Allison Transmission Announces Third Quarter 2019 Results
- Net Sales of
$669 million - Net Income of
$149 million , 22% of Net Sales - Adjusted EBITDA of
$269 million , 40% of Net Sales - Diluted EPS of
$1.23
Net Income for the quarter was
“We are pleased to report that Allison's third quarter 2019 results are within the full year guidance ranges provided to the market on
Third Quarter Net Sales by End Market
End Market |
Q3 2019 |
Q3 2018 |
% Variance |
North America On-Highway |
$369 |
$332 |
11% |
North America Off-Highway |
$6 |
$12 |
(50%) |
Defense |
$40 |
$42 |
(5%) |
Outside North America On-Highway |
$99 |
$96 |
3% |
Outside North America Off-Highway |
$24 |
$46 |
(48%) |
Service Parts, Support Equipment & Other |
$131 |
$164 |
(20%) |
Total Net Sales |
$669 |
$692 |
(3%) |
Third Quarter Highlights
North America On-Highway end market net sales were up 11 percent from the same period in 2018 principally driven by higher demand for Rugged Duty Series and Highway Series models, led by the continued execution of our growth initiatives and market share gains in Class 4/5 truck, and down 7 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 down 5 percent from the same period in 2018 principally driven by lower Wheeled vehicle demand and up 8 percent on a sequential basis principally driven by higher Tracked vehicle demand.
Outside North America On-Highway end market net sales were up 3 percent from the same period in 2018 principally driven by higher demand in
Outside North America Off-Highway end market net sales were down
Service Parts, Support Equipment & Other end market net sales were down 20 percent from the same period in 2018 and down 11 percent sequentially, in both cases 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
Interest 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 2019 Guidance Update
Our updated full year 2019 guidance includes Net Sales in the range of
Our full year 2019 net sales guidance reflects lower demand in the Service Parts, Support Equipment & Other and North America Off-Highway end markets principally driven by lower demand from hydraulic fracturing applications partially offset by increased demand in the North America On-Highway end market, price increases on certain products and the continued execution of our growth initiatives.
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; 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 September 30, |
|
Nine months ended September 30, |
||||||||||||||
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||||
Net sales |
$ |
669 |
|
$ |
692 |
|
$ |
2,081 |
|
$ |
2,066 |
|
||||
Cost of sales |
|
321 |
|
|
324 |
|
|
985 |
|
|
982 |
|
||||
Gross profit |
|
348 |
|
|
368 |
|
|
1,096 |
|
|
1,084 |
|
||||
Selling, general and administrative |
|
85 |
|
|
89 |
|
|
262 |
|
|
274 |
|
||||
Engineering - research and development |
|
39 |
|
|
33 |
|
|
107 |
|
|
94 |
|
||||
Operating income |
|
224 |
|
|
246 |
|
|
727 |
|
|
716 |
|
||||
Interest expense, net |
|
(32 |
) |
|
(30 |
) |
|
(101 |
) |
|
(90 |
) |
||||
Other income, net |
|
2 |
|
|
2 |
|
|
8 |
|
|
5 |
|
||||
Income before income taxes |
|
194 |
|
|
218 |
|
|
634 |
|
|
631 |
|
||||
Income tax expense |
|
(45 |
) |
|
(51 |
) |
|
(137 |
) |
|
(139 |
) |
||||
Net income |
$ |
149 |
|
$ |
167 |
|
$ |
497 |
|
$ |
492 |
|
||||
Basic earnings per share attributable to common stockholders |
$ |
1.24 |
|
$ |
1.28 |
|
$ |
4.04 |
|
$ |
3.66 |
|
||||
Diluted earnings per share attributable to common stockholders |
$ |
1.23 |
|
$ |
1.27 |
|
$ |
4.01 |
|
$ |
3.64 |
|
Allison Transmission Holdings, Inc. | ||||||
Condensed Consolidated Balance Sheets | ||||||
(Unaudited, dollars in millions) | ||||||
September 30, |
|
December 31, |
||||
2019 |
|
2018 |
||||
ASSETS | ||||||
Current Assets | ||||||
Cash and cash equivalents |
$ |
152 |
$ |
231 |
||
Accounts receivable, net |
|
329 |
|
279 |
||
Inventories |
|
209 |
|
170 |
||
Other current assets |
|
58 |
|
45 |
||
Total Current Assets |
|
748 |
|
725 |
||
Property, plant and equipment, net |
|
561 |
|
466 |
||
Intangible assets, net |
|
1,061 |
|
1,066 |
||
Goodwill |
|
2,040 |
|
1,941 |
||
Other non-current assets |
|
61 |
|
39 |
||
TOTAL ASSETS |
$ |
4,471 |
$ |
4,237 |
||
LIABILITIES | ||||||
Current Liabilities | ||||||
Accounts payable |
$ |
185 |
$ |
169 |
||
Product warranty liability |
|
25 |
|
26 |
||
Current portion of long-term debt |
|
6 |
|
- |
||
Deferred revenue |
|
35 |
|
34 |
||
Other current liabilities |
|
226 |
|
197 |
||
Total Current Liabilities |
|
477 |
|
426 |
||
Product warranty liability |
|
29 |
|
40 |
||
Deferred revenue |
|
103 |
|
88 |
||
Long-term debt |
|
2,513 |
|
2,523 |
||
Deferred income taxes |
|
380 |
|
329 |
||
Other non-current liabilities |
|
226 |
|
172 |
||
TOTAL LIABILITIES |
|
3,728 |
|
3,578 |
||
TOTAL STOCKHOLDERS' EQUITY |
|
743 |
|
659 |
||
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY |
$ |
4,471 |
$ |
4,237 |
Allison Transmission Holdings, Inc. | ||||||||||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||||||||||
(Unaudited, dollars in millions) | ||||||||||||||||
Three months ended September 30, |
|
Nine months ended September 30, |
||||||||||||||
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||||
Net cash provided by operating activities |
$ |
212 |
|
$ |
239 |
|
$ |
645 |
|
$ |
605 |
|
||||
Net cash used for investing activities (a) (b) |
|
(146 |
) |
|
(23 |
) |
|
(323 |
) |
|
(52 |
) |
||||
Net cash used for financing activities |
|
(65 |
) |
|
(90 |
) |
|
(399 |
) |
|
(529 |
) |
||||
Effect of exchange rate changes on cash |
|
(2 |
) |
|
(1 |
) |
|
(2 |
) |
|
(2 |
) |
||||
Net (decrease) increase in cash and cash equivalents |
|
(1 |
) |
|
125 |
|
|
(79 |
) |
|
22 |
|
||||
Cash and cash equivalents at beginning of period |
|
153 |
|
|
96 |
|
|
231 |
|
|
199 |
|
||||
Cash and cash equivalents at end of period |
$ |
152 |
|
$ |
221 |
|
$ |
152 |
|
$ |
221 |
|
||||
Supplemental disclosures: | ||||||||||||||||
Interest paid |
$ |
10 |
|
$ |
11 |
|
$ |
63 |
|
$ |
68 |
|
||||
Income taxes paid |
$ |
29 |
|
$ |
34 |
|
$ |
84 |
|
$ |
80 |
|
||||
(a) Business acquisitions |
$ |
(99 |
) |
$ |
- |
|
$ |
(232 |
) |
$ |
- |
|
||||
(b) Additions of long-lived assets |
$ |
(47 |
) |
$ |
(23 |
) |
$ |
(91 |
) |
$ |
(52 |
) |
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, |
||||||||||||||
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||||
Net income (GAAP) |
$ |
149 |
|
$ |
167 |
|
$ |
497 |
|
$ |
492 |
|
||||
plus: | ||||||||||||||||
Income tax expense |
|
45 |
|
|
51 |
|
|
137 |
|
|
139 |
|
||||
Interest expense, net |
|
32 |
|
|
30 |
|
|
101 |
|
|
90 |
|
||||
Amortization of intangible assets |
|
22 |
|
|
22 |
|
|
65 |
|
|
66 |
|
||||
Depreciation of property, plant and equipment |
|
20 |
|
|
19 |
|
|
57 |
|
|
58 |
|
||||
Stock-based compensation expense (a) |
|
2 |
|
|
3 |
|
|
10 |
|
|
9 |
|
||||
UAW Local 933 retirement incentive (b) |
|
(1 |
) |
|
- |
|
|
(1 |
) |
|
7 |
|
||||
Expenses related to long-term debt refinancing (c) |
|
- |
|
|
- |
|
|
1 |
|
|
- |
|
||||
Unrealized loss on foreign exchange (d) |
|
- |
|
|
3 |
|
|
- |
|
|
6 |
|
||||
Adjusted EBITDA (Non-GAAP) |
$ |
269 |
|
$ |
295 |
|
$ |
867 |
|
$ |
867 |
|
||||
Net sales (GAAP) |
$ |
669 |
|
$ |
692 |
|
$ |
2,081 |
|
$ |
2,066 |
|
||||
Net income as a percent of net sales (GAAP) |
|
22.3 |
% |
|
24.1 |
% |
|
23.9 |
% |
|
23.8 |
% |
||||
Adjusted EBITDA as a percent of net sales (Non-GAAP) |
|
40.2 |
% |
|
42.6 |
% |
|
41.7 |
% |
|
42.0 |
% |
||||
Net cash provided by operating activities (GAAP) |
$ |
212 |
|
$ |
239 |
|
$ |
645 |
|
$ |
605 |
|
||||
Deductions to Reconcile to Adjusted Free Cash Flow: | ||||||||||||||||
Additions of long-lived assets |
|
(47 |
) |
|
(23 |
) |
|
(91 |
) |
|
(52 |
) |
||||
Adjusted free cash flow (Non-GAAP) |
$ |
165 |
|
$ |
216 |
|
$ |
554 |
|
$ |
553 |
|
(a) |
Represents stock-based 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 expenses (recorded in Other income, net) related to the refinancing of the prior term loan due 2022 and prior revolving credit facility due 2021 (together, the "Prior Senior Secured Credit Facility") in the first quarter of 2019. | ||||||||||
(d) |
Represents losses (recorded in Other income, net) on intercompany financing transactions related to investments in plant assets for our India facility. |
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) |
$ |
555 |
|
$ |
575 |
|
||
plus: | ||||||||
Income tax expense |
|
158 |
|
|
168 |
|
||
Interest expense, net |
|
135 |
|
|
135 |
|
||
Depreciation and amortization |
|
164 |
|
|
164 |
|
||
Stock-based compensation expense (a) |
|
14 |
|
|
14 |
|
||
Expenses related to long-term debt refinancing (b) |
|
1 |
|
|
1 |
|
||
UAW Local 933 retirement incentive (c) |
|
8 |
|
|
8 |
|
||
Adjusted EBITDA (Non-GAAP) |
$ |
1,035 |
|
$ |
1,065 |
|
||
Net Cash Provided by Operating Activities (GAAP) |
$ |
745 |
|
$ |
775 |
|
||
Deductions to Reconcile to Adjusted Free Cash Flow: | ||||||||
Additions of long-lived assets |
|
(175 |
) |
|
(165 |
) |
||
Adjusted Free Cash Flow (Non-GAAP) |
$ |
570 |
|
$ |
610 |
|
||
(a) |
Represents employee stock compensation expense (recorded in Cost of sales, Selling, general and administrative, and Engineering – research and development). | |||||
(b) |
Represents expenses (recorded in Other income (expense), net) related to the refinancing of the Prior Senior Secured Credit Facility. | |||||
(c) |
Represents a charge (recorded in Cost of sales) related to a retirement incentive program for certain employees represented by the UAW pursuant to the UAW Local 933 collective bargaining agreement effective through November 2023. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20191030005964/en/
Source:
Raymond Posadas
Director of Investor Relations
ir@allisontransmission.com
(317) 242-3078
Media Relations
media@allisontransmission.com
(317) 242-5000