Investor Relations Presentation
Fourth Quarter 2019 (Published March 12, 2020)
1
Safe Harbor Statement
The following information contains, or may be deemed to contain, "forward-looking statements" (as defined in the U.S. Private Securities Litigation Reform Act of 1995). The words "believe," "expect," "anticipate," "intend," "estimate" and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Although forward-looking statements reflect management's good faith beliefs, reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements speak only as of the date the statements are made. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise. These forward-looking statements are subject to numerous risks and uncertainties, including, but 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, including with respect to electric hybrid and fully electric commercial vehicles; our ability to identify, consummate and effectively integrate acquisitions; the concentration of our net sales in our top five customers and the loss of any one of these; increases in cost, disruption of supply or shortage of raw materials or components used in our products; the failure of markets outside North America to increase adoption of fully automatic transmissions; the success of our research and development efforts, the outcome of which is uncertain; U.S. and foreign defense spending; risks associated with our international operations, including increased trade protectionism; general economic and industry conditions; the discovery of defects in our products, resulting in delays in new model launches, recall campaigns and/or increased warranty costs and reduction in future sales or damage to our brand and reputation; labor strikes, work stoppages or similar labor disputes, which could significantly disrupt our operations or those of our principal customers or suppliers; risks related to our substantial indebtedness; and our intention to pay dividends and repurchase shares of our common stock.
Allison Transmission cannot assure you that the assumptions made in preparing any of the forward- looking statements will prove accurate or that any long-term financial goals will be realized. All forward-looking statements included in this presentation speak only as of the date made, and Allison Transmission undertakes no obligation to update or revise publicly any such forward-looking statements, whether as a result of new information, future events, or otherwise. In particular, Allison Transmission cautions you not to place undue weight on certain forward-looking statements pertaining to potential growth opportunities, long-term financial goals or the value we currently ascribe to certain tax attributes set forth herein. Actual results may vary significantly from these statements.
Allison Transmission's business is subject to numerous risks and uncertainties, which may cause future results of operations to vary significantly from those presented herein. Important factors that could cause actual results to differ materially are discussed in Allison Transmission's Annual Report on Form 10-K for the year ended December 31, 2019.
2
Business Overview
3
Allison Transmission at a Glance
- World's largest manufacturer of fully-automatic transmissions for medium- and heavy-duty commercial vehicles
- Nearly 60% global market share of fully-automatic transmissions
- Virtually no exposure to cyclical Class 8 line-haul tractor market
- Allison is the premier fully-automatic transmission brand
- Premium price component frequently specified by end users
- Differentiated technology offering superior performance and lower total cost of ownership
- Well positioned for revenue and earnings growth
- Further adoption outside North America
- Expanding addressable market
- Funded growth opportunities in asset light business model
- Strong cash flow generation and well-defined capital allocation policy
4
Allison Transmission at a Glance
2019 Net Sales by End Market
Parts,
Support
Equipment
and Other
20%
Outside
North America
Off-Highway
4%
Outside
North America
On-Highway
14%
Defense
6% North America
Off-Highway
1%
2019 Net Sales: $2.7 billion
North
America
On-Highway
55%
5
Global Market Leader
-
The "de facto" standard in medium- and heavy-duty applications
- Well established as standard in North America - Increasing presence in emerging markets which today are predominantly manual
- Virtually no exposure to cyclical Class 8 line-haul tractor market
Global On-HighwayFully-Automatic Share(1)
Other(2) | Allison |
~40% | ~60% |
- 2019 Units. Source: Allison and ACT Research.
- Majority of "Other" volume is in North American Class 4-5 truck and European bus.
6
North America On-Highway End Market
Vehicles
Weight (000s of lbs)
2019 Industry Units Produced
2019 Allison Share
Underserved | Core Addressable Market | Underserved | |||||
Class 4-5 | Motor Home | School Bus | Class 6-7 | Class 8 | Class 8 | ||
Straight | Metro1 | ||||||
14 - 19 lbs | 16 - 33 lbs | 16 - 33 lbs | 19 - 33 lbs | 33 lbs+ | 33 lbs+ |
119,464 | 16,345 | 35,340 | 117,624 | 94,510 | 77,855 |
16% | 41% | 84% | 76% | 74% | 7% |
- ~30-40%of Allison's North America On-Highway market volume is driven by municipal spending, reducing end-market volatility
- Multi-yearopportunity to gain share in Class 4/5 with recent medium-duty commercial truck launches by Chevrolet and Navistar, exclusively with the Allison fully-automatic
- New opportunity to further grow share in Class 6/7 with the upcoming launch of the new Mack MD Series commercial truck, exclusively with the Allison fully-automatic
- Growing opportunity in Class 8 Metro1 and Tractor markets with the new Allison Regional Haul SeriesTM fully-automatic transmission2, with proprietary xFE and FuelSense® 2.0 technology
Note: Analysis excludes Allison's Transit/Coach Bus and Electric Hybrid Transit Bus volume.
Source: Class 1-3 from WardsAuto North America Production - December 2020; Core Addressable Market and Class 8 Tractor from Allison and ACT Research.
- "Metro" is a term for tractors that are used in urban environments, currently representing ~30% of the Class 8 tractor market.
- Beginning in the second half of 2020, the Regional Haul Series will be an available option on the Freightliner M2 112 and the Cascadia
7
Strategic Priorities
- Expand global market leadership
- Capitalize on improved developed markets demand
- New vocational offerings
- Emerging markets penetration
- Vocational ladder strategy
- Increasing number of vehicle releases
- Continued focus on new technologies and product development
- Address markets adjacent to core
- Leverage core technologies for new products with minimal investment
- Advanced fuel efficient and emissions reduction technologies
- Alternative fuels and electrification initiatives
- Deliver strong financial results
- Exploit capacity availability and asset light business model
- Earnings growth and cash flow generation
- Focus on margin sustainment
- Well-definedcapital allocation policy
8
Industry Leading EBITDA Margin
EBITDA Margin1
45.0% | |||||||||
40.1% | |||||||||
40.0% | |||||||||
35.0% | |||||||||
30.0% | |||||||||
25.0% | |||||||||
20.0% | |||||||||
15.0% | |||||||||
10.0% | |||||||||
Roper | Gentex | Graco | Sensata | Rockwell | Eaton | Parker | Donaldson | WABCO | Cummins |
Hannifin |
1. Fiscal year 2019 peer EBITDA provided by FactSet. EBITDA included above may not be consistent with such entity's reported EBITDA or Adjusted EBITDA, if available. EBITDA Margin: EBITDA or Adjusted EBITDA divided by net sales.
*See appendix for comments regarding the presentation of non-GAAP financial information.
9
Premier Industrial Company
Global Market Leader and Premier Brand
End User Value Proposition
Diverse End Markets
Significant Cash Flow Generation
Well-Defined Capital Allocation Policy / Free Cash Flow Utilization
Multiple Organic Growth Opportunities
Leading Technology and Innovation
10
A Recognized Leader and Respected Brand
- Over 100 year history of providing high-quality innovative products and demonstrated value to end users
- Proprietary and patented technology developed over many decades and nearly seven million units
- The Allison brand is associated with:
- High Quality
- Reliability
- Durability
- Vocational Value and Expertise
- Technological Leadership
- Superior Customer Service
- Attractive Total Lifecycle Value
End Users Frequently Request Allison Transmissions by Name and Pay a Premium for Them
11
End User Value Proposition
- Advantages of a fully-automatic
Allison Transmission | High |
- Productivity (acceleration)
- Maintenance Savings (life cycle costs)
- Fuel Efficiency and Reduced Emissions
- Driver Skillset / Wages
- | Training (time, cost) | Relative |
Customer | ||
- | Shift Quality | Value |
- Safety
- Residual Value
Low
End Users are Willing to Pay a Premium Price for Allison
Allison
(Fully-Automatic)
Automated
Manual
Transmission
(AMT)
Manual
Transmission
Included in Vehicle Price | $3,000 - $7,000 | $3,000 - $11,000 |
Payback period for a premium Allison Transmission averages less than 3 years
12
Very Diverse End Markets
Global
Distribution | Emergency | Motorhome | Rugged Duty | School/Shuttle Bus | Transit | |||||
On-Highway | British Airport Authority |
Beijing City
Transit
Off-Highway
Aftermarket Defense
Medium- and
Heavy-
Tactical
Parts,
Support
Equipment &
Other
Retran®
13
Over 50 Year Relationship with Industry-Leading OEMs
North America
Defense Outside North America
On-Highway
Off-Highway
On-Highway
Off-Highway
Medium- and | |
Heavy- | |
Tactical | U.S. Government |
14
Significant Cash Flow Generation
Adj. Free Cash Flow Generation(1)
($ in millions)
$737 | ||||||||||||||||||||||||||||||||
$675 | ||||||||||||||||||||||||||||||||
$540 | $530 | $530 | $567 | |||||||||||||||||||||||||||||
$407 | $409 | $31 | $9 | $10 | ||||||||||||||||||||||||||||
$383 | ||||||||||||||||||||||||||||||||
28.8% | ||||||||||||||||||||||||||||||||
$317 | $33 | $20 | 26.7% | 27.2% | ||||||||||||||||||||||||||||
$10 | 25.4% | 25.1% | 25.0% | |||||||||||||||||||||||||||||
$2 | ||||||||||||||||||||||||||||||||
21.2% | ||||||||||||||||||||||||||||||||
19.0% | ||||||||||||||||||||||||||||||||
17.7% | ||||||||||||||||||||||||||||||||
16.5% | ||||||||||||||||||||||||||||||||
$315 | $373 | $374 | $389 | $509 | $521 | $520 | $567 | $737 | $675 | |||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |||||||||||||||||||||||
Certain Non-Recurring Activity | Total | % of Sales | ||||||||||||||||||||||||||||||
Note: See appendix for comments regarding the presentation of non-GAAP financial information.
(1) See appendix for a reconciliation of Adjusted Free Cash Flow.
15
Capital Allocation Priorities
- Organic revenue and earnings growth
- New product and technology development
- Strategic acquisition opportunities
- Return of capital to shareholders
- Prudent balance sheet management
- Low-cost,flexible and pre-payable debt structure with long dated maturities
16
Free Cash Flow Utilization
Well-Defined Capital Allocation
Policy
Realize returns from completed investments in global commercial capabilities, and new product and technology development
Prudent balance sheet management
Return capital to shareholders
─ Quarterly dividend increased to $0.17 per share in Q1 2020
─ $3.0 billion share repurchase authorization (3)
Low-cost, flexible and pre-payable debt structure with long dated maturities
Note: See appendix for comments regarding the presentation of non-GAAP financial information.
- Net of change in Cash & Cash Equivalents
- 2009 adjusted for certain non-recurring activity: (a) capitalized accrued interest on Senior Toggle Notes ($29) million, (b) cash restructuring charge $51 million, (c) accounts payable early payments $3 million, (d) delayed accounts receivable receipts $19 million and (e) Lehman LIBOR swap settlement $17 million. All periods adjusted for collateral for interest rate derivatives, purchase of available-for-sale securities, proceeds from disposal of assets, investments in technology-related initiatives and license expenses, and fee to terminate services agreement with Sponsors.
- $1.05 billion of authorized share repurchase capacity remaining as of 12/31/19
17
Multiple Organic Growth Opportunities
Core North America On-Highway Opportunities
Outside North America Penetration Opportunity
Global Off-Highway Growth Opportunities
18
Core North America On-Highway Opportunities
- Anticipated return to normal production
levels following cyclical high | North America Production in Allison's Core | ||||
- State & local gov't spending along with housing | Addressable Market (units in 000s)(1) | ||||
market recovery continue to support demand for | 1999 - 2009 | ||||
medium and heavy-duty trucks | |||||
- Lack of near term significant EPA emission | 427 | ||||
changes tempers cyclicality | 391 | ||||
374 | 369 | ||||
Allison's growth is further supported by | 337 | 343 | 343 350 | ||
321 | 315 | ||||
- Stability of Class 6/7 MD market | 304 | ||||
- Growing first and last mile delivery sector | 262 | 264 272 | |||
- Continued demand for fuel efficient vehicles | 235 | ||||
Opportunities to penetrate underserved | 178 | ||||
151 | |||||
Class 4/5 and Class 8 Metro markets | |||||
- Recent share gains in Class 4/5 with medium- | |||||
duty commercial truck launches by Chevrolet | |||||
and Navistar, exclusively with the Allison fully- | |||||
automatic transmission | |||||
- Allison Regional Haul Series fully-automatic | |||||
transmission for the Class 8 Tractor market will | |||||
launch with Freightliner Trucks in 2020 | |||||
(1) Source: ACT Research, January 2020. Includes: Class 4 thru 8 less Class 8 Tractor & Class 8 Straight with Sleeper. | |||||
2019: Total 634,126 less Class 8 Tractor of 247,946 less Class 8 Straight with Sleeper of 3,070. |
19
Outside North America Penetration Opportunity
- Growing need for productivity improvements
- Better acceleration and shorter travel time results in increased miles and revenue
- Improved fuel efficiency and increased vehicle uptime
- Focus on reducing life cycle costs
- Lower maintenance and fuel expense
- Increased vehicle residual value
- Micro and demographic trends
- Ease of operation increases pool of qualified drivers
- Less driver training, lower turnover and improved safety
Outside North America Penetration of Fully-Automatic Transmissions for On-Highway(1)(2)
Emerging Markets' Truck Vocational Focus
- OEM release activities supported by focused end user initiatives resulting in fleets requesting Allison by name
#1 supplier of fully-automatic transmissions | Terminal Tractor | Fire and Emergency |
in China |
- Substantial installed base of approximately 80,000 transmissions
- Addressable market of ~250,000 vehicles
Oil Field | Airport Services Construction / Dump |
Source: Allison
- Includes medium- and heavy-duty commercial vehicles.
- 2019 Outside-North America On-Highway Transmission Net Sales by Region: EMEA $208M, Asia Pacific $146M and South America $35M.
Crane Carrier
Refuse
20
Global Off-Highway Growth Opportunities
- Energy Sectors
- Considerable end market cyclicality, currently approaching trough levels
- Multiple opportunities in exploration, fracturing and oil & gas support
- Introduction of new high horsepower hydraulic fracturing transmissions
- Mining and Construction
- Considerable end market cyclicality, recovering from trough levels
- North America, Europe, Middle East, Africa and China
- Increasing urbanization in emerging markets driving increased construction activity and raw material demand
- High Horsepower Hydraulic Fracturing Transmissions
- New Oil Field Series (OFS) models based on six decades of industry expertise
- Addresses global market demand for higher horsepower, extended duty cycles, lower days-to-depth and higher recovery factors
$500 $450 $400
$350
10 Year
$300 Average $250 $200 $150 $100
$50 $-
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
NA Off-Highway Net Sales | ONA Off-Highway Net Sales | Global Off-Highway Parts Net Sales | |||||||
21
Leading Technology and Innovation
Leader in Commercial Propulsion
Variants and Enhancements to Base Technology
Allison Electric Hybrid 40/50 EPTM Extended Range
Commercial Truck and Bus e-Axle Solutions
22
Leader in Commercial Propulsion
Allison's addressable market is a complex application space due to vocational fragmentation, requiring a range of propulsion solutions where we are a natural supplier
•
•
•
•
Internal Combustion Engine applications
Alternative Fuel vehicles with proven performance and a funded infrastructure
Electric Hybrid Systems, including flexible hybrid, range extender and plug-in options
Full Electric Solutions, including fuel cell and battery electric applications
Allison intends to remain a global leader in commercial vehicle propulsion and is positioning to meet the market's future demands with the right products, for the right customers, at the right time
- Ongoing initiatives for opportunities across all of our end markets (On-Highway,Off-Highway, Defense, Hybrid, EV)
- Multiple electrified solutions currently in development:
- Multi-speedCentrally located EV drives
- Extended Range Electric Hybrid Propulsion
- Systems & Battery Management
- Integrated e-Axles
- Transmission Integrated Generators
- Power distribution for electrification of accessories
23
Variants and Enhancements to Base Technology
FuelSense® 2.0
- Proprietary software launched in 2017, ideally suited for shift dense vocations such as transit, school bus, refuse, construction and distribution
- DynaActive Shifting utilizes learning algorithm to continuously find the ideal balance of fuel economy and performance
- Neutral at Stop trims fuel consumption and emissions by reducing load on the engine when the vehicle is stopped
- Acceleration Rate Management limits vehicle acceleration to a customized calibrated rate
Nine Speed Transmission
- New design leverages the proven reliability of the Allison six- speed 2000 SeriesTM
- New benchmark in fuel efficiency and reduced emissions standards
- Significant fuel savings due to deep first gear ratio, industry leading ratio coverage and advanced engine stop-start capability
- Improved driver comfort and acceleration, allowing for a smoother launch and increased productivity
xFE Models
- New transmissions with redesigned torque converter damper, optimized gear ratios and coupled with FuelSense Max™ packages
- Represents the latest in fuel savings innovation
- Fuel savings of up to 7% over comparatively equipped models with FuelSense features
- Best fuel economy from an automatic transmission
- Available in the 1000, 2000 and 3000 Series fully-automatic transmission models
FuelSense is a registered trademark of Allison Transmission Inc.
3414 Regional Haul SeriesTM
- New uprated variant of Allison's proven 3000 SeriesTM fully- automatic transmission
- Designed to support the higher engine and torque requirements of Distribution and Regional Haul Class 8 tractors, primarily serving urban environments
- Lighter than competitive automated manual transmissions, and providing fleets with 25% faster acceleration and up to 8% fuel economy improvement
- Scheduled to launch in 2020 with Freightliner Trucks
24
Allison Electric Hybrid 40/50 EP™ Extended Range
- Launched in 2003, Allison's electric hybrid propulsion system for transit buses has proven to be among the most dependable and efficient electric hybrid systems at work anywhere in the world
- Next generation includes a pure electric extended range for up to 10 miles, featuring zero- emissions with engine off
- Engineered for regenerative braking to increase range or power auxiliary operations
- Allison is the lead electrification and system integrator, controlling the entire powertrain including the engine
- To date, Allison has sold more electric hybrid systems for commercial vehicles than any other company in the world
- Approximately 9,000 Allison Hybrids delivered worldwide
- Over 265 million gallons of fuel saved
- Over 2.6 million metric tons of CO2 emissions prevented
- Released with all North American Transit OEMs
- Real world fuel economy gains and reduced emissions
- Superior gradeability
- Purpose built architecture and design
25
Commercial Truck and Bus e-Axle Solutions
- Line of fully integrated electric axles designed to fit between the wheels of medium- and heavy-duty trucks and buses
- Allison's electrified bolt-in solution is compatible within the current vehicle frame, suspension, wheel-ends, and OEM vehicle assembly process
- Features fully integrated electric motors, a multi-speed gearbox, proprietary oil cooling and pump, providing one of the industry's top performing and most efficient solutions
- Ideal propulsion solution for battery electric, fuel cell electric and range extending electric hybrid vehicles
26
Financial Overview
27
Allison Financial Highlights
- Solid operating margins
- End markets diversity
- Premium vocational pricing model
- Cost controls and productivity improvements
- Multi-TierUAW wage and benefits structure
- Low recurring capital expenditure requirements
- Valuable U.S. income tax shield
- ~$150 million present value
- Positioned for long-term cash earnings growth
- Multiple growth opportunities in asset light business model
- Strong free cash flow
2019 Financial Metrics
(% of Net Sales)
Gross Margin | 51.7% |
Adj. EBITDA | 40.1% |
Margin(1) | |
Adj. Free Cash | 25.0% |
Flow | |
Capex 6.4%
Cash Income | 3.3% |
Taxes | |
- Adjusted EBITDA margin: Adjusted EBITDA divided by net sales.
Note: See appendix for comments regarding the presentation of non-GAAP financial information.
28
Solid Operating Margins
Long-Term Customer Supply Agreements
Over 90%
Over 90% of 2019 N.A. On-Highway Unit Volume was covered by
long-term customer supply agreements
Workforce Optimization (cost/employee) (1)
~67% of total | |
UAW workforce | |
Tier I | Multi-Tier |
Significant savings driven by retirement of Tier I workers; 369 hourly
employees are retirement eligible (~24% of workforce)
Source: Allison.
(1) As of 12/31/19.
Manufacturing Efficiencies (hours/unit)
1000/2000 Series | 3000 Series | 4000 Series |
2008 | 2019 |
Hours Per Unit continue to decline
International Manufacturing
India (~$103mm total investment)
- New facility constructed to better serve Asia-Pacific
- Assembly of 1000/2000 Series
- In-sourcedcomponent manufacturing
Hungary (~$17mm total investment)
- Assembly of 3000/4000 Series
29
Income Tax Attributes
Income Tax Attributes Overview
Allison acquired from General Motors in August 2007
- Asset deal structure
- Step-up in basis for U.S. federal income tax purposes
Cash Income Taxes Paid 2008-2019 ($ millions) | |||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
$4 | $6 | $2 | $6 | $11 | $4 | $5 | $5 | $13 | $96 | $101 | $89 |
As of 12/31/2019 Allison had $0.8bn of unamortized intangible assets
- Expect annual U.S. federal income tax deductions of $315mm through 2021 and $185mm in 2022
($ millions) | Total | 2020 | 2021 | 2022 |
Annual tax amortization | $815 | $315 | $315 | $185 |
Cash tax savings(1) | 173 | 67 | 67 | 39 |
Results in present value tax savings of $145-$158mm(2)
- Assuming continued profitability and no limitations at an assumed 21% federal and state tax rate.
- Based on annual discount rate of 5-10%; includes amortization of intangibles.
30
Summary
- Allison Transmission is the global leader in the markets it serves
- Premier fully-automatic transmission brand
- Over 100 year operating history
- Strong financial position
- Industry leading EBITDA margin
- Asset light business model
- Significant free cash flow generation
- Returning capital to shareholders
- Substantial long-term growth opportunities
- Expand global leadership
- Penetrate emerging markets
- Address underserved markets
- Continuous product innovation
31
Guidance / Supplemental Financial Data
32
2020 Guidance
($ in millions) | Guidance | Commentary |
Full Year 2020 Guidance reflects lower demand for | ||
Net Sales Change | $2,375 to $2,475 | Global On-Highway and Global Off-Highway partially |
offset by increased demand in Service Parts, Support | ||
Equipment & Other and Defense end markets and price | ||
increases on certain products. | ||
Net Income | $425 to $475 | |
Adjusted EBITDA | $855 to $915 | |
Net Cash provided by Operating | $600 to $640 | |
Activities | ||
Adjusted Free Cash Flow | $430 to $480 | Net Cash Provided by Operating Activities less CapEx |
Cash Income Taxes | $60 to $70 | |
33
Historical Financial Summary
Financial Summary
In $ millions | Annual | |||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |||
Net Sales | $1,926 | $2,163 | $2,142 | $1,927 | $2,127 | $1,986 | $1,840 | $2,262 | $2,713 | $2,698 | ||
% Growth | 9.0% | 12.3% | (1.0%) | (10.0%) | 10.4% | (6.7%) | (7.3%) | 22.9% | 19.9% | (0.6%) | ||
Adjusted EBITDA(1) | ||||||||||||
619 | 722 | 717 | 633 | 745 | 720 | 644 | 868 | 1,128 | 1,083 | |||
% of Net Sales | 32.1% | 33.4% | 33.5% | 32.8% | 35.0% | 36.3% | 35.0% | 38.4% | 41.6% | 40.1% | ||
Effective Cash Tax Rate(2) | ||||||||||||
2.7% | 3.9% | 4.9% | 1.4% | 1.4% | 1.8% | 3.8% | 18.2% | 12.5% | 11.6% | |||
Total CapEx | 74 | 97 | 124 | 74 | 64 | 58 | 71 | 91 | 100 | 172 | ||
% of Net Sales | 3.8% | 4.5% | 5.8% | 3.9% | 3.0% | 2.9% | 3.8% | 4.0% | 3.7% | 6.4% | ||
Adj. Free Cash Flow | 317 | 383 | 407 | 409 | 540 | 530 | 530 | 567 | 737 | 675 | ||
% of Net Sales | 16.5% | 17.7% | 19.0% | 21.2% | 25.4% | 26.7% | 28.8% | 25.1% | 27.2% | 25.0% | ||
Note: See appendix for comments regarding the presentation of non-GAAP financial information.
- Excluding technology-related license expenses: 2009 of $10 million, 2010 of $2 million, 2011 of $10 million, 2012 of $12 million, 2013 of $6 million, 2014 of $6 million.
- Effective cash tax rate defined as cash income taxes divided by income (loss) before taxes.
34
Allison Quarterly Sales Summary
Quarterly Net Sales by End Market ($ millions)
2013 | 2014 | 2015 | |||||||||||||
Net Sales | Q1 | Q2 | Q3 | Q4 | Total | Q1 | Q2 | Q3 | Q4 | Total | Q1 | Q2 | Q3 | Q4 | Total |
NA On-Highway | $219 | $243 | $226 | $242 | $930 | $257 | $271 | $279 | $273 | $1,080 | $286 | $297 | $274 | $275 | $1,132 |
NA Off-Highway | 8 | 8 | 9 | 14 | 39 | 12 | 23 | 30 | 36 | 101 | 22 | 10 | 12 | 11 | 55 |
Defense | 57 | 58 | 52 | 35 | 202 | 34 | 49 | 35 | 38 | 156 | 25 | 29 | 34 | 25 | 113 |
ONA On-Highway | 62 | 75 | 70 | 86 | 293 | 64 | 62 | 73 | 65 | 264 | 57 | 73 | 67 | 65 | 262 |
ONA Off-Highway | 21 | 36 | 17 | 14 | 88 | 21 | 24 | 18 | 19 | 82 | 16 | 8 | 4 | 7 | 35 |
Parts, Support Equipment & Other | 90 | 92 | 93 | 100 | 375 | 106 | 107 | 118 | 113 | 444 | 98 | 94 | 102 | 95 | 389 |
Total Net Sales | $457 | $512 | $467 | $491 | $1,927 | $494 | $536 | $553 | $544 | $2,127 | $504 | $511 | $493 | $478 | $1,986 |
2016 | 2017 | 2018 | |||||||||||||
Net Sales | Q1 | Q2 | Q3 | Q4 | Total | Q1 | Q2 | Q3 | Q4 | Total | Q1 | Q2 | Q3 | Q4 | Total |
NA On-Highway | $274 | $280 | $232 | $237 | $1,023 | $275 | $314 | $301 | $287 | $1,177 | $339 | $343 | $332 | $303 | $1,317 |
NA Off-Highway | 5 | 1 | 1 | 0 | 7 | 1 | 5 | 17 | 28 | 51 | 33 | 31 | 12 | 17 | 93 |
Defense | 25 | 28 | 25 | 37 | 115 | 27 | 30 | 35 | 25 | 117 | 37 | 43 | 42 | 36 | 158 |
ONA On-Highway | 70 | 74 | 78 | 83 | 305 | 72 | 85 | 89 | 98 | 344 | 91 | 101 | 96 | 95 | 383 |
ONA Off-Highway | 3 | 3 | 2 | 4 | 12 | 6 | 10 | 14 | 11 | 41 | 12 | 24 | 46 | 47 | 129 |
Parts, Support Equipment & Other | 85 | 89 | 96 | 108 | 378 | 118 | 136 | 139 | 139 | 532 | 151 | 169 | 164 | 149 | 633 |
Total Net Sales | $462 | $475 | $434 | $469 | $1,840 | $499 | $580 | $595 | $588 | $2,262 | $663 | $711 | $692 | $647 | $2,713 |
2019 | |||||||||||||||
Net Sales | Q1 | Q2 | Q3 | Q4 | Total | ||||||||||
NA On-Highway | $377 | $398 | $369 | $330 | $1,474 | ||||||||||
NA Off-Highway | 14 | 9 | 6 | 1 | 30 | ||||||||||
Defense | 32 | 37 | 40 | 42 | 151 | ||||||||||
ONA On-Highway | 94 | 106 | 99 | 91 | 390 | ||||||||||
ONA Off-Highway | 27 | 40 | 24 | 18 | 109 | ||||||||||
Parts, Support Equipment & Other | 131 | 147 | 131 | 135 | 544 | ||||||||||
Total Net Sales | $675 | $737 | $669 | $617 | $2,698 |
35
Appendix: Non-GAAP Financial Information
36
Non-GAAP Financial Information
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 U.S. generally accepted accounting principles ("GAAP") measure to Adjusted EBITDA and Adjusted EBITDA as a percent of net sales is Net income and Net income as a percent of net sales, respectively. 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 Allison Transmission, Inc.'s, the Company's wholly-owned subsidiary, Second Amended and Restated Credit Agreement. Adjusted EBITDA as a percent of net sales is calculated as Adjusted EBITDA divided by net sales.
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 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.
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Non-GAAP Reconciliations (1 of 3)
Adjusted EBITDA reconciliation
$ in millions, Unaudited | For the year ended December 31, | ||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | ||
Net income (GAAP) | $30 | $103 | $514 | $165 | $229 | $182 | $215 | $504 | $639 | $604 | |
plus: | |||||||||||
Interest expense, net | 277 | 217 | 151 | 133 | 138 | 114 | 101 | 103 | 121 | 134 | |
Income tax expense (benefit) | 54 | 48 | (298) | 101 | 139 | 107 | 126 | 23 | 166 | 164 | |
Technology-related investment expenses | - | - | 14 | 5 | 2 | - | 1 | 16 | 3 | 0 | |
Trade name impairments | - | - | - | - | - | 80 | - | - | - | - | |
Impairments of long-lived assets | - | - | - | - | 15 | 1 | - | 32 | 4 | 2 | |
Enviromental remediation | - | - | - | - | - | 14 | - | - | - | (8) | |
Amortization of intangible assets | 154 | 152 | 150 | 105 | 99 | 97 | 92 | 90 | 87 | 86 | |
Depreciation of property, plant and equipment | 100 | 104 | 103 | 99 | 94 | 88 | 84 | 80 | 77 | 81 | |
(Gain) loss on redemptions and repayments of long-term debt | (3) | 16 | 22 | 1 | 1 | 1 | - | - | - | - | |
Stockholder activism expenses | - | - | - | - | - | - | 4 | - | - | - | |
Dual power inverter module extended coverage | (2) | - | 9 | (2) | 1 | (2) | 1 | (2) | - | - | |
UAW Local 933 signing bonus | - | - | 9 | - | - | - | - | 10 | - | - | |
UAW Local 933 retirement incentive | - | - | - | - | - | - | - | - | 15 | 5 | |
Unrealized (gain) loss on commodity hedge contracts | - | 7 | (1) | 2 | (1) | 1 | (2) | - | - | - | |
Unrealized loss on foreign exchange | - | - | - | 2 | 5 | 1 | 1 | - | 3 | - | |
Expenses related to long-term debt refinancing | - | 57 | - | - | - | 25 | 12 | - | - | 1 | |
Restructuring charges | - | - | - | 1 | 1 | - | - | - | - | - | |
Stock based compensation expense | 8 | 8 | 6 | 14 | 15 | 10 | 9 | 12 | 13 | 13 | |
Other, net(1) | (1) | - | 26 | 1 | 1 | 1 | - | - | - | 1 | |
Adjusted EBITDA (non-GAAP) | $617 | $712 | $705 | $627 | $739 | $720 | $644 | $868 | $1,128 | $1,083 | |
Net Sales (GAAP) | $1,926 | $2,163 | $2,142 | $1,927 | $2,127 | $1,986 | $1,840 | $2,262 | $2,713 | $2,698 | |
Net income as a percent of net sales | 1.6% | 4.8% | 24.0% | 8.6% | 10.8% | 9.2% | 11.7% | 22.3% | 23.6% | 22.4% | |
Adjusted EBITDA as a percent of net sales | 32.0% | 32.9% | 32.9% | 32.5% | 34.7% | 36.2% | 35.0% | 38.4% | 41.6% | 40.1% | |
- Includes charges or income related to benefit plan adjustments, termination and service fees paid to Allison's Sponsors, public offering expenses, reductions of supply contract liabilities, and acquisition related earnouts.
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Non-GAAP Reconciliations (2 of 3)
Adjusted Free Cash Flow reconciliation
$ in millions, Unaudited | For the year ended December 31, | |||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |
Net Cash Provided by Operating Activities (GAAP) | $389 | $469 | $498 | $464 | $573 | $580 | $591 | $658 | $837 | $847 |
(Deductions) or Additions: | ||||||||||
Long-lived assets | (74) | (97) | (124) | (75) | (64) | (58) | (71) | (91) | (100) | (172) |
Fee to terminate services agreement with Sponsors | - | - | 16 | - | - | - | - | - | - | - |
Technology-related license expenses | 2 | 10 | 12 | 6 | 6 | - | - | - | - | - |
Stockholder activism expenses | - | - | - | - | - | - | 4 | - | - | - |
Excess tax benefit from stock-based compensation | - | - | 5 | 14 | 25 | 8 | 6 | - | - | - |
Adjusted Free Cash Flow (non-GAAP) | $317 | $383 | $407 | $409 | $540 | $530 | $530 | $567 | $737 | $675 |
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Non-GAAP Reconciliations (3 of 3)
Guidance Reconciliation
$ in millions | Guidance | ||||
Year Ending December 31, 2020 | |||||
Low | High | ||||
Net Income (GAAP) | $ | 425 | $ | 475 | |
plus: | |||||
Income tax expense | 124 | 134 | |||
Interest expense, net | 133 | 133 | |||
Depreciation and amortization | 149 | 149 | |||
Stock-based compensation expense | 15 | 15 | |||
UAW Local 933 retirement incentive | 9 | 9 | |||
Adjusted EBITDA (Non-GAAP) | $ | 855 | $ | 915 | |
Net Cash Provided by Operating Activities (GAAP) | $ | 600 | $ | 640 | |
Deductions to Reconcile to Adjusted Free Cash Flow: | |||||
Additions of long-lived assets | (170) | (160) | |||
Adjusted Free Cash Flow (Non-GAAP) | $ | 430 | $ | 480 |
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Certain Trademarks
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Allison Transmission Holdings Inc. published this content on 12 March 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 March 2020 22:07:01 UTC