Allison Transmission Announces Second Quarter 2020 Results
- Net Income of
$23 million - Diluted EPS of
$0.20 - Adjusted EBITDA of
$115 million - Net Cash Provided by Operating Activities of
$92 million - Adjusted Free Cash Flow of
$67 million
Net Income for the quarter was
Graziosi continued, “Second quarter results reflect the significant impact the pandemic continues to have on global supply chains and customer demand. Despite these ongoing disruptions, all of Allison’s global facilities are currently producing transmissions and components, and the majority of our manufacturing operations have run continuously throughout 2020. To date, we have achieved uninterrupted delivery of our products and continued to generate earnings and positive cash flow. We remain focused on aligning our operations, programs and spending with current end market conditions, while maintaining the flexibility to respond quickly and appropriately as these conditions evolve. Allison is well capitalized and positioned to realize opportunities that may emerge from the current environment, as a result of our long-standing commitment to prudent balance sheet management, ample liquidity and profitable operations.”
Second Quarter
End Market |
Q2 2020 |
Q2 2019 |
% Variance |
|
North America On-Highway |
|
|
(59 |
%) |
North America Off-Highway |
|
|
(67 |
%) |
Defense |
|
|
14 |
% |
Outside North America On-Highway |
|
|
(43 |
%) |
Outside North America Off-Highway |
|
|
(53 |
%) |
Service Parts, Support Equipment & Other |
|
|
(39 |
%) |
Total |
|
|
(49 |
%) |
Second Quarter Highlights
North America On-Highway end market net sales were down 59 percent from the same period in 2019 and down 53 percent on a sequential basis, in both cases principally driven by lower demand for Rugged Duty Series and Highway Series models primarily due to the effects of the pandemic.
North America Off-Highway end market net sales were down
Defense end market net sales were up 14 percent from the same period in 2019 and up 5 percent on a sequential basis, in both cases principally driven by Tracked vehicle demand.
Outside North America On-Highway end market net sales were down 43 percent from the same period in 2019 and down 17 percent sequentially principally driven by lower global demand due to the effects of the pandemic.
Outside North America Off-Highway end market net sales were down
Service Parts, Support Equipment & Other end market net sales were down 39 percent from the same period in 2019 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
Net cash provided by operating activities was
Second Quarter Non-GAAP Financial Measures
Adjusted EBITDA for the quarter was
Adjusted Free Cash Flow for the quarter was
COVID-19 Pandemic and Market Update
The pandemic continues to impact
The Allison team continues working to proactively align operations, programs and spending across our entire business with current end market conditions, including reduced compensation expense through restructuring initiatives of both hourly and salary employees, furloughs of a portion of our workforce, reduced overtime and assessing the timing and cadence of various capital investment and product development initiatives. During the second quarter, we incurred
Conference Call and Webcast
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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 or expected ability to re-open our facilities promptly. 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: the duration and spread of the COVID-19 outbreak, mitigating efforts deployed by government agencies and the public at large, and the overall impact from such outbreak on economic conditions, financial market volatility and our business, including but not limited to the operations of our manufacturing and other facilities, our supply chain, our distribution processes and demand for our products and the corresponding impacts to our net sales and cash flow; 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, excluding non-recurring restructuring charges, after additions of long-lived assets.
Attachments
- Condensed Consolidated Statements of Operations
- Condensed Consolidated Balance Sheets
- Condensed Consolidated Statements of Cash Flows
- Reconciliation of GAAP to Non-GAAP Financial Measures
Condensed Consolidated Statements of Operations | ||||||||||||||||
(Unaudited, dollars in millions, except per share data) | ||||||||||||||||
Three months ended |
|
Six months ended |
||||||||||||||
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||||
Net sales |
$ |
377 |
|
$ |
737 |
|
$ |
1,014 |
|
$ |
1,412 |
|
||||
Cost of sales |
|
212 |
|
|
348 |
|
|
523 |
|
|
664 |
|
||||
Gross profit |
|
165 |
|
|
389 |
|
|
491 |
|
|
748 |
|
||||
Selling, general and administrative |
|
69 |
|
|
93 |
|
|
144 |
|
|
177 |
|
||||
Engineering - research and development |
|
38 |
|
|
37 |
|
|
74 |
|
|
68 |
|
||||
Operating income |
|
58 |
|
|
259 |
|
|
273 |
|
|
503 |
|
||||
Interest expense, net |
|
(33 |
) |
|
(33 |
) |
|
(66 |
) |
|
(69 |
) |
||||
Other income, net |
|
5 |
|
|
3 |
|
|
4 |
|
|
6 |
|
||||
Income before income taxes |
|
30 |
|
|
229 |
|
|
211 |
|
|
440 |
|
||||
Income tax expense |
|
(7 |
) |
|
(48 |
) |
|
(49 |
) |
|
(92 |
) |
||||
Net income |
$ |
23 |
|
$ |
181 |
|
$ |
162 |
|
$ |
348 |
|
||||
Basic earnings per share attributable to common stockholders |
$ |
0.20 |
|
$ |
1.47 |
|
$ |
1.42 |
|
$ |
2.81 |
|
||||
Diluted earnings per share attributable to common stockholders |
$ |
0.20 |
|
$ |
1.46 |
|
$ |
1.41 |
|
$ |
2.78 |
|
Condensed Consolidated Balance Sheets | ||||||
(Unaudited, dollars in millions) | ||||||
|
|
|
||||
2020 |
|
2019 |
||||
ASSETS | ||||||
Current Assets | ||||||
Cash and cash equivalents |
$ |
434 |
$ |
192 |
||
Accounts receivable, net |
|
212 |
|
253 |
||
Inventories |
|
201 |
|
199 |
||
Other current assets |
|
40 |
|
42 |
||
Total Current Assets |
|
887 |
|
686 |
||
Property, plant and equipment, net |
|
634 |
|
616 |
||
Intangible assets, net |
|
986 |
|
1,042 |
||
|
2,062 |
|
2,041 |
|||
Other non-current assets |
|
64 |
|
65 |
||
TOTAL ASSETS |
$ |
4,633 |
$ |
4,450 |
||
LIABILITIES | ||||||
Current Liabilities | ||||||
Accounts payable |
$ |
138 |
$ |
150 |
||
Product warranty liability |
|
29 |
|
24 |
||
Current portion of long-term debt |
|
6 |
|
6 |
||
Deferred revenue |
|
34 |
|
35 |
||
Other current liabilities |
|
149 |
|
202 |
||
Total Current Liabilities |
|
356 |
|
417 |
||
Product warranty liability |
|
19 |
|
28 |
||
Deferred revenue |
|
111 |
|
104 |
||
Long-term debt |
|
2,786 |
|
2,512 |
||
Deferred income taxes |
|
421 |
|
387 |
||
Other non-current liabilities |
|
245 |
|
221 |
||
TOTAL LIABILITIES |
|
3,938 |
|
3,669 |
||
TOTAL STOCKHOLDERS' EQUITY |
|
695 |
|
781 |
||
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY |
$ |
4,633 |
$ |
4,450 |
Condensed Consolidated Statements of Cash Flows | ||||||||||||||||
(Unaudited, dollars in millions) | ||||||||||||||||
Three months ended |
|
Six months ended |
||||||||||||||
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||||
Net cash provided by operating activities (a) |
$ |
92 |
|
$ |
239 |
|
$ |
240 |
|
$ |
433 |
|
||||
Net cash used for investing activities (b) (c) |
|
(24 |
) |
|
(158 |
) |
|
(45 |
) |
|
(177 |
) |
||||
Net cash provided by (used for) financing activities |
|
252 |
|
|
(251 |
) |
|
49 |
|
|
(334 |
) |
||||
Effect of exchange rate changes on cash |
|
- |
|
|
(1 |
) |
|
(2 |
) |
|
- |
|
||||
Net increase (decrease) in cash and cash equivalents |
|
320 |
|
|
(171 |
) |
|
242 |
|
|
(78 |
) |
||||
Cash and cash equivalents at beginning of period |
|
114 |
|
|
324 |
|
|
192 |
|
|
231 |
|
||||
Cash and cash equivalents at end of period |
$ |
434 |
|
$ |
153 |
|
$ |
434 |
|
$ |
153 |
|
||||
Supplemental disclosures: | ||||||||||||||||
Interest paid |
$ |
57 |
|
$ |
39 |
|
$ |
65 |
|
$ |
53 |
|
||||
Income taxes paid |
$ |
2 |
|
$ |
49 |
|
$ |
8 |
|
$ |
55 |
|
||||
(a) Restructuring charges |
$ |
3 |
|
$ |
- |
|
$ |
3 |
|
$ |
- |
|
||||
(b) Business acquisitions |
$ |
4 |
|
$ |
(133 |
) |
$ |
4 |
|
$ |
(133 |
) |
||||
(c) Additions of long-lived assets |
$ |
(28 |
) |
$ |
(25 |
) |
$ |
(49 |
) |
$ |
(44 |
) |
Reconciliation of GAAP to Non-GAAP Financial Measures | ||||||||||||||||
(Unaudited, dollars in millions) | ||||||||||||||||
Three months ended |
|
Six months ended |
||||||||||||||
|
|
|
||||||||||||||
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||||
Net income (GAAP) |
$ |
23 |
|
$ |
181 |
|
$ |
162 |
|
$ |
348 |
|
||||
plus: | ||||||||||||||||
Interest expense, net |
|
33 |
|
|
33 |
|
|
66 |
|
|
69 |
|
||||
Income tax expense |
|
7 |
|
|
48 |
|
|
49 |
|
|
92 |
|
||||
Depreciation of property, plant and equipment |
|
24 |
|
|
19 |
|
|
46 |
|
|
37 |
|
||||
Amortization of intangible assets |
|
13 |
|
|
21 |
|
|
29 |
|
|
43 |
|
||||
Restructuring charges (a) |
|
12 |
|
|
- |
|
|
12 |
|
|
- |
|
||||
Stock-based compensation expense (b) |
|
2 |
|
|
5 |
|
|
5 |
|
|
8 |
|
||||
Unrealized loss on foreign exchange (c) |
|
- |
|
|
1 |
|
|
2 |
|
|
- |
|
||||
Acquisition-related earnouts (d) |
|
1 |
|
|
- |
|
|
1 |
|
|
- |
|
||||
Expenses related to long-term debt refinancing (e) |
|
- |
|
|
- |
|
|
- |
|
|
1 |
|
||||
Adjusted EBITDA (Non-GAAP) |
$ |
115 |
|
$ |
308 |
|
$ |
372 |
|
$ |
598 |
|
||||
Net sales (GAAP) |
$ |
377 |
|
$ |
737 |
|
$ |
1,014 |
|
$ |
1,412 |
|
||||
Net income as a percent of net sales (GAAP) |
|
6.1 |
% |
|
24.6 |
% |
|
16.0 |
% |
|
24.6 |
% |
||||
Adjusted EBITDA as a percent of net sales (Non-GAAP) |
|
30.5 |
% |
|
41.8 |
% |
|
36.7 |
% |
|
42.4 |
% |
||||
Net cash provided by operating activities (GAAP) |
$ |
92 |
|
$ |
239 |
|
$ |
240 |
|
$ |
433 |
|
||||
Deductions to Reconcile to Adjusted Free Cash Flow: | ||||||||||||||||
Additions of long-lived assets |
|
(28 |
) |
|
(25 |
) |
|
(49 |
) |
|
(44 |
) |
||||
Restructuring charges (a) |
|
3 |
|
|
- |
|
|
3 |
|
|
- |
|
||||
Adjusted free cash flow (Non-GAAP) |
$ |
67 |
|
$ |
214 |
|
$ |
194 |
|
$ |
389 |
|
(a) |
Represents restructuring charges (recorded in Cost of sales, Selling, general and administrative, and Engineering – research and development) related to voluntary and involuntary separation programs for hourly and salaried employees in the second quarter of 2020. |
||||||||||
(b) |
Represents stock-based compensation expense (recorded in Cost of sales, Selling, general and administrative, and Engineering – research and development). |
||||||||||
(c) |
Represents losses (recorded in Other income, net) on intercompany financing transactions related to investments in plant assets for our |
||||||||||
(d) |
Represents expense (recorded in Selling, general and administrative and Engineering - research and development) for earnouts related to our acquisition of |
||||||||||
(e) |
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 in the first quarter of 2019. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20200804005967/en/
Managing Director, Investor Relations
ir@allisontransmission.com
(317) 242-3078
Media Relations
media@allisontransmission.com
(317) 242-5000
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