Allison Transmission Announces First Quarter 2020 Results
Net Sales of$637 million - Net Income of
$139 million , 22% ofNet Sales - Adjusted EBITDA of
$257 million , 40% ofNet Sales - Diluted EPS of
$1.20 - As of
March 31, 2020 , the company had$114 million of cash and cash equivalents and$595 million of available revolving credit facility commitments
Net Income for the quarter was
Graziosi continued, “Despite the ongoing COVID-19 related disruptions to global supply chains and customer demand, as well as the withdrawal of our initial 2020 guidance in March, first quarter results were largely in line with our expectations, and the Allison team remains focused on aligning our operations with the needs of our customers. We continue to operate from a position of strength, given our long-standing commitment to prudent balance sheet management, ample liquidity and profitable operations. As of
First Quarter
End Market |
Q1 2020 |
Q1 2019 |
% Variance |
||
North America On-Highway |
|
|
(7%) |
||
North America Off-Highway |
|
|
(43%) |
||
Defense |
|
|
25% |
||
Outside North America On-Highway |
|
|
(23%) |
||
Outside North America Off-Highway |
|
|
- |
||
Service Parts, Support Equipment & Other |
|
|
5% |
||
Total |
|
|
(6%) |
First Quarter Highlights
North America On-Highway end market net sales were down 7 percent from the same period in 2019 principally driven by lower demand for Rugged Duty Series models and up 7 percent on a sequential basis principally driven by higher demand for Rugged Duty Series and
North America Off-Highway end market net sales were down
Defense end market net sales were up 25 percent from the same period in 2019 and down 5 percent on a sequential basis, in both cases principally driven by Tracked vehicle demand.
Outside North America On-Highway end market net sales were down 23 percent from the same period in 2019 principally driven by lower demand in
Outside North America Off-Highway end market net sales were flat with the same period in 2019 driven by higher demand in the energy sector offset by lower demand in the mining and construction sectors and up
Service Parts, Support Equipment & Other end market net sales were up 5 percent from the same period in 2019 principally driven by aluminum die casting component volume associated with the
Gross profit for the quarter was
Selling, general and administrative expenses for the quarter were
Engineering – research and development expenses for the quarter were
Interest expense, net for the quarter was
Net income for the quarter was
Net cash provided by operating activities was
First Quarter Non-GAAP Financial Measures
Adjusted EBITDA for the quarter was
Adjusted Free Cash Flow for the quarter was
COVID-19 and Market Update
The COVID-19 pandemic continues to disrupt global markets and supply chains, creating significant uncertainty and a weaker global outlook. While the impact of these developments on Allison materialized late in the first quarter, we anticipate continued disruptions to our business for the foreseeable future. Given the uncertain duration of the pandemic, as well as continuously evolving customer demand and supply chain readiness, we cannot conclusively provide a full year 2020 revenue, earnings or cash flow outlook at this time.
The Allison team is proactively aligning operations, programs and spending across our business to meet the needs of our customers. Unfortunately, end markets conditions have necessitated temporary shutdowns commensurate with demand at select facilities and furloughs of a portion of our workforce. Further, while growth initiatives remain a priority for Allison, the timing and cadence of various growth and product development initiatives are undergoing recurring assessments in support of our alignment activities. Allison is lowering our full year 2020 Capital Expenditures target by approximately 35 percent compared to 2019 and will continue to monitor market conditions and adjust accordingly.
Conference Call and Webcast
The company will host a conference call at
For those unable to participate in the conference call, a replay will be available from
About
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 or expected ability to re-open our facilities promptly. 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: the duration and spread of the COVID-19 outbreak, mitigating efforts deployed by government agencies and the public at large, and the overall impact from such outbreak on economic conditions, financial market volatility and our business, including but not limited to the operations of our manufacturing and other facilities, our supply chain, our distribution processes and demand for our products; 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
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
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
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.
Attachments
- Condensed Consolidated Statements of Operations
- Condensed Consolidated Balance Sheets
- Condensed Consolidated Statements of Cash Flows
- Reconciliation of GAAP to Non-GAAP Financial Measures
Condensed Consolidated Statements of Operations | ||||||||
(Unaudited, dollars in millions, except per share data) | ||||||||
Three months ended |
||||||||
2020 |
2019 |
|||||||
Net sales |
$ |
637 |
|
$ |
675 |
|
||
Cost of sales |
|
311 |
|
|
316 |
|
||
Gross profit |
|
326 |
|
|
359 |
|
||
Selling, general and administrative |
|
75 |
|
|
84 |
|
||
Engineering - research and development |
|
36 |
|
|
31 |
|
||
Operating income |
|
215 |
|
|
244 |
|
||
Interest expense, net |
|
(33 |
) |
|
(36 |
) |
||
Other (expense) income, net |
|
(1 |
) |
|
3 |
|
||
Income before income taxes |
|
181 |
|
|
211 |
|
||
Income tax expense |
|
(42 |
) |
|
(44 |
) |
||
Net income |
$ |
139 |
|
$ |
167 |
|
||
Basic earnings per share attributable to common stockholders |
$ |
1.20 |
|
$ |
1.33 |
|
||
Diluted earnings per share attributable to common stockholders |
$ |
1.20 |
|
$ |
1.32 |
|
Condensed Consolidated Balance Sheets | ||||||
(Unaudited, dollars in millions) | ||||||
|
|
|||||
2020 |
2019 |
|||||
ASSETS | ||||||
Current Assets | ||||||
Cash and cash equivalents |
$ |
114 |
$ |
192 |
||
Accounts receivable, net |
|
303 |
|
253 |
||
Inventories |
|
207 |
|
199 |
||
Other current assets |
|
42 |
|
42 |
||
Total Current Assets |
|
666 |
|
686 |
||
Property, plant and equipment, net |
|
627 |
|
616 |
||
Intangible assets, net |
|
1,026 |
|
1,042 |
||
|
2,041 |
|
2,041 |
|||
Other non-current assets |
|
64 |
|
65 |
||
TOTAL ASSETS |
$ |
4,424 |
$ |
4,450 |
||
LIABILITIES | ||||||
Current Liabilities | ||||||
Accounts payable |
$ |
191 |
$ |
150 |
||
Product warranty liability |
|
25 |
|
24 |
||
Current portion of long-term debt |
|
6 |
|
6 |
||
Deferred revenue |
|
34 |
|
35 |
||
Other current liabilities |
|
170 |
|
202 |
||
Total Current Liabilities |
|
426 |
|
417 |
||
Product warranty liability |
|
26 |
|
28 |
||
Deferred revenue |
|
106 |
|
104 |
||
Long-term debt |
|
2,512 |
|
2,512 |
||
Deferred income taxes |
|
415 |
|
387 |
||
Other non-current liabilities |
|
246 |
|
221 |
||
TOTAL LIABILITIES |
|
3,731 |
|
3,669 |
||
TOTAL STOCKHOLDERS' EQUITY |
|
693 |
|
781 |
||
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY |
$ |
4,424 |
$ |
4,450 |
Condensed Consolidated Statements of Cash Flows | ||||||||
(Unaudited, dollars in millions) | ||||||||
Three months ended |
||||||||
2020 |
2019 |
|||||||
Net cash provided by operating activities |
$ |
148 |
|
$ |
194 |
|
||
Net cash used for investing activities (a) |
|
(21 |
) |
|
(19 |
) |
||
Net cash used for financing activities |
|
(203 |
) |
|
(83 |
) |
||
Effect of exchange rate changes on cash |
|
(2 |
) |
|
1 |
|
||
Net (decrease) increase in cash and cash equivalents |
|
(78 |
) |
|
93 |
|
||
Cash and cash equivalents at beginning of period |
|
192 |
|
|
231 |
|
||
Cash and cash equivalents at end of period |
$ |
114 |
|
$ |
324 |
|
||
Supplemental disclosures: | ||||||||
Interest paid |
$ |
8 |
|
$ |
14 |
|
||
Income taxes paid |
$ |
6 |
|
$ |
6 |
|
||
(a) Additions of long-lived assets |
$ |
(21 |
) |
$ |
(19 |
) |
Reconciliation of GAAP to Non-GAAP Financial Measures | ||||||||
(Unaudited, dollars in millions) | ||||||||
Three months ended |
||||||||
|
||||||||
2020 |
2019 |
|||||||
Net income (GAAP) |
$ |
139 |
|
$ |
167 |
|
||
plus: | ||||||||
Income tax expense |
|
42 |
|
|
44 |
|
||
Interest expense, net |
|
33 |
|
|
36 |
|
||
Depreciation of property, plant and equipment |
|
22 |
|
|
18 |
|
||
Amortization of intangible assets |
|
16 |
|
|
22 |
|
||
Stock-based compensation expense (a) |
|
3 |
|
|
3 |
|
||
Expenses related to long-term debt refinancing (b) |
|
- |
|
|
1 |
|
||
Unrealized loss (gain) on foreign exchange (c) |
|
2 |
|
|
(1 |
) |
||
Adjusted EBITDA (Non-GAAP) |
$ |
257 |
|
$ |
290 |
|
||
Net sales (GAAP) |
$ |
637 |
|
$ |
675 |
|
||
Net income as a percent of net sales (GAAP) |
|
21.8 |
% |
|
24.7 |
% |
||
Adjusted EBITDA as a percent of net sales (Non-GAAP) |
|
40.3 |
% |
|
43.0 |
% |
||
Net cash provided by operating activities (GAAP) |
$ |
148 |
|
$ |
194 |
|
||
Deductions to Reconcile to Adjusted Free Cash Flow: | ||||||||
Additions of long-lived assets |
|
(21 |
) |
|
(19 |
) |
||
Adjusted free cash flow (Non-GAAP) |
$ |
127 |
|
$ |
175 |
|
(a) |
Represents stock-based compensation expense (recorded in Cost of sales, Selling, general and administrative, and Engineering – research and development). | |||||||
(b) |
Represents expenses (recorded in Other (expense) income, net) related to the refinancing of the prior term loan due 2022 and prior revolving credit facility due 2021 in the first quarter of 2019. | |||||||
(c) |
Represents losses (gains) (recorded in Other (expense) income, net) on intercompany financing transactions related to investments in plant assets for our |
View source version on businesswire.com: https://www.businesswire.com/news/home/20200504005684/en/
Director of Investor Relations
ir@allisontransmission.com
(317) 242-3078
Media Relations
media@allisontransmission.com
(317) 242-5000
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