Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Allison Transmission Second Quarter 2013 Earnings Conference Call. My name is Matt, and I will be your conference operator today. [Operator Instructions] As a reminder, this conference call is being recorded. And I would now like to turn the conference call over to Dave Graziosi, the company's Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Thank you, Matt. Good afternoon, and thank you for joining us for our second quarter 2013 results conference call. With me this afternoon is Larry Dewey, Allison Transmission's Chairman, President and Chief Executive Officer. As a reminder, this conference call, webcast and the presentation we are using this afternoon are available on the Investor Relations section of our website, allisontransmission.com. A replay of this call will be available through August 5. As shown on Page 2 of the presentation, many of our remarks today contain forward-looking statements based on current expectations. These forward-looking statements are subject to known and unknown risks, including those set forth in our second quarter 2013 results press release, our quarterly report on Form 10-Q for the quarter ended March 31, 2013, and our annual report on Form 10-K for the year ended December 31, 2012, and uncertainties and other factors, as well as general economic conditions. Should one or more of these risks or uncertainties materialize or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those we express today. In addition, as noted on Page 3 of the presentation, some of our remarks today contain non-GAAP financial measures as defined by the SEC. You can find reconciliations of the non-GAAP financial measures to the most comparable GAAP measures attached as an appendix to the presentation and to our second quarter 2013 results press release, both of which are posted on the Investor Relations section of our website. Today's call is set to end at 5:30 Eastern Daylight Time. [Operator Instructions] Now I'll turn the call over to Larry Dewey.

Thank you, Dave. Good afternoon, and thank you for joining us today. In the second quarter, Allison continued to demonstrate strong operating margins and cash flow by executing initiatives to proactively align costs and programs across our business as our revenue trajectory improved relative to the first quarter of the year. As has consistently been our approach to managing our business, we will continue to aggressively align costs and investments with growth plans and our commitments to cash flow generation and the return of capital to shareholders, even as we anticipate a near-term improvement in our Global On-Highway end markets. Please turn to Slide 4 of the presentation for the call agenda. On today's call, I'll provide you with an overview of our second quarter 2013 performance, including sales by end market. Dave will review the second quarter 2013 financial performance, including adjusted EBITDA and adjusted free cash flow. I'll wrap up the prepared comments with our full year 2013 guidance update prior to Q&A. Please turn to Slide 5 of the presentation for the 2013 Q2 performance summary. Net sales decreased approximately 8% from the same period in 2012, principally driven by lower demand in the North America energy sector's hydraulic fracturing market, previously considered reductions in U.S. defense spending and weakness in the Outside North America Off-Highway mining sector end market. Partially offsetting these declines were higher demand for North America Hybrid-Propulsion Systems for Transit Buses, principally driven by intra-year movement in the timing of orders and strength in the Outside North America Off-Highway energy sector end market. Net sales to the North America On-Highway end market, our largest, were flat in the second quarter of 2012, an improvement relative to the year-over-year result in the first quarter. Gross margin for the quarter was 44.2%, a decrease of…

Thank you, Larry. Please turn to Slide 7 of the presentation for the Q2 2013 financial performance summary. Given Larry's comments, I'll focus on other income statement line items and adjusted EBITDA. Selling, general and administrative expenses decreased $23 million from the same period in 2012. The decrease was principally driven by $12 million of lower intangible asset amortization, a $9 million charge for the Dual Power Inverter Module extended coverage program in 2012 and reduced global commercial spending activities, partially offset by $2 million of higher employee stock compensation expense. Engineering, research and development expenses were flat with the same period in 2012. Interest expense, net, was flat with the same period in 2012, principally driven by lower interest expense as a result of debt repayments and more favorable mark-to-market adjustments for interest rates derivatives partially offset by higher interest rates on our senior secured credit facility and swaps. Other expense, net, decreased $20 million from the same period in 2012. The decrease in expense was principally driven by an $8 million impairment of technology-related investments in 2012, $8 million of premiums and expenses in 2012 related to redemptions and repayments of long-term debt and a $2 million charge related to the hourly pension plan settlement in 2012. Income tax expense for the second quarter of 2013 was $31 million, resulting in an effective tax rate of 38.3% versus an effective tax rate benefit of 558% for the same period in 2012. The change in effective tax rate was principally driven by the release of our domestic valuation allowance for deferred tax assets in the second quarter of 2012, resulting in an income tax benefit of $385 million. Adjusted EBITDA for the quarter was $172 million or 33.5% of net sales compared to $191 million or 34.1% of net…

Thanks, Dave. Please turn to Slide 9 of the presentation for the full year 2013 guidance update. Our updated full year 2013 guidance includes adjusted EBITDA excluding technology-related license expenses in the range of $630 million to $660 million and adjusted free cash flow in the range of $325 million to $375 million, consistent with the ranges for such measures implied in our prior guidance ranges. We expect to achieve these levels on revised net sales in the range of $1.92 billion to $1.96 billion, implying an adjusted EBITDA margin excluding technology-related license expenses in the range of 32% to 34%, consistent with our prior adjusted EBITDA margin excluding technology-related license expenses guidance. In the second half of 2013, we expect net sales to stabilize on a year-over-year basis, an improvement relative to the sales decline in the first half of the year. We believe there are improving trends in the second half of 2013, which we expect to be driven by strong year-over-year growth in Global On-Highway end markets and abating year-over-year declines in the North America Off-Highway end market. We continue to focus on delivering our adjusted EBITDA excluding technology-related license expenses and adjusted free cash flow commitments through the execution of initiatives that align costs and programs across our business with end market demand conditions. We also believe Allison is well positioned for a cyclical recovery in the North America On-Highway end market while supporting our Outside North America growth plans. Finally, we are updating our full year 2013 guidance for capital expenditures to a range of $75 million to $85 million and cash income taxes to a range of $10 million to $15 million. This concludes the prepared remarks. Matt, please open the call for questions.

[Operator Instructions] And we'll go first to Ross Gilardi with Bank of America Merrill Lynch.

Could you just talk a little bit more about what you're seeing with your order book for North America On-Highway and kind of based on what you're seeing right now, how you think this recovery is really shaping up compared to prior recoveries?

Well, in terms of the prior recoveries, obviously, it's been a lot slower coming. But our numbers, between the sources that we use, we use ACT, FTR. We talk to end users. We talk to the OEMs. If you were looking at published data, we're very, very close, in fact, we're within, I think, 1,000 units on markets, the end markets that we serve, of ACT's numbers. So we're basically laid right over the top of them after checking all those sources. So that shows a second half recovery, particularly in the medium-duty, fairly significant double digits.

And can you comment at all about the order activity?

Certainly. The order activity, we have seen step up. July is tracking to the numbers that we have in the forecast. We're watching. We've seen some nice progression on the inventories, particularly in medium-duty and the Class 8. And again, you have to remember, we're not in the line-haul, so the tractor market can sometimes distort that. But on the straight truck side, we're watching that closely. While that's improved a little bit, they've been heavy for, gosh, a couple of years here, and so we're watching that order stream fairly closely. But certainly, on the medium-duty, we're getting clear signs of recovery, and we're watching the Class 8 straight truck pretty close.

At this time, we'll go to Tim Thein with Citigroup.

Dave, maybe you could just go through, relative to the initial guidance you've laid out coming into the year, to where we are now in terms of the total top line forecast. Can you kind of update us in terms of where -- to the extent there have been small changes, but I'm just curious as you go through some of your key end markets, maybe where those numbers have been tweaked down just so we can kind of think about how that looks as we progress into the back half of the year.

Sure. I mean, obviously, as we laid out the year, I think the biggest change when you overlay the guidance versus the original, probably the most significant change is to the NAFTA On-Highway market. Frankly, as Larry just went through, in terms of expectations on the recovery and the timing and the breadth of that, I think it's safe to say, certainly first quarter played out more or less as expected, second quarter was in the range but, frankly, a little bit softer. As we look at the second half, everything that we're seeing in terms of OEM input, external forecast, et cetera, as Larry went through, line up with exactly where our numbers are. So I think overall, it's safe to say, certainly not as strong as anybody would have liked, but I think it's still a very healthy second half recovery as we see it playing out at this stage. The balance of the book, really, was very close. If you look at defense, almost on top of what we had talked about. Outside North America overall, I would say, is a little bit softer in terms of the first half. I think some of that, as we've seen some of the regional issues play out, that had an impact on production scheduling that we mentioned in the press release and our prepared remarks. Beyond that, Off-Highway, as you know, a majority of our volume in North America is tied to the frac-ing business, and that, as we said, has really reached, from a sequential standpoint, basically flat. And you're seeing the changes from a year-over-year basis very much, at this point, uneventful, frankly. So if you look at mining, that's certainly soft, and I think that we've assumed nothing extraordinary there, frankly, for the second half of the year as, I think, the global numbers that have come out, even through earnings season over the last couple of weeks, have pointed to a pretty soft patch there. So I think that's more or less as we see it playing out. Transit bus would be the final one, and I think again, that movement of orders around the year, but I think overall, it's pretty consistent with our expectations as we came into the year. And again, some of that has a tendency to move around, depending on properties' scheduled deliveries from the various OEMs that we work with.

This is Larry. Just as a little bit of an insight there, if you look at -- and Dave talked about some of the dynamics there in the Off-Highway, particularly mining and energy, and as we've indicated, North America energy, certainly not a great story with everything that's going on. We have worked to increase the non-NAFTA energy business, and that's playing out nicely, particularly in China and places -- other places around the world, Eastern Europe. And we're starting to see even some activity in Latin America. If you take a look at our Off-Highway mining sales year-to-date, on the mining side, it's less than 2% and on the energy side, around 5%. So when you start looking at the movement of some of those numbers to the downside, there's not a lot of impact. Obviously, we look to the upside, particularly in the energy market. Mining's probably a little further out.

And Larry, on the energy piece, Outside North America, is that -- I guess kind of 2-part. One, I'm guessing if you went back 2 years ago and kind of took a picture where you thought the energy business would be or 3 years ago, I'm guessing that you wouldn't have had it laid out in terms of where we are in North America versus non. But does that -- to the extent you have seen that growth Outside North America, does that require much of an investment in the distribution channel to support that? And then secondly, I mean, presumably there are a lot of the same customers you're selling to, but is that same kind of profit dynamic, or does it look similar on the 9000 series transmission Outside North America, or is it a lower kind of horsepower unit that you're selling?

No. With the market positioning we've been able to achieve in the energy sector, where those margins are essentially comparable around the world, different models have different margins, but with any given model, we're pretty consistent globally on that because, as you correctly pointed out, there's a lot of people who operate in several different places, so we've got a pretty level playing field there. And then relative to the need to invest in distribution, actually, we had done some of that groundwork going back a couple of years, particularly in China, a little bit in India, but mostly, China. India's a little more mining work that we had done. Probably the area where we're spending a little bit more time currently is in Latin America. We've got established distribution network there, but clearly bringing them up to speed on some of the Off-Highway activity and products has been a focus for, say, the last year or so. But we're in China, working with the folks there probably 2, 3-plus years ago.

Moving forward, we'll take a question from Ann Duignan with JPMorgan. Ann P. Duignan - JP Morgan Chase & Co, Research Division: Could you break out demand for your rugged truck vehicles versus bus and then define what you mean by rugged? I mean, what I'm trying to get at is, is there any -- are you seeing a continued recovery or any acceleration in demand for cement trucks on the back of the housing cycle, or is that still hope it comes soon?

Well, we're seeing a little bit of that. If you take a look at our split, and I'll just use the 4,000 series. And by Rugged Duty, it typically goes into things like refuse packers, construction-related vehicles, dumps, other types of vehicles. Some people call it On/Off-Highway, although we do have OFS and ORS in that space as well, depending on the application, in order to manage the technology and the pricing into those sectors. But if you look at the -- for the 4000 series, for example, about 3/4 of our demand is the Rugged Duty. On the bus, that would be primarily in the 1000, 2000 in the school bus, and we're in the 30,000 plus a little bit in that space there. You see the school bus figures. The big players publish that. I'm sure you're familiar with that. And then we do some 3000 series into that as well. But those would be the major areas for those products. Ann P. Duignan - JP Morgan Chase & Co, Research Division: Okay. And the question was really about what are you seeing in terms of demand driver for each one of those.

Yes, we're seeing some activity in construction. Frankly, they have a lot of equipment to get to back to work. We've seen some in some areas that we haven't seen orders in, gosh, 2-plus years for anything sizable whatsoever, in some cases, more than that, and I'm thinking of cement mixers, front and rear discharge mixers in that particular case. I would say the -- so we are seeing some cautious, I'll call it, lift resulting in vehicle build in the construction segment. Ann P. Duignan - JP Morgan Chase & Co, Research Division: Okay. And then while I know it's a small segment, but the Outside North America Off-Highway, can you define for us how much mining was down versus how much energy was up?

Yes, let me dig around here because I have a stat on that somewhere. Maybe Dave will point it out here.

Ann, this is Dave. If you look, in terms of second quarter this year for Outside, NAFTA energy quarter-over-quarter is up about -- almost doubled from second quarter of last year, so. If you look at the mining, as we define it, again, overall, that's probably down by half. So energy doubled, and mining is down by about half. Ann P. Duignan - JP Morgan Chase & Co, Research Division: Okay. And then just because you said quarter-over-quarter and then you said year-over-year, that was year-over-year?

Year-over-year for second quarter. Ann P. Duignan - JP Morgan Chase & Co, Research Division: Okay, very good. And then within the energy, just real quick, what region of the world did you see the greatest pickup in demand?

Really, China is the big driver. But as Larry mentioned, we're certainly getting some inquiries and some initial units going into Latin America and continue to be supportive of that. Ann P. Duignan - JP Morgan Chase & Co, Research Division: Okay. So Latin America could be a catalyst for 2014 or year end '13?

I would say that we're seeing, as Dave indicated, strong in China, some activity currently in Russia. And obviously, we're trying to expand on that. And then we're in the very beginning of getting some of the releases and some of the units into some of the folks in Latin America. Specifically, there's a couple of key fleets -- San Antonio and QM are a couple of folks that we're working with down there.

Moving forward, we'll hear from Jerry Revich with Goldman Sachs.

Gentlemen, can you talk about the parts performance in the quarter and just help us understand how the On-Highway business performed versus Off-Highway, if you can split that out at all, any sense of miles driven pickup among your customer base?

In terms of the overall business, as we laid out, roughly flat if you look at it on a quarter-over-quarter basis, quarter-to-quarter basis, year-over-year, certainly, you're seeing, I'd say, more or less flat within the various end markets. On-Highway has a propensity to bounce around a little bit, so it's hard to take one quarter in isolation. But it's really not significantly off from our expectations as we came into the year from a -- looking at what we're hearing, at least from the channel in terms of number of events and things, it's been, I would say, pretty steady. You do see some cyclicality, but that's more in the fourth quarter, early first quarter, but I think it's largely playing out reasonably flat for second quarter on a year-over-year basis. So Off-Highway continues to bounce around, as you would expect, and I think that's consistent with what we're seeing on the new units side, as well as some of the efforts with the fleets that they are either parked or doing some level of refurb. We've talked about that before in terms of some of the fleets trying to position themselves a bit better for when things do turn up. That's a little bit different than, I think, some of the past cycles. Having said that, it's not been any significant driver over the last couple of quarters.

Okay. And in China, you mentioned there was some lumpiness this quarter. I'm wondering how do you expect that to play out in the back half of the year. And in Brazil, can you just comment about performance for your business versus industry production rates in the quarter and what you expect in the back half?

In terms of China, obviously, from the, I'll call it, pure commercial as opposed to some of the government-funded, such as bus tenders, on the pure commercial, folks are certainly reacting to some of the economic conditions. We continue to work to drive the releases so that we've got product available. Even if in the near term here, there's a couple of bumpy spots, we want to be positioned so that when things do turn a little bit to the positive there, more positive -- it's interesting when you talk about their level of growth as being a negative when it's far greater than other places. But I guess it's kind of the change that folks are focused on. But nonetheless, we continue to drive the releases there with good success and work to drive the penetration. As far as the tenders, it's driven by some of the government financing. They clearly have spread those out. We feel very good about the tenders we have won from a competitive positioning standpoint. The issue is, when will they actually place those orders. But we think we've been very successful relative to getting, winning the tender with the OEMs, the various OEMs. It's a question of when will the fleets actually order the vehicles, and so we try to stay close there. And they're moving them around. There are some that have been moved out, but now they've talked about moving them back, so we'll be watching that through the second half. Relative to Latin America, in addition to what we sell into the region as a seller of record, there is a fair amount of product that's coming in from outside. For example, in Venezuela there's a bunch of Russian buses that are going to be equipped with Allison transmissions. There's also a number of Mack vehicles going into the region there, as well as Blue Bird won a major bus tender down there equipped with Allison. So as we look at it, we look at it not only with what's going on in the build in the market. And again, we work to increase our releases there. Certainly, some of the work we're doing with MAN would fall into that category of new release opportunity, but also the vehicles that are imported into the region with the Allisons in them.

Okay. And lastly, I wonder if you could update us on TC10. I appreciate that it's early in the product there, but how's the initial order intake and can you just update us on the timing of additional platform rollouts?

Well, obviously, as we continue to work with different OEMs, until they make a public announcement, we can't really comment on that. Certainly, Navistar has made a public announcement, and they've indicated, I think, publicly, when they'll be shipping units, which is beginning in 2014. Obviously, they'll be building units prior to that, and we'll be shipping them units through the fall here as they build units for some of the fleets that want to be first in line for some of those orders. So results continue to be good. We've got over 100 fleets that have run the product and some have run it on multiple occasions in order to see the -- particularly, the fuel efficiency and the productivity advantages we believe the product offers. Clearly, they'll want to experience, over time, the durability that we'll be providing, and we understand that. And so we would expect a fairly typical ramp rate kind of a thing. People aren't going to convert 100% of their orders out of the box, but we're expecting, based on some of the feedback, maybe a little quicker ramp rate than we've seen on some vocational model introductions.

At this time, we'll go to Andy Kaplowitz with Barclays.

This is Vlad Bystricky on for Andy. Can you guys talk about in the Military business, that's been pretty stable now for the past couple of quarters, so is this sort of a more normalized run rate that we can think about?

Well, I think, as we've said, we still see and folks have asked a lot about the sequestration and that really hasn't been a big driving force or certainly a change in what we have said. We have said that, that business is going to come down to more normal levels. We said it was going to come down in '13, which it has. And we think that will finish out here through 2014. We've expected this reduction for a long time due to reductions in active conflicts and the MRAP production and major vehicle platform replacements completed over the past few years. We have seen some positive movement on the HEMTT and the PLSA2 this year, and we think we're well positioned for the Military business that is going to be there in the out years, if you look at the various programs. And obviously, they've got funding wickets to go through. But for example, in the case of the JLTV, we're in all 3 of the EMD competitors. We've got growing interest, foreign interest in some of our U.S. military vehicle platforms. If you look here recently, there was an article talking about the exercises that are being undertaken between the U.S. military and the Indian military. And we're certainly seeing a greater awareness of what the Allison can do in that equipment and interest out of the Indian military, one of the largest standing armies in the world. And then certainly, if you look at programs like GCV, the Abrams ECP 1, the Bradley ECP 2, et cetera, we're positioning ourselves. So to the extent those vehicles and those programs come to fruition, we think that we'll be there to serve those customers and are well positioned for that. So the question is, how much of it's going to get funded? And then, how well can we position ourselves?

That's helpful, and then just on the cost side, nice job on SG&A this quarter, that it actually came down on a dollar basis. Can you give us some color on where you're finding the savings and your thoughts on, is this a reasonable run rate to think about going forward, these dollar levels?

We, as we talk around here, it's not terribly sophisticated. We talk about managing it like a family budget. And you have plans, and then you have kind of budgets for those expenses and then when things change, you re-examine that. And obviously, in light of what's been a little slower recovery here in North America, we've asked folks to go back and we do a prioritization process. So it's a fairly quick exercise to say, "Okay, what are the key priorities that add the most value to the enterprise?" And you make intelligent trade-off decisions. Certainly, you don't want to compromise the future by any means, and we haven't done that. I mean, you can see that in some of the product development spending and the new products we brought out through what was one of the steepest downturns. So we continue to look at that. I would say that, there's probably some things that you look at and you say, "You know what, you need to paint the house every so often, and you can put that off a year or 2, but sooner or later, you got to get around to doing that." So there's probably some of those activities that as revenues pick up, we would invest in. But we certainly think there's considerable operating leverage to the business. If you look back at, say, even the 2007, I wouldn't consider 2006 a normal year, but even 2005 or 2007, and start looking at that, you start looking at the North America energy market, which is essentially at a standstill and start bringing anything in on that, you can see the lift in revenues, and we would manage costs just as parsimoniously, one of my favorite words, on the upside as we do in a challenged revenue environment. So we would expect considerable operating leverage.

At this time, we'll take a question from Jamie Cook with Crédit Suisse. Jamie L. Cook - Crédit Suisse AG, Research Division: Two quick questions. One, just back to the North America On-Highway business, and you answered one of the questions you were fairly optimistic on the medium-duty business sort of picking up. I guess, can you just give a -- I guess the thing that concerns me is, last year, we were waiting for the second half sort of recovery that never happened. So you can you just give me some feel to the level of visibility that you have in the second half of the year and how much visibility you have? And then I guess, just my second question relates to the overseas Off-Highway business. How sustainable is that energy ramp that you saw? Because the $36 million in revenue was quite a bit better than I would've thought.

In terms of the second half, I mean, we go everything from the line sets we get from OEMs, they're only 10 days out. That's where they go by specific part number in sequence. We certainly have forecasts from the major OEMs out, actually, we try to go out 18 months with them. The further out you get, the less solid they are. I mean, you couldn't argue otherwise. But what we have seen is more consistency -- I think that would be fair -- between the different sources we use in terms of their outlook. Now that could mean that everybody's low or high, but there does seem to be more consistency in those forecasts, which is the base for our optimism. Having said that, we've also not created a cost overhang for ourselves of going after those volumes. For example, we'll take a look and say, based on this ramp in the second half, at what point would we consider adding additional staffing in the factories to produce that? Or until we are sure of that, we'll work a few days overtime to pick up a couple of days a month, you pick up 10% volumes so that you haven't created a hiring and then a staffing reduction overhang. And so we make sure that we do see those ramp-ups before we'd step up from a baseline staffing standpoint. And certainly, a lot of areas wouldn't see any staffing increases because it's not volume-related. We look at that fairly closely. Relative to the Off-Highway, again, driven primarily by China, although there's some activity in Eastern Europe as well. I would say that we feel, as a general statement, that the volumes are solid. There's probably a little bit, as we have gotten into some of the applications, there's probably a little bit of pipeline filling. They like to have a couple of weeks' worth of inventory. Well, when you're starting with your first release, they add a little bit there. But certainly, from an underlying demand standpoint, you've got regionalized energy markets, and you have, beyond the economics of it, you have some of the strategic imperatives that places like China and other places in the world are focused on relative to their decisions as to how much energy, in particular exploration, they want to do. So we feel good about it. We don't think it's a blip. There's going to be -- there's going to some perturbations, but this is what we worked on starting 3 years ago in China.

And at this time, we'll go to David Leiker with Baird. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: Two things, Dave. First, can we talk a little bit on the contribution margin at the gross profit line. It was a little bit light relative to our number, a few million dollars or so. How much does mix play a role in that, do you think?

Mix really isn't that much of an impact. I mean, if you look at our second quarter numbers this year versus last year, our shutdown schedules were similar overall, to Larry's earlier comments, in terms of cost, managing the throughput here. And as you know, we typically watch manning very closely. That all goes into how we're running on a day-to-day basis. Having said that, the changes when you think about in terms of those -- that type of variance on our overall book really isn't that significant, especially when you look at the impact of foreign exchange and some other things that, frankly, we don't -- cannot really control on a day-to-day basis. But I would say overall, there really wasn't that -- anything in there that significant. I think you could tell that from our prepared remarks and commentary. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: What about if you looked at it sequentially versus Q1?

Q1's always a bit challenging because you have the transition in with the year-end shutdowns that we do and then restarting. We're constantly, as part of that process, frankly, transitioning to a full year. Some of that has to do with the timing of OEM schedules in the first quarter as well in terms of when they're returning to production, et cetera. So that will typically have a bit more variability in certain years. But I would say, overall, it wasn't that significant, but I think we did certainly a pretty strong job coming out of shutdown second quarter this year how we thought about things, so. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: Great. And then the last item here. On the guidance, if you look at capital spending, it looks like you pulled down the new product program spending item. Can you just talk about that a little bit?

Sure. As we've indicated in developing, whether it's the TC10, the H3000, et cetera, some of that is going to have to do with ultimately spending -- timing on the completion of our development efforts, as well as when machines are going to be available, et cetera. And as we continue to finalize, frankly, the product, our designs and timing, we'll try to match those up as best we can from a cash flow standpoint. And as we refine the -- both of those projects this year, and as Larry mentioned, the introduction of the TC10, we're essentially more or less on schedule. Some of that may be a break in timing between fourth quarter and first quarter, but overall, pretty close on those programs.

The other comment I'd offer is that, just because we have an approved program doesn't mean we stop scrubbing. If you look at the India Phase 2 facility, they came in several million dollars underneath the original plan because they continued to look for ways to accomplish the original objective at a lower cost. And so that's just kind of part of the culture here.

[Operator Instructions] And we'll move to Brett Hoselton with KeyBanc.

A couple of questions here on the guidance. First, you lowered your sales and your EBITDA guidance slightly in the -- for the full year. What was the primary driver behind that, David? Was it a little bit softer second quarter or did you also reduce your expectations for the back half of the year as well?

There's certainly a bit of softness in the second quarter as we talked about some of the variability in production schedules. We've accounted for that, and I think the second half if you look at -- think about how we saw the year rolling out, we still are certainly optimistic about where the On-Highway NAFTA market is going, but the breadth of that in terms of the size of that recovery and how quick it's occurring has been pushed a bit. So that's -- we've obviously reflected that in our guidance, and as Larry went through, the buildup of the forecast, the inputs that we have from the OEMs, the end users, as well as the external forecasting sources line up with where we're at. So we feel very good about our assumptions going into the second half.

And then a follow-on question, which is simply, as you think about those end markets, as you move into the back half of this year, and then even into 2014, are there particular markets that you are particularly concerned about and are there markets that you look at and think, "Boy, that really is some opportunity to be to the upside."

I think, we've gone through the -- starting with the largest one with NAFTA On-Highway, anything, if you think about the maturity of that market and where we're at, fleet age, et cetera, and backfilling the vehicles that are out there. We see that as -- whether it's this quarter or next quarter, it's going to happen. So from our standpoint, frankly, some of the softness that we saw in terms of the breadth of the recovery this year, we feel is a near-term issue to be resolved. So overall, we feel very good about, certainly, that market. Hybrid transit bus, we've talked about before in terms of the maturity of that and the properties that continue to support it, and we're standing ready to do that as well. The Global Off-Highway business, again, we've talked extensively about frac-ing and where that's going. They certainly like gas prices a lot better where they are today than they were a year ago, and the significance of that. Having said that, I'm not sure anybody's out there predicting when that's going to recover, but that's all upside from where we sit today, in terms of the cyclical lows we believe we're at, at this point. The defense business we've gone through and then parts and support equipment, again, you'll have, in terms of new units they are going to follow with support equipment. And I think the aftermarkets, we would expect some level of improvement there as the market continues to recover. So we feel very good about the overall book at this point, and frankly, some of our efforts to further diversify outside of North America in terms of our efforts there with that team, I think, are paying off in terms of some of these initiatives in sectors like energy being a more recent one. But the success of that is, we started investing several years ago as it is critical to our future in terms of growth expectations and realizing that value.

We'll take a question from Ian Zaffino with Oppenheimer. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: I was just a little bit -- one clarification on the guidance as far as the reduction in revenues, but I guess, the increase in margins, is that coming almost entirely from cost saves or is there some margin -- like a mix benefit also? Or is there a breakdown between mix and maybe cost saves?

Not much of a change in terms of mix. We certainly continue to manage cost commensurate with market conditions. So as we did in 2008 and 2009, we've adjusted as we've seen the market develop. To Larry's point, we're watching things very closely, and we're familiar with this process and have been successful with it before. So I think what you're seeing is the continued leveraging of Allison's business model. There really isn't a lot of science to this other than we're trying to match opportunities and resources and prioritize them, and I think you see the outcome there. Having said that, with our guidance, I think it is also safe to say, as we've watched the year evolve, one of the things we typically do is, as we get further into the year, you get more confident, so we're continuing to refine the margin ranges, as we think about them, as we're seeing the end markets firm up as well, so I think all of that's built into the guidance that you see. And as we said, we're confident in terms of where the largest market is headed at this point, and our ability to manage cost commensurate with the balance of the opportunities that we see. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: Okay. And then on the comment on Europe getting better or improving. Can you guys put a little more detail on that? Like where exactly are you seeing that? Not only what regions, but also what product lines?

Yes, the areas that probably have been the brightest spots in terms of net delta, we have seen some of the orders hold up a little bit better than we had thought. That's not saying they're up. That's saying they're down less from some of the traditional Western European big players. But what we've seen is, we've seen a pickup compared to past years in Russia, in the former CIS. We've got a lot of activity going on there, buses and trucks. Russian OEMs, as well as some of the European OEMs into Russia such as Iveco, Scania. And then Turkey has been another area. Turkey bus has been a real plus for us. We're up -- relatively small numbers, but nonetheless, we're up 56% year-over-year on bus sales in Turkey, just as a bright spot for us. So when we talk about, in the European region, we refer -- it's Europe, Middle East and Africa, and so those are a couple of areas that -- some of the traditional Western Europe is not as down as far as we thought. And then we've had some nice pickups in Russia, Turkey, a little bit in South Africa. That's been a little choppy. But in the Off-Highway space, we've been able to do some things with particularly Bell there with our long-term supply agreement with them.

Next question will be from Rob Wertheimer with Vertical Research Partners.

I wanted to, if I could, to parse the North American guide just a little bit more. You started the year, I think, up 8. I think you're -- well, we're up 3, and we have flat 2H sales versus 2Q. And you sort of said stabilization year-over-year, which is more at the 190 level than the 215 level. So not to try and get too fine point, but are you expecting actually a sequential down from 2Q? We've not heard of a lot of production cuts. Just wanted to see if there's a little bit of vagueness in your -- just generality in your comment or whether you're expecting a cut there.

I think NAFTA overall in terms of On-Highway, when you look at the second half from our perspective should be up mid-double-digits in terms of the numbers that we're going off of, and that lines up, again, very closely with what we've heard from the OEMs and, frankly, has triangulated that with some other sources. So we're expecting some very good, positive results in the second half versus the first half, and I think when you look at the overall quarters, certainly Q3, as you would expect, because it has more working days, will be higher than Q4 just because of the schedule that we have with the OEMs, but it's a healthy step up from first half.

Okay. Okay. When you said net sales -- well, okay, fair enough, so it's for the whole thing. And then second, you touched on Europe, you touched on Turkey and Russia, are you sensing -- was there any kind of a pre-buy that affected it? I know the U.K. had a little bit of a surge. Anything like that or is it really more of the stronger markets and maybe some share gain in the ones you mentioned?

In the vocations that we serve or the end markets we serve, we haven't seen a lot of that. I think more of that's been in some of the over-the-road, what we might call here in this country, line-haul type applications, where we don't have a penetration there.

At this time, we'll take a question from Alex Potter with Piper Jaffray.

I was wondering if you could dive in a little bit more on energy in China. We've spoken a lot about that on the call so far. How much of that, if any, is starting to come from frac-ing in China versus other more traditional approaches?

Actually, much of what we're doing is in the frac-ing space. So yes, so quite a bit of it. There are some support vehicles that we're in as well, particularly with some of 5000 Series Off-Highway product or the 4000 Series On-Highway product. But most of the 8 in the case of smaller rigs and 9000 Series product is going into frac-ing and pumping.

Okay, good. And then a follow-up on that. There's been, I guess, a little bit of debate regarding whether China may have been a little bit aggressive or overly optimistic in their ability to extract that resource, but at least from your comments here, it looks as though they're making, I guess, substantial progress. Would you say that, that's fair?

Well, I would say, they're certainly building rigs. I've read the same thing. Apparently, it's a little more challenging to frac it. I think that what I would say is, the things we're hearing are that they will, shall we say, apply more horsepower to the problem. And so that's what we're hearing. Clearly, there's some -- the bigger issue that they're wrestling with and have been vocal about at some of the industry forums has been the amount of water used in a traditional frac-ing situation. They're interested in how the frac-ing can be accomplished using less water.

Any -- you care to make a prediction there regarding the feasibility or their ability to, I guess, hit their targets? Do you think 5, 10 years from now, we're going to be talking about significant volumes of gas coming out of shale in China?

I would say this: Number one, certainly, there's a lot of folks that study it a lot more closely than I do, and so I would defer to their analysis. I would just say that in my -- in the experience I've had on the numerous opportunities I've had to conduct business personally in China, I wouldn't sell them short on solving an issue that they want to get after.

Okay, fair enough. And then the last one here. Just wondering if you could comment on straight trucks. What is it, in North America, what is it you're looking for kind of as a sign there that demand could be picking up? And does it seem like that's starting?

I think there's 2 areas that you'd want to look at. One is construction, just to see how strong that will pick up and what kind of demand that creates against the vehicles they have and need to replace, as Dave touched on earlier. And then the other one we're watching is municipalities. As we indicated, in this downturn, they have been more severely impacted because not only were the tax receipts impacted, but they had pension issues, frankly, staffing issues, where they had staffed up over the heavy tax receipts years. And so they had to sort through those. We're just now getting to, in many cases, the new budget years. And so we'll be watching, certainly, I think they've seen an improvement in their financial situations. The issue is, just how significant will they go after new equipment. And so we're watching that closely. We think there's upside, the question is how much.

And that does conclude the question-and-answer session. I'll turn things back over to Larry Dewey for closing remarks.

Well, we certainly appreciate both the time, as well as the interest in the business. It's obvious folks have spent -- from the questions, spent a fair amount of time with the material. And we appreciate that and look forward to chatting with you in the future. We'll continue to drive this business and work to the guidance that we've provided. Thank you.

Once again, this does conclude today's conference call. Thank you all for your participation. You may now disconnect.