Distribution segment sales increased 15% due to higher demand in power generation markets, especially in North America. Power Systems segment sales increased 19% primarily due to higher demand in power generation markets, especially in China and North America

Accelera segment sales for the three months ended March 31, 2025, increased $10 million versus the comparable period in 2024 primarily due to improved sales of electrified powertrains and electrolyzers.

Capital expenditures for the three months ended March 31, 2025, were $162 million. Company plans to spend an estimated $1.4 billion to $1.5 billion in 2025 on capital expenditures with over 65 percent of these expenditures expected to be invested in North America.

The company is proactively taking steps in its supply chain to mitigate impacts where possible and working with customers to pass through incremental costs due to escalating tariff environment.

At March 31, 2025, the company had $2.2 billion in cash and marketable securities on hand and access to its $4.0 billion credit facilities, net of $1.7 billion of commercial paper outstanding.

In December 2023, the company announced that it reached the agreement in principle with U.S. Environmental Protection Agency, the California Air Resources Board, the Environmental and Natural Resources Division of the DOJ and the California Attorney General's Office to resolve certain regulatory civil claims regarding our emissions certification and compliance process for certain engines primarily used in pick-up truck applications in the U.S., which became final and effective in April 2024

The escalating tariff environment, marked by the U.S. imposition of tariffs on certain countries, followed by the imposition of retaliatory tariffs on U.S. goods and services by certain countries has introduced significant market volatility and raised concerns about potential economic impacts.

Failure to comply with the terms and conditions of the Settlement Agreements will subject the company to further stipulated penalties. Subsequent to the second quarter of 2024, the company has recorded immaterial amounts related to stipulated penalties it determined to be probable and estimable

The company is 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.

Increasing competition, including increased global competition among our customers in emerging markets, is a risk factor.

The company has long-standing relationships with many of the leading manufacturers in the markets it serves, including PACCAR Inc., Traton Group, Daimler Trucks North America and Stellantis N.V.

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

Selling, general and administrative expenses decreased $68 million for the three months ended March 31, 2025, and decreased 0.6 points as a percentage of net sales versus the comparable period in 2024. The decreases were mainly due to lower compensation and consulting expenses, primarily due to the divestiture of Atmus.

Research, development and engineering expenses decreased $25 million for the three months ended March 31, 2025, and decreased 0.2 points as a percentage of net sales versus the comparable period in 2024. The decreases were mainly due to lower compensation expenses, primarily due to the divestiture of Atmus.

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

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

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

Our plan to reposition our portfolio of product offerings through exploration of strategic acquisitions, divestitures or exiting the production of certain product lines or product categories and related uncertainties of such decisions is a risk factor.

During the three months ended March 31, 2025, we did not make any repurchases of common stock. The dollar value remaining available for future purchases under the 2019 program at March 31, 2025, was $218 million.

We paid dividends of $251 million during the three months ended March 31, 2025.

We plan to spend an estimated $1.4 billion to $1.5 billion in 2025 on capital expenditures with over 65 percent of these expenditures expected to be invested in North America.

Evolving environmental and climate change legislation and regulatory initiatives is a risk factor.

Increased scrutiny from regulatory agencies, as well as unpredictability in the adoption, implementation and enforcement of emission standards around the world is a risk factor.

Failure to meet sustainability expectations or standards, or achieve our sustainability goals is a risk factor.

Political, economic and other risks from operations in numerous countries including political, economic and social uncertainty and the evolving globalization of our business is a risk factor.

Increasing competition, including increased global competition among our customers in emerging markets is a risk factor.

Climate change, global warming, more stringent climate change regulations, accords, mitigation efforts, greenhouse gas regulations or other legislation designed to address climate change is a risk factor.