INDIANAPOLIS, Oct. 30, 2017 /PRNewswire/ -- Allison
Transmission Holdings Inc. (NYSE: ALSN), the largest global
provider of commercial duty fully-automatic
transmissions, today reported net sales for the third quarter
of $595 million, a 37 percent
increase from the same period in 2016. The increase in net sales
was principally driven by higher demand in the North America
On-Highway, Service Parts, Support Equipment & Other and Global
Off-Highway end markets.
Net Income for the quarter was $111
million compared to $45
million for the same period in 2016. Adjusted EBITDA, a
non-GAAP financial measure, for the quarter was $241 million, or 40.5 percent of net sales,
compared to $151 million, or 34.7
percent of net sales, for the same period in 2016. Net Cash
Provided by Operating Activities for the quarter was $215 million compared to $128 million for the same period in 2016.
Adjusted Free Cash Flow, a non-GAAP financial measure, for the
quarter was $195 million compared to
$115 million for the same period in
2016.
Lawrence E. Dewey, Chairman and
Chief Executive Officer of Allison Transmission commented,
"Allison's third quarter 2017 results exceeded the guidance ranges
we provided to the market on July 31
principally driven by stronger than anticipated demand for
North America service parts and
North America Off-Highway products." Dewey continued,
"Allison has demonstrated solid operating margins and free cash
flow through the first half of the year, I am pleased to report
that this trend continued in the third quarter. Margins and Net
Cash Provided by Operating Activities for the third quarter
approached all-time highs, while the company maintained its
well-defined approach to capital structure and allocation. During
the third quarter, we settled $239
million of share repurchases, paid a dividend of
$0.15 per share and completed an
offering of $400 million in senior
notes due in 2027. Given third quarter 2017 results and current end
markets conditions, we are raising our full year 2017 net sales
guidance from an increase in the range of 15 to 17 percent to an
increase in the range of 21 to 22 percent."
Third Quarter Net Sales by End Market
End
Market
|
Q3
2017
Net Sales
($M)
|
Q3
2016
Net Sales
($M)
|
%
Variance
|
North America
On-Highway
|
$282
|
$224
|
26%
|
North America
Electric Hybrid-Propulsion Systems
for Transit Bus
|
$19
|
$8
|
138%
|
North America
Off-Highway
|
$17
|
$1
|
1600%
|
Defense
|
$35
|
$25
|
40%
|
Outside North
America On-Highway
|
$89
|
$78
|
14%
|
Outside North
America Off-Highway
|
$14
|
$2
|
600%
|
Service Parts,
Support Equipment & Other
|
$139
|
$96
|
45%
|
Total Net
Sales
|
$595
|
$434
|
37%
|
Third Quarter Highlights
North America On-Highway end market net sales were up 26 percent
from the same period in 2016 principally driven by higher demand
for Rugged Duty Series and Highway Series models and down 6 percent
on a sequential basis principally driven by lower demand for Rugged
Duty Series, Pupil Transport/Shuttle and Highway Series models.
North America Electric Hybrid-Propulsion Systems for Transit Bus
end market net sales were up $11
million from the same period in 2016 and up $4 million sequentially, in both cases
principally driven by the timing of certain transit property
orders.
North America Off-Highway end market net sales were up
$16 million from the same period in
2016 and up $12 million on a
sequential basis, in both cases principally driven by higher demand
from hydraulic fracturing applications.
Defense end market net sales were up $10
million from the same period in 2016 and up $5 million sequentially, in both cases
principally driven by higher demand.
Outside North America On-Highway end market net sales were up 14
percent from the same period in 2016 principally driven by higher
demand in Asia and Europe and up 5 percent on a sequential basis
principally driven by higher demand in Europe.
Outside North America Off-Highway end market net sales were up
$12 million from the same period in
2016 principally driven by improved demand in the mining and energy
sectors, and up $4 million
sequentially principally driven by improved demand in the mining
sector.
Service Parts, Support Equipment & Other end market net
sales were up 45 percent from the same period in 2016 principally
driven by higher demand for North America Off-Highway service
parts, global On-Highway service parts and global support
equipment, and up 2 percent on a sequential basis principally
driven by higher demand for global On-Highway service parts.
Gross profit for the quarter was $302
million, an increase of 48 percent from $204 million for the same period in 2016. Gross
margin for the quarter was 50.8 percent, an increase of 370 basis
points from a gross margin of 47.1 percent for the same period in
2016. The increase in gross profit from the same period in 2016 was
principally driven by increased net sales and price increases on
certain products partially offset by unfavorable material costs,
higher manufacturing expense commensurate with increased net sales
and higher incentive compensation expense.
Selling, general and administrative expenses for the quarter
were $78 million, a decrease of
$1 million from $79 million for the same period in 2016. The
decrease was principally driven by favorable product warranty
adjustments partially offset by increased commercial activities
spending and higher incentive compensation expense.
Engineering – research and development expenses for the quarter
were $26 million, an increase of
$5 million from $21 million for the same period in 2016. The
increase was principally driven by increased product initiatives
spending.
Net income for the quarter was $111
million compared to $45
million for the same period in 2016. The increase was
principally driven by increased gross profit, 2016 expense for
previously recorded deferred financing costs as a result of the
long-term debt refinancing and favorable product warranty
adjustments partially offset by increased income tax expense,
higher incentive compensation expense, increased interest expense
and increased product initiatives and commercial activities
spending.
Third Quarter Non-GAAP Financial Measures
Adjusted EBITDA for the quarter was $241
million, or 40.5 percent of net sales, compared to
$151 million, or 34.7 percent of net
sales, for the same period in 2016. The increase in Adjusted EBITDA
was principally driven by increased net sales, price increases on
certain products and favorable product warranty adjustments
partially offset by higher incentive compensation expense,
unfavorable material costs, increased manufacturing expense
commensurate with increased net sales, and increased product
initiatives and commercial activities spending.
Adjusted Free Cash Flow for the quarter was $195 million compared to $115 million for the same period in 2016, an
increase of $80 million. The increase
was principally driven by increased gross profit, increased
accounts payable, increased deferred revenue and decreased cash
interest expense partially offset by increased cash income taxes,
and increased capital expenditures.
Full Year 2017 Guidance Update
Our updated full year 2017 guidance includes a year-over-year
net sales increase in the range of 21 to 22 percent, Adjusted
EBITDA margin in the range of 37.75 to 38.75 percent, Adjusted Free
Cash Flow in the range of $510 to $530
million, capital expenditures in the range of $90 to $95 million, which includes maintenance
spending of approximately $85
million, and cash income taxes in the range of $105 to $115 million.
Allison's full year 2017 net sales guidance reflects stronger
demand for North America Off-Highway service parts, Global
On-Highway products and Global Off-Highway products. Our full year
2017 net sales outlook also assumes price increases on certain
products.
Although we are not providing specific fourth quarter 2017
guidance, Allison does expect fourth quarter net sales to be up
from the same period in 2016 and down sequentially.
Conference Call and Webcast
The company will host a
conference call at 8:00 a.m. ET on
Tuesday, October 31 to discuss its
third quarter 2017 results. The dial-in number is 1-201-689-8470
and the U.S. toll-free dial-in number is 1-877-407-9039. A live
webcast of the conference call will also be available online at
http://ir.allisontransmission.com.
For those unable to participate in the conference call, a replay
will be available from 11:00 a.m. ET
on October 31 until 11:59 p.m. ET on November
7. The replay dial-in number is 1-844-512-2921 and the
international replay dial-in number is 1-412-317-6671. The replay
passcode is 13670855.
About Allison Transmission
Allison Transmission
(NYSE: ALSN) is the world's largest manufacturer of fully automatic
transmissions for medium- and heavy-duty commercial vehicles and is
a leader in hybrid-propulsion systems for city buses. Allison
transmissions are used in a variety of applications including
refuse, construction, fire, distribution, bus, motorhomes, defense
and energy. Founded in 1915, the company is headquartered in
Indianapolis, Indiana, USA and
employs approximately 2,600 people worldwide. With a market
presence in more than 80 countries, Allison has regional
headquarters in the Netherlands,
China and Brazil with manufacturing facilities in the
U.S., Hungary and India. Allison also has approximately 1,400
independent distributor and dealer locations worldwide. For more
information, visit allisontransmission.com.
Forward-Looking Statements
This press release contains
forward-looking statements. All statements other than statements of
historical fact contained in this press release are forward-looking
statements, including all statements regarding future financial
results. In some cases, you can identify forward-looking statements
by terminology such as "may," "will," "should," "expect," "plans,"
"project," "anticipate," "believe," "estimate," "predict,"
"intend," "forecast," "could," "potential," "continue" or the
negative of these terms or other similar terms or phrases.
Forward-looking statements are not guarantees of future performance
and involve known and unknown risks. Factors which may cause the
actual results to differ materially from those anticipated at the
time the forward-looking statements are made include, but are not
limited to: risks related to our substantial indebtedness;
uncertainty in the global regulatory and business environments in
which we operate; our participation in markets that are
competitive; the highly cyclical industries in which certain of our
end users operate; the failure of markets outside North America to increase adoption of
fully-automatic transmissions; the concentration of our net sales
in our top five customers and the loss of any one of these; future
reductions or changes in government subsidies for hybrid vehicles
and other external factors impacting demand; U.S. defense spending;
general economic and industry conditions; the discovery of defects
in our products, resulting in delays in new model launches, recall
campaigns and/or increased warranty costs and reduction in future
sales or damage to our brand and reputation; our ability to prepare
for, respond to and successfully achieve our objectives relating to
technological and market developments, competitive threats and
changing customer needs; risks associated with our international
operations; labor strikes, work stoppages or similar labor
disputes, which could significantly disrupt our operations or those
of our principal customers; our intention to pay dividends and
repurchase shares of our common stock and other risks and
uncertainties associated with our business described in our Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K. Although we believe the expectations reflected
in such forward-looking statements are based upon reasonable
assumptions, we can give no assurance that the expectations will be
attained or that any deviation will not be material. All
information is as of the date of this press release, and we
undertake no obligation to update any forward-looking statement to
conform the statement to actual results or changes in
expectations.
Use of Non-GAAP Financial Measures
This press release
contains information about Allison's financial results which are
not presented in accordance with accounting principles generally
accepted in the United States
("GAAP"). Such non-GAAP financial measures are reconciled to their
closest GAAP financial measures at the end of this press release.
Non-GAAP financial measures should not be considered in isolation
or as a substitute for our reported results prepared in accordance
with GAAP and, as calculated, may not be comparable to other
similarly titled measures of other companies.
This press release also contains forward-looking estimates of
non-GAAP Adjusted EBITDA Margin and Adjusted Free Cash Flow for
fiscal year 2017. We are unable to provide a reconciliation of our
forward-looking estimate of non-GAAP Adjusted EBITDA Margin to a
forward-looking estimate of GAAP Net Income because certain
information needed to make a reasonable forward-looking estimate of
GAAP Net Income is difficult to predict and estimate and is often
dependent on future events which may be uncertain or outside of our
control. These may include unanticipated charges related to asset
impairments (fixed assets, investments, intangibles or goodwill)
and unanticipated non-recurring items not reflective of ongoing
operations. We are unable to provide a reconciliation of our
forward-looking estimate of non-GAAP Adjusted Free Cash Flow to a
forward-looking estimate of GAAP Net Cash Provided by Operating
Activities because certain information needed to make a reasonable
forward-looking estimate of GAAP Net Cash Provided by Operating
Activities is difficult to predict and estimate and is often
dependent on future events which may be uncertain or outside of our
control. These may include unanticipated non-recurring items.
Attachment
- Condensed Consolidated Statements of Operations
- Condensed Consolidated Balance Sheets
- Condensed Consolidated Statements of Cash Flows
- Reconciliation of GAAP to Non-GAAP Financial Measures
Allison Transmission
Holdings, Inc.
|
Condensed
Consolidated Statements of Operations
|
(Unaudited, dollars
in millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended September 30,
|
|
Nine months
ended September 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
595
|
|
$
434
|
|
$
1,674
|
|
$
1,371
|
Cost of
sales
|
|
293
|
|
230
|
|
831
|
|
725
|
Gross
profit
|
|
302
|
|
204
|
|
843
|
|
646
|
Selling, general and
administrative
|
|
78
|
|
79
|
|
245
|
|
240
|
Engineering -
research and development
|
|
26
|
|
21
|
|
74
|
|
64
|
Operating
income
|
|
198
|
|
104
|
|
524
|
|
342
|
Interest expense,
net
|
|
(26)
|
|
(22)
|
|
(78)
|
|
(84)
|
Expenses related to
long-term debt refinancing
|
|
-
|
|
(12)
|
|
-
|
|
(12)
|
Other (expense)
income, net
|
|
(2)
|
|
1
|
|
(3)
|
|
1
|
Income before income
taxes
|
|
170
|
|
71
|
|
443
|
|
247
|
Income tax
expense
|
|
(59)
|
|
(26)
|
|
(154)
|
|
(93)
|
Net income
|
|
$
111
|
|
$
45
|
|
$
289
|
|
$
154
|
Basic earnings per
share attributable to common
stockholders
|
|
$
0.75
|
|
$
0.27
|
|
$
1.91
|
|
$
0.91
|
Diluted earnings per
share attributable to common
stockholders
|
|
$
0.75
|
|
$
0.27
|
|
$
1.90
|
|
$
0.91
|
Allison Transmission
Holdings, Inc.
|
Condensed
Consolidated Balance Sheets
|
(Unaudited, dollars
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
|
|
|
2017
|
|
2016
|
ASSETS
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
210
|
|
$
205
|
Accounts receivable
|
|
|
271
|
|
197
|
Inventories
|
|
|
|
156
|
|
126
|
Other current assets
|
|
|
28
|
|
20
|
Total Current
Assets
|
|
|
665
|
|
548
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
456
|
|
464
|
Intangible assets,
net
|
|
|
1,175
|
|
1,242
|
Goodwill
|
|
|
|
|
1,941
|
|
1,941
|
Other non-current
assets
|
|
|
24
|
|
24
|
TOTAL
ASSETS
|
|
|
|
$
4,261
|
|
$
4,219
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
184
|
|
$
128
|
Product Warranty Liability
|
|
|
22
|
|
25
|
Current portion of long-term debt
|
|
12
|
|
12
|
Deferred revenue
|
|
|
|
33
|
|
27
|
Other current liabilities
|
|
|
193
|
|
150
|
Total Current
Liabilities
|
|
|
444
|
|
342
|
|
|
|
|
|
|
|
|
Product Warranty
Liability
|
|
|
27
|
|
38
|
Deferred
Revenue
|
|
|
|
75
|
|
66
|
Long-term
debt
|
|
|
|
2,536
|
|
2,147
|
Deferred income
taxes
|
|
|
393
|
|
312
|
Other non-current
liabilities
|
|
|
231
|
|
233
|
TOTAL
LIABILITIES
|
|
|
|
3,706
|
|
3,138
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS'
EQUITY
|
|
555
|
|
1,081
|
TOTAL LIABILITIES
& STOCKHOLDERS' EQUITY
|
$
4,261
|
|
$
4,219
|
Allison Transmission
Holdings, Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited, dollars
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended September 30,
|
|
Nine Months
Ended September 30,
|
|
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
|
$
215
|
|
$
128
|
|
$
492
|
|
$
416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used for
investing activities (a)
|
|
|
(20)
|
|
(15)
|
|
(43)
|
|
(37)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used for
financing activities
|
|
|
(71)
|
|
(313)
|
|
(447)
|
|
(466)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes in cash
|
|
|
1
|
|
-
|
|
3
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
|
125
|
|
(200)
|
|
5
|
|
(87)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents at beginning of period
|
|
|
85
|
|
365
|
|
205
|
|
252
|
Cash and cash
equivalents at end of period
|
|
|
$
210
|
|
$
165
|
|
$
210
|
|
$
165
|
Supplemental
disclosures:
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
|
|
$
16
|
|
$
21
|
|
$
71
|
|
$
64
|
Income taxes paid
|
|
|
|
$
31
|
|
$
2
|
|
$
65
|
|
$
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Additions
of long-lived assets
|
|
|
|
|
|
$
(20)
|
|
$
(14)
|
|
$
(40)
|
|
$
(36)
|
Allison Transmission
Holdings, Inc.
|
Reconciliation of
GAAP to Non-GAAP Financial Measures
|
(Unaudited, dollars
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net income
(GAAP)
|
|
|
|
$
111
|
|
$
45
|
|
$
289
|
|
$
154
|
plus:
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
|
59
|
|
26
|
|
154
|
|
93
|
Interest expense, net
|
|
|
26
|
|
22
|
|
78
|
|
84
|
Amortization of intangible assets
|
|
22
|
|
23
|
|
67
|
|
69
|
Depreciation of property, plant and equipment
|
|
21
|
|
21
|
|
60
|
|
63
|
Stock-based compensation expense (a)
|
|
2
|
|
2
|
|
8
|
|
6
|
Dual power inverter module units extended coverage (b)
|
|
(2)
|
|
-
|
|
(2)
|
|
1
|
Unrealized loss (gain) on foreign exchange (c)
|
|
|
2
|
|
(1)
|
|
1
|
|
1
|
Technology-related investment expense (d)
|
|
-
|
|
1
|
|
3
|
|
1
|
Expenses related to long-term debt refinancing (e)
|
|
|
-
|
|
12
|
|
-
|
|
12
|
Unrealized gain on commodity hedge contracts (f)
|
|
-
|
|
-
|
|
-
|
|
(2)
|
Stockholder activism expenses (g)
|
|
-
|
|
-
|
|
-
|
|
4
|
Adjusted EBITDA
(Non-GAAP)
|
|
|
$
241
|
|
$
151
|
|
$
658
|
|
$
486
|
Net sales
(GAAP)
|
|
|
|
$
595
|
|
$
434
|
|
$
1,674
|
|
$
1,371
|
Adjusted EBITDA
margin (Non-GAAP)
|
|
40.5%
|
|
34.7%
|
|
39.3%
|
|
35.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by
Operating Activities (GAAP)
|
|
$
215
|
|
$
128
|
|
$
492
|
|
$
416
|
(Deductions) or
Additions to Reconcile to Adjusted Free Cash Flow:
|
|
|
|
|
|
|
|
|
Additions of long-lived assets
|
|
|
(20)
|
|
(14)
|
|
(40)
|
|
(36)
|
Stockholder activism expenses (g)
|
|
-
|
|
-
|
|
-
|
|
4
|
Excess tax benefit from stock-based compensation (h)
|
|
-
|
|
1
|
|
-
|
|
1
|
Adjusted Free Cash
Flow (Non-GAAP)
|
|
$
195
|
|
$
115
|
|
$
452
|
|
$
385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Represents employee
stock compensation expense (recorded in Cost of sales, Selling,
general and administrative, and Engineering – research and
development).
|
(b)
|
Represents an
adjustment (recorded in Selling, general and administrative)
associated with the Dual Power Inverter Module ("DPIM") extended
coverage program liability. The DPIM liability will continue to be
reviewed for any changes in estimates as additional claims data and
field information become available.
|
(c)
|
Represents losses
(gains) (recorded in Other (expense) income, net) on intercompany
financing transactions related to investments in plant assets for
our India facility.
|
(d)
|
Represents a charge
(recorded in Other (expense) income, net) for investments in
co-development agreements to expand our position in transmission
technologies.
|
(e)
|
Represents expenses
related to the refinancing of Allison Transmission, Inc.'s, our
wholly owned subsidiary, Senior Secured Credit Facility in the
third quarter of 2016.
|
(f)
|
Represents unrealized
gains (recorded in Other (expense) income, net) on the
mark-to-market of our commodity hedge contracts.
|
(g)
|
Represents expenses
(recorded in Selling, general and administrative) directly
associated with stockholder activism activity including the notice,
and subsequent withdrawal, of director nomination and governance
proposals by Ashe Capital Management, LP.
|
(h)
|
Represents the amount
of tax benefit (recorded in Income tax expense) related to
stock-based compensation adjusted from cash flows from operating
activities to cash flows from financing
activities.
|
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SOURCE Allison Transmission Holdings Inc.