Allison Transmission Announces Third Quarter 2016 Results
Net Income for the quarter was
Third Quarter Net Sales by End Market
End Market |
Q3 2016 Net Sales ($M) |
Q3 2015 Net Sales ($M) |
% Variance |
North America On-Highway |
224 |
262 |
(15%) |
North America Hybrid-Propulsion Systems for Transit Bus |
8 |
12 |
(33%) |
North America Off-Highway |
1 |
12 |
(92%) |
Defense |
25 |
34 |
(26%) |
Outside North America On-Highway |
78 |
67 |
16% |
Outside North America Off-Highway |
2 |
4 |
(50%) |
Service Parts, Support Equipment & Other |
96 |
102 |
(6%) |
Total Net Sales |
434 |
493 |
(12%) |
Third Quarter Highlights
North America On-Highway end market net sales were down 15 percent from the same period in 2015 principally driven by lower demand for Rugged Duty Series, Highway Series and Pupil Transport/Shuttle models partially offset by higher demand for Transit/Other Bus models and down 15 percent on a sequential basis principally driven by lower demand for Rugged Duty Series, Pupil Transport/Shuttle Series and Highway Series models partially offset by higher demand for Transit/Other Bus models.
North America Hybrid-Propulsion Systems for Transit Bus end market net sales were down 33 percent from the same period in 2015 and down 50 percent sequentially principally driven by lower demand due to engine emissions improvements and other alternative technologies.
North America Off-Highway end market net sales were down 92 percent from the same period in 2015 and flat on a sequential basis principally driven by the previously contemplated impact of low energy prices.
Defense end market net sales were down 26 percent from the same period in 2015 principally driven by lower demand for Tracked Defense partially offset by higher demand for Wheeled Defense and down 11 percent sequentially principally driven by lower demand for Tracked Defense.
Outside North America On-Highway end market net sales were up 16 percent from the same period in 2015 principally driven by higher demand in
Outside North America Off-Highway end market net sales were down 50 percent from the same period in 2015 and down 33 percent sequentially principally driven by lower demand in the mining sector.
Service Parts, Support Equipment & Other end market net sales were down 6 percent from the same period in 2015 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
Net income for the quarter was
Third Quarter Non-GAAP Financial Measures
Adjusted EBITDA for the quarter was
Adjusted Free Cash Flow for the quarter was
Full Year 2016 Guidance Update
Our updated full year 2016 guidance includes a year-over-year net sales decrease in the range of 8.5 to 9.5 percent, an Adjusted EBITDA margin in the range of 34.0 to 35.0 percent, an Adjusted Free Cash Flow in the range of
Although we are not providing specific fourth quarter 2016 guidance, Allison does expect fourth quarter net sales to be approximately flat sequentially and down from the same period in 2015.
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. 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
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
This press release also contains forward-looking estimates of non-GAAP Adjusted EBITDA Margin and Adjusted Free Cash Flow for fiscal year 2016. We are unable to provide a reconciliation of our forward-looking estimate of non-GAAP Adjusted EBITDA Margin to a forward-looking estimate of GAAP Net Income because certain information needed to make a reasonable forward-looking estimate of GAAP Net Income is difficult to predict and estimate and is often dependent on future events which may be uncertain or outside of our control. These may include unanticipated charges related to asset impairments (fixed assets, investments, intangibles or goodwill) and unanticipated non-recurring items not reflective of ongoing operations. We are unable to provide a reconciliation of our forward-looking estimate of non-GAAP Adjusted Free Cash Flow to a forward-looking estimate of GAAP Net Cash Provided by Operating Activities because certain information needed to make a reasonable forward-looking estimate of GAAP Net Cash Provided by Operating Activities is difficult to predict and estimate and is often dependent on future events which may be uncertain or outside of our control. These may include the level of excess income tax benefit from share-based compensation and unanticipated non-recurring items.
Attachment
- Condensed Consolidated Statements of Operations
- Condensed Consolidated Balance Sheets
- Condensed Consolidated Statements of Cash Flows
- Reconciliation of GAAP to Non-GAAP Financial Measures
Allison Transmission Holdings, Inc. |
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Condensed Consolidated Statements of Operations |
||||||||
(Unaudited, dollars in millions, except per share data) |
||||||||
Three months ended September 30, |
Nine months ended September 30, |
|||||||
2016 |
2015 |
2016 |
2015 |
|||||
Net sales |
$ 434.3 |
$ 493.0 |
$ 1,371.3 |
$ 1,507.6 |
||||
Cost of sales |
229.6 |
256.9 |
724.8 |
796.0 |
||||
Gross profit |
204.7 |
236.1 |
646.5 |
711.6 |
||||
Selling, general and administrative expenses |
80.0 |
86.6 |
240.4 |
235.6 |
||||
Engineering - research and development |
20.7 |
23.6 |
64.3 |
69.0 |
||||
Environmental remediation |
- |
14.0 |
- |
14.0 |
||||
Loss associated with impairment of long-lived assets |
- |
- |
- |
1.3 |
||||
Operating income |
104.0 |
111.9 |
341.8 |
391.7 |
||||
Interest expense, net |
(22.2) |
(33.7) |
(84.1) |
(93.7) |
||||
Expenses related to long-term debt refinancing |
(11.6) |
(0.2) |
(11.6) |
(25.3) |
||||
Other income (expense), net |
0.8 |
(4.2) |
0.5 |
(3.6) |
||||
Income before income taxes |
71.0 |
73.8 |
246.6 |
269.1 |
||||
Income tax expense |
(26.4) |
(27.3) |
(92.9) |
(99.8) |
||||
Net income |
$ 44.6 |
$ 46.5 |
$ 153.7 |
$ 169.3 |
||||
Basic earnings per share attributable to common |
$ 0.27 |
$ 0.27 |
$ 0.91 |
$ 0.95 |
||||
Diluted earnings per share attributable to common |
$ 0.27 |
$ 0.27 |
$ 0.91 |
$ 0.95 |
Allison Transmission Holdings, Inc. |
|||||||||
Condensed Consolidated Balance Sheets |
|||||||||
(Unaudited, dollars in millions) |
|||||||||
September 30, |
December 31, |
||||||||
2016 |
2015 |
||||||||
ASSETS |
|||||||||
Current Assets |
|||||||||
Cash and cash equivalents |
$ 164.7 |
$ 251.6 |
|||||||
Accounts receivable - net of allowance for |
|||||||||
doubtful accounts of $0.5 and $0.4, respectively |
202.8 |
195.0 |
|||||||
Inventories |
155.8 |
141.4 |
|||||||
Other current assets |
26.6 |
28.8 |
|||||||
Total Current Assets |
549.9 |
616.8 |
|||||||
Property, plant and equipment, net |
454.6 |
479.7 |
|||||||
Intangible assets, net |
3,206.5 |
3,275.8 |
|||||||
Other non-current assets |
28.3 |
36.1 |
|||||||
TOTAL ASSETS |
$ 4,239.3 |
$ 4,408.4 |
|||||||
LIABILITIES |
|||||||||
Current Liabilities |
|||||||||
Accounts payable |
$ 134.6 |
$ 126.2 |
|||||||
Current portion of long-term debt |
11.9 |
24.5 |
|||||||
Other current liabilities |
189.2 |
153.9 |
|||||||
Total Current Liabilities |
335.7 |
304.6 |
|||||||
Long-term debt |
2,148.8 |
2,352.7 |
|||||||
Other non-current liabilities |
638.1 |
562.5 |
|||||||
TOTAL LIABILITIES |
3,122.6 |
3,219.8 |
|||||||
TOTAL STOCKHOLDERS' EQUITY |
1,116.7 |
1,188.6 |
|||||||
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY |
$ 4,239.3 |
$ 4,408.4 |
|||||||
Allison Transmission Holdings, Inc. |
||||||||||||
Condensed Consolidated Statements of Cash Flows |
||||||||||||
(Unaudited, dollars in millions) |
||||||||||||
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||
Net cash provided by operating activities |
$ 127.7 |
$ 162.4 |
$ 415.6 |
$ 405.1 |
||||||||
Net cash used for investing activities (a) |
(15.0) |
(17.1) |
(37.5) |
(31.8) |
||||||||
Net cash used for financing activities |
(312.8) |
(212.8) |
(465.8) |
(485.2) |
||||||||
Effect of exchange rate changes in cash |
0.4 |
(0.9) |
0.8 |
(2.7) |
||||||||
Net decrease in cash and cash equivalents |
(199.7) |
(68.4) |
(86.9) |
(114.6) |
||||||||
Cash and cash equivalents at beginning of period |
364.4 |
216.8 |
251.6 |
263.0 |
||||||||
Cash and cash equivalents at end of period |
$ 164.7 |
$ 148.4 |
$ 164.7 |
$ 148.4 |
||||||||
Supplemental disclosures: |
||||||||||||
Interest paid |
$ 20.5 |
$ 21.8 |
$ 63.6 |
$ 75.4 |
||||||||
Income taxes paid |
$ 2.4 |
$ 1.1 |
$ 10.0 |
$ 5.0 |
||||||||
(a) Additions of long-lived assets |
$ (14.1) |
$ (15.2) |
$ (36.7) |
$ (30.1) |
||||||||
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, |
|||||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||||
Net income (GAAP) |
$ 44.6 |
$ 46.5 |
$ 153.7 |
$ 169.3 |
||||||||||
plus: |
||||||||||||||
Interest expense, net |
22.2 |
33.7 |
84.1 |
93.7 |
||||||||||
Income tax expense |
26.4 |
27.3 |
92.9 |
99.8 |
||||||||||
Amortization of intangible assets |
23.0 |
24.3 |
69.4 |
72.9 |
||||||||||
Depreciation of property, plant and equipment |
21.1 |
22.4 |
62.8 |
65.8 |
||||||||||
Expenses related to long-term debt refinancing (a) |
11.6 |
0.2 |
11.6 |
25.3 |
||||||||||
Stock-based compensation expense (b) |
2.1 |
2.5 |
6.4 |
7.2 |
||||||||||
Unrealized (gain) loss on foreign exchange (c) |
(1.1) |
2.8 |
0.7 |
1.6 |
||||||||||
Technology-related investment expense (d) |
1.0 |
- |
1.0 |
- |
||||||||||
Unrealized (gain) loss on commodity hedge contracts (e) |
(0.2) |
0.7 |
(1.7) |
0.7 |
||||||||||
Dual power inverter module extended coverage (f) |
(0.2) |
(0.3) |
1.3 |
(2.1) |
||||||||||
Environmental remediation (g) |
- |
14.0 |
- |
14.0 |
||||||||||
Stockholder activism expenses (h) |
- |
- |
3.7 |
- |
||||||||||
Loss associated with impairment of long-lived assets (i) |
- |
- |
- |
1.3 |
||||||||||
Loss on repayments of long-term debt (j) |
- |
- |
- |
0.2 |
||||||||||
Adjusted EBITDA (Non-GAAP) |
$ 150.5 |
$ 174.1 |
$ 485.9 |
$ 549.7 |
||||||||||
Net sales (GAAP) |
$ 434.3 |
$ 493.0 |
$ 1,371.3 |
$ 1,507.6 |
||||||||||
Adjusted EBITDA margin (Non-GAAP) |
34.7% |
35.3% |
35.4% |
36.5% |
||||||||||
Net Cash Provided by Operating Activities (GAAP) |
$ 127.7 |
$ 162.4 |
$ 415.6 |
$ 405.1 |
||||||||||
(Deductions) or Additions to Reconcile to Adjusted Free Cash Flow: |
||||||||||||||
Additions of long-lived assets |
(14.1) |
(15.2) |
(36.7) |
(30.1) |
||||||||||
Stockholder activism expenses (h) |
0.1 |
- |
3.7 |
- |
||||||||||
Excess tax benefit from stock-based compensation (k) |
1.8 |
0.2 |
2.1 |
8.2 |
||||||||||
Technology-related license expenses (l) |
- |
0.2 |
- |
0.2 |
||||||||||
Adjusted Free Cash Flow (Non-GAAP) |
$ 115.5 |
$ 147.6 |
$ 384.7 |
$ 383.4 |
||||||||||
(a) | Represents expenses related to the refinancing of Allison Transmission, Inc.'s ("ATI"), our wholly owned subsidiary, Senior Secured Credit Facility in the third quarter of 2016 and ATI's tender offer and redemption of its 7.125% Senior Notes in the second quarter of 2015. |
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(b) |
Represents stock-based compensation expense (recorded in Cost of sales, Selling, general and administrative expenses, and Engineering – research and development). |
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(c) |
Represents (gains) losses (recorded in Other income (expense), net) on the mark-to-market of our foreign currency hedge contracts and 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. |
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(e) |
Represents unrealized (gains) losses (recorded in Other income (expense), net) on the mark-to-market of our commodity hedge contracts. |
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(f) |
Represents an adjustment (recorded in Selling, general and administrative expenses) 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. |
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(g) |
Represents environmental remediation expenses for ongoing operating, monitoring and maintenance activities at our Indianapolis, Indiana manufacturing facilities as a result of the U.S. Environmental Protection Agency determining that we are responsible for future operating, monitoring and maintenance activities and that General Motors' environmental remediation activities, pursuant to the asset purchase agreement, were completed in the third quarter of 2015. |
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(h) |
Represents expenses of $3.7 million (recorded in Selling, general and administrative expenses) for the nine months ended September 30, 2016, and payments of $0.1 million and $3.7million for the three months and nine months ended September 30, 2016, respectively, directly associated with stockholder activism activity including the notice, and subsequent withdrawal, of director nomination and governance proposals by Ashe Capital Management, LP. |
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(i) |
Represents a charge associated with the impairment of long-lived assets related to the production of the H3000 and H4000 hybrid-propulsion systems. |
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(j) |
Represents losses (recorded in Other income (expense), net) realized on the repayments of ATI's long-term debt. |
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(k) |
Represents the amount of tax benefit (recorded in Income tax expense) related to stock-based compensation adjusted from cash flows from operating activities to cash flows from financing activities. |
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(l) |
Represents payments (recorded in Engineering - research and development) for licenses to expand our position in transmission technologies. |
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SOURCE
Investor Relations, ir@allisontransmission.com, (317) 242-3078 or Media Relations, media@allisontransmission.com, (317) 242-5000