Allison Transmission Holdings, one of the largest global providers of commercial duty fully automatic transmissions, has reported net sales for the fourth quarter of $647 million, a 10 percent increase from the same period in 2017. The company said this increase in net sales was principally driven by higher demand in the Outside North America Off-Highway and North America On-Highway end markets.
Net Income for the quarter was $147 million compared to $215 million for the same period in 2017. Fourth quarter 2017 included a one-time income tax benefit of $152 million as a result of the U.S. Tax Cuts and Jobs Act enacted into law in December 2017. Adjusted EBITDA, a non-GAAP financial measure, for the quarter was $261 million compared to $210 million for the same period in 2017.
David Graziosi, president and CEO of Allison Transmission, commented, “I am pleased to report that 2018 was a record year for Allison Transmission. Full-year results exceeded our initial Net Sales guidance ranges across all of our end-markets. Furthermore, Allison achieved record levels of net sales, net income, adjusted EBITDA, net cash provided by operating activities and adjusted free cash flow. Full year net sales growth of 20 percent was surpassed, by even stronger growth in net income, up 27 percent, diluted EPS, up 42 percent and adjusted EBITDA, up 30 percent. And notably, double-digit growth was realized in the Outside North America On-Highway end market for the third consecutive year.”
Graziosi continued, “Throughout the year, we continued our well-defined approach to capital structure and allocation. During the fourth quarter, we paid a dividend of 15 cents per share and settled $153 million of share repurchases, resulting in $609 million of total share repurchases in 2018 or approximately 10 percent of our outstanding shares.”
Fourth Quarter Highlights
Gross profit for the quarter was $338 million, an increase of 17 percent from $288 million for the same period in 2017. Gross margin for the quarter was 52.2 percent, an increase of 320 basis points from a gross margin of 49.0 percent for the same period in 2017. The increase in gross profit from the same period in 2017 was principally driven by increased net sales, price increases on certain products and favorable material costs.
Selling, general and administrative expenses for the quarter were $90 million, a decrease of $7 million from $97 million for the same period in 2017. The decrease was principally driven by unfavorable product warranty adjustments in 2017 that did not recur in 2018.
Engineering – research and development expenses for the quarter were $37 million, an increase of $6 million from $31 million for the same period in 2017. The increase was principally driven by increased product initiatives spending, the company said.
As a result of continued weak demand conditions for the TC10 transmission Allison ceased production and recorded a corresponding $4 million impairment loss compared to a $32 million impairment loss for the same period in 2017.
Income tax expense for the quarter was $27 million compared to a $131 million benefit for the same period in 2017. The change was principally driven by a one-time income tax benefit resulting from a decrease in deferred tax liabilities in 2017 as a result of the U.S. Tax Cuts and Jobs Act enacted into law in December 2017 and increased taxable income partially offset by a decrease in effective tax rate as a result of the U.S. Tax Cuts and Jobs Act.
Net income for the quarter was $147 million compared to $215 million for the same period in 2017. The decrease also was principally driven by the enactment of the U.S. Tax Cuts and Jobs Act in December 2017, according to Allison, along with increased product initiatives spending and increased interest expense partially offset by increased gross profit, decreased loss associated with the impairment of long-lived assets, decreased technology-related investment expense and decreased selling, general and administrative expenses.
Full Year 2019 Guidance
Allison expects 2019 net sales to be in the range of $2.58 billion to $2.68 billion, net income in the range of $535 million to $585 million, Adjusted EBITDA in the range of $1 billion to $1.06 billion.
Although the company did not provide specific first quarter 2019 guidance, Allison does expect first quarter net sales to be flat from the same period in 2018 principally driven by increased demand expected in the North America On-Highway end market offset by decreased demand expected in the North America Off-Highway and Service Parts, Support Equipment & Other end markets.