NOTE D. REVENUE

Revenue is recognized as each distinct performance obligation within a contract is satisfied. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. The Company enters into long-term agreements (“LTAs”) and distributor agreements with certain customers. The LTAs and distributor agreements do not include committed volumes until underlying purchase orders are issued; therefore, the Company determined that purchase orders are the contract with a customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when the performance obligation is satisfied, as there is no right of return.

Some of the Company's contracts include multiple performance obligations, most commonly the sale of both a transmission and extended transmission coverage or similar service-type warranties ("ETC"). The Company allocates the contract’s transaction price to each performance obligation based on the standalone selling price of each distinct good or service in the contract.

The Company may also use volume-based discounts and rebates as marketing incentives in the sales of both vehicle propulsion solutions and service parts, which are accounted for as variable consideration. The Company records the impact of the incentives as a reduction to revenue when it is determined that the adjustment is not likely to reverse. The Company estimates the impact of other incentives based on the related sales and market conditions in the end market vocation. Refund liabilities related to rebates and other incentives are included in other accrued liabilities on the Company's Condensed Consolidated Balance Sheets.

The Company recorded no material adjustments based on variable consideration during any of the three or six months ended June 30, 2026 or 2025.

Payment terms with our customers are established based on an assessment of the customer's credit worthiness and industry and regional practices and generally do not exceed 180 days. For certain goods or services, the Company receives consideration prior to satisfying the related performance obligation. Such consideration is recorded as a contract liability in current and non-current deferred revenue as of June 30, 2026 and December 31, 2025. See "Note K. Deferred Revenue” for more information, including the amount of revenue earned during each of the three and six months ended June 30, 2026 and 2025 that had been previously deferred. The Company had no material contract assets as of either June 30, 2026 or December 31, 2025.

NOTE K. DEFERRED REVENUE

As of June 30, 2026, current and non-current deferred revenue were $73 million and $105 million, respectively. As of June 30, 2025, current and non-current deferred revenue were $36 million and $100 million, respectively.

Deferred revenue recorded in current and non-current liabilities related to ETC as of June 30, 2026 was $33 million and $102 million, respectively. Deferred revenue recorded in current and non-current liabilities related to ETC as of June 30, 2025 was $29 million and $100 million, respectively.