31, 2025 and 2024, respectively. These plans are reflected in other liabilities in our Consolidated Balance Sheets.

Components of Net Periodic OPEB Cost

The following table presents the net periodic OPEB cost under our plans:

						Years ended December 31,
In millions						2025						2024						2023
Interest cost						$	6					$	7					$	9
Recognized net actuarial gain						(5)						(3)						(2)
Net periodic OPEB cost						$	1					$	4					$	7

Other changes in benefit obligations recognized in other comprehensive loss (income) for the years ended December 31 were as follows:

						Years ended December 31,
In millions						2025						2024						2023
Recognized net actuarial gain						$	5					$	3					$	2
Incurred actuarial gain						(13)						(19)						(2)
Total recognized in other comprehensive (income) loss						$	(8)					$	(16)					$	—
Total recognized in net periodic OPEB cost and other comprehensive (income) loss						$	(7)					$	(12)					$	7

Assumptions

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:

						2025						2024
Discount rate						5.22		%				5.60		%

The table below presents assumptions used in determining the net periodic OPEB cost and reflects weighted-average percentages for the various plans as follows:

						2025						2024						2023
Discount rate						5.60		%				5.19		%				5.59		%

Our consolidated OPEB obligation is determined by application of the terms of health care and life insurance plans, together with relevant actuarial assumptions and health care cost trend rates. For measurement purposes, a 6.5 percent annual rate of increase in the per capita cost of covered health care benefits was assumed in 2025. The rate is assumed to decrease on a linear basis to 5.0 percent through 2032 and remain at that level thereafter.

Estimated Benefit Payments

The table below presents expected benefit payments under our OPEB plans:

In millions						2026						2027						2028						2029						2030						2031 - 2035
Expected benefit payments						$	14					$	13					$	13					$	12					$	11					$	41

NOTE 11. SUPPLEMENTAL BALANCE SHEET DATA

Other assets included the following:

									December 31,
			In millions						2025						2024
			Deferred income taxes						$	1,063					$	1,119
			Operating lease assets						537						532
			Corporate-owned life insurance						454						423
			Other						498						559
			Other assets						$	2,552					$	2,633

Other accrued expenses included the following:

						December 31,
In millions						2025						2024
Marketing accruals						$	346					$	335
Other taxes payable						318						249
Income taxes payable						156						244
Current portion of operating lease liabilities						138						130
Other						968						940
Other accrued expenses						$	1,926					$	1,898

Other liabilities included the following:

						December 31,
In millions						2025						2024
Accrued product warranty						$	887					$	843
Pensions						443						503
Operating lease liabilities						424						409
Deferred income taxes						388						389
Accrued compensation						210						193
Other postretirement benefits						94						104
Long-term derivative liabilities						72						89
Other						610						619
Other liabilities						$	3,128					$	3,149

NOTE 12. DEBT

Loans Payable

Loans payable at December 31, 2025 and 2024 were $313 million and $356 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:

						2025						2024
Weighted-average interest rate						2.55		%				2.85		%

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 authorized commercial paper programs. These programs facilitate the private placement of unsecured short-term debt through third-party brokers. We intend to use the net proceeds from the commercial paper borrowings for general corporate purposes. We had $353 million and $1.3 billion in outstanding borrowings under our commercial paper programs at December 31, 2025 and 2024, respectively. The weighted-average interest rate for commercial paper at December 31 was as follows:

						2025						2024
Weighted-average interest rate						3.20		%				4.49		%

Revolving Credit Facilities

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 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. 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 each committed credit facility is available for swingline loans. Based on our current long-term debt ratings, the applicable margin on Secured Overnight Financing Rate (SOFR) rate loans for the 3-year facility was 0.75 percent per annum and 0.75 percent for the 5-year facility. Advances under the facility may be prepaid without premium or penalty, subject to customary breakage costs. These revolving credit facilities are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes. Our credit agreements include various covenants, including, among others, maintaining a net debt to total capital ratio of no more than 0.65 to 1.0. At December 31, 2025, we were in compliance with the financial debt covenants. There were no outstanding borrowings under these facilities at December 31, 2025 and December 31, 2024.

The total combined borrowing capacity under the revolving credit facilities and commercial programs should not exceed $4.0 billion. At December 31, 2025, our $353 million of commercial paper outstanding effectively reduced the $4.0 billion available capacity under our revolving credit facilities to $3.6 billion.

At December 31, 2025, we also had an additional $798 million available for borrowings under our uncommitted international and other domestic credit facilities.

Long-term Debt

A summary of long-term debt was as follows:

												December 31,
In millions						Interest Rate						2025						2024
Long-term debt
Hydrogenics promissory notes, due 2025						—%						$	—					$	110
Senior notes, due 2025 (1)						0.75%						—						500
Debentures, due 2027						6.75%						58						58
Debentures, due 2028						7.125%						250						250
Senior notes, due 2028						4.25%						300						—
Senior notes, due 2029						4.90%						500						500
Senior notes, due 2030 (1)						1.50%						850						850
Senior notes, due 2031						4.70%						700						—
Senior notes, due 2034						5.15%						750						750
Senior notes, due 2035						5.30%						1,000						—
Senior notes, due 2043						4.875%						500						500
Senior notes, due 2050						2.60%						650						650
Senior notes, due 2054						5.45%						1,000						1,000
Debentures, due 2098 (2)						5.65%						165						165
Other debt												175						160
Unamortized discount and deferred issuance costs												(91)						(89)
Fair value adjustments due to hedge on indebtedness												(57)						(85)
Finance leases												136						125
Total long-term debt												6,886						5,444
Less: Current maturities of long-term debt (3)												94						660
Long-term debt												$	6,792					$	4,784
(1) In 2021, we entered into a series of interest rate swaps to effectively convert debt from a fixed rate to floating rate. In March of 2025, we settled the remainder of the interest rate swaps on our debt due in 2025. See "Interest Rate Risk" in NOTE 20, "DERIVATIVES," for additional information. During the third quarter of 2025, we repaid the outstanding balance of the senior notes due in 2025.
(2) The effective interest rate is 7.48 percent.
(3) The weighted-average interest rates for the years ended December 31, 2025 and 2024, were 5.19 percent and 1.01 percent, respectively.

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. The senior unsecured notes due in 2028 and 2035 pay interest semi-annually on May 9 and November 9, commencing on November 9, 2025. The senior unsecured notes due in 2031 pay interest semi-annually on February 15 and August 15, commencing on February 15, 2026. 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:

In millions						2026						2027						2028						2029						2030
Principal payments						$	94					$	130					$	608					$	539					$	863

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. We can redeem these debentures at any time prior to maturity at the greater of par plus accrued interest or an amount designed to ensure that the debenture holders are not penalized by the early redemption.

Our debt agreements contain several restrictive covenants. The most restrictive of these covenants applies to our revolving credit facility which will upon default, among other things, limit our ability to incur additional debt or issue preferred stock, enter into sale-leaseback transactions, sell or create liens on our assets, make investments and merge or consolidate with any other entity. At December 31, 2025, we were in compliance with all of the financial debt covenants under our borrowing agreements.

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 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.

Interest Expense

For the years ended December 31, 2025, 2024 and 2023, total interest incurred was $360 million, $387 million and $383 million, respectively, and interest capitalized was $31 million, $17 million and $8 million, respectively.

Interest Rate Risk

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,” for additional information.

Fair Value of Debt

Based on borrowing rates currently available to us for bank loans with similar terms and average maturities, considering our risk premium, the fair values and carrying values of total debt, including current maturities, were as follows:

						December 31,
In millions						2025						2024
Fair values of total debt (1)						$	7,337					$	6,651
Carrying value of total debt						7,552						7,059
(1) The fair value of debt is derived from Level 2 input measures.

NOTE 13. PRODUCT WARRANTY LIABILITY

A tabular reconciliation of the product warranty liability, including the deferred revenue related to our extended warranty coverage and accrued product campaigns, was as follows:

						December 31,
In millions						2025						2024						2023
Balance at beginning of year						$	2,623					$	2,497					$	2,477
Provision for base warranties issued						632						641						602
Deferred revenue on extended warranty contracts sold						390						343						350
Provision for product campaigns issued						44						65						28
Payments made during period						(730)						(704)						(705)
Amortization of deferred revenue on extended warranty contracts						(296)						(297)						(300)
Changes in estimates for pre-existing product warranties and campaigns						120						99						37
Foreign currency translation adjustments and other						(5)						(21)						8
Balance at end of period						$	2,778					$	2,623					$	2,497

We recognized supplier recoveries of $24 million, $54 million and $36 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Warranty related deferred revenues and warranty liabilities on our Consolidated Balance Sheets were as follows:

						December 31,
In millions						2025						2024						Balance Sheet Location
Deferred revenue related to extended coverage programs
Current portion						$	303					$	286					Current portion of deferred revenue
Long-term portion						895						815						Deferred revenue
Total						$	1,198					$	1,101
Product warranty
Current portion						$	693					$	679					Current portion of accrued product warranty
Long-term portion						887						843						Other liabilities
Total						$	1,580					$	1,522
Total warranty accrual						$	2,778					$	2,623

NOTE 14. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

We are subject to numerous lawsuits and claims arising out of the ordinary course of our business, including actions related to product liability; personal injury; the use and performance of our products; warranty matters; product recalls; patent, trademark or other intellectual property infringement; contractual liability; the conduct of our business; tax reporting in foreign jurisdictions; distributor termination; workplace safety; environmental and regulatory matters, including the enforcement of environmental and emissions standards; and asbestos claims. We also have been identified as a potentially responsible party at multiple waste disposal sites under U.S. federal and related state environmental statutes and regulations and may have joint and several liability for any investigation and remediation costs incurred with respect to such sites. We have denied liability with respect to many of these lawsuits, claims and proceedings and are vigorously defending such lawsuits, claims and proceedings. We carry various forms of commercial, property and casualty, product liability and other forms of insurance; however, such insurance may not be applicable or adequate to cover the costs associated with a judgment against us with respect to these lawsuits, claims and proceedings. 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 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.

In December 2023, we announced that we reached the agreement in principle with the U.S. Environmental Protection Agency, the California Air Resources Board, the Environmental and Natural Resources Division of the 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). 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. 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 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.

Guarantees and Commitments

Periodically, we enter into guarantee arrangements, including guarantees of non-U.S. distributor financings, residual value guarantees on equipment under operating leases and other miscellaneous guarantees of joint ventures or third-party obligations. At December 31, 2025, the maximum potential loss related to these guarantees was $46 million.

We have arrangements with certain suppliers that require us to purchase minimum volumes or be subject to monetary penalties. At December 31, 2025, if we were to stop purchasing from each of these suppliers, the aggregate amount of the penalty would be approximately $481 million. These arrangements enable us to secure supplies of critical components and IT services. We do not currently anticipate paying any penalties under these contracts.

We enter into physical forward contracts with suppliers of platinum and palladium to purchase certain volumes of the commodities at contractually stated prices for various periods, which generally fall within two years. At December 31, 2025, the total commitments under these contracts were $65 million. These arrangements enable us to guarantee the purchase prices of these commodities, which otherwise are subject to market volatility.

We have guarantees with certain customers that require us to satisfactorily honor contractual or regulatory obligations, or compensate for monetary losses related to nonperformance. These performance bonds and other performance-related guarantees were $221 million at December 31, 2025.

Indemnifications

Periodically, we enter into various contractual arrangements where we agree to indemnify a third-party against certain types of losses. Common types of indemnities include:

• product liability and license, patent or trademark indemnifications;

• asset sale agreements where we agree to indemnify the purchaser against future environmental exposures related to the asset sold; and

• any contractual agreement where we agree to indemnify the counterparty for losses suffered as a result of a misrepresentation in the contract.

We regularly evaluate the probability of having to incur costs associated with these indemnities and accrue for expected losses that are probable. Because the indemnifications are not related to specified known liabilities and due to their uncertain nature, we are unable to estimate the maximum amount of the potential loss associated with these indemnifications.

NOTE 15. CUMMINS INC. SHAREHOLDERS' EQUITY

Preferred and Preference Stock

We are authorized to issue one million shares of zero par value preferred and one million shares of preference stock with preferred shares being senior to preference shares. We can determine the number of shares of each series, and the rights, preferences and limitations of each series. At December 31, 2025 and 2024, there were no preferred or preference stock outstanding.

Common Stock

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

In millions						Common Stock						Treasury Stock
Balance at December 31, 2022						222.5						81.2
Shares issued						—						(0.5)
Balance at December 31, 2023						222.5						80.7
Shares issued						—						(1.2)
Atmus divestiture share exchange (1)						—						5.6
Balance at December 31, 2024						222.5						85.1
Shares issued						—						(0.7)
Balance at December 31, 2025						222.5						84.4
(1) 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 exchange resulted in a reduction of shares of our common stock outstanding by 5.6 million shares. See NOTE 21, “ATMUS DIVESTITURE,” for additional information.

Treasury Stock

Shares of common stock repurchased by us are recorded at cost as treasury stock and result in a reduction of shareholders' equity in our Consolidated Balance Sheets. Treasury shares may be reissued as part of our stock-based compensation programs. When shares are reissued, we use the weighted-average cost method for determining cost. The gains between the cost of the shares and the issuance price are added to additional paid-in-capital. The losses are deducted from additional paid-in capital to the extent of the gains. Thereafter, the losses are deducted from retained earnings. Treasury stock activity for the three-year period ended December 31, 2025, consisting of shares issued and repurchased is presented in our Consolidated Statements of Changes in Redeemable Noncontrolling Interests and Equity.

In December 2021, the Board authorized the acquisition of up to $2.0 billion of additional common stock upon completion of the $2.0 billion repurchase plan authorized in 2019. 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.

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 exchange resulted in a reduction of shares of our common stock outstanding by 5.6 million shares. See NOTE 21, “ATMUS DIVESTITURE,” for additional information.

We did not make any repurchases of common stock during 2025, 2024 or 2023.

Dividends

Total dividends paid to common shareholders in 2025, 2024 and 2023 were $1,055 million, $969 million and $921 million, 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. We expect to fund dividend payments with cash from operations.

In July 2025, the Board authorized an increase to our quarterly dividend of 9.9 percent from $1.82 per share to $2.00 per share. In July 2024, the Board authorized an 8.3 percent increase to our quarterly cash dividend on our common stock from $1.68 per share to $1.82 per share. In July 2023, the Board approved a 7.0 percent increase to our quarterly dividend on our common stock from $1.57 per share to $1.68 per share. Cash dividends per share paid to common shareholders for the last three years were as follows:

						Quarterly Dividends
						2025						2024						2023
First quarter						$	1.82					$	1.68					$	1.57
Second quarter						1.82						1.68						1.57
Third quarter						2.00						1.82						1.68
Fourth quarter						2.00						1.82						1.68
Total						$	7.64					$	7.00					$	6.50

NOTE 16. ACCUMULATED OTHER COMPREHENSIVE LOSS

Following are the changes in accumulated other comprehensive (loss) income by component:

In millions						Change in pensions and other postretirement defined benefit plans						Foreign currency translation adjustment												Unrealized gain (loss) on derivatives									Total attributable to Cummins Inc.						Noncontrolling interests						Total
Balance at December 31, 2022						$	(427)					$	(1,552)											$	89								$	(1,890)
Other comprehensive income (loss) before reclassifications
Before-tax amount						(541)						96												35									(410)						$	(3)					$	(413)
Tax benefit (expense)						113						(1)												(7)									105						—						105
After-tax amount						(428)						95												28									(305)						(3)						(308)
Amounts reclassified from accumulated other comprehensive income (loss) (1)						7						—												(18)									(11)						—						(11)
Net current period other comprehensive (loss) income						(421)						95												10									(316)						$	(3)					$	(319)
Balance at December 31, 2023						$	(848)					$	(1,457)											$	99								$	(2,206)
Other comprehensive income (loss) before reclassifications
Before-tax amount						(14)						(313)												47									(280)						$	(16)					$	(296)
Tax expense						(2)						(8)												(12)									(22)						—						(22)
After-tax amount						(16)						(321)												35									(302)						(16)						(318)
Amounts reclassified from accumulated other comprehensive income (loss) (1)						21						61			(2)									(19)									63						—						63
Net current period other comprehensive income (loss)						5						(260)												16									(239)						$	(16)					$	(255)
Balance at December 31, 2024						$	(843)					$	(1,717)											$	115								$	(2,445)
Other comprehensive (loss) income before reclassifications
Before-tax amount						(122)						222												3									103						$	(13)					$	90
Tax benefit (expense)						26						35												(1)									60						—						60
After-tax amount						(96)						257												2									163						(13)						150
Amounts reclassified from accumulated other comprehensive income (loss) (1)						27						—												(23)									4						—						4
Net current period other comprehensive (loss) income						(69)						257												(21)									167						$	(13)					$	154
Balance at December 31, 2025						$	(912)					$	(1,460)											$	94								$	(2,278)
(1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure.
(2) See NOTE 21, “ATMUS DIVESTITURE,” for additional information.

NOTE 17. NONCONTROLLING INTERESTS

Noncontrolling interests in the equity of consolidated subsidiaries were as follows:

						December 31,
In millions						2025						2024
Eaton Cummins Automated Transmission Technologies						$	479					$	490
Cummins India Ltd.						455						431
Other						125						116
Noncontrolling interests						$	1,059					$	1,037

NOTE 18. STOCK INCENTIVE AND STOCK OPTION PLANS

Our stock incentive plan (the Plan) allows for granting of up to 8.5 million total shares of equity awards to executives, employees and non-employee directors. Awards available for grant under the Plan include, but are not limited to, stock options, stock appreciation rights, performance shares and other stock awards. Shares issued under the Plan may be newly issued shares or reissued treasury shares.

Stock options are generally granted with a strike price equal to the fair market value of the stock on the date of grant and a life of 10 years. Stock options granted have a three-year vesting period. The strike price may be higher than the fair value of the stock on the date of the grant, but cannot be lower. Compensation expense is recorded on a straight-line basis over the vesting period beginning on the grant date. The compensation expense is based on the fair value of each option grant using the Black-Scholes option pricing model. Options granted to employees eligible for retirement under our retirement plan are fully expensed at the grant date.

Stock options are also awarded through the Key Employee Stock Investment Plan (KESIP) which allows certain employees, other than officers, to purchase shares of common stock on an installment basis up to an established credit limit. For every block of 100 KESIP shares purchased by the employee 50 stock options are granted. The options granted through the KESIP program are considered awards under the Plan and are vested immediately. Compensation expense for stock options granted through the KESIP program is recorded based on the fair value of each option grant using the Black-Scholes option pricing model.

Performance shares are granted as target awards and are earned based on certain measures of our operating performance. A payout factor has been established ranging from 0 to 200 percent of the target award based on our actual performance during the three-year performance period. The fair value of the award is equal to the average market price, adjusted for the present value of dividends over the vesting period, of our stock on the grant date. Compensation expense is recorded ratably over the period beginning on the grant date until the shares become unrestricted and is based on the amount of the award that is expected to be earned under the plan formula, adjusted each reporting period based on current information.

Restricted stock and restricted stock units are awarded from time to time at no cost to certain employees. Restrictions limit the sale or transfer of the shares during a defined period. Most awards are not entitled to cash dividends and voting rights until vesting. Generally, the shares vest and become free from restrictions ratably over a three-year service period, provided the participant remains an employee. The fair value of the awards typically equals the average market price of our stock on the grant date adjusted for the present value of dividends over the vesting period. Compensation expense is determined at the grant date and is recognized over the restriction period on a straight-line basis.

Employee compensation expense (net of estimated forfeitures) related to our share-based plans for the years ended December 31, 2025, 2024 and 2023, was approximately $93 million, $100 million and $79 million, respectively. The excess tax benefit associated with our employee share-based plans for the years ended December 31, 2025, 2024 and 2023, was $15 million, $23 million and $7 million, respectively. The total unrecognized compensation expense (net of estimated forfeitures) related to nonvested awards for our employee share-based plans was approximately $87 million at December 31, 2025, and is expected to be recognized over a weighted-average period of approximately two years. Cash received from share-based payment arrangements for the years ended December 31, 2025, 2024 and 2023, was $69 million, $133 million and $48 million, respectively.

The table below summarizes the employee share-based activity in the Plan:

						Options						Weighted-average Exercise Price						Weighted-average Remaining Contractual Life (in years)						Aggregate Intrinsic Value (in millions)
Balance at December 31, 2022						2,145,963						$	145.57
Granted						17,500						225.39
Exercised						(345,250)						142.69
Forfeited						(3,793)						144.16
Balance at December 31, 2023						1,814,420						146.89
Granted						9,100						294.05
Exercised						(1,004,358)						142.18
Forfeited						(4,821)						149.48
Balance at December 31, 2024						814,341						154.33
Granted						17,500						329.81
Exercised						(435,214)						157.70
Forfeited						(900)						149.82
Balance at December 31, 2025						395,727						$	158.39					3.3						$	140
Exercisable, December 31, 2023						1,814,420						$	146.89					4.2						$	169
Exercisable, December 31, 2024						814,341						$	154.33					4.0						$	159
Exercisable, December 31, 2025						395,727						$	158.39					3.3						$	140

The weighted-average grant date fair value of options granted during the years ended December 31, 2025, 2024 and 2023, was $84.27, $77.19 and $57.01, respectively. The total intrinsic value of options exercised during the years ended December 31, 2025, 2024 and 2023, was approximately $106 million, $160 million and $35 million, respectively.

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

						Performance Shares												Restricted Shares
Nonvested						Shares						Weighted-average Fair Value						Shares						Weighted-average Fair Value
Balance at December 31, 2022						485,299						$	193.17					236,413						$	213.66
Granted						170,205						222.86						176,128						223.92
Vested						(99,425)						126.38						(74,270)						215.38
Forfeited						(68,566)						199.69						(27,931)						217.01
Balance at December 31, 2023						487,513						216.24						310,340						218.77
Granted						259,004						264.95						208,029						276.83
Vested						(233,136)						244.14						(75,759)						215.98
Forfeited						(40,909)						233.84						(37,493)						232.01
Balance at December 31, 2024						472,472						227.65						405,117						247.88
Granted						202,736						242.48						114,116						303.98
Vested						(248,197)						185.74						(78,084)						169.73
Forfeited						(19,454)						264.83						(20,213)						253.47
Balance at December 31, 2025						407,557						$	258.77					420,936						$	277.32

The total vesting date fair value of performance shares vested during the years ended December 31, 2025, 2024 and 2023, was $91 million, $63 million and $25 million, respectively. The total fair value of restricted shares vested was $33 million, $24 million and $17 million for the years ended December 31, 2025, 2024 and 2023, 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:

						2025						2024						2023
Expected life (years)						5						6						6
Risk-free interest rate						4.10		%				4.20		%				3.91		%
Expected volatility						30.12		%				29.15		%				28.73		%
Dividend yield						2.59		%				2.79		%				2.81		%

Expected life—The expected life of employee stock options represents the weighted-average period the stock options are expected to remain outstanding based upon our historical data.

Risk-free interest rate—The risk-free interest rate assumption is based upon the observed U.S. treasury security rate appropriate for the expected life of our employee stock options.

Expected volatility—The expected volatility assumption is based upon the weighted-average historical daily price changes of our common stock over the most recent period equal to the expected option life of the grant, adjusted for activity which is not expected to occur in the future.

Dividend yield—The dividend yield assumption is based on our history and expectation of dividend payouts.

NOTE 19. EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.

We calculate basic earnings per share (EPS) of common stock by dividing net income attributable to Cummins Inc. by the weighted-average number of common shares outstanding for the period. The calculation of diluted EPS assumes the issuance of common stock for all potentially dilutive share equivalents outstanding, which is calculated using the treasury-stock method for share-based awards. Following are the computations for basic and diluted earnings per share:

						Years ended December 31,
In millions, except per share amounts						2025						2024						2023
Net income attributable to Cummins Inc.						$	2,843					$	3,946					$	735
Weighted-average common shares outstanding
Basic						137.9						138.2						141.7
Dilutive effect of stock compensation awards						0.8						0.9						1.0
Diluted						138.7						139.1						142.7
Earnings per common share attributable to Cummins Inc.
Basic						$	20.62					$	28.55					$	5.19
Diluted						20.50						28.37						5.15

The weighted-average diluted common shares outstanding exclude the anti-dilutive effect of certain stock options. The options excluded from diluted earnings per share were as follows:

						Years ended December 31,
						2025						2024						2023
Options excluded						3,825						1,467						10,587

NOTE 20. DERIVATIVES

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. When material, we adjust the estimated fair value of our derivative contracts for counterparty or our credit risk. None of our derivative instruments are subject to collateral requirements. Substantially all of our derivative contracts are subject to master netting arrangements, which provide us with the option to settle certain contracts on a net basis when they settle on the same day with the same currency. In addition, these arrangements provide for a net settlement of all contracts with a given counterparty in the event that the arrangement is terminated due to the occurrence of default or a termination event.

Foreign Currency Exchange Rate Risk

We had foreign currency forward contracts with notional amounts of $5.2 billion at December 31, 2025, with the following currencies comprising 82 percent of outstanding foreign currency forward contracts: British pound, Chinese renminbi, Euro, Australian dollar and Canadian dollar. 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, Australian dollar, Canadian dollar and Euro.

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 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, 2025, was $989 million. In the second quarter of 2025, we began entering into cross-currency interest rate swaps designated as net investment hedges for certain of our investments to help reduce volatility in the equity value of our subsidiaries. Under the current terms of our cross-currency interest rate swaps, we generally pay fixed-rate interest in Euros or Chinese renminbi and receive fixed-rate interest in U.S. dollars. The notional amount of these hedges at December 31, 2025, was $500 million.

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

						Years ended December 31,
In millions						2025												2024												2023
Type of Derivative						Gain (Loss) Recognized in AOCL												Gain (Loss) Reclassified from AOCL into Earnings						Gain (Loss) Recognized in AOCL												Gain (Loss) Reclassified from AOCL into Earnings						Gain (Loss) Recognized in AOCL												Gain (Loss) Reclassified from AOCL into Earnings
Foreign exchange forwards						$	(73)											$	—					$	32											$	—					(30)												—
Cross-currency interest rate swaps						(9)												—						—												—						—												—

Interest Rate Risk

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 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 (also similarly adjusted to SOFR). 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 USD SOFR plus a spread through February 2041. 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, were recognized in current income as interest expense. The net swap settlements that accrue each period were also reported in our Consolidated Financial Statements as interest expense. In 2023 and 2024, we settled a portion of these swaps with the immaterial losses amortized over the remaining term of the related debt. In the first quarter of 2025, we settled the remainder of the interest rate swaps on our 2025 debt. The interest rate swaps on our 2030 debt and 2054 debt had notional amounts outstanding at December 31, 2025 of $680 million and $150 million, respectively.

The following table summarizes the gains and losses:

						Years ended December 31,
In millions						2025																		2024												2023
Type of Swap						Gain (Loss) on Swaps						Gain (Loss) on Borrowings																		Gain (Loss) on Swaps						Gain (Loss) on Borrowings						Gain (Loss) on Swaps						Gain (Loss) on Borrowings
Interest rate swaps (1)						$	30					$	(29)																	$	12					$	(11)					$	31					$	(32)
(1) The difference between the gain (loss) on swaps and borrowings represented hedge ineffectiveness.

In the first quarter of 2025, we entered into a series of interest rate lock agreements including 5-year and 10-year locks, with notional amounts totaling $200 million and $400 million, respectively, to reduce variability of cash flows of interest payments on total fixed rate debt forecasted to be issued in 2025 to replace our senior notes at maturity and for other general purposes. In the second quarter of 2025, we entered into additional 10-year interest rate lock agreements with notional amounts totaling $100 million. The terms of the rate locks mirrored the time period of the expected fixed rate debt issuances and the expected timing of interest payments on planned debt issuances. 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 the second quarter of 2025, with the issuance of senior unsecured notes, we settled all interest rate lock agreements with a notional amount of $700 million. The immaterial net losses from settlement will be amortized over the remaining term of the related debt. Amortization of net losses were immaterial for the year ended December 31, 2025.

Derivatives Not Designated as Hedging Instruments

The following table summarizes the effect on our Consolidated Statements of Net Income for derivative instruments not designated as hedging instruments:

						Years ended December 31,
In millions						2025						2024						2023
(Loss) gain recognized in income - Cost of sales (1)						$	(4)					$	3					$	(3)
Gain (loss) recognized in income - Other expense, net (1)						85						(65)						(21)
(1) Includes foreign currency forward contracts.

Fair Value Amount and Location of Derivative Instruments

The following table summarizes the location and fair value of derivative instruments on our Consolidated Balance Sheets:

						Derivatives Designated as Hedging Instruments												Derivatives Not Designated as Hedging Instruments
						December 31,												December 31,
In millions						2025						2024						2025						2024
Notional amount						$	3,241					$	3,512					$	4,316					$	2,713
Derivative assets
Prepaid expenses and other current assets						$	16					$	60					$	39					$	6
Other assets						—						6						—						—
Total derivative assets (1)						$	16					$	66					$	39					$	6
Derivative liabilities
Other accrued expenses						$	29					$	10					$	3					$	67
Other liabilities						72						89						—						—
Total derivative liabilities (1)						$	101					$	99					$	3					$	67
(1) Estimates of the fair value of all derivative assets and liabilities above are derived from Level 2 inputs, which are 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 input measures and there were no transfers into or out of Level 2 or 3 during 2025 or 2024.

We elected to present our derivative contracts on a gross basis in our Consolidated Balance Sheets. Had we chosen to present on a net basis, we would have derivatives in a net asset position of $20 million and $37 million and derivatives in a net liability position of $69 million and $131 million at December 31, 2025, and 2024, respectively.

NOTE 21. ATMUS DIVESTITURE

Initial Public Offering (IPO)

On May 23, 2023, in connection with the Atmus IPO, Cummins issued approximately $350 million of commercial paper with certain lenders. On May 26, 2023, Atmus shares began trading on the New York Stock Exchange under the symbol "ATMU." The IPO was completed on May 30, 2023, whereby Cummins exchanged 19.5 percent (approximately 16 million shares) of its ownership in Atmus, at $19.50 per share, to retire $299 million of the commercial paper as proceeds from the offering through a non-cash transaction.

In connection with the completion of the IPO, through a series of asset and equity contributions, we transferred the filtration business to Atmus. In exchange, Atmus transferred consideration of $650 million to Cummins, which consisted primarily of the net proceeds from a term loan facility and revolver executed by Atmus during May 2023. 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 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.

Divestiture

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 our 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.

NOTE 22. ACCELERA ACTIONS

2025 Actions

During the third quarter of 2025, in our Accelera segment, we observed rapidly deteriorating conditions in our electrolyzer markets and overall hydrogen markets, along with significant uncertainty in the alternative power markets resulting from reductions in government incentives. As a result, we determined that a triggering event occurred for our electrolyzer reporting unit, warranting an interim impairment test of goodwill and the related asset group. We also re-evaluated the recoverability of certain inventory in this business due to the declining customer demand, resulting in a $30 million excess and obsolete inventory write-down. We concluded that the undiscounted cash flows exceeded the carrying value of the related asset group and thus an impairment did not exist for the related long-lived assets. However, we determined that on a fair value basis our goodwill was fully impaired and recorded a charge of $210 million. The fair value of this reporting unit was determined using primarily a discounted cash flow model (a form of the income approach). This model incorporated a number of assumptions and judgements surrounding current market and economic conditions, internal forecasts of future business performance including short and long-term growth rates, earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests (EBITDA) margins and discount rates.

The continuing deterioration in the electrolyzer markets in the fourth quarter of 2025, prompted a strategic review of this business. As

a result of these 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 this shift, we recorded several non-cash charges in the fourth quarter related to inventory write-downs along with intangible and fixed asset impairments. We also recorded severance of approximately $13 million and contract termination costs of $34 million. Total charges for the fourth quarter actions were $218 million.

The following table presents the full impact of these 2025 actions on our Consolidated Statements of Net Income:

						Year ended
In millions						December 31, 2025						Statement of Net Income Location
Impairment of goodwill						$	210					Other operating expense, net
Inventory write-downs						119						Cost of sales
Impairment of property, plant and equipment and leases						55						Other operating expense, net
Contract termination costs						34						Cost of sales
Impairment of other intangible assets						27						Other operating expense, net
Severance						13						Cost of sales, selling, general and administrative expenses and research, development and engineering expenses
Total						$	458

The majority of the $458 million is reflected in net cash provided by operating activities, as a change in inventory of $119 million and other, net of $292 million. Of the $458 million, $415 million were non-cash charges and the majority of the remaining $43 million cash charge will be paid during 2026. Of the total charges, approximately $445 million occurred in jurisdictions where we receive no tax benefits because of valuation allowances or the charges are attributable to nondeductible goodwill.

2024 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 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. 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:

						Year ended
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
Total						$	312

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 at that time.

NOTE 23. ACQUISITIONS

Acquisitions for the years ended December 31, 2025, 2024 and 2023, 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)**
2024
Engendren Corporation						02/16/24						100		%				$	65					$	—					$	65					COMB												$	33					$	8
2023
Cummins France SA						10/31/23						100		%				$	25					$	5					$	30					COMB												$	4					$	—
Faurecia						10/02/23						100		%				208						—						208			(3)			COMB												92						—
Hydrogenics Corporation						06/29/23						19		%				287						48						335			(4)			EQUITY												—						—
Teksid Hierro de Mexico, S.A. de C.V.						04/03/23						100		%				143						—						143			(5)			COMB												18						—
(1) All results from acquired entities were included in segment results subsequent to the acquisition date. Previously consolidated entities were accounted for as equity transactions (EQUITY). Newly consolidated entities were accounted for as business combinations (COMB).
(2) Intangible assets acquired in the business combination were mostly customer, technology and trade name related.
(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, $50 million paid on December 31, 2024 and the remaining $110 million paid in 2025.
(5) Total purchase consideration included $32 million for the settlement of accounts payable that was treated as an operating cash outflow.

NOTE 24. REPORTABLE SEGMENTS

Reportable segments under GAAP are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (CODM), or decision-making group, in deciding how to allocate resources and in assessing performance. Our CODM is the Chief Executive Officer.

Our reportable 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 Engine segment produces engines (15 liters and smaller) and associated parts for sale to customers in on-highway and various off-highway markets. Our engines are used in trucks of all sizes, buses and recreational vehicles, as well as in various industrial applications, including construction, agriculture, power generation systems and other off-highway applications. The Components segment sells axles, drivelines, brakes and suspension systems for commercial diesel and natural gas applications, aftertreatment systems, turbochargers, fuel systems, valvetrain technologies, automated transmissions and electronics. The Distribution segment includes wholly-owned and partially-owned distributorships engaged in wholesaling engines, generator sets and service parts, as well as performing service and repair activities on our products, maintaining relationships with various OEMs throughout the world and providing selected sales and aftermarket support for our Accelera business. The Power Systems segment is an integrated power provider, which designs, manufactures and sells standby and prime power generators, engines (16 liters and larger) for standby and prime power generator sets and industrial applications (including mining, oil and gas, marine, rail and defense), alternators and other power components. The Accelera segment designs, manufactures, sells and supports electrified power systems with innovative components and subsystems, including battery and electric powertrain technologies. The Accelera segment is currently in the early stages of commercializing these technologies with efforts primarily focused on the development of electrified power systems and related components and subsystems. We continue to serve all our markets as they adopt electrification, meeting the needs of our OEM partners and end customers.

Our CODM uses segment EBITDA as the basis to evaluate the performance of each of our reportable 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.

The accounting policies of our reportable segments are the same as those applied in our Consolidated Financial Statements. We prepared the financial results of our reportable segments on a basis that is consistent with the manner in which we internally disaggregate financial information to assist in making internal operating decisions. 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 IT, human resources, legal, finance and supply chain management. We do not allocate gains or losses of corporate-owned life insurance and the gain and certain costs related to the divestiture of Atmus. EBITDA may not be consistent with measures used by other companies.

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

In millions						Engine						Components												Distribution												Power Systems						Accelera						Total Segments
2025
External sales						$	8,104					$	8,643											$	12,386											$	4,114					$	423					$	33,670
Intersegment sales						2,771						1,506												19												3,349						37						7,682
Total sales						10,875						10,149												12,405												7,463						460						41,352
Cost of goods sold (excluding warranty expenses)						8,260						8,138												9,842												5,081						701			(1)			32,022
Warranty expenses						408						120												23												126						95						772
Selling expenses						231						163												613												170						29			(1)			1,206
Administrative expenses						570						505												365												410						69			(1)			1,919
Research, development and engineering expenses						624						280												53												253						186			(1)			1,396
Equity, royalty and interest income (loss) from investees						254						31												105												109						(30)						469
Other income (expense) (2)						70						(72)												65												22						(298)			(1)			(213)
Add back: Depreciation and amortization (3)						276						496												129												140						52						1,093
Segment EBITDA						$	1,382					$	1,398											$	1,808											$	1,694					$	(896)		(1)			$	5,386
Interest income (4)						$	37					$	29											$	23											$	16					$	1					$	106
Net assets						2,520						6,820												3,602												2,695						944						16,581
Investments and advances to equity investees						697						494												409												168						359						2,127
Capital expenditures						518						336												127												222						32						1,235
2024
External sales						$	8,987					$	9,894											$	11,352											$	3,500					$	369					$	34,102
Intersegment sales						2,725						1,785												32												2,908						45						7,495
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			(5)			32,387
Warranty expenses						420						173												23												101						34						751
Selling expenses						214						184												628												174						33			(5)			1,233
Administrative expenses						582						555												382												421						70			(5)			2,010
Research, development and engineering expenses						616						328												55												236						226			(5)			1,461
Equity, royalty and interest income (loss) from investees						212						64												90												79						(50)			(5)			395
Other income (expense) (2)						23						(59)												54												—						(183)			(5)			(165)
Add back: Depreciation and amortization (3)						245						493												123												131						61						1,053
Segment EBITDA						$	1,653					$	1,591		(6)									$	1,378											$	1,180					$	(764)		(5)			$	5,038
Interest income (4)						$	17					$	25											$	37											$	7					$	1					$	87
Net assets						2,076						6,433												3,151												2,350						1,234						15,244
Investments and advances to equity investees						653						504												394												145						187						1,883
Capital expenditures						556						339												111												143						59						1,208
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In millions						Engine						Components												Distribution												Power Systems						Accelera						Total Segments
2023
External sales						$	8,874					$	11,531											$	10,199											$	3,125					$	336					$	34,065
Intersegment sales						2,810						1,878												50												2,548						18						7,304
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
Add back: Depreciation and amortization (3)						225						491												115												122						63						1,016
Segment EBITDA						$	1,630					$	1,840		(7)									$	1,209											$	836					$	(443)					$	5,072
Interest income (4)						$	19					$	31											$	34											$	9					$	2					$	95
Net assets						930						6,965												2,348												1,938						1,159						13,340
Investments and advances to equity investees						660						582												396												132						25						1,795
Capital expenditures						538						373												103												115						84						1,213
(1) Included $157 million of charges in cost of goods sold, $2 million of charges in selling, general and administrative expenses, $7 million of charges in research, development and engineering expenses, $292 million of charges in other operating expenses and $458 million of charges in EBITDA, all related to Accelera actions in 2025. See NOTE 22, “ACCELERA 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, $12 million and $8 million for the years ended 2025, 2024 and 2023, respectively. A portion of depreciation expense is included in research, development and engineering expense.
(4) Interest income is a component of other income (expense).
(5) 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, development and engineering 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 ACTIONS,” for additional information.
(6) Included $21 million of costs associated with the divestiture of Atmus for the year ended December 31, 2024.
(7) Included $78 million of costs associated with the divestiture of Atmus for the year ended December 31, 2023.

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,
In millions						2025						2024						2023
TOTAL SEGMENT EBITDA						$	5,386					$	5,038					$	5,072
Intersegment eliminations and other (1)						(1)						1,288						(2,055)
Less:
Interest expense						329						370						375
Depreciation and amortization						1,093						1,053						1,016
INCOME BEFORE INCOME TAXES						$	3,963					$	4,903					$	1,626
(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. See NOTE 14, “COMMITMENTS AND CONTINGENCIES,” and NOTE 21, “ATMUS 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:

						December 31,
In millions						2025						2024
Net assets for reportable segments						$	16,581					$	15,244
Cash, cash equivalents and marketable securities						3,609						2,264
Net liabilities deducted in arriving at net segment assets (1)						12,597						12,556
Pension and OPEB adjustments excluded from net segment assets						136						352
Deferred tax assets not allocated to segments						1,063						1,119
Deferred debt costs not allocated to segments						6						5
Total assets						$	33,992					$	31,540
(1) Liabilities deducted in arriving at net segment assets include certain accounts payable, accrued expenses, long-term liabilities and other items.

See NOTE 2, “REVENUE FROM CONTRACTS WITH CUSTOMERS,” for segment net sales by country.

Long-lived assets include property, plant and equipment, net of depreciation, investments and advances to equity investees and other assets, excluding deferred tax assets, refundable taxes and deferred debt expenses. Long-lived segment assets by country were as follows:

						December 31,
In millions						2025						2024
United States						$	6,317					$	5,751
China						1,010						968
India						598						566
United Kingdom						580						494
Other countries						2,054						1,932
Total long-lived assets						$	10,559					$	9,711

Our largest customer is PACCAR, Inc. Worldwide sales to this customer were approximately $4.4 billion, $5.4 billion and $5.5 billion for the years ended December 31, 2025, 2024 and 2023, representing 13 percent, 16 percent and 16 percent, respectively, of our consolidated net sales. No other customer accounted for more than 10 percent of consolidated net sales.