Financial Data and Key Metrics Changes - Graco reported fourth quarter sales of $593 million, an increase of 8% from the same quarter last year, with acquisitions contributing 4%, currency translation 2%, and organic sales another 2% to growth [3] - Reported net earnings increased 22% to $133 million, or 79 cents per diluted share, while adjusted non-GAAP net earnings were 77 cents per diluted share, an increase of 20% [3] - The gross margin rate increased by 80 basis points compared to the same quarter last year, despite higher product costs due to tariffs and lower factory volumes [4] - Operating expenses decreased by $1 million, or 1%, primarily due to the absence of prior year business reorganization and litigation costs [4][5] Business Line Data and Key Metrics Changes - Contractor segment sales increased 8% in the fourth quarter, with acquisitions contributing 5%, currency translation 2%, and organic sales another 1% [13] - The industrial segment saw an 11% growth in sales, driven by strong organic performance and contributions from acquisitions [14] - Expansion markets declined 6% in the quarter but achieved high single-digit full-year sales growth in the semiconductor business [15] Market Data and Key Metrics Changes - Organic sales at constant currency were up 2%, with growth in both the industrial and contractor segments [11] - The industrial business had strong organic performance in the Americas and EMEA, while Asia-Pacific experienced declines, particularly in China [14] - The overall market for contractor equipment remained flat, with affordability concerns keeping activity subdued [13] Company Strategy and Development Direction - Graco aims to generate one-third of its long-term revenue growth through strategic acquisitions, with a strong acquisition pipeline [12] - The company is focused on product innovation and advancing the One Graco operating model, which has led to significant inventory reductions and cost efficiencies [60] - Graco is optimistic about growth opportunities in 2026, projecting low single-digit organic growth on a constant currency basis and mid-single-digit growth factoring in expected incremental sales from acquisitions [16] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the operating environment, noting steady order rates and potential for growth in the contractor segment [33] - The company highlighted the importance of new product launches and the impact of lower mortgage rates on the residential market as potential positive developments [125] - Management acknowledged the unpredictable nature of the global trade environment and its potential impact on operations [126] Other Important Information - Cash provided by operations totaled $684 million for the year, an increase of $62 million, or 10% [7] - Significant cash uses included share repurchases of 5.1 million shares totaling $423 million and dividends of $183 million [8] - The effective tax rate is expected to be 20%-21% for the upcoming year, excluding any one-time items [8] Q&A Session Summary Question: Clarification on upfront licensing fees associated with electric pumps - Management explained that the upfront licensing fees are likely to be lumpy and not factored into the full-year outlook for organic growth [22][25] Question: Geographic conditions for 2026 - Management characterized the geographic conditions as low single-digit growth, with steady order rates but cautious optimism for improvement [29][33] Question: Signs of pull-forward demand in the contractor side - Management indicated that there was no significant pull-forward demand, but noted a slight pickup in the home center channel [40][42] Question: Pricing assumptions in organic growth guidance - Management expects to realize about 1.5% on the pricing front this year, with price adjustments implemented in late 2025 [51][52] Question: Update on One Graco initiative - Management reported significant inventory reductions and cost efficiencies as a result of the One Graco initiative, with expectations for continued benefits in 2026 [58][60] Question: Backlog trends in the quarter - Management stated that backlogs are at a decent level and that they did a good job in manufacturing to meet customer demands [110][111]

Core Insights - BorgWarner Inc. has reported a 1% increase in U.S. GAAP net sales for Q2 2025, reaching $3,638 million, with light vehicle eProduct sales growing by 31% year-over-year [6][7] - The company has increased its full-year 2025 guidance for net sales to a range of $14.0 billion to $14.4 billion, up from the previous range of $13.6 billion to $14.2 billion, driven by higher industry production expectations and favorable foreign exchange impacts [8][9] - BorgWarner's Board of Directors has authorized a 55% increase in its quarterly cash dividend per share and a $1 billion share repurchase program through 2028 [6][9] Financial Performance - U.S. GAAP net earnings for Q2 2025 were $224 million, or $1.03 per diluted share, compared to $315 million, or $1.39 per diluted share in Q2 2024 [7][16] - Adjusted net earnings per diluted share for Q2 2025 were $1.21, a 2% increase from $1.19 in Q2 2024, primarily due to a lower share count [7][8] - The company achieved a U.S. GAAP operating margin of 7.9% in Q2 2025, with an adjusted operating margin of 10.3% [6][9] Business Developments - BorgWarner secured multiple new business awards, including turbocharger and electric motor contracts with major global OEMs, expected to support long-term profitable growth [3][6] - Production for several new contracts is anticipated to begin between 2025 and 2028, indicating a strong pipeline for future revenue [6][9] Guidance and Expectations - The company expects its U.S. GAAP operating margin for 2025 to be in the range of 8.3% to 8.5%, with adjusted operating margin projected between 10.1% and 10.3% [9] - Net earnings for 2025 are expected to be in the range of $3.80 to $3.97 per diluted share, with adjusted net earnings projected between $4.45 and $4.65 per diluted share [9][8]