ALLISON TRANSMISSION HOLDINGS, INC. The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion in conjunction with our condensed consolidated interim financial statements and the related notes contained elsewhere in this Quarterly Report on Form 10-Q. The statements in this discussion regarding industry trends, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in "Cautionary Note Regarding Forward-Looking Statements" and Part II, Item 1A "Risk Factors" below, in Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year endedDecember 31, 2019 as filed with theSecurities and Exchange Commission ("SEC") onFebruary 27, 2020 , and Part II, Item 1A "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2020 filed with theSEC onMay 5, 2020 . Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Overview
Allison Transmission Holdings, Inc. and its subsidiaries ("Allison," the "Company," "we," "us" or "our") design and manufacture vehicle propulsion solutions, including commercial duty on-highway, off-highway and defense fully automatic transmissions and electric hybrid and fully electric systems. The business was founded in 1915 and has been headquartered inIndianapolis, Indiana since inception. Allison was an operating unit ofGeneral Motors Corporation from 1929 until 2007, when Allison once again became a stand-alone company. InMarch 2012 , Allison began trading on theNew York Stock Exchange under the symbol "ALSN". Although approximately 77% of revenues were generated inNorth America in 2019, we have a global presence by serving customers inEurope ,Asia ,South America andAfrica . We serve customers through an independent network of approximately 1,500 independent distributor and dealer locations worldwide.
Trends Impacting Our Business
Our net sales are driven by commercial vehicle production, which tends to be highly correlated to macroeconomic conditions. InMarch 2020 , theWorld Health Organization categorized the novel coronavirus ("COVID-19") as a pandemic, and it continues to impactthe United States and other major markets in which we operate across the world, resulting in severe disruptions to global markets and supply chains, significant uncertainty and a weaker global outlook. The effects of the pandemic on the global economy had a material impact on demand for our products and to our results of operations during the second quarter 2020 as our suppliers and customers reduced or halted production. To limit the spread of COVID-19, governments have taken various actions including travel bans and restrictions, quarantines, curfews, stay-at-home orders, social distancing guidelines and business shutdowns and closures. Despite these ongoing disruptions, we have continued our manufacturing operations throughout 2020 allowing us to deliver our products to customers without interruption. However, our manufacturing facilities inHungary ,India , andTennessee suspended operations, for varying lengths of time, and our global manufacturing facilities have cut back on operating levels and shifts as a result of government orders, our inability to obtain component parts from suppliers and/or decreased customer demand. Additional suspensions and cutbacks of our manufacturing operations may occur as the impacts from COVID-19 and related responses continue to develop within our global supply chains and customer base, and additional production slowdowns and shutdowns by our global suppliers and customers may continue and could continue to have a material impact to our financial results. We are taking a variety of measures to promote the safety and security of our employees and to maintain operations with as minimal impact as possible to our stakeholders, including increased frequency of cleaning and disinfecting of facilities, social distancing, remote working when possible, travel restrictions and limitations on visitor 26
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access to facilities. We are also working to align operations, programs and spending across our entire business with current conditions, including reduced compensation expense through restructuring initiatives of both hourly and salary employees related to voluntary and involuntary separation programs, furloughs of a portion of our workforce, reducing overtime, and assessing the timing and cadence of various capital investments and product development initiatives. OurNet Sales were materially impacted during the second quarter of 2020 by the ongoing COVID-19 outbreak, and we expect that ourNet Sales will continue to be impacted for the third quarter 2020 and likely beyond. The extent to which our future operations will continue to be impacted by the outbreak will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including continuing efforts by governmental authorities to stall the spread and limit the impact of COVID-19, and the timing of such developments.
Second Quarter
Q2 2020 Q2 2019
End Market Net Sales Net Sales % Variance
North America On-Highway $ 164 $ 398 (59 )%
North America Off-Highway 3 9 (67 )%
Defense 42 37 14 %
Outside North America On-Highway 60 106 (43 )%
Outside North America Off-Highway 19 40 (53 )%
Service Parts, Support Equipment and Other 89 147 (39 )%
Total Net Sales $ 377 $ 737 (49 )%
North America On-Highway end market net sales were down 59% for the second
quarter 2020 compared to the second quarter 2019, principally driven by lower
demand for Rugged Duty Series and Highway Series models primarily due to the
effects of the COVID-19 pandemic.
North America Off-Highway end market net sales were down
Defense end market net sales were up 14% for the second quarter 2020 compared to the second quarter 2019, principally driven by Tracked vehicle demand.
Outside North America On-Highway end market net sales were down 43% for the second quarter 2020 compared to the second quarter 2019, principally driven by lower global demand due to the effects of the COVID-19 pandemic.
Outside North America Off-Highway end market net sales were down$21 million for the second quarter 2020 compared to the second quarter 2019, principally driven by lower demand in the energy, mining and construction sectors. Service Parts, Support Equipment and Other end market net sales were down 39% for the second quarter 2020 compared to the second quarter 2019, principally driven by lower demand forNorth America service parts and support equipment primarily due to the effects of the COVID-19 pandemic, partially offset by aluminum die cast component volume associated with the acquisition ofWalker Die Casting, Inc. ("Walker Die Casting ").
Key Components of our Results of Operations
Net sales
We generate our net sales primarily from the sale of vehicle propulsion solutions, service and component parts, support equipment, defense kits, engineering services, royalties and extended transmission coverage to a wide array of OEMs, distributors and theU.S. government. Sales are recorded net of provisions for customer allowances and other rebates. Engineering services are recorded as net sales in accordance with the terms of the contract. The associated costs are recorded in cost of sales. We also have royalty agreements with third parties that provide net sales as a result of joint efforts in developing marketable products. 27
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Table of Contents Cost of sales Our primary components of cost of sales are purchased parts, the overhead expense related to our manufacturing operations and direct labor associated with the manufacture and assembly of transmissions and parts. For the six months endedJune 30, 2020 , direct material costs were approximately 64%, overhead costs were approximately 27%, and direct labor costs were approximately 9% of total cost of sales. We are subject to changes in our cost of sales caused by movements in underlying commodity prices. We seek to hedge against this risk by using long-term agreements, as appropriate. See Part I, Item 3 "Quantitative and Qualitative Disclosures about Market Risk-Commodity Price Risk" included below.
Selling, general and administrative
The principal components of our selling, general and administrative expenses are salaries and benefits for our office personnel, advertising and promotional expenses, product warranty expense, expenses relating to certain information technology systems and amortization of our intangibles.
Engineering - research and development
We incur costs in connection with research and development programs that are expected to contribute to future earnings. Such costs are expensed as incurred.
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Non-GAAP Financial Measures
We use Adjusted Earnings before Interest, Taxes, Depreciation, and Amortization
("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 earnings before interest expense, income tax expense,
amortization of intangible assets, depreciation of property, plant and equipment
and other adjustments as defined by the Second Amended and Restated Credit
Agreement dated as of March 29, 2019 (the "Credit Agreement") governing Allison
Transmission, Inc.'s ("ATI"), our wholly-owned subsidiary, term loan facility in
the amount of $641 million due March 2026 ("New Term Loan"). 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, excluding non-recurring restructuring charges, after
additions of long-lived assets.
The following is a reconciliation of Net income and Net income as a percent of
net sales to Adjusted EBITDA and Adjusted EBITDA as a percent of net sales and a
reconciliation of Net cash provided by operating activities to Adjusted free
cash flow:
Three months ended Six months ended
June 30, June 30,
(unaudited, dollars in millions) 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) or additions 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)
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Table of Contents (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 both 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 expenses (recorded in Selling, general and administrative and
Engineering - research and development) for earnouts related to our
acquisition of Vantage Power Limited .
(e) Represents expenses (recorded in Other income, net) related to therefinancing of the prior term loan due 2022 and prior revolving credit
facility due 2021 in the first quarter of 2019.
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Table of Contents Results of Operations
Comparison of three months ended
The recent outbreak of COVID-19 had a material adverse effect on our results of operations for the second quarter 2020. We continue to actively monitor the impact of the global pandemic, which we expect to materially adversely impact our business and results of operations for the third quarter 2020 and likely beyond. See "Trends Impacting our Business" above for additional information on the impact of COVID-19 on our results of operations. The following table sets forth certain financial information for the three months endedJune 30, 2020 and 2019. The following table and discussion should be read in conjunction with the information contained in our condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Three Months Ended June 30, % % (unaudited, dollars in millions) 2020 of net sales 2019 of net sales Net sales$ 377 100 %$ 737 100 % Cost of sales 212 56 348 47 Gross profit 165 44 389 53 Operating expenses: Selling, general and administrative 69 19 93 13 Engineering - research and development 38 10 37 5 Total operating expenses 107 29 130 18 Operating income 58 15 259 35 Interest expense, net (33 ) (8 ) (33 ) (4 ) Other income, net 5 1 3 - Income before income taxes 30 8 229 31 Income tax expense (7 ) (2 ) (48 ) (6 ) Net income$ 23 6 %$ 181 25 % Net sales Net sales for the quarter endedJune 30, 2020 were$377 million compared to$737 million for the quarter endedJune 30, 2019 , a decrease of 49%. The decrease was principally driven by a$234 million , or 59%, decrease in net sales in the North America On-Highway end market principally driven by lower demand for Rugged Duty Series and Highway Series models primarily due to the effects of the COVID-19 pandemic, a$58 million , or 39%, decrease in net sales in the Service Parts, Support Equipment and Other end market principally driven by lower demand forNorth America service parts and support equipment primarily due to the effects of the COVID-19 pandemic partially offset by aluminum die cast component volume associated with the acquisition ofWalker Die Casting , a$46 million , or 43%, decrease in net sales in the Outside North America On-Highway end market principally driven by lower demand due to the effects of the COVID-19 pandemic, a$21 million , or 53%, decrease in net sales in the Outside North America Off-Highway end market principally driven by lower demand in the energy, mining and construction sectors and a$6 million , or 67%, decrease in net sales in the North America Off-Highway end market principally driven by lower demand for hydraulic fracturing applications, partially offset by a$5 million , or 14%, increase in net sales in the Defense end market principally driven by Tracked vehicle demand. Cost of sales Cost of sales for the quarter endedJune 30, 2020 was$212 million compared to$348 million for the quarter endedJune 30, 2019 , a decrease of 39%. The decrease was principally driven by decreased direct material and manufacturing expense commensurate with decreased net sales, lower incentive compensation expense and favorable material costs, partially offset by restructuring charges. 31
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Table of Contents Gross profit Gross profit for the quarter endedJune 30, 2020 was$165 million compared to$389 million for the quarter endedJune 30, 2019 , a decrease of 58%. The decrease was principally driven by$247 million related to decreased net sales and$5 million of restructuring charges, partially offset by lower manufacturing expense commensurate with decreased net sales,$8 million of lower incentive compensation expense,$3 million of price increases on certain products and$2 million of favorable material costs. Gross profit as a percent of net sales for the three months endedJune 30, 2020 decreased 900 basis points compared to the same period in 2019 principally driven by lower net sales and restructuring charges, partially offset by lower incentive compensation expense, price increases on certain products and favorable material costs.
Selling, general and administrative
Selling, general and administrative expenses for the quarter endedJune 30, 2020 were$69 million compared to$93 million for the quarter endedJune 30, 2019 , a decrease of 26%. The decrease was principally driven by$11 million of lower commercial activities spending,$10 million of lower incentive compensation expense,$8 million of lower intangible amortization expense and$3 million of lower stock compensation expense, partially offset by product warranty adjustments and$3 million of restructuring charges.
Engineering - research and development
Engineering expenses for the quarter ended
Interest expense, net
Interest expense, net for each of the quarters endedJune 30, 2020 andJune 30, 2019 was$33 million . Interest expense, net was principally driven by approximately$4 million of lower interest expense on ATI's New Term Loan due to lower variable interest rates, offset by$2 million of increased interest expense on interest rate hedges that became effective in the third quarter of 2019 and$2 million of interest expense on ATI's new revolving credit facility with commitments in the amount of$600 million dueSeptember 2024 ("New Revolving Credit Facility").
Other income, net
Other income, net for the quarter endedJune 30, 2020 was$5 million compared to$3 million for the quarter endedJune 30, 2019 . The change was principally driven by$2 million of favorable change associated with assets held in a rabbi trust. Income tax expense Income tax expense for the three months endedJune 30, 2020 was$7 million , resulting in an effective tax rate of 23%, compared to$48 million of income tax expense and an effective tax rate of 21% for the three months endedJune 30, 2019 . The decrease in income tax expense was principally driven by decreased taxable income. The change in the effective tax rate was principally driven by decreased estimatedU.S. federal income tax deductions. 32
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Comparison of six months ended
The recent outbreak of COVID-19 had a material adverse effect on our results of operations for the six months endedJune 30, 2020 . We continue to actively monitor the impact of the global pandemic, which we expect to materially adversely impact our business and results of operations for the third quarter 2020 and likely beyond. See "Trends Impacting our Business" above for additional information on the impact of COVID-19 on our results of operations. The following table sets forth certain financial information for the six months endedJune 30, 2020 and 2019. The following table and discussion should be read in conjunction with the information contained in our condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Six Months
Ended
% %
(unaudited, dollars in millions) 2020 of net sales 2019 of net sales
Net sales $ 1,014 100 % $ 1,412 100 %
Cost of sales 523 52 664 47
Gross profit 491 48 748 53
Operating expenses:
Selling, general and administrative 144 14 177 13
Engineering - research and development 74 7 68 5
Total operating expenses 218 21 245 17
Operating income 273 27 503 36
Interest expense, net (66 ) (6 ) (69 ) (5 )
Other income, net 4 - 6 0
Income before income taxes 211 21 440 31
Income tax expense (49 ) (5 ) (92 ) (7 )
Net income $ 162 16 % $ 348 25 %
Net sales
Net sales for the six months ended June 30, 2020 were $1,014 million compared to
$1,412 million for the six months ended June 30, 2019 , a decrease of 28%. The
decrease was principally driven by a $259 million , or 33%, decrease in net sales
in the North America On-Highway end market principally driven by lower demand
for Rugged Duty Series and Highway Series models primarily due to the effects of
the COVID-19 pandemic, a $68 million , or 34%, decrease in net sales in the
Outside North America On-Highway end market principally driven by lower demand
due to the effects of the COVID-19 pandemic, a $51 million , or 18%, decrease in
net sales in the Service Parts, Support Equipment and Other end market
principally driven by lower demand due to the effect of the COVID-19 pandemic
and lower demand for off-highway service parts partially offset by aluminum die
cast component volume associated with the acquisition of Walker Die Casting , a
$21 million , or 31%, decrease in net sales in the Outside North America
Off-Highway end market principally driven by lower demand in the energy, mining
and construction sectors and a $12 million , or 52%, decrease in net sales in the
North America Off-Highway end market principally driven by lower demand for
hydraulic fracturing applications, partially offset by a $13 million , or 19%,
increase in net sales in the Defense end market principally driven by Tracked
vehicle demand.
Cost of sales
Cost of sales for the six months ended June 30, 2020 was $523 million compared
to $664 million for the six months ended June 30, 2019 , a decrease of 21%. The
decrease was principally driven by decreased direct material and manufacturing
expenses commensurate with decreased net sales, lower incentive compensation
expense and favorable material costs, partially offset by restructuring charges.
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Table of Contents Gross profit Gross profit for the six months endedJune 30, 2020 was$491 million compared to$748 million for the six months endedJune 30, 2019 , a decrease of 34%. The decrease was principally driven by$285 million related to decreased net sales and$5 million of restructuring charges, partially offset by$12 million of lower incentive compensation expense, lower manufacturing expense commensurate with decreased net sales and$8 million of favorable material costs. Gross profit as a percent of net sales for the six months endedJune 30, 2020 decreased 460 basis points compared to the same period in 2019 principally driven by lower net sales and restructuring charges, partially offset by lower incentive compensation expense, favorable material costs and price increases on certain products.
Selling, general and administrative
Selling, general and administrative expenses for the six months endedJune 30, 2020 were$144 million compared to$177 million for the six months endedJune 30, 2019 , a decrease of 19%. The decrease was principally driven by$18 million of lower incentive compensation expense,$14 million of lower intangible amortization expense, decreased commercial activities spending and$3 million of lower stock compensation expense, partially offset by product warranty adjustments and$3 million of restructuring charges.
Engineering - research and development
Engineering expenses for the six months endedJune 30, 2020 were$74 million compared to$68 million for the six months endedJune 30, 2019 , an increase of 9%. The increase was principally driven by the timing of product initiatives spending and$4 million of restructuring charges, partially offset by$6 million of lower incentive compensation expense.
Interest expense, net
Interest expense, net for the six months endedJune 30, 2020 was$66 million compared to$69 million for the six months endedJune 30, 2019 , a decrease of 4%. The decrease was principally driven by approximately$6 million of lower interest expense on ATI's New Term Loan due to lower variable interest rates and$5 million of expenses related to the long-term debt refinancing in 2019 that did not recur in 2020, partially offset by$4 million of increased interest expense on interest rate hedges that became effective in the third quarter of 2019 and$2 million of interest expense on ATI's New Revolving Credit Facility.
Other income, net
Other income, net for the six months endedJune 30, 2020 was$4 million compared to$6 million for the six months endedJune 30, 2019 . The change was principally driven by$3 million of unfavorable foreign exchange rate changes on intercompany financing.
Income tax expense
Income tax expense for the six months endedJune 30, 2020 was$49 million , resulting in an effective tax rate of 23%, compared to$92 million of income tax expense and an effective tax rate of 21% for the six months endedJune 30, 2019 . The decrease in income tax expense was principally driven by decreased taxable income. The change in the effective tax rate was principally driven by decreased estimatedU.S. federal income tax deductions. 34
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Liquidity and Capital Resources
We generate cash primarily from our operations to fund our operating, investing and financing activities. Our principal uses of cash are operating expenses, capital expenditures, working capital needs, debt service, dividends on common stock, stock repurchases and strategic growth initiatives, including acquisitions. Our ability to generate cash in the future and our future uses of cash are subject to general economic, financial, competitive, legislative, regulatory and other factors that may be beyond our control, including the impact to our cash flow that has been experienced due to lower net sales, and is expected to continue to be experienced, related to COVID-19. We had total available cash and cash equivalents of$434 million and$192 million as ofJune 30, 2020 andDecember 31, 2019 , respectively. Of the available cash and cash equivalents,$189 million and$122 million were deposited in operating accounts as ofJune 30, 2020 andDecember 31, 2019 , respectively, while$245 million and$70 million were invested inU.S. government backed securities as ofJune 30, 2020 andDecember 31, 2019 , respectively. As ofJune 30, 2020 , the total of cash and cash equivalents held by foreign subsidiaries was$64 million , the majority of which was located inChina andEurope . We manage our worldwide cash requirements considering available funds among the subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed. As a result, we do not currently anticipate any local liquidity restrictions will preclude us from funding our targeted initiatives or operating needs with local resources. We have not recognized any deferred tax liabilities associated with earnings in foreign subsidiaries, except for our subsidiary located inChina , as they are intended to be permanently reinvested and used to support foreign operations or have no associated tax requirements. We have recorded a deferred tax liability of$3 million for the tax liability associated with the remittance of previously taxed income and unremitted earnings for our subsidiary located inChina . TheU.S. Tax Cuts and Jobs Act requirement of a one-time repatriation tax on foreign earnings and profits resulted in us recording a$6 million liability for the deemed repatriation to be paid to theU.S. Government in 2017. In the future, theU.S. Tax Cuts and Jobs Act provides for tax free repatriations of earnings and profits generated by foreign subsidiaries through a 100% dividends received deduction. The remaining deferred tax liabilities, if recorded, related to unremitted earnings that are indefinitely reinvested are not material. Our liquidity requirements are significant, primarily due to our debt service requirements. As ofJune 30, 2020 , we had$641 million of indebtedness associated with ATI's New Term Loan,$275 million of indebtedness associated with ATI's New Revolving Credit Facility,$1,000 million of indebtedness associated with ATI's 5.0% Senior Notes dueSeptember 2024 ("5.0% Senior Notes"),$400 million of indebtedness associated with ATI's 4.75% Senior Notes dueOctober 2027 ("4.75% Senior Notes") and$500 million of indebtedness associated with ATI's 5.875% Senior Notes dueJune 2029 ("5.875% Senior Notes" and, together with the 5.0% Senior Notes and 4.75% Senior Notes, the "Senior Notes"). The minimum required quarterly principal payment on ATI's New Term Loan through its maturity date ofMarch 2026 is$2 million . We made$3 million and zero principal payments on the New Senior Secured Credit Facility during the six months endedJune 30, 2020 and 2019, respectively. There are no required quarterly principal payments on ATI's Senior Notes. 35
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The New Senior Secured Credit Facility provides for a$600 million New Revolving Credit Facility, net of an allowance for up to$75 million in outstanding letter of credit commitments. Throughout the six months endedJune 30, 2020 , we made periodic withdrawals and payments on the New Revolving Credit Facility as part of our debt and cash management plans. The maximum amount outstanding at any time during the six months endedJune 30, 2020 was$500 million . As ofJune 30, 2020 , we had$319 million available under the New Revolving Credit Facility, net of$275 million of revolving loans outstanding and$6 million in letters of credit. If we have commitments outstanding on the New Revolving Credit Facility at the end of a fiscal quarter, the New Senior Secured Credit Facility requires us to maintain a specified maximum first lien net leverage ratio of 5.50x. Additionally, within the terms of the New Senior Secured Credit Facility, a first lien net leverage ratio at or below 4.00x results in the elimination of excess cash flow payments on the New Senior Secured Credit Facility for the applicable year. As ofJune 30, 2020 , our first lien net leverage ratio was 0.56x. The New Senior Secured Credit Facility also provides certain financial incentives based on our first lien net leverage ratio. A first lien net leverage ratio at or below 4.00x and above 3.50x results in a 25 basis point reduction to the applicable margin on the New Revolving Credit Facility. A first lien net leverage ratio at or below 3.50x results in an additional 25 basis point reduction to the applicable margin on the New Revolving Credit Facility. These reductions remain in effect as long as we achieve a first lien net leverage ratio at or below the related threshold. In addition, the Credit Agreement includes, among other things, customary restrictions (subject to certain exceptions) on our ability to incur certain indebtedness, grant certain liens, make certain investments, engage in acquisitions, consolidations and mergers, declare or pay certain dividends, and repurchase shares of our common stock. The indentures governing the Senior Notes contain negative covenants restricting or limiting our ability to, among other things, incur or guarantee additional indebtedness, incur liens, pay dividends on, redeem or repurchase our capital stock, make certain investments, permit payment or dividend restrictions on certain of our subsidiaries, sell assets, engage in certain transactions with affiliates, and consolidate or merge or sell all or substantially all of our assets. As ofJune 30, 2020 , we are in compliance with all covenants under the New Senior Secured Credit Facility and indentures governing the Senior Notes. Our credit ratings are reviewed by Moody's Investors Service ("Moody's") and Fitch Ratings ("Fitch"). Moody's rates our corporate credit at 'Ba2', New Term Loan at 'Baa3', 5.0% Senior Notes at 'Ba3', 4.75% Senior Notes at 'Ba3' and 5.875% Senior Notes at 'Ba3'. Fitch rates our corporate credit at 'BB', New Term Loan at 'BB+', 5.0% Senior Notes at 'BB', 4.75% Senior Notes at 'BB' and 5.875% Senior Notes at 'BB'. OnNovember 14, 2016 , our Board of Directors authorized us to repurchase up to$1,000 million of our common stock pursuant to a stock repurchase program (the "Repurchase Program"). OnNovember 8, 2017 ,July 30, 2018 andMay 9, 2019 , our Board of Directors increased the authorization by$500 million ,$500 million and$1,000 million , respectively, bringing the total amount authorized under the Repurchase Program to$3,000 million . We did not repurchase any shares of our common stock under the Repurchase Program during the three months endedJune 30, 2020 . During the six months endedJune 30, 2020 , we repurchased approximately$180 million of our common stock under the Repurchase Program. All of the repurchase transactions during the six months endedJune 30, 2020 were settled in cash during the same period. As ofJune 30, 2020 , we had approximately$872 million available under the Repurchase Program. 36
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The following table shows our sources and uses of funds for the six months ended
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