Allison Transmission Holdings Inc

Previous wording

Second Quarter Net Sales by End Market (dollars in millions)

Current wording

Third Quarter Net Sales by End Market (dollars in millions)

Previous wording

North America On-Highway end market net sales were up 15% for the second quarter 2024 compared to the second quarter 2023, principally driven by strength in demand for Class 8 vocational vehicles and medium-duty trucks and price increases on certain products.

Current wording

North America On-Highway end market net sales were up 22% for the third quarter 2024 compared to the third quarter 2023, principally driven by strength in demand for Class 8 vocational vehicles and medium-duty trucks and price increases on certain products.

Previous wording

Our primary components of cost of sales are purchased parts, the overhead expense related to our manufacturing operations and direct labor associated with the manufacture and assembly of vehicle propulsion solutions and parts. For the six months ended June 30, 2024, direct material costs were approximately 65%, overhead costs were approximately 27%, and direct labor costs were approximately 8% of cost of sales. We are subject to changes in our cost of sales caused by movements in underlying commodity prices. We seek to hedge against this risk by using long-term agreements (“LTAs”), as appropriate. See Part I, Item 3, “Quantitative and Qualitative Disclosures about Market Risk—Commodity Price Risk” included below.

Current wording

Our primary components of cost of sales are purchased parts, the overhead expense related to our manufacturing operations and direct labor associated with the manufacture and assembly of vehicle propulsion solutions and parts. For the nine months ended September 30, 2024, direct material costs were approximately 65%, overhead costs were approximately 27%, and direct labor costs were approximately 8% of cost of sales. We are subject to changes in our cost of sales caused by movements in underlying commodity prices. We seek to hedge against this risk by using long-term agreements (“LTAs”), as appropriate. See Part I, Item 3, “Quantitative and Qualitative Disclosures about Market Risk—Commodity Price Risk” included below.

Previous wording

We use Adjusted Earnings before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) and Adjusted EBITDA as a percent of net sales to measure our operating profitability. We believe that Adjusted EBITDA and Adjusted EBITDA as a percent of net sales provide management, investors and creditors with useful measures of the operational results of our business and increase the period-to-period comparability of our operating profitability and comparability with other companies. Adjusted EBITDA as a percent of net sales is also used in the calculation of management’s incentive compensation program. The most directly comparable U.S. generally accepted accounting principles (“GAAP”) measure to Adjusted EBITDA and Adjusted EBITDA as a percent of net sales is Net income and Net income as a percent of net sales, respectively. Adjusted EBITDA is calculated as earnings before interest expense, net, income tax expense, amortization of intangible assets, depreciation of property, plant and equipment and other adjustments as defined by the Second Amended and Restated Credit Agreement dated as of March 29, 2019, as amended (the “Credit Agreement”), governing Allison Transmission, Inc.’s (“ATI”), our wholly-owned subsidiary, term loan facility in the amount of $517 million due March 2031 (“Term Loan”) and ATI’s revolving credit facility with commitments in the amount of $750 million due March 2029 ("Revolving Credit Facility" and, together with the Term Loan, the "Senior Secured Credit Facility"). Adjusted EBITDA as a percent of net sales is calculated as Adjusted EBITDA divided by net sales.

Current wording

We use Adjusted Earnings before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) and Adjusted EBITDA as a percent of net sales to measure our operating profitability. We believe that Adjusted EBITDA and Adjusted EBITDA as a percent of net sales provide management, investors and creditors with useful measures of the operational results of our business and increase the period-to-period comparability of our operating profitability and comparability with other companies. Adjusted EBITDA as a percent of net sales is also used in the calculation of management’s incentive compensation program. The most directly comparable U.S. generally accepted accounting principles (“GAAP”) measure to Adjusted EBITDA and Adjusted EBITDA as a percent of net sales is Net income and Net income as a percent of net sales, respectively. Adjusted EBITDA is calculated as earnings before interest expense, net, income tax expense, amortization of intangible assets, depreciation of property, plant and equipment and other adjustments as defined by the Second Amended and Restated Credit Agreement dated as of March 29, 2019, as amended (the “Credit Agreement”), governing Allison Transmission, Inc.’s (“ATI”), our wholly-owned subsidiary, term loan facility in the amount of $515 million due March 2031 (“Term Loan”) and ATI’s revolving credit facility with commitments in the amount of $750 million due March 2029 ("Revolving Credit Facility" and, together with the Term Loan, the "Senior Secured Credit Facility"). Adjusted EBITDA as a percent of net sales is calculated as Adjusted EBITDA divided by net sales.

Previous wording

Represents a loss (gain) (recorded in Other (expense) income, net) related to an investment in the common stock of Jing-Jin Electric Technologies Co. Ltd.

Current wording

Represents a (gain) loss (recorded in Other income (expense), net) related to an investment in the common stock of Jing-Jin Electric Technologies Co. Ltd.

Previous wording

Represents a non-cash settlement charge (recorded in Other (expense) income, net) for a pro rata portion of previously unrecognized pension plan actuarial net losses associated with the pension risk transfer of a portion of our salaried defined benefit pension plan obligations to a third-party insurance company.

Current wording

Represents a non-cash settlement charge (recorded in Other income (expense), net) for a pro rata portion of previously unrecognized pension plan actuarial net losses associated with the pension risk transfer of a portion of our salaried defined benefit pension plan obligations to a third-party insurance company.

Previous wording

Represents a loss (gain) (recorded in Other (expense) income, net) related to investments in co-development agreements to expand our position in propulsion solution technologies.

Current wording

Represents a loss (gain) (recorded in Other income (expense), net) related to investments in co-development agreements to expand our position in propulsion solution technologies.

Previous wording

Net sales for the six months ended June 30, 2024 were $1,605 million compared to $1,524 million for the six months ended June 30, 2023, an increase of 5%. The increase was principally driven by a $103 million, or 13%, increase in net sales in the North America On-Highway end market principally driven by strength in demand for Class 8 vocational and medium-duty trucks and price increases on certain products, a $31 million, or 52%, increase in net sales in the Defense end market principally driven by increased demand for Tracked vehicle applications, partially offset by lower demand for wheeled vehicle applications and a $12 million, or 5%, increase in net sales in the Outside North America On-Highway end market principally driven by higher demand in Asia and price increases on certain products, partially offset by lower demand in Europe, partially offset by a $38 million, or 10%, decrease in net sales in the Service Parts, Support Equipment and Other end market principally driven by lower demand for North America service parts and aluminum die cast components, partially offset by higher demand for global support equipment and a $27 million, or 28%, decrease in Global Off-Highway net sales principally driven by lower demand from the energy sector in North America, partially offset by strength in demand from the energy sector outside of North America.

Current wording

Net sales for the quarter ended September 30, 2024 were $824 million compared to $736 million for the quarter ended September 30, 2023, an increase of 12%. The increase was principally driven by an $81 million, or 22%, increase in net sales in the North America On-Highway end market principally driven by strength in demand for Class 8 vocational vehicles and medium-duty trucks and price increases on certain products, a $10 million, or 23%, increase in net sales in the Defense end market principally driven by increased demand for Tracked vehicle applications and an $8 million, or 7%, increase in net sales in the Outside North America On-Highway end market principally driven by higher demand in Asia and price increases on certain products, partially offset by lower demand in Europe, partially offset by an $8 million, or 29%, decrease in Global Off-Highway net sales principally driven by lower demand from the energy sector in North America and the mining and construction sectors outside of North America, partially offset by strength in demand from the energy sector outside of North America, and a $3 million, or 2%, decrease in net sales in the Service Parts, Support Equipment and Other end market principally driven by lower demand for global service parts, partially offset by price increases on certain products.

Previous wording

Gross profit for the quarter ended June 30, 2024 was $394 million compared to $381 million for the quarter ended June 30, 2023, an increase of 3%. The increase was principally driven by $21 million of price increases on certain products and $4 million of increased net sales, partially offset by $12 million of higher manufacturing expense. Gross profit as a percent of net sales for the three months ended June 30, 2024 decreased 40 basis points compared to the same period in 2023 principally driven by increased cost of sales and unfavorable product mix, partially offset by price increases on certain products.

Current wording

Gross profit for the quarter ended September 30, 2024 was $396 million compared to $357 million for the quarter ended September 30, 2023, an increase of 11%. The increase was principally driven by $40 million of increased net sales and $24 million of price increases on certain products, partially offset by $23 million of higher manufacturing expense. Gross profit as a percent of net sales for the three months ended September 30, 2024 decreased 40 basis points compared to the same period in 2023 principally driven by increased cost of sales, partially offset by increased net sales and price increases on certain products.

Previous wording

Selling, general and administrative expenses for the quarter ended June 30, 2024 were $82 million compared to $92 million for the quarter ended June 30, 2023, a decrease of 11%. The decrease was principally driven by lower intangible amortization expense.

Current wording

Selling, general and administrative expenses for the quarter ended September 30, 2024 were $85 million compared to $86 million for the quarter ended September 30, 2023, a decrease of 1%. The decrease was principally driven by lower intangible amortization expense, partially offset by increased commercial activities spending and higher incentive compensation expense.

Previous wording

Interest expense, net for the quarter ended June 30, 2024 was $22 million compared to $28 million for the quarter ended June 30, 2023, a decrease of 21%. The decrease was principally driven by higher interest income on cash and cash equivalents and lower interest expense on ATI's Term Loan due primarily to the repayment of $101 million of principal in the first quarter of 2024.

Current wording

Interest expense, net for the quarter ended September 30, 2024 was $21 million compared to $27 million for the quarter ended September 30, 2023, a decrease of 22%. The decrease was principally driven by higher interest income on cash and cash equivalents and lower interest expense on ATI's Term Loan due primarily to the repayment of $101 million of principal in the first quarter of 2024.

Previous wording

Other (expense) income, net for the quarter ended June 30, 2024 was ($7) million compared to $2 million for the quarter ended June 30, 2023. The change was principally driven by a $4 million non-cash defined benefit pension plan settlement charge and a $3 million change in unrealized mark-to-market adjustments for marketable securities.

Current wording

Other income (expense), net for the quarter ended September 30, 2024 was $10 million compared to ($2) million for the quarter ended September 30, 2023. The change was principally driven by $7 million of favorable foreign exchange and a $4 million change in unrealized mark-to-market adjustments for marketable securities.

Previous wording

Income tax expense for the six months ended June 30, 2024 was $82 million, resulting in an effective tax rate of 19%, compared to $83 million of income tax expense and an effective tax rate of 19% for the six months ended June 30, 2023.

Current wording

Income tax expense for the three months ended September 30, 2024 was $49 million, resulting in an effective tax rate of 20%, compared to $35 million of income tax expense and an effective tax rate of 18% for the three months ended September 30, 2023. The increases in income tax expense and the effective tax rate were principally driven by higher taxable income.

Previous wording

The following table sets forth certain financial information for the six months ended June 30, 2024 and 2023. The following table and discussion should be read in conjunction with the information contained in our condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

The following table sets forth certain financial information for the nine months ended September 30, 2024 and 2023. The following table and discussion should be read in conjunction with the information contained in our condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

Net sales for the quarter ended June 30, 2024 were $816 million compared to $783 million for the quarter ended June 30, 2023, an increase of 4%. The increase was principally driven by a $59 million, or 15%, increase in net sales in the North America On-Highway end market principally driven by strength in demand for Class 8 vocational vehicles and medium-duty trucks and price increases on certain products, a $10 million, or 30%, increase in net sales in the Defense end market principally driven by increased demand for Tracked vehicle applications and a $5 million, or 4%, increase in net sales in the Outside North America On-Highway end market principally driven by higher demand in Asia and price increases on certain products, partially offset by lower demand in Europe, partially offset by a $26 million, or 53%, decrease in Global Off-Highway net sales principally driven by lower demand from the energy sector in North America and the mining and construction sectors outside of North America, partially offset by strength in demand from the energy sector outside of North America, and a $15 million, or 8%, decrease in net sales in the Service Parts, Support Equipment and Other end market principally driven by lower demand for North America service parts and aluminum die cast components, partially offset by higher demand for global support equipment.

Current wording

Net sales for the nine months ended September 30, 2024 were $2,429 million compared to $2,260 million for the nine months ended September 30, 2023, an increase of 7%. The increase was principally driven by a $184 million, or 16%, increase in net sales in the North America On-Highway end market principally driven by strength in demand for Class 8 vocational and medium-duty trucks and price increases on certain products, a $41 million, or 40%, increase in net sales in the Defense end market principally driven by increased demand for Tracked vehicle applications and a $20 million, or 6%, increase in net sales in the Outside North America On-Highway end market principally driven by higher demand in Asia and price increases on certain products, partially offset by lower demand in Europe, partially offset by a $41 million, or 8%, decrease in net sales in the Service Parts, Support Equipment and Other end market principally driven by lower demand for North America service parts and aluminum die cast components, partially offset by price increases on certain products and a $35 million, or 28%, decrease in Global Off-Highway net sales principally driven by lower demand from the energy sector in North America and the mining and construction sectors outside of North America, partially offset by strength in demand from the energy sector outside of North America.

Previous wording

Cost of sales for the six months ended June 30, 2024 was $845 million compared to $782 million for the six months ended June 30, 2023, an increase of 8%. The increase was principally driven by higher manufacturing expense, including $13 million of non-recurring UAW contract signing incentives, and higher direct material costs.

Current wording

Cost of sales for the nine months ended September 30, 2024 was $1,273 million compared to $1,161 million for the nine months ended September 30, 2023, an increase of 10%. The increase was principally driven by higher direct material and manufacturing expense commensurate with increased net sales and higher manufacturing expense, including $13 million of non-recurring UAW contract signing incentives.

Previous wording

Gross profit for the six months ended June 30, 2024 was $760 million compared to $742 million for the six months ended June 30, 2023, an increase of 2%. The increase was principally driven by $35 million of price increases on certain products and $24 million related to increased net sales, partially offset by $24 million of higher manufacturing expense, $13 million of non-recurring UAW contract signing incentives and $4 million of higher direct material costs. Gross profit as a percent of net sales for the six months ended June 30, 2024 decreased 130 basis points compared to the same period in 2023 principally driven by increased cost of sales, including $13 million of non-recurring UAW contract signing incentives, partially offset by price increases on certain products and increased net sales.

Current wording

Gross profit for the nine months ended September 30, 2024 was $1,156 million compared to $1,099 million for the nine months ended September 30, 2023, an increase of 5%. The increase was principally driven by $64 million related to increased net sales and $59 million of price increases on certain products, partially offset by $60 million of higher manufacturing expense, including $13 million of non-recurring UAW contract signing incentives, and $6 million of higher direct material costs. Gross profit as a percent of net sales for the nine months ended

Previous wording

Selling, general and administrative expenses for the six months ended June 30, 2024 were $168 million compared to $179 million for the six months ended June 30, 2023, a decrease of 6%. The decrease was principally driven by lower intangible amortization expense, partially offset by higher commercial activities spending.

Current wording

Selling, general and administrative expenses for the nine months ended September 30, 2024 were $253 million compared to $265 million for the nine months ended September 30, 2023, a decrease of 5%. The decrease was principally driven by lower intangible amortization expense, partially offset by increased commercial activities spending.

Previous wording

Engineering expenses for the six months ended June 30, 2024 were $95 million compared to $91 million for the six months ended June 30, 2023, an increase of 4%. The increase was principally driven by increased product initiatives spending.

Current wording

Engineering expenses for the nine months ended September 30, 2024 were $146 million compared to $140 million for the nine months ended September 30, 2023, an increase of 4%. The increase was principally driven by increased product initiatives spending.

Previous wording

Interest expense, net for the six months ended June 30, 2024 was $47 million compared to $56 million for the six months ended June 30, 2023, a decrease of 16%. The decrease was principally driven by higher interest income on cash and cash equivalents.

Current wording

Interest expense, net for the nine months ended September 30, 2024 was $68 million compared to $83 million for the nine months ended September 30, 2023, a decrease of 18%. The decrease was principally driven by higher interest income on cash and cash equivalents and lower interest expense on ATI's Term Loan due primarily to the repayment of $101 million of principal in the first quarter of 2024.

Previous wording

Other (expense) income, net for the six months ended June 30, 2024 was ($12) million compared to $12 million for the six months ended June 30, 2023. The change was principally driven by a $13 million change in unrealized mark-to-market adjustments for marketable securities, a $4 million non-cash defined benefit pension plan settlement charge and a $4 million change in technology-related investments gains and losses.

Current wording

Other (expense) income, net for the nine months ended September 30, 2024 was ($2) million compared to $10 million for the nine months ended September 30, 2023. The change was principally driven by a $9 million change in unrealized mark-to-market adjustments for marketable securities, a $4 million change in technology-related investments gains and losses and a $4 million non-cash defined benefit pension plan settlement charge, partially offset by $5 million of favorable foreign exchange.

Previous wording

Income tax expense for the three months ended June 30, 2024 was $47 million, resulting in an effective tax rate of 20%, compared to $41 million of income tax expense and an effective tax rate of 19% for the three months ended June 30, 2023. The increase in income tax expense was principally driven by higher taxable income.

Current wording

Income tax expense for the nine months ended September 30, 2024 was $131 million, resulting in an effective tax rate of 19%, compared to $118 million of income tax expense and an effective tax rate of 19% for the nine months ended September 30, 2023. The increase in income tax expense was principally driven by higher taxable income.

Previous wording

We generate cash primarily from our operations to fund our operating, investing and financing activities. Our principal uses of cash are operating expenses, capital expenditures, working capital needs, debt service, dividends on common stock, stock repurchases and strategic growth initiatives, including investments, acquisitions and collaborations. Our ability to generate cash in the future and our future uses of cash are subject to general economic, financial, competitive, legislative, regulatory and other factors that may be beyond our control. We had total available cash and cash equivalents of $648 million and $555 million as of June 30, 2024 and December 31, 2023, respectively. Of the available cash and cash equivalents, $140 million was deposited in operating accounts and $508 million was invested in U.S. government backed securities and time deposits as of June 30, 2024, compared to $134 million deposited in operating accounts and $421 million invested in U.S. government backed securities as of December 31, 2023.

Current wording

We generate cash primarily from our operations to fund our operating, investing and financing activities. Our principal uses of cash are operating expenses, capital expenditures, working capital needs, debt service, dividends on common stock, stock repurchases and strategic growth initiatives, including investments, acquisitions and collaborations. Our ability to generate cash in the future and our future uses of cash are subject to general economic, financial, competitive, legislative, regulatory and other factors that may be beyond our control. We had total available cash and cash equivalents of $788 million and $555 million as of September 30, 2024 and December 31, 2023, respectively. Of the available cash and cash equivalents, $200 million was deposited in operating accounts and $588 million was invested in U.S. government backed securities and time deposits as of September 30, 2024, compared to $134 million deposited in operating accounts and $421 million invested in U.S. government backed securities as of December 31, 2023.

Previous wording

As of June 30, 2024, the total of cash held by foreign subsidiaries was $74 million, the majority of which was at our subsidiaries located in China, India, Japan and the Netherlands. We manage our worldwide cash requirements considering available funds among the subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed. As a result, we do not currently anticipate that local liquidity restrictions will preclude us from funding our targeted initiatives or operating needs with local resources.

Current wording

As of September 30, 2024, the total of cash held by foreign subsidiaries was $70 million, the majority of which was at our subsidiaries located in China, Japan, India, Hungary and the Netherlands. We manage our worldwide cash requirements considering available funds among the subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed. As a result, we do not currently anticipate that local liquidity restrictions will preclude us from funding our targeted initiatives or operating needs with local resources.

Previous wording

Our liquidity requirements are significant, primarily due to our debt service requirements. As of June 30, 2024, we had $517 million of indebtedness associated with ATI’s Term Loan, $400 million of indebtedness associated with ATI’s 4.75% Senior Notes due October 2027 (“4.75% Senior Notes”), $500 million of indebtedness associated with ATI’s 5.875% Senior Notes due June 2029 (“5.875% Senior Notes”) and $1,000 million of indebtedness associated with ATI’s 3.75% Senior Notes due January 2031 (“3.75% Senior Notes” and, together with the 4.75% Senior Notes and 5.875% Senior Notes, the “Senior Notes”). Short-term and long-term debt service liquidity requirements consist of $1 million of minimum required quarterly principal payments on ATI’s Term Loan through its maturity date of March 2031 and periodic interest payments on ATI’s Term Loan and the Senior Notes. There are no required quarterly principal payments on the Senior Notes. Long-term debt service liquidity requirements also consist of the payment in full of any remaining principal balance of ATI’s Term Loan and the Senior Notes upon their respective maturity dates.

Current wording

Our liquidity requirements are significant, primarily due to our debt service requirements. As of September 30, 2024, we had $515 million of indebtedness associated with ATI’s Term Loan, $400 million of indebtedness associated with ATI’s 4.75% Senior Notes due October 2027 (“4.75% Senior Notes”), $500 million of indebtedness associated with ATI’s 5.875% Senior Notes due June 2029 (“5.875% Senior Notes”) and $1,000 million of indebtedness associated with ATI’s 3.75% Senior Notes due January 2031 (“3.75% Senior Notes” and, together with the 4.75% Senior Notes and 5.875% Senior Notes, the “Senior Notes”). Short-term and long-term debt service liquidity requirements consist of $1 million of minimum required quarterly principal payments on ATI’s Term Loan through its maturity date of March 2031 and periodic interest payments on ATI’s Term Loan and the Senior Notes. There are no required quarterly principal payments on the Senior Notes. Long-term debt service liquidity requirements also consist of the payment in full of any remaining principal balance of ATI’s Term Loan and the Senior Notes upon their respective maturity dates.

Previous wording

We made $102 million and $3 million of principal payments on the Term Loan during the six months ended June 30, 2024 and 2023, respectively. Our ability to make payments on and refinance our indebtedness and to fund planned capital expenditures and growth initiatives will depend on our ability to generate cash in the future.

Current wording

We made $103 million and $5 million of principal payments on the Term Loan during the nine months ended September 30, 2024 and 2023, respectively. Our ability to make payments on and refinance our indebtedness and to fund planned capital expenditures and growth initiatives will depend on our ability to generate cash in the future.

Previous wording

The Senior Secured Credit Facility provides for a $750 million Revolving Credit Facility, net of an allowance for up to $75 million in outstanding letter of credit commitments. As of June 30, 2024, we had $745 million available under the Revolving Credit Facility, net of $5 million in letters of credit. As of June 30, 2024, we had no amounts outstanding under the Revolving Credit Facility. If we have commitments outstanding on the Revolving Credit Facility at the end of a fiscal quarter, the Senior Secured Credit Facility requires us to maintain a specified maximum first lien net leverage ratio of 5.50x. Additionally, within the terms of the Senior Secured Credit Facility, a first lien net leverage ratio at or below 4.00x results in the elimination of excess cash flow payments on the Senior Secured Credit Facility for the applicable year. As of June 30, 2024, our first lien net leverage ratio was (0.12x). The Senior Secured Credit Facility also provides certain financial incentives based on our first lien net leverage ratio. A first lien net leverage ratio at or below 4.00x and above 3.50x results in a 25 basis point reduction to the applicable margin on the Revolving Credit Facility. A first lien net leverage ratio at or below 3.50x results in an additional 25 basis point reduction to the applicable margin on the Revolving Credit Facility. These reductions remain in effect as long as we achieve a first lien net leverage ratio at or below the related threshold.

Current wording

The Senior Secured Credit Facility provides for a $750 million Revolving Credit Facility, net of an allowance for up to $75 million in outstanding letter of credit commitments. As of September 30, 2024, we had $745 million available under the Revolving Credit Facility, net of $5 million in letters of credit. As of September 30, 2024, we had no amounts outstanding under the Revolving Credit Facility. If we have commitments outstanding on the Revolving Credit Facility at the end of a fiscal quarter, the Senior Secured Credit Facility requires us to maintain a specified maximum first lien net leverage ratio of 5.50x. Additionally, within the terms of the Senior Secured Credit Facility, a first lien net leverage ratio at or below 4.00x results in the elimination of excess cash flow payments on the Senior Secured Credit Facility for the applicable year. As of September 30, 2024, our first lien net leverage ratio was (0.23x). The Senior Secured Credit Facility also provides certain financial incentives based on our first lien net leverage ratio. A first lien net leverage ratio at or below 4.00x and above 3.50x results in a 25 basis point reduction to the applicable margin on the Revolving Credit Facility. A first lien net leverage ratio at or below 3.50x results in an additional 25 basis point reduction to the applicable margin on the Revolving Credit Facility. These reductions remain in effect as long as we achieve a first lien net leverage ratio at or below the related threshold.

Previous wording

Our Board of Directors has authorized us to repurchase up to $4,000 million of our common stock pursuant to a stock repurchase program (the "Repurchase Program"). During the six months ended June 30, 2024, we repurchased $83 million of our common stock under the Repurchase Program. All of the repurchase transactions during the six months ended June 30, 2024 were settled in cash during the same period. As of June 30, 2024, we had approximately $689 million available under the Repurchase Program.

Current wording

Our Board of Directors has authorized us to repurchase up to $4,000 million of our common stock pursuant to a stock repurchase program (the "Repurchase Program"). During the nine months ended September 30, 2024, we repurchased $134 million of our common stock under the Repurchase Program. Substantially all of the repurchase transactions during the nine months ended September 30, 2024 were settled in cash during the same period. As of September 30, 2024, we had approximately $639 million available under the Repurchase Program.

Previous wording

The following table shows our sources and uses of funds for the six months ended June 30, 2024 and 2023 (dollars in millions):

Current wording

The following table shows our sources and uses of funds for the nine months ended September 30, 2024 and 2023 (dollars in millions):

Previous wording

Generally, cash provided by operating activities has been adequate to fund our operations. We have significant liquidity, including $648 million of cash and cash equivalents and $745 million available under the Revolving Credit Facility, net of $5 million of letters of credit, as of June 30, 2024. At this time, we believe cash provided by operating activities, cash and cash equivalents and borrowing capacity under the Revolving Credit Facility will be sufficient to meet our known and anticipated cash requirements for the next twelve months and thereafter.

Current wording

Generally, cash provided by operating activities has been adequate to fund our operations. We have significant liquidity, including $788 million of cash and cash equivalents and $745 million available under the Revolving Credit Facility, net of $5 million of letters of credit, as of September 30, 2024. At this time, we believe cash provided by operating activities, cash and cash equivalents and borrowing capacity under the Revolving Credit Facility will be sufficient to meet our known and anticipated cash requirements for the next twelve months and thereafter.

Previous wording

Operating activities for the six months ended June 30, 2024 generated $344 million of cash compared to $334 million for the six months ended June 30, 2023. The increase was principally driven by lower cash income taxes and higher gross profit, partially offset by higher cash incentive compensation payments and non-recurring UAW contract signing incentive payments.

Current wording

Operating activities for the nine months ended September 30, 2024 generated $590 million of cash compared to $546 million for the nine months ended September 30, 2023. The increase was principally driven by higher gross profit, lower cash income taxes and lower cash interest payments, partially offset by higher cash incentive compensation payments, higher operating working capital funding requirements and non-recurring UAW contract signing incentive payments.

Previous wording

Investing activities for the six months ended June 30, 2024 used $32 million of cash compared to $41 million for the six months ended June 30, 2023. The decrease was principally driven by an $11 million decrease in capital expenditures.

Current wording

Investing activities for the nine months ended September 30, 2024 used $70 million of cash compared to $71 million for the nine months ended September 30, 2023. The decrease was principally driven by a $5 million decrease in capital expenditures, partially offset by a $4 million increase in equity method investments.

Previous wording

Financing activities for the six months ended June 30, 2024 used $218 million of cash compared to $174 million for the six months ended June 30, 2023. The increase was principally driven by $99 million of increased payments on our long-term debt and $4 million of debt financing fees associated with the amendment of the Credit Agreement governing our Senior Secured Credit Facility, partially offset by $54 million of lower stock repurchases under the Repurchase Program and $10 million of higher proceeds from the exercise of stock options.

Current wording

Financing activities for the nine months ended September 30, 2024 used $287 million of cash compared to $205 million for the nine months ended September 30, 2023. The increase was principally driven by $98 million of increased payments on our long-term debt and $4 million of debt financing fees associated with the amendment of the Credit Agreement governing our Senior Secured Credit Facility, partially offset by $24 million of lower stock repurchases under the Repurchase Program.

Previous wording

A discussion of our critical accounting policies and significant accounting estimates is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the Securities and Exchange Commission on February 14, 2024. The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of some assets and liabilities and, in some instances, the reported amounts of revenues and expenses during the applicable reporting period. Actual results could differ materially from these estimates. Changes in estimates are recorded in results of operations in the period that the events or circumstances giving rise to such changes occur. Within the context of these critical accounting estimates, we are not currently aware of any reasonably likely events or circumstances that would result in different policies or estimates being reported for the three and six months ended June 30, 2024.

Current wording

A discussion of our critical accounting policies and significant accounting estimates is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the Securities and Exchange Commission on February 14, 2024. The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of some assets and liabilities and, in some instances, the reported amounts of revenues and expenses during the applicable reporting period. Actual results could differ materially from these estimates. Changes in estimates are recorded in results of operations in the period that the events or circumstances giving rise to such changes occur. Within the context of these critical accounting estimates, we are not currently aware of any reasonably likely events or circumstances that would result in different policies or estimates being reported for the three and nine months ended September 30, 2024.