Core Insights - Allison Transmission Holdings (ALSN) reported Q2 2025 earnings of $2.29 per share, exceeding the Zacks Consensus Estimate of $2.20 and reflecting a 7.5% year-over-year increase. Quarterly revenues reached $814 million, a slight decline of 0.2% from the previous year but surpassing the Zacks Consensus Estimate of $794 million [1]. Segmental Performance - In the North America On-Highway end market, net sales decreased by 8.6% year-over-year to $417 million, falling short of the Zacks Consensus Estimate of $442 million due to reduced demand for medium-duty trucks [2]. - The Outside North America On-Highway end market saw net sales rise to $142 million from $128 million in the same quarter of 2024, driven by increased demand in South America and Europe, and exceeded the Zacks Consensus Estimate of $123 million [2]. - Global Off-Highway end market net sales dropped to $16 million from $23 million year-over-year, missing the Zacks Consensus Estimate of $18.45 million due to weaker demand from energy, mining, and construction sectors outside North America [3]. - The Defense end market experienced a significant increase in net sales, rising 46.5% year-over-year to $63 million, driven by focused growth initiatives, and also surpassed the Zacks Consensus Estimate of $52 million [3]. - Net sales in the Service Parts, Support Equipment & Other end markets grew by 6% year-over-year to $176 million, attributed to higher demand for service parts and price increases, beating the Zacks Consensus Estimate of $162 million [4]. Financial Position - Gross profit for Allison Transmission was $402 million, up from $394 million in the previous year, primarily due to price increases on certain products [5]. - Adjusted EBITDA for the quarter was $313 million, an increase from $301 million reported a year ago [5]. - Selling, general and administrative expenses rose by 24.4% year-over-year to $102 million, while engineering and R&D expenses decreased to $44 million from $49 million [6]. - As of June 30, 2025, cash and cash equivalents stood at $778 million, a slight decrease from $781 million at the end of 2024, with long-term debt remaining unchanged at $2.4 billion [6]. - Net cash provided by operating activities totaled $184 million, and adjusted free cash flow was $153 million, up from $150 million in the previous year [7]. 2025 Outlook - The company revised its full-year 2025 net sales guidance to a range of $3,075-$3,175 million, down from the previous estimate of $3,200-$3,300 million. Net income expectations were also lowered to $640-$680 million from $735-$785 million [8]. - Adjusted EBITDA is now estimated to be between $1,130-$1,180 million, down from the earlier forecast of $1,170-$1,230 million [8]. - Expected net cash provided by operating activities is now between $785 million and $835 million, compared to the previous estimate of $800-$860 million, with capital expenditures projected in the range of $165-$175 million [9][10].

Analyst's Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in ALSN over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking ...

Core Insights - Brazil's modernization of student transportation is being supported by Allison Transmission through the delivery of microbuses equipped with advanced automatic transmissions, marking a significant step in the school bus market in South America [1][2] Company Overview - Allison Transmission is a leading designer and manufacturer of propulsion solutions for commercial and defense vehicles, recognized as the largest global manufacturer of medium- and heavy-duty fully automatic transmissions [8][9] - The company has a global presence in over 150 countries, with regional headquarters in the Netherlands, China, and Brazil, and manufacturing facilities in the USA, Hungary, and India [8][9] Industry Impact - The introduction of fully automatic transmissions in school buses is part of the Caminho da Escola Program, aimed at providing safer and more reliable transportation for public school students in Brazil [3][5] - The new buses are designed for rough terrain, ensuring that students traveling long distances on unpaved roads have access to education [3][4] Product Features - Allison's fully automatic transmissions enhance driving experience by eliminating manual gear shifts, reducing physical strain on drivers, and providing greater control in challenging driving conditions [4][6] - The design of Allison Automatics allows for continuous power delivery and a smooth driving experience, minimizing torque interruptions during gear shifts [6]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The financial statements for Q2 and H1 2025 show stable sales, increased net income, and higher operating cash flow, alongside significant stock repurchases [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and stockholders' equity increased slightly as of June 30, 2025, driven by current asset growth and a slight decrease in liabilities Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $1,587 | $1,538 | | **Total Assets** | $5,411 | $5,336 | | **Total Current Liabilities** | $472 | $506 | | **Total Liabilities** | $3,658 | $3,685 | | **Total Stockholders' Equity** | $1,753 | $1,651 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Q2 2025 net sales remained flat, while net income and diluted EPS increased for both the quarter and the six-month period Q2 and H1 2025 vs 2024 Performance (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $814 | $816 | $1,580 | $1,605 | | Gross profit | $402 | $394 | $780 | $760 | | Operating income | $256 | $263 | $505 | $497 | | Net income | $195 | $187 | $387 | $356 | | Diluted EPS | $2.29 | $2.13 | $4.50 | $4.05 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased in H1 2025, but significant cash was used for investing activities and substantially higher stock repurchases Six Months Ended June 30 Cash Flow Summary (in millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $365 | $344 | | Net cash used for investing activities | $(59) | $(32) | | Net cash used for financing activities | $(316) | $(218) | | **Net (decrease) increase in cash** | **$(3)** | **$93** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail revenue by market, the **$2.7 billion** Dana off-highway acquisition, and the impact of new U.S. tax legislation Disaggregated Revenue by End Market (in millions) | End Market | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | North America On-Highway | $417 | $456 | $852 | $876 | | Outside North America On-Highway | $142 | $128 | $254 | $243 | | Global Off-Highway | $16 | $23 | $34 | $69 | | Defense | $63 | $43 | $116 | $91 | | Service Parts, Support Equipment and Other | $176 | $166 | $324 | $326 | | **Total Net Sales** | **$814** | **$816** | **$1,580** | **$1,605** | - On June 11, 2025, the company agreed to acquire the off-highway business of Dana Incorporated for approximately **$2,732 million**, funded by cash and debt. The transaction is expected to close in late Q4 2025[87](index=87&type=chunk) - A new U.S. federal income tax law, the One Big Beautiful Bill Act (OBBBA), was enacted on July 4, 2025. It allows for immediate deduction of qualified capital investments and suspends the requirement to capitalize R&D expenditures. The company is currently evaluating its impact[90](index=90&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses flat Q2 sales, improved gross profit, the pending **$2.7 billion** Dana acquisition, and strong liquidity supporting operations and capital returns [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Q2 2025 net sales were flat, with strong Defense growth offsetting declines in North America On-Highway, leading to an improved gross profit margin of **49%** Q2 Net Sales by End Market (in millions) | End Market | Q2 2025 | Q2 2024 | % Variance | | :--- | :--- | :--- | :--- | | North America On-Highway | $417 | $456 | (9)% | | Outside North America On-Highway | $142 | $128 | 11% | | Global Off-Highway | $16 | $23 | (30)% | | Defense | $63 | $43 | 47% | | Service Parts, Support Equipment and Other | $176 | $166 | 6% | | **Total Net Sales** | **$814** | **$816** | **0%** | - Q2 2025 gross profit increased by **$8 million** YoY, driven by **$34 million** from price increases, which more than offset the impact of decreased sales volume and unfavorable material costs[117](index=117&type=chunk) - Selling, general and administrative expenses increased **24%** in Q2 2025, primarily due to costs related to the pending acquisition of Dana's off-highway business and higher product warranty expense[118](index=118&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$778 million** cash and **$745 million** credit, supporting operations, **$256 million** in stock repurchases, and a **$2 billion** acquisition bridge loan - As of June 30, 2025, total liquidity included **$778 million** in cash and cash equivalents and **$745 million** available under the Revolving Credit Facility[134](index=134&type=chunk)[139](index=139&type=chunk) - In H1 2025, the company returned significant capital to shareholders, repurchasing **$256 million** of its common stock, a substantial increase from **$83 million** in H1 2024[142](index=142&type=chunk)[147](index=147&type=chunk) - In connection with the pending acquisition of Dana's off-highway business, the company has entered into a commitment for a **$2 billion** bridge loan facility, which it expects to replace with permanent financing[141](index=141&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rates, foreign currency, and commodity prices, with sensitivity analyses showing potential impacts on net earnings - A **one-eighth percent** change in interest rates on the fully drawn Senior Secured Credit Facility would impact annual interest expense by approximately **$1 million**[156](index=156&type=chunk) - A **10%** aggregate change in the Chinese Yuan, Euro, Indian Rupee, and Japanese Yen would change net earnings by an estimated **$7 million** per year[158](index=158&type=chunk) - A **10%** price variation in aluminum and steel would change annual earnings by approximately **$8 million** and **$12 million**, respectively, assuming current purchase levels[160](index=160&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were **effective** as of the end of the period covered by the report[162](index=162&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[163](index=163&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, but management anticipates no material adverse effect on its financial condition or operations - The company is party to various legal proceedings but does not expect the outcomes to have a **material adverse effect** on its financial condition[79](index=79&type=chunk)[165](index=165&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) New risk factors relate to the pending Dana acquisition, including completion, financing, integration challenges, and realizing anticipated synergies - New risks have been added related to the pending acquisition of Dana's off-highway business[166](index=166&type=chunk) - Specific risks include: the acquisition may not be completed in a timely manner or at all; failure to obtain intended financing; potential loss of key personnel and disruption of business relationships; and challenges with successfully integrating the acquired business and realizing expected synergies[166](index=166&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[177](index=177&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q2 2025, the company repurchased **1,088,028** shares for **$102.5 million**, with **$1.26 billion** remaining authorized for future repurchases Common Stock Repurchases for Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining for Repurchase | | :--- | :--- | :--- | :--- | | April 2025 | 585,859 | $89.61 | $1,313,156,511 | | May 2025 | 297,720 | $100.76 | $1,283,159,528 | | June 2025 | 204,449 | $97.81 | $1,263,161,863 | | **Total Q2** | **1,088,028** | **$94.20** | **N/A** | [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) An officer terminated a Rule 10b5-1 trading arrangement for **6,300** shares on May 7, 2025 - On May 7, 2025, an officer of the company terminated a previously established Rule 10b5-1 trading plan for the sale of **6,300** shares[181](index=181&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) Key exhibits include the Stock Purchase Agreement for the Dana acquisition and required CEO/CFO certifications - Key exhibits filed with this report include the Stock Purchase Agreement for the Dana acquisition and CEO/CFO certifications (Exhibits **2.1**, **31.1**, **31.2**, **32.1**)[182](index=182&type=chunk)

Core Insights - Allison Transmission reported revenue of $814 million for the quarter ended June 2025, a slight decrease of 0.3% year-over-year, while EPS increased to $2.29 from $2.13 in the same quarter last year [1] - The revenue exceeded the Zacks Consensus Estimate of $794.43 million, resulting in a positive surprise of +2.46%, and the EPS also surpassed the consensus estimate of $2.20 with a surprise of +4.09% [1] Financial Performance Metrics - Key metrics indicate that Allison Transmission's stock has underperformed, returning -10.5% over the past month compared to the S&P 500 composite's +0.6% [3] - Net Sales by End Market showed varied performance: - Global Off-Highway: $16 million vs. $18.45 million estimate, underperforming [4] - North America On-Highway: $417 million vs. $441.84 million estimate, a decline of -8.6% year-over-year [4] - Service Parts, Support Equipment & Other: $176 million vs. $162.13 million estimate, an increase of +6% year-over-year [4] - Outside North America On-Highway: $142 million vs. $123.26 million estimate, an increase of +10.9% year-over-year [4] - Defense: $63 million vs. $52.25 million estimate, a significant increase of +46.5% year-over-year [4]

Financial Data and Key Metrics Changes - Year-over-year net sales for Q2 2025 were flat at $814 million compared to the same period in 2024 [23] - Gross profit increased to $402 million, up $8 million from $394 million in Q2 2024 [25] - Net income for the quarter rose to $195 million, an increase of $8 million from $187 million in Q2 2024 [25] - Adjusted EBITDA for the quarter was $313 million, reflecting a 4% year-over-year increase [25] - Diluted earnings per share increased by 8% year-over-year to a record $2.29 [26] Business Line Data and Key Metrics Changes - Defense end market net sales increased by 47% year-over-year [23] - Outside North America on-highway end market achieved record quarterly net sales of $142 million, an 11% increase year-over-year, driven by higher demand in South America and Europe [23] - Service parts, support equipment, and other end market net sales increased by 6% year-over-year, primarily due to higher demand for service parts and price increases [24] - Global off-highway end market net sales decreased by 30%, and North America on-highway end market net sales decreased by 9% [24] Market Data and Key Metrics Changes - The company noted a significant increase in demand in South America and Europe, contributing to the growth in the outside North America on-highway end market [23] - The North American on-highway market is experiencing layoffs and production adjustments due to elevated dealer inventories and reduced demand [39][40] Company Strategy and Development Direction - The acquisition of Dana's off-highway business for approximately $2.7 billion is expected to enhance Allison's global footprint and operational capabilities [17][19] - The company anticipates $120 million in annual run rate synergies from the acquisition, primarily through operational efficiencies and procurement [18][21] - Allison aims to leverage Dana's technology centers for local development and cost synergies, enhancing product innovation and engineering capabilities [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed that current market conditions are viewed as a deferral of demand rather than a permanent decline, with expectations of improved conditions in 2026 [70] - The company is closely monitoring regulatory changes, including EPA emissions regulations, which may impact customer purchasing behavior [70] - Management remains optimistic about the defense market and expects continued growth in that segment [55] Other Important Information - The company revised its full-year 2025 guidance, expecting net sales to be in the range of $3.75 billion to $3.175 billion [28] - Capital expenditures are anticipated to be between $165 million and $175 million, with adjusted free cash flow expected in the range of $620 million to $660 million [28] Q&A Session Summary Question: Can you expand on the potential for inorganic growth post-acquisition? - Management indicated that the acquisition provides opportunities for bolt-on acquisitions and organic growth due to a larger global footprint and enhanced capabilities [30][31] Question: What areas are driving the guidance change? - Management noted significant revisions in North America on-highway build rates and OEM responses to market demand conditions as key factors influencing the guidance change [37][39] Question: Can you discuss margin guidance and pricing expectations? - Management highlighted that pricing was strong in the quarter, with expectations for continued positive pricing tailwinds, although volume deterioration is anticipated [48][50] Question: What is the outlook for the service parts business in the second half? - Management expects stable trends in service requirements, although demand for support equipment may decrease due to lower volumes [72]

Financial Data and Key Metrics Changes - Year-over-year net sales for Q2 2025 were $814 million, flat compared to the same period in 2024 [20] - Gross profit increased to $402 million, up $8 million from $394 million in Q2 2024 [22] - Net income for the quarter was $195 million, an increase of $8 million from $187 million in Q2 2024 [22] - Adjusted EBITDA for the quarter was $313 million, a 4% increase year over year [22] - Diluted earnings per share increased 8% year over year to a record $2.29 [23] Business Line Data and Key Metrics Changes - Defense end market net sales increased 47% year over year [20] - Outside North America on-highway end market net sales reached $142 million, an 11% increase year over year, driven by higher demand in South America and Europe [20] - Service parts, support equipment, and other end market net sales increased 6% year over year, driven by higher demand for service parts and price increases [21] - Global off-highway end market net sales decreased by 30% [21] - North America on-highway end market net sales decreased by 9% [21] Market Data and Key Metrics Changes - The company noted a significant decrease in North America on-highway build rates, with OEMs responding to near-term market demand conditions [39] - The defense market continues to show growth, with expectations for improvement in both wheeled and tracked vehicles in the second half of the year [55] - The service parts business is expected to remain stable, although demand for support equipment may decrease due to lower volumes [72] Company Strategy and Development Direction - The acquisition of Dana's off-highway business for approximately $2.7 billion is expected to enhance Allison's global footprint and operational capabilities [15] - The company anticipates $120 million in annual run rate synergies from the acquisition, primarily through operational efficiencies [15] - Allison aims to leverage Dana's global technology centers for local development and cost synergies [18] - The focus post-acquisition will be on combining the two businesses while maintaining solid financial performance [19] Management's Comments on Operating Environment and Future Outlook - Management expressed that current market conditions are viewed as a deferral of demand rather than a permanent decline [40] - The company is closely monitoring the impact of tariffs and regulatory changes, particularly regarding emissions regulations [70] - Management remains optimistic about the defense market and expects continued growth in that segment [55] Other Important Information - The company ended Q2 2025 with a net leverage ratio of 1.38 times and $778 million in cash [25] - Full year 2025 guidance was revised to net sales in the range of $3.75 billion to $3.175 billion [26] - The company plans to maintain its capital allocation strategy, balancing share buybacks and debt repayment [62] Q&A Session Summary Question: Can you expand on the potential for inorganic growth post-acquisition? - Management indicated that the acquisition provides opportunities for bolt-on acquisitions and organic growth due to a larger global footprint [29] Question: What areas are driving the guidance change? - Management noted significant revisions in North America on-highway build rates and OEM responses to market demand [39] Question: Can you discuss margin guidance and pricing expectations? - Management expects pricing to remain strong, with anticipated impacts from tariffs but limited exposure due to North American sourcing [51] Question: What is the outlook for the service parts business in the second half? - Management expects stable trends in service requirements, although demand for support equipment may decrease [72]

Dave Graziosi, Chair & CEO Fred Bohley, COO Scott Mell, CFO & Treasurer Q2 2025 Earnings Release August 4th, 2025 1 Call Agenda Safe Harbor Statement The following information contains forward-looking statements. The words "believe," "expect," "anticipate," "intend," "estimate" and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. You should not place undue reliance on these forward-looking stateme ...

[Second Quarter 2025 Financial & Operational Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20%26%20Operational%20Highlights) Allison Transmission reported Q2 2025 net sales of $814 million, record diluted EPS of $2.29, and announced the acquisition of Dana's Off-Highway business - Announced a definitive agreement to acquire Dana Incorporated's Off-Highway business for approximately **$2.7 billion**, with the transaction expected to close in late Q4 2025[2](index=2&type=chunk) Q2 2025 Key Financial Metrics | Metric | Value | YoY Change | | :--- | :--- | :--- | | Net Sales | $814 million | -0.2% | | Net Income | $195 million | +4% | | Diluted EPS | $2.29 (Record) | +8% | | Adjusted EBITDA | $313 million | +4% | | Adjusted EBITDA Margin | 38.5% | +160 bps | - Continued strength in the Defense end market and record quarterly net sales of **$142 million** in the Outside North America On-Highway end market were key top-line drivers[2](index=2&type=chunk)[3](index=3&type=chunk) - Repurchased **$102 million** of common stock during the quarter, representing over **1%** of outstanding shares, with year-to-date repurchases amounting to **3%** of outstanding shares[3](index=3&type=chunk) [Financial Performance Analysis](index=1&type=section&id=Financial%20Performance%20Analysis) Net sales were flat at $814 million, with Defense and Outside North America On-Highway growth offsetting North America declines, leading to a 4% net income increase [Net Sales by End Market](index=1&type=section&id=Net%20Sales%20by%20End%20Market) Q2 Net Sales by End Market ($M) | End Market | Q2 2025 | Q2 2024 | Variance ($M) | | :--- | :--- | :--- | :--- | | North America On-Highway | $417 | $456 | ($39) | | Outside North America On-Highway | $142 | $128 | $14 | | Global Off-Highway | $16 | $23 | ($7) | | Defense | $63 | $43 | $20 | | Service Parts, Support Equipment & Other | $176 | $166 | $10 | | **Total Net Sales** | **$814** | **$816** | **($2)** | - Key drivers for sales changes include: **Defense** increased by **$20 million** due to execution of growth initiatives; **Outside North America On-Highway** increased by **$14 million** from higher demand in South America and Europe; **North America On-Highway** decreased by **$39 million** due to lower demand for medium-duty trucks, partially offset by price increases[6](index=6&type=chunk) [Key Financial Metrics (Income Statement & Cash Flow)](index=2&type=section&id=Key%20Financial%20Metrics%20%28Income%20Statement%20%26%20Cash%20Flow%29) - Gross profit increased by **$8 million** to **$402 million**, primarily driven by price increases on certain products, which offset lower volumes and unfavorable material costs[8](index=8&type=chunk) - Selling, general and administrative (SG&A) expenses rose by **$20 million** to **$102 million**, principally due to **$15 million** of expenses related to the announced acquisition of the Dana Off-Highway business[9](index=9&type=chunk) - Net income increased by **$8 million** to **$195 million**, driven by higher gross profit and unrealized gains on marketable securities, partially offset by the increased SG&A expenses[10](index=10&type=chunk) - Net cash provided by operating activities increased by **$13 million** to **$184 million**, mainly due to lower working capital requirements and higher gross profit[11](index=11&type=chunk) [2025 Guidance Update](index=2&type=section&id=2025%20Guidance%20Update) The company revised its full-year 2025 guidance, reflecting market conditions, acquisition expenses, and tax impacts, while maintaining its Adjusted EBITDA margin midpoint Revised Full Year 2025 Guidance ($M) | Metric | Range | | :--- | :--- | | Net Sales | $3,075 - $3,175 | | Net Income | $640 - $680 | | Adjusted EBITDA | $1,130 - $1,180 | | Net Cash from Operating Activities | $785 - $835 | | Capital Expenditures | $165 - $175 | | Adjusted Free Cash Flow | $620 - $660 | [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including Statements of Operations, Balance Sheets, and Cash Flows, for Q2 and YTD 2025 versus 2024 [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (Unaudited, $M) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | Net sales | $814 | $816 | $1,580 | $1,605 | | Gross profit | $402 | $394 | $780 | $760 | | Operating income | $256 | $263 | $505 | $497 | | Net income | $195 | $187 | $387 | $356 | | Diluted EPS | $2.29 | $2.13 | $4.50 | $4.05 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (Unaudited, $M) | | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **ASSETS** | | | | Cash and cash equivalents | $778 | $781 | | Total Current Assets | $1,587 | $1,538 | | TOTAL ASSETS | $5,411 | $5,336 | | **LIABILITIES & EQUITY** | | | | Total Current Liabilities | $472 | $506 | | Long-term debt | $2,394 | $2,395 | | TOTAL LIABILITIES | $3,658 | $3,685 | | TOTAL STOCKHOLDERS' EQUITY | $1,753 | $1,651 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (Unaudited, $M) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | Net cash provided by operating activities | $184 | $171 | $365 | $344 | | Net cash used for investing activities | ($33) | ($20) | ($59) | ($32) | | Net cash used for financing activities | ($132) | ($54) | ($316) | ($218) | | Net increase (decrease) in cash | $25 | $97 | ($3) | $93 | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=8&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) This section details adjustments from GAAP to non-GAAP measures, including Adjusted EBITDA and Adjusted Free Cash Flow, for Q2 2025 and full-year guidance Q2 Reconciliation of Net Income to Adjusted EBITDA ($M) | | Three months ended June 30, | | :--- | :--- | | | **2025** | **2024** | | Net income (GAAP) | $195 | $187 | | Income tax expense | $47 | $47 | | Depreciation & Amortization | $30 | $29 | | Interest expense, net | $22 | $22 | | Acquisition-related expenses | $15 | $— | | Stock-based compensation | $8 | $8 | | Other adjustments | ($4) | $8 | | **Adjusted EBITDA (Non-GAAP)** | **$313** | **$301** | Full Year 2025 Guidance Reconciliation ($M) | | Low | High | | :--- | :--- | :--- | | **Net Income to Adjusted EBITDA** | | | | Net income (GAAP) | $640 | $680 | | Adjustments (Taxes, Interest, D&A, etc.) | $490 | $500 | | **Adjusted EBITDA (Non-GAAP)** | **$1,130** | **$1,180** | | **Operating Cash Flow to Adj. FCF** | | | | Net cash provided by Operating activities (GAAP) | $785 | $835 | | Additions of long-lived assets | ($165) | ($175) | | **Adjusted free cash flow (Non-GAAP)** | **$620** | **$660** |

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