- Fourth Quarter 2019: Net Sales $617 million, Net Income $107
million, Adjusted EBITDA $216 million, Net Cash Provided by
Operating Activities $202 million, Adjusted Free Cash Flow $121
million
- Full Year 2019: Net Sales $2,698 million, Net Income $604
million, Adjusted EBITDA $1,083 million, Net Cash Provided by
Operating Activities $847 million, Adjusted Free Cash Flow $675
million
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
$617 million, a 5 percent decrease from the same period in 2018.
The decrease in net sales was principally driven by lower demand in
the Global Off-Highway and Service Parts, Support Equipment &
Other end markets partially offset by higher demand in the North
America On-Highway end market.
Net Income for the quarter was $107 million compared to $147
million for the same period in 2018. Adjusted EBITDA, a non-GAAP
financial measure, for the quarter was $216 million compared to
$261 million for the same period in 2018. Net Cash Provided by
Operating Activities for the quarter was $202 million compared to
$232 million for the same period in 2018. Adjusted Free Cash Flow,
a non-GAAP financial measure, for the quarter was $121 million
compared to $184 million for the same period in 2018.
David S. Graziosi, President and Chief Executive Officer of
Allison Transmission commented:
“2019 was an important year for Allison Transmission. We
successfully completed three acquisitions, broke ground on two
state-of-the-art technology facilities and achieved meaningful
market share gains in North America. Full year 2019 results
exceeded our guidance expectations, and both our North America and
Outside North America On-Highway end markets concluded a third
consecutive record revenue year.” Graziosi continued, “I am further
pleased to report that Allison’s established and well-defined
approach to capital structure and allocation remains intact. During
the fourth quarter, we settled $62 million of share repurchases,
resulting in $393 million of total share repurchases for the year,
or approximately 7% of our outstanding shares. Also during the
quarter, we paid a dividend of $0.15 per share and completed an
opportunistic repricing of our term loan due March 2026,
illustrating our commitment to prudent balance sheet management
through a low-cost, flexible and pre-payable debt structure with
long-dated maturities, while simultaneously investing in our
business and returning capital to shareholders.”
Fourth Quarter Net Sales by End Market
End Market
Q4 2019
Net Sales ($M)
Q4 2018
Net Sales ($M)
% Variance
North America On-Highway
$330
$303
9%
North America Off-Highway
$1
$17
(94%)
Defense
$42
$36
17%
Outside North America
On-Highway
$91
$95
(4%)
Outside North America
Off-Highway
$18
$47
(62%)
Service Parts, Support Equipment &
Other
$135
$149
(9%)
Total Net Sales
$617
$647
(5%)
Fourth Quarter Highlights
North America On-Highway end market net sales were up 9 percent
from the same period in 2018 principally driven by higher demand
for Rugged Duty Series, Highway Series and Electric-Hybrid
Propulsion models, led by the continued execution of our growth
initiatives and associated market share gains, and down 11 percent
on a sequential basis principally driven by lower demand for Rugged
Duty Series, Highway Series and Pupil Transport/Shuttle Series
models.
North America Off-Highway end market net sales were down $16
million from the same period in 2018 and down $5 million
sequentially, in both cases principally driven by lower demand from
hydraulic fracturing applications.
Defense end market net sales were up 17 percent from the same
period in 2018 principally driven by higher Tracked vehicle demand
and up 5 percent on a sequential basis principally driven by higher
Wheeled vehicle demand.
Outside North America On-Highway end market net sales were down
4 percent from the same period in 2018 principally driven by lower
demand in Europe and Asia partially offset by higher demand in
South America and down 9 percent sequentially principally driven by
lower demand in Europe.
Outside North America Off-Highway end market net sales were down
$29 million from the same period in 2018 and down $6 million on a
sequential basis, in both cases principally driven by lower demand
in the energy, mining and construction sectors.
Service Parts, Support Equipment & Other end market net
sales were down 9 percent from the same period in 2018 principally
driven by lower demand for North America Off-Highway service parts
and up 3 percent sequentially principally driven by higher demand
for North America parts.
Gross profit for the quarter was $298 million, a decrease of 12
percent from $338 million for the same period in 2018. Gross margin
for the quarter was 48.3 percent, a decrease of 390 basis points
from a gross margin of 52.2 percent for the same period in 2018.
The decrease in gross profit from the same period in 2018 was
principally driven by lower net sales and unfavorable mix,
partially offset by price increases on certain products and
favorable material costs.
Selling, general and administrative expenses for the quarter
were $92 million, an increase of $2 million from the same period in
2018. The increase was principally driven by increased commercial
activities spending partially offset by lower 2019 product warranty
expense.
Engineering – research and development expenses for the quarter
were $47 million, an increase of $10 million from the same period
in 2018. The increase was principally driven by increased product
initiatives spending.
During the fourth quarter, we recorded an $8 million benefit
related to a reduction of the liability for ongoing environmental
remediation activities at our Indianapolis, Indiana manufacturing
facilities.
Interest expense for the quarter was $33 million, an increase of
$2 million from the same period in 2018. The increase was
principally driven by higher interest rates related to long-term
debt refinancing that extended maturities at fixed interest
rates.
Net income for the quarter was $107 million, a decrease of $40
million from the same period in 2018. The decrease was principally
driven by lower gross profit and increased product initiatives
spending partially offset by an environmental remediation
benefit.
Net cash provided by operating activities was $202 million, a
decrease of $30 million from the same period in 2018. The decrease
was principally driven by lower gross profit, increased cash
interest expense and increased product initiatives spending
partially offset by lower operating working capital requirements
and decreased cash income taxes.
Fourth Quarter Non-GAAP Financial Measures
Adjusted EBITDA for the quarter was $216 million, a decrease of
$45 million from the same period in 2018. The decrease in Adjusted
EBITDA was principally driven by lower gross profit and increased
product initiatives spending.
Adjusted Free Cash Flow for the quarter was $121 million, a
decrease of $63 million from the same period in 2018. The decrease
was principally driven by $33 million of increased capital
expenditures and $30 million of lower net cash provided by
operating activities.
Full Year 2020 Guidance
Allison expects 2020 net sales to be in the range of $2,375 to
$2,475 million, Net Income in the range of $425 to $475 million,
Adjusted EBITDA in the range of $855 to $915 million, Net Cash
Provided by Operating Activities in the range of $600 to $640
million, Adjusted Free Cash Flow in the range of $430 to $480
million and cash income taxes in the range of $60 to $70
million.
Our 2020 net sales guidance reflects lower demand in the Global
On-Highway and Global Off-Highway end markets partially offset by
increased demand in the Service Parts, Support Equipment &
Other and Defense end markets and price increases on certain
products.
Although we are not providing specific first quarter 2020
guidance, Allison does expect first quarter net sales to be down
from the same period in 2019 principally driven by lower demand
expected in the Global On-Highway end markets.
Conference Call and Webcast
The company will host a conference call at 8:00 a.m. ET on
Thursday, February 20 to discuss its fourth quarter and full year
2019 results and full year 2020 guidance. The dial-in number is
1-877-425-9470 and the international dial-in number is
1-201-389-0878. A live webcast of the conference call will also be
available online at http://ir.allisontransmission.com.
For those unable to participate on the conference call, a replay
will be available from 11:00 a.m. ET on February 20 until 11:59
p.m. ET on February 27. 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 13698301.
About Allison Transmission
Allison Transmission (NYSE: ALSN) is the world's largest
manufacturer of fully automatic transmissions for medium- and
heavy-duty commercial vehicles. 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. 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; our
participation in markets that are competitive; the highly cyclical
industries in which certain of our end users operate; uncertainty
in the global regulatory and business environments in which we
operate; our ability to prepare for, respond to and successfully
achieve our objectives relating to technological and market
developments, competitive threats and changing customer needs; the
concentration of our net sales in our top five customers and the
loss of any one of these; the failure of markets outside North
America to increase adoption of fully-automatic transmissions; U.S.
and foreign defense spending; general economic and industry
conditions; increases in cost, disruption of supply or shortage of
raw materials or components used in our products; 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; risks
associated with our international operations, including increased
trade protectionism; 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 and forward-looking estimates of 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.
We use Adjusted 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 GAAP measure to
Adjusted EBITDA is Net income. The most directly comparable GAAP
measure to Adjusted EBITDA as a percent of net sales is Net Income
as a percent of net sales. Adjusted EBITDA is calculated as the
earnings before interest expense, income tax expense, amortization
of intangible assets, depreciation of property, plant and equipment
and other adjustments as defined by Allison Transmission, Inc.’s,
the Company’s wholly-owned subsidiary, Second Amended and Restated
Credit Agreement. Adjusted EBITDA as a percent of net sales is
calculated as Adjusted EBITDA divided by net sales.
We use Adjusted Free Cash Flow to evaluate the amount of cash
generated by our business that, after the capital investment needed
to maintain and grow our business and certain mandatory debt
service requirements, can be used for the repayment of debt,
stockholder distributions and strategic opportunities, including
investing in our business. We believe that Adjusted Free Cash Flow
enhances the understanding of the cash flows of our business for
management, investors and creditors. Adjusted Free Cash Flow is
also used in the calculation of management’s incentive compensation
program. The most directly comparable GAAP measure to Adjusted Free
Cash Flow is Net cash provided by operating activities. Adjusted
Free Cash Flow is calculated as Net cash provided by operating
activities after additions of long-lived assets.
Attachment
- Condensed Consolidated Statements of Operations
- Condensed Consolidated Balance Sheets
- Condensed Consolidated Statements of Cash Flows
- Reconciliation of GAAP to Non-GAAP Financial Measures
- Reconciliation of GAAP to Non-GAAP Financial Measures for Full
Year Guidance
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,
2019
2018
2019
2018
Net sales
$
617
$
647
$
2,698
$
2,713
Cost of sales
319
309
1,304
1,291
Gross profit
298
338
1,394
1,422
Selling, general and administrative
92
90
354
364
Engineering - research and development
47
37
154
131
Environmental remediation
(8
)
-
(8
)
-
Loss associated with impairment of long-lived assets
2
4
2
4
Operating income
165
207
892
923
Interest expense, net
(33
)
(31
)
(134
)
(121
)
Other income (expense), net
2
(2
)
10
3
Income before income taxes
134
174
768
805
Income tax expense
(27
)
(27
)
(164
)
(166
)
Net income
$
107
$
147
$
604
$
639
Basic earnings per share attributable to common stockholders
$
0.90
$
1.15
$
4.95
$
4.81
Diluted earnings per share attributable to common stockholders
$
0.90
$
1.14
$
4.91
$
4.78
Allison Transmission Holdings, Inc. Condensed Consolidated Balance
Sheets (Unaudited, dollars in millions)
December 31,
December 31,
2019
2018
ASSETS Current Assets Cash and cash equivalents
$
192
$
231
Accounts receivable, net
253
279
Inventories
199
170
Other current assets
42
45
Total Current Assets
686
725
Property, plant and equipment, net
616
466
Intangible assets, net
1,042
1,066
Goodwill
2,041
1,941
Other non-current assets
65
39
TOTAL ASSETS
$
4,450
$
4,237
LIABILITIES Current Liabilities Accounts payable
$
150
$
169
Product warranty liability
24
26
Current portion of long-term debt
6
-
Deferred revenue
35
34
Other current liabilities
202
197
Total Current Liabilities
417
426
Product warranty liability
28
40
Deferred revenue
104
88
Long-term debt
2,512
2,523
Deferred income taxes
387
329
Other non-current liabilities
221
172
TOTAL LIABILITIES
3,669
3,578
TOTAL STOCKHOLDERS' EQUITY
781
659
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY
$
4,450
$
4,237
Allison Transmission Holdings, Inc. Condensed Consolidated
Statements of Cash Flows (Unaudited, dollars in millions)
Three months ended December
31,
Twelve months ended December
31,
2019
2018
2019
2018
Net cash provided by operating activities
$
202
$
232
$
847
$
837
Net cash used for investing activities (a) (b)
(82
)
(51
)
(405
)
(103
)
Net cash used for financing activities
(81
)
(171
)
(480
)
(700
)
Effect of exchange rate changes on cash
1
-
(1
)
(2
)
Net increase (decrease) in cash and cash equivalents
40
10
(39
)
32
Cash and cash equivalents at beginning of period
152
221
231
199
Cash and cash equivalents at end of period
$
192
$
231
$
192
$
231
Supplemental disclosures: Interest paid
$
62
$
47
$
125
$
115
Income taxes paid
$
5
$
21
$
89
$
101
(a) Business acquisitions
$
-
$
-
$
(232
)
$
-
(b) Additions of long-lived assets
$
(81
)
$
(48
)
$
(172
)
$
(100
)
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,
2019
2018
2019
2018
Net income (GAAP)
$
107
$
147
$
604
$
639
plus: Income tax expense
27
27
164
166
Interest expense, net
33
31
134
121
Amortization of intangible assets
21
21
86
87
Depreciation of property, plant and equipment
24
19
81
77
Stock-based compensation expense (a)
3
4
13
13
Environmental remediation (b)
(8
)
-
(8
)
-
UAW Local 933 retirement incentive (c)
6
8
5
15
Loss associated with impairment of long-lived assets (d)
2
4
2
4
Expenses related to long-term debt refinancing (e)
-
-
1
-
Acquisition-related earnouts (f)
1
-
1
-
Technology-related investment expense (g)
-
3
-
3
Unrealized (gain) loss on foreign exchange (h)
-
(3
)
-
3
Adjusted EBITDA (Non-GAAP)
$
216
$
261
$
1,083
$
1,128
Net sales (GAAP)
$
617
$
647
$
2,698
$
2,713
Net income as a percent of net sales (GAAP)
17.3
%
22.7
%
22.4
%
23.6
%
Adjusted EBITDA as a percent of net sales (Non-GAAP)
35.0
%
40.3
%
40.1
%
41.6
%
Net cash provided by operating activities (GAAP)
$
202
$
232
$
847
$
837
Deductions to Reconcile to Adjusted Free Cash Flow: Additions of
long-lived assets
(81
)
(48
)
(172
)
(100
)
Adjusted free cash flow (Non-GAAP)
$
121
$
184
$
675
$
737
(a)
Represents stock-based
compensation expense (recorded in Cost of sales, Selling, general
and administrative, and Engineering – research and
development).
(b)
Represents an environmental
remediation benefit (recorded in Selling, general and
administrative) related to a reduction of the liability for ongoing
environmental remediation operating, monitoring and maintenance
activities at our Indianapolis, Indiana manufacturing
facilities.
(c)
Represents a charge (recorded in
Cost of sales) related to a retirement incentive program for
certain employees represented by the International Union, United
Automobile, Aerospace and Agricultural Implement Workers of America
(“UAW”) pursuant to the UAW Local 933 collective bargaining
agreement effective through November 2023.
(d)
Represents charges (recorded in
Selling, general and administrative) associated with the impairment
of long-lived assets related to the production of the TC10
transmission.
(e)
Represents expenses (recorded in
Other income (expense), net) related to the refinancing of the
prior term loan due 2022 and prior revolving credit facility due
2021 (together, the "Prior Senior Secured Credit Facility") in the
first quarter of 2019 and the repricing of the new term loan due
March 2026 ("New Term Loan") in the fourth quarter of 2019.
(f)
Represents expenses (recorded in
Selling, general and administrative and Engineering - research and
development) for earnouts related to our acquisition of Vantage
Power Limited.
(g)
Represents a charge (recorded in
Other income (expense), net) for investments in co-development
agreements to expand our position in transmission technologies.
(h)
Represents (gains) losses
(recorded in Other income (expense), net) on intercompany financing
transactions related to investments in plant assets for our India
facility.
Allison Transmission Holdings,
Inc.
Reconciliation of GAAP to
Non-GAAP Financial Measures for Full Year Guidance
(Unaudited, dollars in
millions)
Guidance
Year Ending December 31, 2020
Low
High
Net Income (GAAP)
$
425
$
475
plus: Income tax expense
124
134
Interest expense, net
133
133
Depreciation and amortization
149
149
Stock-based compensation expense (a)
15
15
UAW Local 933 retirement incentive (b)
9
9
Adjusted EBITDA (Non-GAAP)
$
855
$
915
Net Cash Provided by Operating Activities (GAAP)
$
600
$
640
Deductions to Reconcile to Adjusted Free Cash Flow: Additions of
long-lived assets
(170
)
(160
)
Adjusted Free Cash Flow (Non-GAAP)
$
430
$
480
(a)
Represents employee stock
compensation expense (recorded in Cost of sales, Selling, general
and administrative, and Engineering – research and
development).
(b)
Represents a charge (recorded in
Cost of sales) related to a retirement incentive program for
certain employees represented by the International Union, United
Automobile, Aerospace and Agricultural Implement Workers of America
(“UAW”) pursuant to the UAW Local 933 collective bargaining
agreement effective through November 2023.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200219005963/en/
Raymond Posadas Director of Investor Relations
ir@allisontransmission.com (317) 242-3078
Media Relations media@allisontransmission.com (317) 242-5000
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