CNH Industrial N.V.(CNH) - 2025 Q2 - Quarterly Results

Executive Summary & Q2 2025 Highlights CNH Industrial N.V. navigated challenging Q2 2025 market conditions with effective operations, despite significant declines in consolidated revenue and net income, while achieving substantial industrial free cash flow growth CEO Statement The CEO affirmed effective operations and strategic focus despite challenging market conditions, emphasizing product excellence and partner support - The company operated effectively and met targets despite challenging market conditions[1] - Strategic priorities include advancing operational improvements and investments to deliver superior products and technology[1] - Appreciation for supplier and dealer support in navigating uncertain trade environments and achieving long-term success[1] Q2 2025 Consolidated Financial Highlights Consolidated revenue and industrial net sales declined significantly in Q2 2025 due to lower demand, but industrial free cash flow improved substantially Q2 2025 Consolidated Financial Data (US-GAAP) | Indicator | Q2 2025 ($ million) | Q2 2024 ($ million) | Change ($ million) | Change Rate | | :--------------------------------- | :------------- | :------------- | :----- | :------- | | Consolidated Revenue | 4,711 | 5,488 | (777) | (14)% | | Industrial Net Sales | 4,021 | 4,803 | (782) | (16)% | | Net Income | 217 | 404 | (187) | (46)% | | Diluted EPS | 0.17 | 0.32 | (0.15) | - | | Cash Flow from Operating Activities | 772 | 379 | +393 | +103.7% | | Industrial Free Cash Flow | 451 | 140 | +311 | +222.1% | - Consolidated revenue decreased by 14% to $4.711 billion, and industrial net sales decreased by 16% to $4.021 billion, primarily due to lower industry demand and dealer destocking[1][4] - Net income and diluted EPS decreased by 46% and $0.15 to $217 million and $0.17, respectively[1][4] Q2 2025 Non-GAAP Financial Highlights Non-GAAP metrics for Q2 2025 revealed substantial declines in industrial adjusted EBIT and net income, yet industrial free cash flow saw significant year-over-year improvement Q2 2025 Non-GAAP Financial Data | Indicator | Q2 2025 ($ million) | Q2 2024 ($ million) | Change ($ million) | Change Rate | | :--------------------------------- | :------------- | :------------- | :----- | :------- | | Industrial Adjusted EBIT | 224 | 502 | (278) | (55)% | | Industrial Adjusted EBIT Margin | 5.6% | 10.5% | (490) bps | - | | Adjusted Net Income | 216 | 451 | (235) | (52)% | | Adjusted Diluted EPS | 0.17 | 0.35 | (0.18) | - | | Industrial Free Cash Flow | 451 | 140 | +311 | +222.1% | - Industrial gross margin decreased by 230 basis points to 20.6%[4] - Adjusted effective tax rate (ETR) increased from 21.0% in Q2 2024 to 27.7%[5] Segment Performance - Q2 2025 Q2 2025 saw significant declines in net sales and adjusted EBIT for Agriculture and Construction due to weak demand, while Financial Services experienced slight revenue and net income decreases Agriculture Segment The Agriculture segment experienced substantial declines in net sales and adjusted EBIT in Q2 2025, driven by weak demand and dealer destocking Q2 2025 Agriculture Segment Financial Data | Indicator | Q2 2025 ($ million) | Q2 2024 ($ million) | Change ($ million) | Change Rate | | :------------------- | :------------- | :------------- | :----- | :------- | | Net Sales | 3,248 | 3,913 | (665) | (17)% | | Gross Margin | 21.8% | 24.4% | (260) bps | - | | Adjusted EBIT | 263 | 502 | (239) | (48)% | | Adjusted EBIT Margin | 8.1% | 12.8% | (470) bps | - | - North American sales of tractors under 140 HP decreased by 7%, tractors over 140 HP decreased by 37%, and combine harvesters decreased by 23%[7] - R&D investment as a percentage of sales was 6.0%, up from 5.5% in Q2 2024[8] Construction Segment Construction segment net sales and adjusted EBIT declined in Q2 2025, mainly due to lower volumes in North America, despite slight global heavy equipment sales growth Q2 2025 Construction Segment Financial Data | Indicator | Q2 2025 ($ million) | Q2 2024 ($ million) | Change ($ million) | Change Rate | | :------------------- | :------------- | :------------- | :----- | :------- | | Net Sales | 773 | 890 | (117) | (13)% | | Gross Margin | 15.7% | 16.5% | (80) bps | - | | Adjusted EBIT | 35 | 60 | (25) | (42)% | | Adjusted EBIT Margin | 4.5% | 6.7% | (220) bps | - | - Global heavy construction equipment industry sales increased by 3% year-over-year, while light construction equipment decreased by 2%[9] - Total demand in North and South America decreased by 4%, while EMEA and APAC grew by 1% and 3%, respectively[9] Financial Services Segment Financial Services revenue and net income slightly decreased in Q2 2025, impacted by currency, lower yields, and higher risk costs, partially offset by remarketing sales and improved interest margins Q2 2025 Financial Services Segment Financial Data | Indicator | Q2 2025 ($ million) | Q2 2024 ($ million) | Change ($ million) | Change Rate | | :------------------- | :------------- | :------------- | :----- | :------- | | Revenue | 685 | 687 | (2) | (0.3)% | | Net Income | 87 | 91 | (4) | (4)% | | Equity at Quarter-End | 2,907 | 2,843 | +64 | +2.2% | | Retail Loan Originations | 2,740 | 2,864 | (124) | (4.3)% | - Managed portfolio (including unconsolidated joint ventures) was $28.7 billion, an increase of $0.2 billion year-over-year[13] - Receivables past due over 30 days increased from 2.5% in Q2 2024 to 3.9% of total receivables, primarily due to higher delinquencies in Brazil[13] 2025 Outlook CNH Industrial N.V. anticipates lower 2025 retail sales in agriculture and construction, planning production cuts and cost reductions to mitigate margin erosion, while reaffirming full-year guidance Market Conditions & Company Strategy The company expects lower 2025 retail sales in agriculture and construction, planning production cuts to reduce inventory and implementing cost-saving measures to mitigate margin erosion - Global retail sales for agriculture and construction equipment markets are expected to be lower in 2025 than in 2024[14] - The company will reduce production volumes to decrease excess channel inventory, resulting in lower net sales in 2025[14] - Operating costs are being reduced through lean manufacturing, strategic sourcing, and prudent management of SG&A and R&D expenses to partially mitigate margin erosion[15] - The company is navigating an evolving global trade environment, with uncertainties in U.S. trade policy potentially impacting full-year forecasts[16] Reaffirmed Full-Year Guidance Full-year 2025 guidance was reaffirmed, anticipating decreased net sales and adjusted EBIT margins for agriculture and construction, but stable industrial free cash flow and adjusted diluted EPS Full-Year 2025 Guidance | Indicator | Full-Year 2025 Guidance | | :--------------------------------- | :------------- | | Agriculture Net Sales | Down 12% to 20% year-over-year | | Agriculture Adjusted EBIT Margin | 7% to 9% | | Construction Net Sales | Down 4% to 15% year-over-year | | Construction Adjusted EBIT Margin | 2% to 4% | | Industrial Free Cash Flow | $100 million to $500 million | | Adjusted Diluted EPS | $0.50 to $0.70 | Six Months Ended June 30, 2025 Results (YTD Q2 2025) H1 2025 saw double-digit declines in consolidated revenue, industrial net sales, net income, and adjusted EBIT, but operating and industrial free cash flows significantly improved YTD Q2 2025 Consolidated Financial Highlights H1 2025 saw double-digit declines in consolidated revenue, industrial net sales, net income, and adjusted EBIT, but operating and industrial free cash flows significantly improved YTD Q2 2025 Consolidated Financial Data (US-GAAP) | Indicator | H1 2025 ($ million) | H1 2024 ($ million) | Change ($ million) | Change Rate | | :--------------------------------- | :------------- | :------------- | :----- | :------- | | Consolidated Revenue | 8,539 | 10,306 | (1,767) | (17)% | | Industrial Net Sales | 7,193 | 8,934 | (1,741) | (19)% | | Net Income | 349 | 773 | (424) | (55)% | | Diluted EPS | 0.27 | 0.61 | (0.34) | - | | Cash Flow from Operating Activities | 934 | (515) | +1,449 | +281.4% | | Industrial Free Cash Flow | (116) | (1,069) | +953 | +89.1% | - Industrial gross margin decreased by 290 basis points to 19.9%[19] - Industrial adjusted EBIT decreased by 63% to $325 million, with adjusted EBIT margin down 530 basis points to 4.5%[19] YTD Q2 2025 Segment Performance In H1 2025, both Agriculture and Construction segments experienced significant declines in net sales and adjusted EBIT due to persistent weak market demand, while the Financial Services segment also saw slight revenue and net income decreases YTD Q2 2025 Agriculture Segment H1 2025 Agriculture segment net sales decreased by 20%, adjusted EBIT by 55%, and adjusted EBIT margin by 530 basis points YTD Q2 2025 Agriculture Segment Financial Data | Indicator | H1 2025 ($ million) | H1 2024 ($ million) | Change ($ million) | Change Rate | | :------------------- | :------------- | :------------- | :----- | :------- | | Net Sales | 5,829 | 7,286 | (1,457) | (20)% | | Gross Margin | 21.0% | 24.1% | (310) bps | - | | Adjusted EBIT | 402 | 890 | (488) | (55)% | | Adjusted EBIT Margin | 6.9% | 12.2% | (530) bps | - | YTD Q2 2025 Construction Segment H1 2025 Construction segment net sales decreased by 17%, adjusted EBIT by 56%, and adjusted EBIT margin by 310 basis points YTD Q2 2025 Construction Segment Financial Data | Indicator | H1 2025 ($ million) | H1 2024 ($ million) | Change ($ million) | Change Rate | | :------------------- | :------------- | :------------- | :----- | :------- | | Net Sales | 1,364 | 1,648 | (284) | (17)% | | Gross Margin | 15.3% | 16.9% | (160) bps | - | | Adjusted EBIT | 49 | 111 | (62) | (56)% | | Adjusted EBIT Margin | 3.6% | 6.7% | (310) bps | - | YTD Q2 2025 Financial Services Segment H1 2025 Financial Services segment revenue decreased by 3% to $1.336 billion, and net income declined by 15% to $177 million YTD Q2 2025 Financial Services Segment Financial Data | Indicator | H1 2025 ($ million) | H1 2024 ($ million) | Change ($ million) | Change Rate | | :------------------- | :------------- | :------------- | :----- | :------- | | Revenue | 1,336 | 1,372 | (36) | (3)% | | Net Income | 177 | 209 | (32) | (15)% | Notes & Disclosures This section details non-GAAP financial information, outlines forward-looking statements and associated risks, and provides essential contact details for media and investor relations Non-GAAP Financial Information Non-GAAP financial measures are used to monitor operations, provide useful insights, and enhance financial performance assessment, with detailed definitions provided - Non-GAAP financial measures are used to identify operating trends, make future spending and resource allocation decisions, and provide additional transparency into core operations[21] - Non-GAAP financial measures do not have standardized meanings under U.S. GAAP and may not be comparable to similarly titled measures used by other companies[21] - Prior period financial statements have been revised to reflect non-material corrections for highly inflationary accounting treatment of unconsolidated affiliates in Turkey, leading to an overstatement of equity in earnings of unconsolidated subsidiaries and affiliates in 2023 and H1 2024[22] Forward-looking Statements This report includes forward-looking statements based on current views and assumptions, subject to known and unknown risks, uncertainties, and other factors - Forward-looking statements are not guarantees of future performance but are based on current views and assumptions, involving known and unknown risks and uncertainties[25] - Factors that could cause actual results to differ materially include economic conditions, production and supply chain disruptions, government policies, international trade policies, competitor actions, new technology developments, labor relations, and interest and currency rate fluctuations[26][28] - The company expressly disclaims any intention or obligation to update or revise any forward-looking statements[29] Contacts Contact information for media and investor relations, including names, phone numbers, and email addresses, is provided - Media inquiries: Laura Overall (+44 207 925 1964) or Rebecca Fabian (+1 312 515 2249), email: mediarelations@cnh.com[32] - Investor Relations: Jason Omerza (+1 630 740 8079) or Federico Pavesi (+39 345 605 6218), email: investor.relations@cnh.com[32] Consolidated Financial Statements The consolidated financial statements for Q2 and H1 2025 reveal declines in revenue and net income, changes in asset and liability composition, and significant improvements in operating cash flow Consolidated Statements of Operations Consolidated statements of operations reveal year-over-year declines in total revenue and net income for Q2 and H1 2025, with reduced costs and R&D, but high interest expenses Consolidated Statements of Operations Summary | Indicator ($ million) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--------------------------------------- | :------------- | :------------- | :------------- | :------------- | | Total Revenues | 4,711 | 5,488 | 8,539 | 10,306 | | Cost of Sales | 3,192 | 3,702 | 5,761 | 6,897 | | Selling, General and Administrative Expenses | 478 | 461 | 864 | 872 | | Research and Development Expenses | 218 | 237 | 402 | 465 | | Restructuring Expenses | 5 | 51 | 11 | 82 | | Interest Expense | 360 | 418 | 722 | 812 | | Net Income | 217 | 404 | 349 | 773 | | Diluted EPS | 0.17 | 0.32 | 0.27 | 0.61 | - In Q2 2025, total revenues decreased by 14.1% year-over-year, and net income decreased by 46.3% year-over-year[33] - In H1 2025, total revenues decreased by 17.1% year-over-year, and net income decreased by 54.9% year-over-year[33] Consolidated Balance Sheets Total assets slightly increased as of June 30, 2025, primarily due to higher finance receivables and inventories, with corresponding increases in liabilities and equity Consolidated Balance Sheets Summary | Indicator ($ million) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------- | :------------- | | Cash and Cash Equivalents | 2,512 | 3,191 | | Finance Receivables, Net | 23,387 | 23,085 | | Inventories, Net | 5,216 | 4,776 | | Property, Plant, Equipment and Operating Lease Assets, Net | 3,704 | 3,402 | | Intangible Assets, Net | 4,861 | 4,805 | | Total Assets | 43,687 | 42,933 | | Debt | 27,408 | 26,882 | | Other Payables and Liabilities | 8,376 | 8,221 | | Total Liabilities | 35,853 | 35,165 | | Equity | 7,779 | 7,713 | - As of June 30, 2025, cash and cash equivalents decreased by $679 million compared to year-end 2024[35] - Net finance receivables increased by $302 million, and net inventories increased by $440 million[35] Consolidated Statements of Cash Flows H1 2025 saw operating cash flow significantly improve from negative to positive, reduced investing outflows, and increased financing outflows due to net debt reduction and dividends Consolidated Statements of Cash Flows Summary | Indicator ($ million) | H1 2025 | H1 2024 | | :--------------------------------------- | :------------- | :------------- | | Net Cash Provided (Used) by Operating Activities | 934 | (515) | | Net Cash Provided (Used) by Investing Activities | (622) | (929) | | Net Cash Provided (Used) by Financing Activities | (1,261) | (820) | | Cash, Cash Equivalents and Restricted Cash at End of Period | 3,147 | 2,647 | - Net cash provided by operating activities increased by $1.449 billion year-over-year, turning from a negative $515 million in H1 2024 to a positive $934 million in H1 2025[37] - Cash outflow from financing activities increased by $441 million, primarily due to a net debt reduction of $935 million and dividend payments of $321 million[37] Supplemental Segment Financial Statements Supplemental segment financial statements for Q2 and H1 2025 detail significant revenue and net income declines for industrial activities, with financial services also showing decreases, alongside changes in balance sheet and cash flow components Supplemental Statements of Operations - Three Months Ended June 30, 2025 and 2024 Q2 2025 saw significant declines in industrial total revenue and net income, with financial services also experiencing slight reductions, impacted by rising costs and increased interest expenses Q2 2025 Industrial Activities and Financial Services Statements of Operations Summary | Indicator ($ million) | Industrial Activities (Q2 2025) | Financial Services (Q2 2025) | Industrial Activities (Q2 2024) | Financial Services (Q2 2024) | | :--------------------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Total Revenues | 4,060 | 685 | 4,832 | 687 | | Cost of Sales | 3,192 | — | 3,702 | — | | Selling, General and Administrative Expenses | 364 | 114 | 374 | 87 | | Research and Development Expenses | 218 | — | 237 | — | | Interest Expense | 65 | 329 | 75 | 374 | | Net Income | 130 | 87 | 313 | 91 | - Industrial net sales decreased by 16.3% year-over-year to $4.021 billion[39] - Industrial net income decreased by 58.5% year-over-year to $130 million[39] Supplemental Statements of Operations - Six Months Ended June 30, 2025 and 2024 H1 2025 saw significant declines in industrial total revenue and net income due to weak demand, with financial services also experiencing revenue and net income decreases from higher interest and operating costs H1 2025 Industrial Activities and Financial Services Statements of Operations Summary | Indicator ($ million) | Industrial Activities (H1 2025) | Financial Services (H1 2025) | Industrial Activities (H1 2024) | Financial Services (H1 2024) | | :--------------------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Total Revenues | 7,262 | 1,336 | 9,005 | 1,372 | | Cost of Sales | 5,761 | — | 6,897 | — | | Selling, General and Administrative Expenses | 669 | 195 | 716 | 156 | | Research and Development Expenses | 402 | — | 465 | — | | Interest Expense | 120 | 661 | 149 | 734 | | Net Income | 172 | 177 | 564 | 209 | - Industrial net sales decreased by 19.5% year-over-year to $7.193 billion[43] - Industrial net income decreased by 69.5% year-over-year to $172 million[43] Supplemental Balance Sheets Industrial activities' total assets increased due to inventories and PPE, while financial services' total assets slightly decreased, with finance receivables remaining key, and total debt rising for both segments Industrial Activities and Financial Services Supplemental Balance Sheets Summary | Indicator ($ million) | Industrial Activities (Q2 2025) | Financial Services (Q2 2025) | Industrial Activities (Q4 2024) | Financial Services (Q4 2024) | | :--------------------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Cash and Cash Equivalents | 2,106 | 406 | 2,332 | 859 | | Finance Receivables, Net | 273 | 23,604 | 218 | 23,528 | | Inventories, Net | 5,155 | 61 | 4,713 | 63 | | Total Assets | 17,538 | 26,914 | 16,677 | 27,254 | | Debt | 5,230 | 22,744 | 4,499 | 23,173 | | Equity | 4,872 | 2,907 | 4,968 | 2,745 | - Industrial activities' total assets increased from $16.677 billion at year-end 2024 to $17.538 billion as of June 30, 2025[47] - Financial Services total assets decreased from $27.254 billion at year-end 2024 to $26.914 billion[47] Supplemental Statements of Cash Flows H1 2025 saw industrial operating cash flow turn positive with increased investing outflows, while financial services maintained strong operating cash flow but experienced significantly higher financing outflows due to net debt reduction Industrial Activities and Financial Services Supplemental Statements of Cash Flows Summary | Indicator ($ million) | Industrial Activities (H1 2025) | Financial Services (H1 2025) | Industrial Activities (H1 2024) | Financial Services (H1 2024) | | :--------------------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Net Cash Provided (Used) by Operating Activities | 110 | 944 | (837) | 402 | | Net Cash Provided (Used) by Investing Activities | (639) | 17 | 101 | (1,029) | | Net Cash Provided (Used) by Financing Activities | 124 | (1,505) | (1,082) | 181 | | Cash and Cash Equivalents at End of Period | 2,201 | 946 | 1,714 | 933 | - Industrial activities' net cash provided by operating activities increased by $947 million year-over-year, turning from a negative $837 million in H1 2024 to a positive $110 million in H1 2025[50] - Financial Services' cash outflow from financing activities increased by $1.686 billion year-over-year, primarily due to a net debt reduction of $1.385 billion[50] Other Supplemental Financial Information & Reconciliations This section provides detailed reconciliations for adjusted EBIT, net cash (debt), and free cash flow, along with adjusted net income, and outlines revisions to prior period financial statements Adjusted EBIT of Industrial Activities by Segment Agriculture and Construction segments saw significant adjusted EBIT declines in Q2 and H1 2025 due to market challenges, with unallocated items negatively affecting overall industrial adjusted EBIT Adjusted EBIT of Industrial Activities by Segment | Indicator ($ million) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--------------------------------------- | :------------- | :------------- | :------------- | :------------- | | Agriculture | 263 | 502 | 402 | 890 | | Construction | 35 | 60 | 49 | 111 | | Unallocated Items, Eliminations and Other | (74) | (60) | (126) | (127) | | Total Industrial Adjusted EBIT | 224 | 502 | 325 | 874 | - In Q2 2025, Agriculture segment adjusted EBIT decreased by 47.6% year-over-year, and Construction segment decreased by 41.7%[53] - In H1 2025, total industrial adjusted EBIT decreased by 62.9% year-over-year[53] Reconciliation of Consolidated Net Income to Adjusted EBIT of Industrial Activities This reconciliation details the calculation from consolidated net income to industrial adjusted EBIT by excluding taxes, financial services, industrial interest, FX, pension costs, restructuring, and other non-recurring items Reconciliation of Consolidated Net Income to Adjusted EBIT of Industrial Activities Summary | Indicator ($ million) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--------------------------------------- | :------------- | :------------- | :------------- | :------------- | | Net Income | 217 | 404 | 349 | 773 | | Less: Consolidated Income Tax Expense | (76) | (95) | (123) | (172) | | Less: Financial Services Net Income | (87) | (91) | (177) | (209) | | Less: Financial Services Income Tax | (25) | (23) | (53) | (42) | | Add: Industrial Activities Net Interest Expense | 26 | 46 | 51 | 78 | | Add: Industrial Activities Net Foreign Exchange (Gains) Losses | 9 | 4 | 14 | 4 | | Add: Restructuring Expenses | 5 | 51 | 11 | 81 | | Total Industrial Adjusted EBIT | 224 | 502 | 325 | 874 | - In Q2 2025, restructuring expenses were $5 million, significantly lower than $51 million in Q2 2024[54] - Q2 2024 included a $15 million loss on the sale of a non-core product line, which was absent in Q2 2025[55] Reconciliation of Total (Debt) to Net Cash (Debt) This reconciliation details total debt and net cash (debt) as of June 30, 2025, segmented by industrial and financial services, including cash, restricted cash, intercompany notes, Iveco Group finance receivables, and hedging derivatives Reconciliation of Total (Debt) to Net Cash (Debt) Summary | Indicator ($ million) | Consolidated (Q2 2025) | Consolidated (Q4 2024) | Industrial Activities (Q2 2025) | Industrial Activities (Q4 2024) | Financial Services (Q2 2025) | Financial Services (Q4 2024) | | :--------------------------------------- | :------------- | :------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Third-Party (Debt) | (27,408) | (26,882) | (4,989) | (4,043) | (22,419) | (22,839) | | Total (Debt) | (27,477) | (26,944) | (5,233) | (4,503) | (22,810) | (23,231) | | Cash and Cash Equivalents | 2,512 | 3,191 | 2,106 | 2,332 | 406 | 859 | | Restricted Cash | 635 | 675 | 95 | 89 | 540 | 586 | | Intercompany Notes Receivable | — | — | 325 | 334 | 241 | 456 | | Finance Receivables from Iveco Group N.V. | 263 | 168 | 174 | 50 | 89 | 118 | | Hedging Derivatives | (2) | (37) | (20) | (29) | 18 | (8) | | Net Cash (Debt) | (24,069) | (22,947) | (2,553) | (1,727) | (21,516) | (21,220) | - As of June 30, 2025, consolidated net cash (debt) was negative $24.069 billion, an increase from negative $22.947 billion as of December 31, 2024[56] - Industrial activities' net cash (debt) increased from negative $1.727 billion at year-end 2024 to negative $2.553 billion[56] Reconciliation of Net Cash Provided (Used) by Operating Activities to Free Cash Flow of Industrial Activities This reconciliation details the calculation from operating cash flow to industrial free cash flow by deducting financial services cash flow, hedging derivatives, operating lease asset investments, and PPE/intangible asset investments Reconciliation of Net Cash Provided (Used) by Operating Activities to Free Cash Flow of Industrial Activities Summary | Indicator ($ million) | H1 2025 | H1 2024 | Q2 2025 | Q2 2024 | | :--------------------------------------- | :------------- | :------------- | :------------- | :------------- | | Net Cash Provided (Used) by Operating Activities | 934 | (515) | 772 | 379 | | Less: Net Cash Provided (Used) by Financial Services Operating Activities | (824) | (322) | (186) | (124) | | Less: Industrial Activities Investments in Property, Plant, Equipment and Intangible Assets | (191) | (206) | (88) | (110) | | Free Cash Flow of Industrial Activities | (116) | (1,069) | 451 | 140 | - In H1 2025, industrial free cash flow was negative $116 million, a significant improvement from negative $1.069 billion in H1 2024[58] - In Q2 2025, industrial free cash flow was $451 million, a substantial increase from $140 million in Q2 2024[58] Reconciliation of Adjusted Net Income and Adjusted Income Tax (Expense) Benefit This reconciliation details the calculation from net income to adjusted net income and adjusted income tax by excluding restructuring, U.S. medical plan benefits, and non-core product sales for comparable performance Reconciliation of Adjusted Net Income and Adjusted Income Tax (Expense) Benefit Summary | Indicator ($ million) | H1 2025 | H1 2024 | Q2 2025 | Q2 2024 | | :--------------------------------------- | :------------- | :------------- | :------------- | :------------- | | Net Income (Loss) | 349 | 773 | 217 | 404 | | Adjusted Net Income (Loss) | 348 | 839 | 216 | 451 | | Adjusted Diluted EPS ($) | 0.27 | 0.66 | 0.17 | 0.35 | | Income Tax (Expense) Benefit | (123) | (172) | (76) | (95) | | Adjusted Income Tax (Expense) Benefit | (123) | (191) | (76) | (108) | | Adjusted Effective Tax Rate | 28.2% | 20.3% | 27.7% | 21.0% | - In H1 2025, adjusted net income was $348 million, and adjusted diluted EPS was $0.27[59] - In Q2 2025, the adjusted effective tax rate increased from 21.0% in Q2 2024 to 27.7%[59] Revision of Prior Period Financial Statements Prior period financial statements were revised to correct non-material errors in highly inflationary accounting for Turkish affiliates, impacting equity in earnings, net income, diluted EPS, and non-GAAP measures - The revision is due to non-material corrections for highly inflationary accounting treatment of unconsolidated affiliates in Turkey[60] - This correction resulted in an overstatement of equity in earnings of unconsolidated subsidiaries and affiliates by $96 million in 2023 and $67 million in H1 2024, respectively[60] Summary of Prior Period Financial Statement Revision Impact (H1 2024) | Indicator ($ million) | Pre-Revision | Revision Impact | Post-Revision | | :--------------------------------------- | :------- | :------- | :------- | | Equity in Earnings of Unconsolidated Subsidiaries and Affiliates | 156 | (67) | 89 | | Net Income (Loss) | 840 | (67) | 773 | | Diluted EPS | 0.66 | (0.05) | 0.61 | | Adjusted Net Income | 906 | (67) | 839 | | Adjusted Diluted EPS | 0.71 | (0.05) | 0.66 | | Industrial Adjusted EBIT | 941 | (67) | 874 |