Allison Transmission ends Q2 with $127 million cash, returns $150 million to shareholders

By Lisa Kerner

Charlotte, N.C., July 24 – Allison Transmission Holdings, Inc. ended its second quarter of fiscal 2014 with $127 million of cash, $453 million of revolver availability and net leverage of 3.82 times, according to chief financial officer David Graziosi during an earnings conference call on Thursday.

“Allison continued to demonstrate solid free cash flow conversion and a well-defined capital allocation policy focused on the return of capital to shareholders while pursuing a prudent level of net leverage,” Graziosi said.

During the quarter, Allison returned capital to its shareholders through a $150 million share repurchase and payment of a dividend, according to chief executive officer Larry Dewey.

Second-quarter highlights

Allison’s net sales for the quarter were up 5% year over year at $536 million, driven mainly by continued recoveries in the North America on-highway and off-highway end markets, according to the earnings news release.

Adjusted net income was up $28 million from the prior-year period at $89 million.

Adjusted EBITDA for the quarter was $186 million, or 34.7%. This compares to $172 million, or 33.5%, of net sales for the same period in 2013.

The Indianapolis-based automatic transmission company reported adjusted free cash flow of $132 million for the second quarter, compared to $117 million a year ago.

Gross profit for the quarter was up 5% from the prior year at $239 million, while gross margin was up 30 basis points at 44.5%.

According to Allison, the increase in gross profit was driven by increased net sales and price increases on certain products partially offset by unfavorable material costs.

Guidance Update

Updated full-year 2014 guidance includes a year-over-year net sales increase in the range of 4% to 6% and an adjusted EBITDA margin in the range of 32.5% to 34%.

The company expects adjusted free cash flow in the range of $385 million to $425 million and capital expenditures in the range of $60 million to $70 million.

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