INDIANAPOLIS, Feb. 14, 2018 /PRNewswire/ -- Allison
Transmission Holdings Inc. (NYSE: ALSN), the largest global
provider of commercial duty fully-automatic
transmissions, today reported net sales for the fourth quarter
of $588 million, a 25 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, North
America Off-Highway and Outside North America On-Highway end
markets.
Net Income for the quarter was $215
million compared to $61
million for the same period in 2016. Adjusted EBITDA, a
non-GAAP financial measure, for the quarter was $210 million, or 35.7 percent of net sales,
compared to $158 million, or 33.8
percent of net sales, for the same period in 2016. Net Cash
Provided by Operating Activities for the quarter was $166 million compared to $175 million for the same period in 2016.
Adjusted Free Cash Flow, a non-GAAP financial measure, for the
quarter was $115 million compared to
$145 million for the same period in
2016.
Lawrence E. Dewey, Chairman and
Chief Executive Officer of Allison Transmission commented, "2017
was a noteworthy year at Allison. Full year results exceeded our
initial Net Sales guidance ranges across all of our end markets.
Furthermore, Allison achieved record levels of Net Sales, Gross
Margin and Net Cash Provided by Operating Activities, and realized
its second consecutive year of double digit growth in the Outside
North America On-Highway end market. Dewey continued, "Throughout
the year, we continued our well-defined approach to capital
structure and allocation. During the fourth quarter, we paid
a dividend of $0.15 per share and
settled $106 million of share
repurchases, resulting in $885
million of total share repurchases in 2017."
Fourth Quarter Net
Sales by End Market
|
|
|
|
|
End
Market
|
Q4 2017
Net Sales
($M)
|
Q4 2016
Net Sales
($M)
|
%
Variance
|
North America
On-Highway
|
270
|
217
|
24%
|
North America
Electric Hybrid-Propulsion Systems for Transit Bus
|
17
|
20
|
(15%)
|
North America
Off-Highway
|
28
|
0
|
NA
|
Defense
|
25
|
37
|
(32%)
|
Outside North
America On-Highway
|
98
|
83
|
18%
|
Outside North
America Off-Highway
|
11
|
4
|
175%
|
Service Parts,
Support Equipment & Other
|
139
|
108
|
29%
|
Total Net
Sales
|
588
|
469
|
25%
|
Fourth Quarter Highlights
North America On-Highway end market net sales were up 24 percent
from the same period in 2016 principally driven by higher demand
for Rugged Duty Series models and down 4 percent on a sequential
basis principally driven by lower demand for Pupil
Transport/Shuttle Series, Transit/Other Bus and Highway Series
models.
North America Electric Hybrid-Propulsion Systems for Transit Bus
end market net sales were down $3
million from the same period in 2016 and down $2 million sequentially, in both cases
principally driven by intra-year movement in the timing of
orders.
North America Off-Highway end market net sales were up
$28 million from the same period in
2016 and up $11 million on a
sequential basis, in both cases principally driven by higher demand
from hydraulic fracturing applications.
Defense end market net sales were down $12 million from the same period in 2016 and down
$10 million sequentially, in both
cases principally driven by the timing of Tracked Defense
shipments.
Outside North America On-Highway end market net sales were up 18
percent from the same period in 2016 principally driven by higher
demand in Asia, Europe and South
America, and up 10 percent on a sequential basis principally
driven by higher demand in Asia
and Europe.
Outside North America Off-Highway end market net sales were up
$7 million from the same period in
2016 principally driven by higher demand in the mining sector and
down $3 million sequentially
principally driven by lower demand in the energy sector.
Service Parts, Support Equipment & Other end market net
sales were up 29 percent from the same period in 2016 principally
driven by higher demand for North America Off-Highway service parts
and global support equipment, and flat on a sequential basis.
Gross profit for the quarter was $288
million, an increase of 32 percent from $218 million for the same period in 2016. Gross
margin for the quarter was 49.0 percent, an increase of 260 basis
points from a gross margin of 46.4 percent for the same period in
2016. The increase in gross profit from the same period in 2016 was
principally driven by favorable net sales and price increases
on certain products partially offset by $9
million of cost in connection with the ratification of a
six-year collective bargaining agreement with UAW Local 933, higher
manufacturing expense commensurate with increased net sales and
unfavorable material cost.
Selling, general and administrative expenses for the quarter
were $97 million, an increase of
$13 million from $84 million for the same period in 2016. The
increase was principally driven by unfavorable product warranty
adjustments and increased commercial activities spending partially
offset by lower incentive compensation expense.
Engineering – research and development expenses for the quarter
were $31 million, an increase of
$7 million from $24 million for the same period in 2016. The
increase was principally driven by increased product initiatives
spending partially offset by lower incentive compensation
expense.
As a result of events and circumstances in the fourth quarter
2017, we reviewed certain of the long-lived assets related to the
production of the TC10 transmission, and recorded an impairment
charge of $32 million.
Continued weak demand conditions for this product contributed to
the future cash flows of the related long-lived assets being less
than the carrying value of those assets.
Income tax for the quarter was a $131
million benefit compared to a $33
million expense for the same period in 2016. The
change was principally driven by a one-time income tax benefit of
$155 million resulting from a
decrease in deferred tax liabilities partially offset by an
increase in tax liabilities related to our accumulated foreign
earnings and profits, both as a result of the U.S. Tax Cuts and
Jobs Act enacted into law in December
2017.
Net income for the quarter was $215
million compared to $61
million for the same period in 2016. The increase was
principally driven by the enactment of the U.S. Tax Cuts and Jobs
Act, increased gross profit and lower incentive compensation
expense partially offset by a loss associated with the impairment
of long-lived assets, increased technology-related investment
expense, unfavorable product warranty adjustments, increased
product initiatives spending, increased interest expense and
increased commercial activities spending.
Fourth Quarter Non-GAAP Financial Measures
Adjusted EBITDA for the quarter was $210
million, or 35.7 percent of net sales, compared to
$158 million, or 33.8 percent of net
sales, for the same period in 2016. The increase was principally
driven by increased net sales, price increases on certain products
and lower incentive compensation expense partially offset by
unfavorable product warranty adjustments, increased product
initiatives spending, higher manufacturing expense commensurate
with increased net sales, increased commercial activities spending
and unfavorable material cost.
Adjusted Free Cash Flow for the quarter was $115 million compared to $145 million for the same period in 2016, a
decrease of $30 million. The decrease
was principally driven by increased cash interest expense,
increased cash income taxes, increased pension funding, increased
capital expenditures, unfavorable warranty adjustments, increased
product initiatives spending and increased commercial activities
spending partially offset by increased gross profit and lower
incentive compensation expense.
2018 Guidance
Allison expects 2018 net sales to be in the range of up 3 to 7
percent compared to 2017, an Adjusted EBITDA margin in the range of
37.5 to 39.5 percent and an Adjusted Free Cash Flow in the range of
$550 to $600
million. Capital expenditures are expected to be in the
range of $85 to $95 million and cash income taxes are expected to
be in the range of $70 to
$80 million.
Our 2018 net sales guidance anticipates continued strength in
the North American On-Highway end market. Allison's 2018 net sales
outlook also assumes increased demand in the Outside North America
On-Highway, Defense and North America Off-Highway end markets and
price increases on certain products partially offset by decreased
demand in the Service Parts, Support Equipment & Other end
market.
Although we are not providing specific first quarter 2018
guidance, Allison does expect first quarter net sales to be
up from the same period in 2017 principally driven by
increased demand expected in the North America On-Highway and North
America Off-Highway end markets.
Conference Call and Webcast
The company will host a
conference call at 8:00 a.m. ET on
Thursday, February 15 to discuss its fourth quarter 2017
results. 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 February 15 until 11:59 p.m. ET on February
22. 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 13674799.
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 electric 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; 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 2018. 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 the level of excess income tax benefit
from share-based compensation and 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 December 31,
|
|
Twelve months
ended December 31,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
588
|
|
$
469
|
|
$
2,262
|
|
$
1,840
|
Cost of
sales
|
|
300
|
|
251
|
|
1,131
|
|
976
|
Gross
profit
|
|
288
|
|
218
|
|
1,131
|
|
864
|
Selling, general and
administrative
|
|
97
|
|
84
|
|
342
|
|
324
|
Engineering -
research and development
|
|
31
|
|
24
|
|
105
|
|
88
|
Loss associated with
impairment of long-lived assets
|
32
|
|
-
|
|
32
|
|
-
|
Operating
income
|
|
128
|
|
110
|
|
652
|
|
452
|
Interest expense,
net
|
|
(25)
|
|
(17)
|
|
(103)
|
|
(101)
|
Expenses related to
long-term debt refinancing
|
|
-
|
|
-
|
|
-
|
|
(12)
|
Other (expense)
income, net
|
|
(19)
|
|
1
|
|
(22)
|
|
2
|
Income before income
taxes
|
|
84
|
|
94
|
|
527
|
|
341
|
Income tax benefit
(expense)
|
|
131
|
|
(33)
|
|
(23)
|
|
(126)
|
Net income
|
|
$
215
|
|
$
61
|
|
$
504
|
|
$
215
|
Basic earnings per
share attributable to common stockholders
|
|
$
1.52
|
|
$
0.37
|
|
$
3.38
|
|
$
1.28
|
Diluted earnings per
share attributable to common stockholders
|
|
$
1.51
|
|
$
0.36
|
|
$
3.36
|
|
$
1.27
|
Allison Transmission
Holdings, Inc.
|
Condensed
Consolidated Balance Sheets
|
(Unaudited, dollars
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
December
31,
|
|
|
|
|
|
2017
|
|
2016
|
ASSETS
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
199
|
|
$
205
|
Accounts receivable
|
|
|
221
|
|
197
|
Inventories
|
|
|
|
154
|
|
126
|
Income taxes receivable
|
|
|
33
|
|
3
|
Other current assets
|
|
|
25
|
|
17
|
Total Current
Assets
|
|
|
632
|
|
548
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
448
|
|
464
|
Intangible assets,
net
|
|
|
1,153
|
|
1,242
|
Goodwill
|
|
|
|
|
1,941
|
|
1,941
|
Other non-current
assets
|
|
|
31
|
|
24
|
TOTAL
ASSETS
|
|
|
|
$
4,205
|
|
$
4,219
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
159
|
|
$
128
|
Product warranty liability
|
|
|
22
|
|
25
|
Current portion of long-term debt
|
|
12
|
|
12
|
Deferred revenue
|
|
|
|
41
|
|
27
|
Other current liabilities
|
|
|
183
|
|
150
|
Total Current
Liabilities
|
|
|
417
|
|
342
|
|
|
|
|
|
|
|
|
Product warranty
liability
|
|
|
33
|
|
38
|
Deferred
revenue
|
|
|
|
75
|
|
66
|
Long-term
debt
|
|
|
|
2,534
|
|
2,147
|
Deferred income
taxes
|
|
|
276
|
|
312
|
Other non-current
liabilities
|
|
|
181
|
|
233
|
TOTAL
LIABILITIES
|
|
|
|
3,516
|
|
3,138
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS'
EQUITY
|
|
689
|
|
1,081
|
TOTAL LIABILITIES
& STOCKHOLDERS' EQUITY
|
$
4,205
|
|
$
4,219
|
Allison Transmission
Holdings, Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited, dollars
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months Ended
December 31,
|
|
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
|
$
166
|
|
$
175
|
|
$
658
|
|
$
591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used for
investing activities (a)
|
|
|
(51)
|
|
(35)
|
|
(94)
|
|
(72)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used for
financing activities
|
|
|
(127)
|
|
(98)
|
|
(574)
|
|
(564)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes in cash
|
|
|
1
|
|
(2)
|
|
4
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease)
increase in cash and cash equivalents
|
|
|
(11)
|
|
40
|
|
(6)
|
|
(47)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents at beginning of period
|
|
|
210
|
|
165
|
|
205
|
|
252
|
Cash and cash
equivalents at end of period
|
|
|
$
199
|
|
$
205
|
|
$
199
|
|
$
205
|
Supplemental
disclosures:
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
|
$
53
|
|
$
14
|
|
$
124
|
|
$
78
|
Income taxes paid
|
|
|
|
$
31
|
|
$
3
|
|
$
96
|
|
$
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Additions
of long-lived assets
|
|
|
|
|
|
$
(51)
|
|
$
(35)
|
|
$
(91)
|
|
$
(71)
|
Allison Transmission
Holdings, Inc.
|
|
|
Reconciliation of
GAAP to Non-GAAP Financial Measures
|
|
|
(Unaudited, dollars
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Twelve months
ended
|
|
|
|
|
|
|
December
31,
|
|
December
31,
|
|
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net income
(GAAP)
|
|
$
215
|
|
$
61
|
|
$
504
|
|
$
215
|
plus:
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) expense
|
|
(131)
|
|
33
|
|
23
|
|
126
|
Interest expense, net
|
|
25
|
|
17
|
|
103
|
|
101
|
Amortization of intangible assets
|
|
23
|
|
23
|
|
90
|
|
97
|
Depreciation of property, plant and equipment
|
|
20
|
|
21
|
|
80
|
|
79
|
Loss associated with impairment of long-lived assets (a)
|
|
32
|
|
-
|
|
32
|
|
-
|
Technology-related investment expense (b)
|
|
13
|
|
-
|
|
16
|
|
1
|
Stock-based compensation expense (c)
|
|
4
|
|
-
|
|
12
|
|
-
|
UAW Local 933 contract signing bonus (d)
|
|
10
|
|
-
|
|
10
|
|
-
|
Dual power inverter module units extended coverage (e)
|
|
-
|
|
-
|
|
(2)
|
|
1
|
Unrealized (gain) loss on foreign exchange (f)
|
|
(1)
|
|
-
|
|
-
|
|
1
|
Expenses related to long-term debt refinancing (g)
|
|
-
|
|
-
|
|
-
|
|
12
|
Unrealized gain on commodity hedge contracts (h)
|
|
-
|
|
-
|
|
-
|
|
(2)
|
Stockholder activism expenses (i)
|
|
-
|
|
-
|
|
-
|
|
4
|
Other, net
|
|
-
|
|
3
|
|
-
|
|
9
|
Adjusted EBITDA
(Non-GAAP)
|
|
$
210
|
|
$
158
|
|
$
868
|
|
$
644
|
Net sales
(GAAP)
|
|
$
588
|
|
$
469
|
|
$
2,262
|
|
$
1,840
|
Adjusted EBITDA
margin (Non-GAAP)
|
|
35.7%
|
|
33.8%
|
|
38.4%
|
|
35.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by
Operating Activities (GAAP)
|
|
$
166
|
|
$
175
|
|
$
658
|
|
$
591
|
(Deductions) or
Additions to Reconcile to Adjusted Free Cash Flow:
|
|
|
|
|
|
|
|
|
Additions of long-lived assets
|
|
(51)
|
|
(35)
|
|
(91)
|
|
(71)
|
Stockholder activism expenses (i)
|
|
-
|
|
-
|
|
-
|
|
4
|
Excess tax benefit from stock-based compensation (j)
|
|
-
|
|
5
|
|
-
|
|
6
|
Adjusted Free Cash
Flow (Non-GAAP)
|
|
$
115
|
|
$
145
|
|
$
567
|
|
$
530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Represents a charge
associated with the impairment of long-lived assets related to the
production of the TC10 transmission.
|
(b)
|
Represents a charge
(recorded in Other (expense) income, net) for investments in
co-development agreements to expand our position in transmission
technologies.
|
(c)
|
Represents
stock-based compensation expense (recorded in Cost of sales,
Selling, general and administrative, and Engineering – research and
development).
|
(d)
|
Represents a bonus
(recorded in Cost of sales, Selling, general and administrative,
and Engineering – research and development) to eligible employees
recorded in the fourth quarter of 2017 as a result of UAW Local 933
represented employees ratifying a six-year collective bargaining
agreement effective through November 2023.
|
(e)
|
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.
|
(f)
|
Represents (gains)
losses (recorded in Other (expense) income, net) on intercompany
financing transactions related to investments in plant assets for
our India facility.
|
(g)
|
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.
|
(h)
|
Represents unrealized
gains (recorded in Other (expense) income, net) on the
mark-to-market of our commodity hedge contracts.
|
(i)
|
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.
|
(j)
|
Represents the amount
of tax benefit (recorded in Income tax benefit (expense)) related
to stock-based compensation expense adjusted from cash flows from
operating activities to cash flows from financing
activities.
|
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SOURCE Allison Transmission Holdings Inc.