Allison Transmission Announces Third Quarter 2018 Results
* Net Sales of
* Net Income of
* Diluted EPS of
* Adjusted EBITDA of
* Company raises full year 2018 net sales guidance to an increase in the range of 18 to 19 percent
Net Income for the quarter was
Third Quarter Net Sales by End Market |
||||||
Q3 2018 | Q3 2017 | |||||
End Market |
Net Sales | Net Sales |
% Variance |
|||
|
($M) | ($M) |
|
|||
North America On-Highway (a) | $332 | $301 | 10% | |||
North America Off-Highway | $12 | $17 | (29%) | |||
Defense | $42 | $35 | 20% | |||
Outside North America On-Highway | $96 | $89 | 8% | |||
Outside North America Off-Highway | $46 | $14 | 229% | |||
Service Parts, Support Equipment & Other | $164 | $139 | 18% | |||
Total Net Sales | $692 | $595 | 16% |
(a) North America On-Highway end-market net sales are inclusive of net sales for North America Electric Hybrid-Propulsion Systems for Transit Bus.
Third Quarter Highlights
North America On-Highway end market net sales were up 10 percent from the same period in 2017 principally driven by higher demand for Rugged Duty Series models and down 3 percent on a sequential basis principally driven by lower demand for Transit Series and Pupil Transport/Shuttle models.
North America Off-Highway end market net sales were down
Defense end market net sales were up 20 percent from the same period in 2017 principally driven by higher Tracked and Wheeled demand and down 2 percent on a sequential basis.
Outside North America On-Highway end market net sales were up 8 percent
from the same period in 2017 principally driven by higher demand in
Outside North America Off-Highway end market net sales were up
Service Parts, Support Equipment & Other end market net sales were up 18
percent from the same period in 2017 principally driven by higher demand
for
Gross profit for the quarter was
Selling, general and administrative expenses for the quarter were
Engineering – research and development expenses for the quarter were
Income tax expense for the quarter was
Net income for the quarter was
Net cash provided by operating activities was
Third Quarter Non-GAAP Financial Measures
Adjusted EBITDA for the quarter was
Adjusted Free Cash Flow for the quarter was
Full Year 2018 Guidance Update
Our updated full year 2018 guidance includes a year-over-year net sales
increase in the range of 18 to 19 percent, Net Income in the range of
Allison’s full year 2018 net sales guidance reflects increased demand in the Global On-Highway and Global Off-Highway products, price increases on certain products and continued execution of our growth initiatives.
Although we are not providing specific fourth quarter 2018 guidance, Allison does expect fourth quarter net sales to be up from the same period in 2017 and down sequentially.
Conference Call and Webcast
The company will host a conference call at
For those unable to participate on 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. 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; 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.
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 September 30, |
Nine months ended September 30, |
|||||||||||||||
2018 | 2017 | 2018 |
2017 |
|||||||||||||
Net sales | $ | 692 | $ | 595 | $ | 2,066 | $ | 1,674 | ||||||||
Cost of sales | 324 | 293 | 982 | 831 | ||||||||||||
Gross profit | 368 | 302 | 1,084 | 843 | ||||||||||||
Selling, general and administrative | 89 | 78 | 274 | 245 | ||||||||||||
Engineering - research and development | 33 | 26 | 94 | 74 | ||||||||||||
Operating income | 246 | 198 | 716 | 524 | ||||||||||||
Interest expense, net | (30 | ) | (26 | ) | (90 | ) | (78 | ) | ||||||||
Other income (expense), net | 2 | (2 | ) | 5 | (3 | ) | ||||||||||
Income before income taxes | 218 | 170 | 631 | 443 | ||||||||||||
Income tax expense | (51 | ) | (59 | ) | (139 | ) | (154 | ) | ||||||||
Net income | $ | 167 | $ | 111 | $ | 492 | $ | 289 | ||||||||
Basic earnings per share attributable to common stockholders | $ | 1.28 | $ | 0.75 | $ | 3.66 | $ | 1.91 | ||||||||
Diluted earnings per share attributable to common stockholders | $ | 1.27 | $ | 0.75 | $ | 3.64 | $ | 1.90 | ||||||||
Allison Transmission Holdings, Inc. | ||||||||||
Condensed Consolidated Balance Sheets | ||||||||||
(Unaudited, dollars in millions) | ||||||||||
September 30, | December 31, | |||||||||
2018 | 2017 | |||||||||
ASSETS | ||||||||||
Current Assets | ||||||||||
Cash and cash equivalents | $ | 221 | $ | 199 | ||||||
Accounts receivable | 335 | 221 | ||||||||
Inventories | 166 | 154 | ||||||||
Income taxes receivable | 18 | 33 | ||||||||
Other current assets | 24 | 25 | ||||||||
Total Current Assets | 764 | 632 | ||||||||
Property, plant and equipment, net | 448 | 448 | ||||||||
Intangible assets, net | 1,087 | 1,153 | ||||||||
Goodwill | 1,941 | 1,941 | ||||||||
Other non-current assets | 45 | 31 | ||||||||
TOTAL ASSETS | $ | 4,285 | $ | 4,205 | ||||||
LIABILITIES | ||||||||||
Current Liabilities | ||||||||||
Accounts payable | $ | 198 | $ | 159 | ||||||
Product warranty liability | 26 | 22 | ||||||||
Current portion of long-term debt | - | 12 | ||||||||
Deferred revenue | 35 | 41 | ||||||||
Other current liabilities | 189 | 183 | ||||||||
Total Current Liabilities | 448 | 417 | ||||||||
Product warranty liability | 41 | 33 | ||||||||
Deferred revenue | 89 | 75 | ||||||||
Long-term debt | 2,522 | 2,534 | ||||||||
Deferred income taxes | 322 | 276 | ||||||||
Other non-current liabilities | 179 | 181 | ||||||||
TOTAL LIABILITIES | 3,601 | 3,516 | ||||||||
TOTAL STOCKHOLDERS' EQUITY | 684 | 689 | ||||||||
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY | $ | 4,285 | $ | 4,205 | ||||||
Allison Transmission Holdings, Inc. | ||||||||||||||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||||||||||||||
(Unaudited, dollars in millions) | ||||||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||
Net cash provided by operating activities | $ | 239 | $ | 215 | $ | 605 | $ | 492 | ||||||||||||
Net cash used for investing activities (a) | (23 | ) | (20 | ) | (52 | ) | (43 | ) | ||||||||||||
Net cash used for financing activities | (90 | ) | (71 | ) | (529 | ) | (447 | ) | ||||||||||||
Effect of exchange rate changes on cash | (1 | ) | 1 | (2 | ) | 3 | ||||||||||||||
Net increase in cash and cash equivalents | 125 | 125 | 22 | 5 | ||||||||||||||||
Cash and cash equivalents at beginning of period | 96 | 85 | 199 | 205 | ||||||||||||||||
Cash and cash equivalents at end of period | $ | 221 | $ | 210 | $ | 221 | $ | 210 | ||||||||||||
Supplemental disclosures: | ||||||||||||||||||||
Interest paid | $ | 11 | $ | 16 | $ | 68 | $ | 71 | ||||||||||||
Income taxes paid | $ | 34 | $ | 31 | $ | 80 | $ | 65 | ||||||||||||
(a) Additions of long-lived assets | $ | (23 | ) | $ | (20 | ) | $ | (52 | ) | $ | (40 | ) | ||||||||
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, | |||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||
Net income (GAAP) | $ | 167 | $ | 111 | $ | 492 | $ | 289 | ||||||||||||
plus: | ||||||||||||||||||||
Income tax expense | 51 | 59 | 139 | 154 | ||||||||||||||||
Interest expense, net | 30 | 26 | 90 | 78 | ||||||||||||||||
Amortization of intangible assets | 22 | 22 | 66 | 67 | ||||||||||||||||
Depreciation of property, plant and equipment | 19 | 21 | 58 | 60 | ||||||||||||||||
Stock-based compensation expense (a) | 3 | 2 | 9 | 8 | ||||||||||||||||
UAW Local 933 retirement incentive (b) | - | - | 7 | - | ||||||||||||||||
Unrealized loss on foreign exchange (c) | 3 | 2 | 6 | 1 | ||||||||||||||||
Technology-related investment expense (d) | - | - | - | 3 | ||||||||||||||||
Dual power inverter module units extended coverage (e) | - | (2 | ) | - | (2 | ) | ||||||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 295 | $ | 241 | $ | 867 | $ | 658 | ||||||||||||
Net sales (GAAP) | $ | 692 | $ | 595 | $ | 2,066 | $ | 1,674 | ||||||||||||
Net income as a percent of net sales (GAAP) | 24.1 | % | 18.7 | % | 23.8 | % | 17.3 | % | ||||||||||||
Adjusted EBITDA as a percent of net sales (Non-GAAP) | 42.6 | % | 40.5 | % | 42.0 | % | 39.3 | % | ||||||||||||
Net Cash Provided by Operating Activities (GAAP) | $ | 239 | $ | 215 | $ | 605 | $ | 492 | ||||||||||||
Deductions to Reconcile to Adjusted Free Cash Flow: | ||||||||||||||||||||
Additions of long-lived assets | (23 | ) | (20 | ) | (52 | ) | (40 | ) | ||||||||||||
Adjusted Free Cash Flow (Non-GAAP) | $ | 216 | $ | 195 | $ | 553 | $ | 452 |
(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. | |
(c) | Represents losses (recorded in Other income (expense), net) on intercompany financing transactions related to investments in plant assets for our India facility. | |
(d) | Represents a charge (recorded in Other income (expense), net) for investments in co-development agreements to expand our position in transmission technologies. | |
(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. | |
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, 2018 | |||||||||
Low | High | ||||||||
Net Income (GAAP) | $ | 600 | $ | 620 | |||||
plus: | |||||||||
Income tax expense | 171 | 173 | |||||||
Interest expense, net | 122 | 120 | |||||||
Depreciation and amortization | 164 | 164 | |||||||
UAW Local 933 retirement incentive (a) | 14 | 14 | |||||||
Stock-based compensation expense (b) | 13 | 13 | |||||||
Unrealized loss on foreign exchange (c) | 6 | 6 | |||||||
Adjusted EBITDA (Non-GAAP) | $ | 1,090 | $ | 1,110 | |||||
Net Cash Provided by Operating Activities (GAAP) | $ | 785 | $ | 805 | |||||
Deductions to Reconcile to Adjusted Free Cash Flow: | |||||||||
Additions of long-lived assets | (100 | ) | (90 | ) | |||||
Adjusted Free Cash Flow (Non-GAAP) | $ | 685 | $ | 715 |
(a) | 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. | |
(b) | Represents employee stock compensation expense (recorded in Cost of sales, Selling, general and administrative, and Engineering – research and development). | |
(c) | Represents losses (recorded in Other income (expense), net) on intercompany financing transactions related to investments in plant assets for our India facility. | |
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Source:
Allison Transmission Holdings Inc.
Investor Relations,
317-242-3078
ir@allisontransmission.com
or
Media
Relations, 317-242-5000
media@allisontransmission.com