Allison Transmission Announces Record Results for Full Year 2018
- Record Full Year 2018: Net Sales
$2,713 million , Net Income$639 million , Adjusted EBITDA$1,128 million , Net Cash Provided by Operating Activities$837 million , Adjusted Free Cash Flow$737 million - Fourth Quarter 2018: Net Sales
$647 million , Net Income$147 million , Adjusted EBITDA$261 million , Net Cash Provided by Operating Activities$232 million , Adjusted Free Cash Flow$184 million
Net Income for the quarter was
Fourth Quarter Net Sales by End Market |
|||||||
Q4 2018 | Q4 2017 | ||||||
End Market | Net Sales | Net Sales | % Variance | ||||
($M) | ($M) | ||||||
North America On-Highway (a) | $303 | $287 | 6% | ||||
North America Off-Highway | $17 | $28 | (39%) | ||||
Defense | $36 | $25 | 44% | ||||
Outside North America On-Highway | $95 | $98 | (3%) | ||||
Outside North America Off-Highway | $47 | $11 | 327% | ||||
Service Parts, Support Equipment & Other | $149 | $139 | 7% | ||||
Total Net Sales | $647 | $588 | 10% |
(a) | North America On-Highway end-market net sales are inclusive of net sales for North America Electric Hybrid-Propulsion Systems for Transit Bus. | |
Fourth Quarter Highlights
North America On-Highway end market net sales were up 6 percent from the same period in 2017 principally driven by higher demand for Rugged Duty Series and Highway Series models and down 9 percent on a sequential basis principally driven by lower demand for Rugged Duty Series and Pupil Transport/Shuttle Series models.
North America Off-Highway end market net sales were down
Defense end market net sales were up
Outside North America On-Highway end market net sales were down 3 percent from the same period in 2017 principally driven by lower demand in
Outside North America Off-Highway end market net sales were up
Service Parts, Support Equipment & Other end market net sales were up 7 percent from the same period in 2017 principally driven by higher demand for North America On-Highway service parts and global support equipment and down 9 percent sequentially principally driven by lower 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
As a result of continued weak demand conditions for the TC10 transmission we ceased production and recorded a corresponding
Income tax expense for the quarter was
Net income for the quarter was
Net cash provided by operating activities was
Fourth Quarter Non-GAAP Financial Measures
Adjusted EBITDA for the quarter was
Adjusted Free Cash Flow for the quarter was
Full Year 2019 Guidance
Allison expects 2019 net sales to be in the range of
Our 2019 net sales guidance reflects lower demand in the
Although we are not providing specific first quarter 2019 guidance, Allison does expect first quarter net sales to be flat from the same period in 2018 principally driven by increased demand expected in the North America On-Highway end market offset by decreased demand expected in the North America Off-Highway and Service Parts, Support Equipment & Other end markets.
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: 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.
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, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net sales | $ | 647 | $ | 588 | $ | 2,713 | $ | 2,262 | ||||||||
Cost of sales | 309 | 300 | 1,291 | 1,131 | ||||||||||||
Gross profit | 338 | 288 | 1,422 | 1,131 | ||||||||||||
Selling, general and administrative | 90 | 97 | 364 | 342 | ||||||||||||
Engineering - research and development | 37 | 31 | 131 | 105 | ||||||||||||
Loss associated with impairment of long-lived assets | 4 | 32 | 4 | 32 | ||||||||||||
Operating income | 207 | 128 | 923 | 652 | ||||||||||||
Interest expense, net | (31 | ) | (25 | ) | (121 | ) | (103 | ) | ||||||||
Other (expense) income, net | (2 | ) | (19 | ) | 3 | (22 | ) | |||||||||
Income before income taxes | 174 | 84 | 805 | 527 | ||||||||||||
Income tax (expense) benefit | (27 | ) | 131 | (166 | ) | (23 | ) | |||||||||
Net income | $ | 147 | $ | 215 | $ | 639 | $ | 504 | ||||||||
Basic earnings per share attributable to common stockholders | $ | 1.15 | $ | 1.52 | $ | 4.81 | $ | 3.38 | ||||||||
Diluted earnings per share attributable to common stockholders | $ | 1.14 | $ | 1.51 | $ | 4.78 | $ | 3.36 | ||||||||
Allison Transmission Holdings, Inc. | ||||||
Condensed Consolidated Balance Sheets | ||||||
(Unaudited, dollars in millions) | ||||||
December 31, | December 31, | |||||
2018 | 2017 | |||||
ASSETS | ||||||
Current Assets | ||||||
Cash and cash equivalents | $ | 231 | $ | 199 | ||
Accounts receivable | 279 | 221 | ||||
Inventories | 170 | 154 | ||||
Income taxes receivable | 16 | 33 | ||||
Other current assets | 29 | 25 | ||||
Total Current Assets | 725 | 632 | ||||
Property, plant and equipment, net | 466 | 448 | ||||
Intangible assets, net | 1,066 | 1,153 | ||||
Goodwill | 1,941 | 1,941 | ||||
Other non-current assets | 39 | 31 | ||||
TOTAL ASSETS | $ | 4,237 | $ | 4,205 | ||
LIABILITIES | ||||||
Current Liabilities | ||||||
Accounts payable | $ | 169 | $ | 159 | ||
Product warranty liability | 26 | 22 | ||||
Current portion of long-term debt | - | 12 | ||||
Deferred revenue | 34 | 41 | ||||
Other current liabilities | 197 | 183 | ||||
Total Current Liabilities | 426 | 417 | ||||
Product warranty liability | 40 | 33 | ||||
Deferred revenue | 88 | 75 | ||||
Long-term debt | 2,523 | 2,534 | ||||
Deferred income taxes | 329 | 276 | ||||
Other non-current liabilities | 172 | 181 | ||||
TOTAL LIABILITIES | 3,578 | 3,516 | ||||
TOTAL STOCKHOLDERS' EQUITY | 659 | 689 | ||||
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY | $ | 4,237 | $ | 4,205 | ||
Allison Transmission Holdings, Inc. | ||||||||||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||||||||||
(Unaudited, dollars in millions) | ||||||||||||||||
Three months ended December 31, | Twelve months ended December 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net cash provided by operating activities | $ | 232 | $ | 166 | $ | 837 | $ | 658 | ||||||||
Net cash used for investing activities (a) | (51 | ) | (51 | ) | (103 | ) | (94 | ) | ||||||||
Net cash used for financing activities | (171 | ) | (127 | ) | (700 | ) | (574 | ) | ||||||||
Effect of exchange rate changes on cash | - | 1 | (2 | ) | 4 | |||||||||||
Net increase (decrease) in cash and cash equivalents | 10 | (11 | ) | 32 | (6 | ) | ||||||||||
Cash and cash equivalents at beginning of period | 221 | 210 | 199 | 205 | ||||||||||||
Cash and cash equivalents at end of period | $ | 231 | $ | 199 | $ | 231 | $ | 199 | ||||||||
Supplemental disclosures: | ||||||||||||||||
Interest paid | $ | 47 | $ | 53 | $ | 115 | $ | 124 | ||||||||
Income taxes paid | $ | 21 | $ | 31 | $ | 101 | $ | 96 | ||||||||
(a) Additions of long-lived assets | $ | (48 | ) | $ | (51 | ) | $ | (100 | ) | $ | (91 | ) | ||||
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, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income (GAAP) | $ | 147 | $ | 215 | $ | 639 | $ | 504 | ||||||||
plus: | ||||||||||||||||
Income tax expense (benefit) | 27 | (131 | ) | 166 | 23 | |||||||||||
Interest expense, net | 31 | 25 | 121 | 103 | ||||||||||||
Amortization of intangible assets | 21 | 23 | 87 | 90 | ||||||||||||
Depreciation of property, plant and equipment | 19 | 20 | 77 | 80 | ||||||||||||
UAW Local 933 retirement incentive (a) | 8 | - | 15 | - | ||||||||||||
Stock-based compensation expense (b) | 4 | 4 | 13 | 12 | ||||||||||||
Loss associated with impairment of long-lived assets (c) | 4 | 32 | 4 | 32 | ||||||||||||
Unrealized (gain) loss on foreign exchange (d) | (3 | ) | (1 | ) | 3 | - | ||||||||||
Technology-related investment expense (e) | 3 | 13 | 3 | 16 | ||||||||||||
UAW Local 933 contract signing bonus (f) | - | 10 | - | 10 | ||||||||||||
Dual power inverter module units extended coverage (g) | - | - | - | (2 | ) | |||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 261 | $ | 210 | $ | 1,128 | $ | 868 | ||||||||
Net sales (GAAP) | $ | 647 | $ | 588 | $ | 2,713 | $ | 2,262 | ||||||||
Net income as a percent of net sales (GAAP) | 22.7 | % | 36.6 | % | 23.6 | % | 22.3 | % | ||||||||
Adjusted EBITDA as a percent of net sales (Non-GAAP) | 40.3 | % | 35.7 | % | 41.6 | % | 38.4 | % | ||||||||
Net Cash Provided by Operating Activities (GAAP) | $ | 232 | $ | 166 | $ | 837 | $ | 658 | ||||||||
Deductions to Reconcile to Adjusted Free Cash Flow: | ||||||||||||||||
Additions of long-lived assets | (48 | ) | (51 | ) | (100 | ) | (91 | ) | ||||||||
Adjusted Free Cash Flow (Non-GAAP) | $ | 184 | $ | 115 | $ | 737 | $ | 567 | ||||||||
(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 charges associated with the impairment of long-lived assets related to the production of the TC10 transmission. | |
(d) | Represents (gains) losses (recorded in Other (expense) income, net) on intercompany financing transactions related to investments in plant assets for our India facility. | |
(e) | Represents a charge (recorded in Other (expense) income, net) for investments in co-development agreements to expand our position in transmission technologies. | |
(f) | 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. | |
(g) | 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, 2019 | ||||||||
Low | High | |||||||
Net Income (GAAP) | $ | 535 | $ | 585 | ||||
plus: | ||||||||
Income tax expense | 158 | 168 | ||||||
Interest expense, net | 126 | 126 | ||||||
Depreciation and amortization | 157 | 157 | ||||||
UAW Local 933 retirement incentive (a) | 9 | 9 | ||||||
Stock-based compensation expense (b) | 15 | 15 | ||||||
Adjusted EBITDA (Non-GAAP) | $ | 1,000 | $ | 1,060 | ||||
Net Cash Provided by Operating Activities (GAAP) | $ | 710 | $ | 750 | ||||
Deductions to Reconcile to Adjusted Free Cash Flow: | ||||||||
Additions of long-lived assets | (160 | ) | (150 | ) | ||||
Adjusted Free Cash Flow (Non-GAAP) | $ | 550 | $ | 600 | ||||
(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). |
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Source:
Investor Relations
ir@allisontransmission.com
(317) 242-3078
Media Relations
media@allisontransmission.com
(317) 242-5000