INDIANAPOLIS, July 27, 2015 /PRNewswire/ -- Allison Transmission Holdings Inc. (NYSE: ALSN), the largest global provider of commercial duty fully-automatic transmissions, today reported net sales for the second quarter of $511 million, a 5 percent decrease from the same period in 2014. The decrease in net sales was principally driven by lower demand in the global Off-Highway and Defense end markets partially offset by the continued recovery in the North America On-Highway end market, higher demand in the Outside North America On-Highway end market and price increases on certain products.

Adjusted Net Income, a non-GAAP financial measure, for the quarter was $98 million, compared to Adjusted Net Income of $117 million for the same period in 2014, a decrease of $19 million. Adjusted EBITDA, a non-GAAP financial measure, for the quarter was $186 million, or 36.3 percent of net sales, compared to $186 million, or 34.7 percent of net sales, for the same period in 2014. Adjusted Free Cash Flow, a non-GAAP financial measure, for the quarter was $140 million, or $0.78 per diluted share, compared to $135 million for the same period in 2014, or $0.74 per diluted share.

Lawrence E. Dewey, Chairman, President and Chief Executive Officer of Allison Transmission commented, "Our second quarter 2015 results are within the full year guidance ranges we provided to the market on April 27. Net sales in the North America On-Highway end market improved on a year-over-year basis for the eighth consecutive quarter. During the second quarter Allison experienced the unfavorable impact of lower energy and commodity prices in the global Off-Highway and Service Parts, Support Equipment & Other end markets. Given that these end markets continue to exhibit an elevated level of uncertainty and a dearth of near-term visibility we are updating our full year net sales guidance to a decrease in the range of 6 to 8 percent year-over-year. Allison continued its prudent and well-defined approach to capital allocation during the second quarter by settling $79 million of share repurchases, paying a dividend of $0.15 per share, repaying $54 million of debt and completing a refinancing of the Senior Notes due 2019."

Second Quarter Net Sales by End Market

Second Quarter Highlights

North America On-Highway end market net sales were up 14 percent from the same period in 2014 principally driven by higher demand for Rugged Duty Series and Highway Series models and up 3 percent on a sequential basis principally driven by higher demand for Pupil Transport / Shuttle Series and Highway Series models.

North America Hybrid-Propulsion Systems for Transit Bus end market net sales were down 29 percent from the same period in 2014 principally driven by lower demand due to engine emissions improvements and non-hybrid alternatives that generally require a fully-automatic transmission (e.g. xNG) and up 11 percent sequentially principally driven by intra-year movement in the timing of orders.

North America Off-Highway end market net sales were down 57 percent from the same period in 2014 and down 55 percent on a sequential basis principally driven by lower demand from hydraulic fracturing applications.

Defense end market net sales were down 41 percent from the same period in 2014 principally driven by the recognition of previously deferred revenue in 2014 totaling $16 million commensurate with the shipment of certain tracked transmissions at the request of the U.S. government and reductions in U.S. defense spending to longer term averages experienced during periods without active conflicts and up 16 percent sequentially principally driven by intra-year movement in the timing of orders.

Outside North America On-Highway end market net sales were up 18 percent from the same period in 2014 principally driven by higher demand in Europe, Japan and India, and up 28 percent on a sequential basis principally driven by higher demand in Europe, Japan and China.

Outside North America Off-Highway end market net sales were down 67 percent from the same period in 2014 and down 50 percent sequentially principally driven by lower demand in the energy and mining sectors.

Service Parts, Support Equipment & Other end market net sales were down 12 percent from the same period in 2014 and down 4 percent on a sequential basis principally driven by lower demand for North America service parts.

Gross profit for the quarter was $236 million, a decrease of 1 percent from $239 million for the same period in 2014. Gross margin for the quarter was 46.2 percent, an increase of 170 basis points from a gross margin of 44.5 percent for the same period in 2014. The decrease in gross profit from the same period in 2014 was principally driven by decreased sales volume partially offset by price increases on certain products, favorable material costs and lower incentive compensation expense.

Selling, general and administrative expenses for the quarter were $76 million, a decrease of 11 percent from $85 million for the same period in 2014, principally driven by favorable product warranty adjustments, lower incentive and stock based compensation expense, and reduced global commercial spending activities.

Engineering – research and development expenses for the quarter were $23 million, an increase of $2 million from $21 million for the same period in 2014, principally driven by increased product initiatives spending partially offset by lower incentive compensation expense.

Second Quarter Non-GAAP Financial Measures

Adjusted Net Income for the quarter was $98 million, compared to $117 million for the same period in 2014, a decrease of $19 million. The decrease was principally driven by $25 million of premiums and expenses on the tender offer and redemption of long-term debt partially offset by decreased cash interest expense.

Adjusted EBITDA for the quarter was $186 million, or 36.3 percent of net sales, compared to $186 million, or 34.7 percent of net sales, for the same period in 2014. The decrease in net sales and increased product initiatives spending was offset by price increases on certain products, favorable material costs, favorable product warranty adjustments, lower incentive compensation expense and reduced global commercial spending activities.

Adjusted Free Cash Flow for the quarter was $140 million compared to $135 million for the same period in 2014, an increase of $5 million. The increase was principally driven by increased net cash provided by operating activities partially offset by increased capital expenditures and decreased excess tax benefit from stock-based compensation.

Full Year 2015 Guidance Update

Our updated full year 2015 guidance includes a year-over-year net sales decrease in the range of 6 to 8 percent, an Adjusted EBITDA margin in the range of 34.75 to 35.75 percent and an Adjusted Free Cash Flow in the range of $470 to $500 million. Allison's updated net sales guidance reflects the elevated level of uncertainty and a dearth of near-term visibility in the global Off-Highway end markets. We are affirming the remaining guidance released to the market on April 27: capital expenditures in the range of $60 to $70 million and cash income taxes in the range of $10 to $15 million.

Although we are not providing specific third quarter 2015 guidance, Allison does expect third quarter net sales to be lower than the same period in 2014. The anticipated year-over-year decrease in third quarter net sales is expected to occur due to higher demand in the North America On-Highway end market being more than offset by lower demand in other end markets.

Conference Call and Webcast
The company will host a conference call at 8:00 a.m. ET on Tuesday, July 28 to discuss its second quarter 2015 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 July 28 until 11:59 p.m. ET on August 4. The replay dial-in number is 1-858-384-5517 and the U.S. toll-free replay dial-in number is 1-877-870-5176. The replay passcode is 13614517.

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 2,700 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; 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, 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 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.

Attachment

• Condensed Consolidated Statements of Operations
• Condensed Consolidated Balance Sheets
• Condensed Consolidated Statements of Cash Flows
• Reconciliation of GAAP to Non-GAAP Financial Measures

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SOURCE Allison Transmission Holdings Inc.

Investor Relations, ir@allisontransmission.com, (317) 242-3078, Media Relations, media@allisontransmission.com, (317) 242-5000