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Allison Transmission Announces First Quarter 2013 Results



          Allison Transmission Announces First Quarter 2013 Results

-- Net Sales $457 million, Adjusted Net Income $80 million and Adjusted Free
Cash Flow $48 million

-- Adjusted EBITDA excluding technology-related license expenses $147 million,
or 32.1 percent of Net Sales

PR Newswire

INDIANAPOLIS, April 29, 2013

INDIANAPOLIS, April 29, 2013 /PRNewswire/ -- Allison Transmission Holdings
Inc. (NYSE: ALSN), the largest global provider of commercial duty
fully-automatic transmissions and hybrid-propulsion systems,  today reported
net sales for the quarter of $457 million, a 24 percent decrease from the same
period in 2012. Net Income for the quarter was $28 million, compared to a net
income of $58 million for the same period in 2012, a decrease of $30 million.
Adjusted Net Income, a non-GAAP financial measure, for the quarter was $80
million, compared to Adjusted Net Income of $144 million for the same period
in 2012, a decrease of $64 million. Diluted earnings per share for the quarter
were $0.15.

(Logo: http://photos.prnewswire.com/prnh/20120702/DE33547LOGO )

The decrease in net sales was principally driven by considerably lower demand
in the North America energy sector's hydraulic fracturing market, relative to
the same period in 2012, due to weakness in natural gas pricing, previously
considered reductions in U.S. defense spending and weaker global On-Highway
end markets. Partially offsetting these declines were price increases on
certain products. 

Adjusted EBITDA, a non-GAAP financial measure, for the quarter was $141
million, or 30.8 percent of net sales, compared to $223 million for the same
period in 2012. Excluding $6 million of technology-related license expenses
Adjusted EBITDA for the quarter was $147 million, or 32.1 percent of net
sales. Adjusted Free Cash Flow, also a non-GAAP financial measure, for the
quarter was $48 million compared to $120 million for the same period in 2012.

Lawrence E. Dewey, Chairman, President and Chief Executive Officer of Allison
Transmission commented, "Our first quarter 2013 results are consistent with
the guidance we provided to the market on February 19. Despite challenging end
markets demand conditions, Allison continued to demonstrate strong operating
margins and cash flow by executing initiatives to proactively align costs and
programs across our business. Although these initiatives affected our entire
organization, we believe Allison continues to be well positioned for a
cyclical recovery in the North America On-Highway end market while supporting
its Outside North America growth plans. Maintaining our prudent approach to
capital structure management we refinanced the remaining balance of our Senior
Secured Credit Facility Term B-1 Loan due in 2014, reduced the applicable
borrowing margin of our Senior Secured Credit Facility Term B-2 Loan due in
2017, extended the maturity of our $400 million revolving credit facility to
2016 and paid a quarterly dividend to our shareholders. In addition, on April
15, Allison's Board of Directors approved an increase in its quarterly cash
dividend from $0.06 to $0.12 per share, further highlighting our commitments
to cash flow generation and the return of capital to shareholders."

First Quarter Net Sales by End Market

                                      Q1 2013        Q1 2012
End Market                                                          % Variance
                                      Net Sales ($M) Net Sales ($M)
North America On-Highway              $188           $219           (14%)
North America Hybrid-Propulsion       $31            $35            (11%)
Systems for Transit Bus
North America Off-Highway             $8             $74            (89%)
Defense                               $57            $77            (26%)
Outside North America On-Highway      $62            $66            (6%)
Outside North America Off-Highway     $21            $32            (34%)
Service, Parts, Support Equipment &   $90            $99            (9%)
Other
Total Net Sales                       $457           $602           (24%)

First Quarter Highlights  
North America On-Highway end market net sales were down 14 percent from the
same period in 2012 principally driven by lower demand for Rugged Duty Series
models partially offset by increased demand for Motorhome Series models.

North America Hybrid-Propulsion Systems for Transit Bus end market net sales
were down 11 percent from the same period in 2012 principally driven by
municipal subsidy and spending constraints, engine emission improvements and
non-hybrid alternative technologies that generally require a fully-automatic
transmission (e.g. xNG).

North America Off-Highway end market net sales were down 89 percent from the
same period in 2012 principally driven by lower demand from hydraulic
fracturing applications due to weakness in natural gas pricing.

Defense end market net sales were down 26 percent from the same period in 2012
principally driven by continued reductions in U.S. defense spending to longer
term averages experienced during periods without active conflicts.

Outside North America On-Highway end market net sales were down 6 percent from
the same period in 2012 reflecting weakness in Asia partially offset by
strength in Latin America.

Outside North America Off-Highway end market net sales were down 34 percent
from the same period in 2012 principally driven by weakness in the mining
sector.

Service Parts, Support Equipment & Other end market net sales were down 9
percent from the same period in 2012 principally driven by lower demand for
North America Off-Highway service parts and global support equipment
commensurate with lower transmission unit volumes, partially offset by price
increases on certain products.

Gross profit for the quarter was $198 million, a decrease of 30 percent from
gross profit of $284 million for the same period in 2012. Gross margin for the
quarter was 43.4 percent, an increase of 60 basis points from a gross margin
of 42.8 percent for the fourth quarter of 2012, excluding costs ($7 million)
and charges ($8 million) to conclude a new five-year labor agreement. The
decrease in gross profit from the same period in 2012 was principally driven
by decreased net sales and unfavorable material costs, partially offset by
improved manufacturing performance and price increases on certain products.

Selling, general and administrative expenses for the quarter were $88 million,
a decrease of 13 percent from selling, general and administrative expenses of
$101 million for the same period in 2012. The decrease was principally driven
by $8 million of lower intangible asset amortization and reduced global
commercial spending activities reflecting actions to align costs and programs
across our business with expectations of weakened near-term end markets
demand.

Engineering – research and development expenses for the quarter were $29
million, compared to $28 million for the same period in 2012, a decrease of $5
million excluding the 2013 technology-related license expenses of $6 million
to expand our position in transmission technologies. The decrease was
principally driven by lower product initiatives spending reflecting actions to
align costs and programs across our business with expectations of weakened
near-term end markets demand.

First Quarter Non-GAAP Financial Measures   
Adjusted EBITDA for the quarter was $141 million, or 30.8 percent of net
sales, compared to $223 million, or 37.0 percent of net sales, for the same
period in 2012. Adjusted EBITDA excluding technology-related license expenses
for the quarter was $147 million, or 32.1 percent of net sales, an increase of
180 basis points from an Adjusted EBITDA margin, excluding costs ($7 million)
to conclude a new five-year labor agreement and a product warranty charge ($9
million) for specific product issues, of 30.3 percent for the fourth quarter
of 2012. The decrease in Adjusted EBITDA from the same period in 2012 was
principally driven by decreased net sales, unfavorable material costs and $6
million of technology-related license expenses, partially offset by improved
manufacturing performance, price increases on certain products, reduced global
commercial spending activities and reduced product initiatives spending.

Adjusted Net Income for the quarter was $80 million compared to $144 million
for the same period in 2012. The decrease in Adjusted Net Income was
principally driven by decreased Adjusted EBITDA, partially offset by decreased
cash interest expense as a result of debt refinancing and repayments, and $14
million of premiums and expenses in 2012 related to redemptions of long-term
debt.

Adjusted Free Cash Flow for the quarter was $48 million compared to $120
million for the same period in 2012. The decrease was principally driven by
decreased net cash provided by operating activities partially offset by
reduced capital expenditures. The decrease in capital expenditures was
principally driven by the 2012 expansion of our India facility and lower
product initiatives spending, partially offset by increased investments in
productivity and replacement programs.

Full Year 2013 Guidance Update  
We are affirming our full year 2013 guidance released to the market on
February 19: net sales decline in the range of 6 to 8 percent, Adjusted EBITDA
margin excluding technology-related license expenses in the range of 32 to 34
percent, Adjusted Free Cash Flow in the range of $325 to $375 million, capital
expenditures in the range of $80 to $90 million and cash income taxes in the
range of $15 to $20 million.

Consistent with our previous guidance we expect low levels of demand in the
North America energy sector's hydraulic fracturing market, reductions in U.S.
defense spending to longer term averages experienced during periods without
active conflicts and lower demand in the North America Hybrid-Propulsion
Systems for Transit Bus end market due to municipal spending constraints to
lead to net sales reductions in these end markets. We also expect that the
majority of the full year 2013 net sales reduction implied by the midpoint of
our guidance has occurred in the first quarter, and will be followed by growth
in the global On-Highway end markets for the balance of the year. Our full
year 2013 Adjusted EBITDA margin excluding technology-related license expenses
guidance incorporates several initiatives to proactively align costs and
programs across our business with Allison's net sales guidance.

Conference Call and Webcast   
The company will host a conference call at 4:30 p.m. EDT on Monday April 29 to
discuss its first quarter 2013 results. Dial-in number is 719-325-2454 and the
U.S. toll-free dial-in number is 888-401-4668. The passcode for the call is
9910460. A live webcast of the conference call will also be available online
at http://ir.allisontransmission.com.

For those unable to participate in the conference call, a replay will be
available from 7:30 p.m. EDT on April 29 until 11:59 p.m. EDT on May 6. The
replay dial-in number is 858-384-5517 and the U.S. toll-free replay dial-in
number is 877-870-5176. The replay passcode is 9910460.

About Allison Transmission   
Allison Transmission is the world's largest manufacturer of fully-automatic
transmissions for medium- and heavy-duty commercial vehicles, medium- and
heavy-tactical U.S. defense vehicles and hybrid-propulsion systems for transit
buses. Allison transmissions are used in a variety of applications including
on-highway trucks (distribution, refuse, construction, fire and emergency),
buses (primarily school and transit), motor homes, off-highway vehicles and
equipment (primarily energy and mining) and defense vehicles (wheeled and
tracked). Founded in 1915, the Allison business is headquartered in
Indianapolis, Ind., USA and employs approximately 2,800 people. Allison has
manufacturing facilities and customization centers located in China, The
Netherlands, Brazil, India and Hungary. With a global presence, serving
customers in North America, Europe, Asia, Australia, South America, and
Africa, Allison also has over 1,400 independent distributor and dealer
locations worldwide. More information about Allison is available at
www.allisontransmission.com.

Forward-Looking Statements   
This press release may contain forward-looking statements. All statements
other than statements of historical fact contained in this press release are
forward-looking statements, including all statements regarding future
financial results. In some cases, you can identify forward-looking statements
by terminology such as "may," "will," "should," "expect," "plans," "project,"
"anticipate," "believe," "estimate," "predict," "intend," "forecast," "could,"
"potential," "continue" or the negative of these terms or other similar terms
or phrases. Forward-looking statements are not guarantees of future
performance and involve known and unknown risks. Factors which may cause the
actual results to differ materially from those anticipated at the time the
forward-looking statements are made include, but are not limited to: risks
related to our substantial indebtedness; our participation in markets that are
competitive; the highly cyclical industries in which certain of our end users
operate; the failure of markets outside North America to increase adoption of
fully-automatic transmissions; the concentration of our net sales in our top
five customers and the loss of any one of these; future reductions or changes
in government subsidies for hybrid vehicles, U.S. defense spending; 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; our ability to prepare for, respond to and successfully achieve
our objectives relating to technological and market developments and changing
customer needs; risks associated with our international operations; and labor
strikes, work stoppages or similar labor disputes, which could significantly
disrupt our operations or those of our principal customers. Although we
believe the expectations reflected in such forward-looking statements are
based upon reasonable assumptions, we can give no assurance that the
expectations will be attained or that any deviation will not be material. All
information is as of the date of this press release, and we undertake no
obligation to update any forward-looking statement to conform the statement to
actual results or changes in expectations.

Use of Non-GAAP Financial Measures   
This press release contains information about Allison's financial results
which are not presented in accordance with accounting principles generally
accepted in the United States ("GAAP"). Such non-GAAP financial measures are
reconciled to their closest GAAP financial measures at the end of this press
release. Non-GAAP financial measures should not be considered in isolation or
as a substitute for our reported results prepared in accordance with GAAP and,
as calculated, may not be comparable to other similarly titled measures of
other companies.

Attachment

  o Condensed Consolidated Statements of Operations
  o Condensed Consolidated Balance Sheets
  o Condensed Consolidated Statements of Cash Flows
  o Reconciliation of GAAP to Non-GAAP Financial Measures

 

  Allison Transmission Holdings, Inc.
  Condensed Consolidated Statements of Operations
  (Unaudited, dollars in millions, except per share data)
                                             

                                             Three months ended March 31, 
                                            2013                2012
  Net sales                                 $            457.4  $          
                                                                 601.9
  Cost of sales                             259.1               318.1
  Gross profit                              198.3               283.8
  Selling, general and administrative       87.9                101.2
  expenses
  Engineering - research and development    29.0                27.9
  Operating income                          81.4                154.7
  Interest expense, net                     (33.9)              (40.7)
  Other expense, net                        (3.1)               (30.8)
  Income before income taxes                44.4                83.2
  Income tax expense                        (16.9)              (25.2)
  Net income                                $                   $            
                                             27.5                58.0
  Basic earnings per share attributable
  to
    common stockholders                     $                   $            
                                             0.15                0.32
  Diluted earnings per share attributable
  to
    common stockholders                     $                   $            
                                             0.15                0.31

 

 

  Allison Transmission Holdings, Inc.
  Condensed Consolidated Balance Sheets
  (dollars in millions)
                                          March 31,           December 31, 
                                         2013                2012
                                          (Unaudited)         (Audited) 
  ASSETS
  Current Assets
      Cash and cash equivalents          $            120.9  $            
                                                              80.2
      Accounts receivables - net of
  allowance for
         doubtful accounts of $1.2 and   204.0               165.0
  $0.9, respectively
      Inventories                        168.2               157.1
      Deferred income taxes, net         56.7                55.3
      Other current assets               28.9                32.7
  Total Current Assets                   578.7               490.3
  Property, plant and equipment, net     585.2               596.2
  Intangible assets, net                 3,627.2             3,657.1
  Deferred income taxes, net             21.2                32.3
  Other non-current assets               91.6                90.1
  TOTAL ASSETS                           $        4,903.9    $        4,866.0
  LIABILITIES
  Current Liabilities
      Accounts payable                   $            161.4  $          
                                                              133.1
      Current portion of long term       23.5                19.5
  debt 
  Other current liabilities              211.9               225.2
  Total Current Liabilities              396.8               377.8
  Long term debt                         2,791.4             2,801.3
  Other non-current liabilities          320.9               330.0
  TOTAL LIABILITIES                      3,509.1             3,509.1
  TOTAL STOCKHOLDERS' EQUITY             1,394.8             1,356.9
  TOTAL LIABILITIES & STOCKHOLDERS'      $        4,903.9    $        4,866.0
  EQUITY

 

 

  Allison Transmission Holdings, Inc.
  Condensed Consolidated Statements of Cash Flows
  (Unaudited, dollars in millions)
                                                 

                                                 Three months ended March 31, 
                                                2013            2012
  Net cash provided by operating activities     $         54.7  $       139.6
  Net cash used for investing activities        (19.1)          (35.4)
   -   Additions of long-lived assets           (12.6)          (35.7)
  Net cash provided by (used for) financing     2.1             (217.8)
  activities
  Effect of exchange rate changes in cash       3.0             (7.5)
  Net increase (decrease) in cash and cash      40.7            (121.1)
  equivalents
  Cash and cash equivalents at beginning of     80.2            314.0
  period
  Cash and cash equivalents at end of period    $       120.9   $       192.9
  Supplemental disclosures:
            Interest paid                       $         30.0  $         36.1
            Income taxes paid                   $               $          
                                                 1.2             2.9

 

 

 Allison Transmission Holdings, Inc.
 Reconciliation of GAAP to Non-GAAP Financial Measures
 (Unaudited, dollars in millions)
                                                  

                                                  Three months ended March
                                                 31, 
                                                 2013           2012
 Net income                                      $              $            
                                                   27.5           58.0
 plus:
     Interest expense, net                       33.9           40.7
     Cash interest expense                       (30.0)         (36.1)
     Income tax expense                          16.9           25.2
     Cash income taxes                           (1.2)          (2.9)
     Fee to terminate services agreement with    -              16.0
 the Sponsors (a)
     Initial public offering expenses (b)        -              5.7
     Technology-related investments expense (c)  2.5            -
     Amortization of intangible assets           29.9           37.5
 Adjusted net income                             $              $          
                                                   79.5          144.1
     Cash interest expense                       30.0           36.1
     Cash income taxes                           1.2            2.9
     Depreciation of property, plant and         24.7           24.6
 equipment
     Loss on repurchases of long-term debt (d)   -              13.5
     Unrealized loss (gain) on hedge contracts   1.9            (0.7)
 (e)
     Other (f)                                   3.4            2.5
 Adjusted EBITDA                                 $              $          
                                                  140.7          223.0
 Adjusted EBITDA excluding technology-related    $              $          
 license expenses (g)                             146.7          223.0
 Net sales                                       $              $          
                                                  457.4          601.9
 Adjusted EBITDA margin                          30.8%          37.0%
 Adjusted EBITDA margin excluding                32.1%          37.0%
 technology-related license expenses (g)
 Net Cash Provided by Operating Activities       $              $          
                                                   54.7          139.6
 (Deductions) or Additions to Reconcile to
 Adjusted Free Cash Flow:
 Additions of long-lived assets                  (12.6)         (35.7)
 Fee to terminate services agreement with the    -              16.0
 Sponsors (a)
 Technology-related license expenses (g)         6.0            -
 Adjusted Free Cash Flow                         $              $          
                                                   48.1          119.9

       Represents a one-time payment (recorded in Other expense, net) to
   (a) terminate the services agreement with affiliates of The Carlyle Group
       and Onex Corporation (the "Sponsors").
   (b) Represents fees and expenses (recorded in Other expense, net) related
       to our initial public offering in March 2012.
       Represents an impairment charge (recorded in Other expense, net) for an
   (c) investment in a co-development agreement to expand our position in
       transmission technologies.
       Represents a loss (recorded in Other expense, net) realized on the
   (d) redemptions and repayments of long-term debt for the three months ended
       March 31, 2012. 
       Represents $1.9 million and ($0.7) million of unrealized losses/(gains)
   (e) (recorded in Other expense, net) on the mark-to-market of our foreign
       currency and commodities derivative contracts for the three months
       ended March 31, 2013 and 2012, respectively. 
       Represents employee stock compensation expense and service fees
   (f) (recorded in Selling, general and administrative expenses) paid to the
       Sponsors.
       Represents payments (recorded in Engineering – research and
   (g) development) for licenses to expand our position in transmission
       technologies.

 

SOURCE Allison Transmission Holdings, Inc.

Website: http://www.allisontransmission.com
Contact: Investor Relations: (317) 242-3078, ir@allisontransmission.com; or
Media Relations: (317) 242-5000, media@allisontransmission.com
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