Allison Transmission Holdings, Inc. · NYSE:ALSN
Allison Transmission — Investor Presentation (March 2016)
38 slides from Allison Transmission's investor presentation, Mar 11, 2016
Slide 1: Investor Relations Presentation Fourth Quarter 2015
Investor Relations Presentation Fourth Quarter 2015 (Published Mar 11, 2016) 1
Slide 2: Safe Harbor Statement
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
Slide 3: Business Overview
Business Overview 3
Slide 4: Allison Transmission at a Glance
Allison Transmission at a Glance World’s largest manufacturer of fully-automatic transmissions for medium- and heavy-duty commercial vehicles – 63% global market share of fully-automatic transmissions – Virtually no exposure to Class 8 line-haul tractors Allison is the premier fully-automatic tr
Slide 5: Allison Transmission at a Glance
Allison Transmission at a Glance 2015 Net Sales by End Market Parts, Support Equipment and Other 19% North Outside America North America On-Highway Off-Highway 53% 2% Outside North America On-Highway 13% Defense 6% North America Off-Highway Hybrid 3% Transit Bus 2015 Net Sales: $2.0 billion 4% 5
Slide 6: Global Market Leader
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 more cyclical Class 8 line-haul tractors Global On-Highway F
Slide 7: North America On-Highway End Market
North America On-Highway End Market Underserved Core Addressable Market Underserved Class 8 Class 8 Class 8 Class 1-3 Class 4-5 Motor Home School Bus Class 6-7 Straight Metro Tractor Vehicles Weight < 14 lbs 14 – 19 lbs 16 – 33 lbs 16 – 33 lbs 19 – 33 lbs 33 lbs+ 33 lbs+ 33 lbs+ (000s of lbs) 2015 I
Slide 8: Best in Class EBITDA Margin
Best in Class EBITDA Margin EBITDA Margin(1) 40% 36.3% 35% 30% 25% 20% 15% 10% (2) Gentex Roper Graco Sensata Rockwell Eaton Donaldson WABCO Parker Cummins Hannifin (1) Calendar Year 2015 EBITDA, which excludes non-recurring or one-time items as designated by each entity, are based on information av
Slide 9: Strategic Priorities
Strategic Priorities Expand global market leadership – Capitalize on continued developed markets recovery – New vocational offerings Emerging markets penetration – Vocational ladder strategy – Increase number of vehicle releases Continued focus on new technologies and product development – Add
Slide 10: Premier Industrial Company
Premier Industrial Company Global Market Leader Premier Brand and End User Value Proposition Technology Leadership - The Allison Advantage Diverse End Markets Multiple Organic Growth Opportunities Strong Cash Flow Generation with Well-Defined Capital Allocation Policy 10
Slide 11: A Recognized Leader and Respected Brand
A Recognized Leader and Respected Brand The Allison brand is associated with: – High Quality – Reliability – Durability – Vocational Value and Expertise – Technological Leadership – Superior Customer Service – Attractive Total Lifecycle Value 100 year history of providing high-quality innovative
Slide 12: End User Value Proposition
End User Value Proposition End Users are Willing to Pay a Premium Price for Allison Advantages of a fully-automatic Allison Transmission High – Productivity (acceleration) – Maintenance Savings (life cycle costs) – Fuel Efficiency – Driver Skillset / Wages Allison (Fully-Automatic) – Training (tim
Slide 13: Technology Leadership – The Allison Advantage
Technology Leadership – The Allison Advantage Allison employs proprietary and patented technology developed over many decades and more than six million units Technology is matched to the selected engine and optimized for the intended vocation Software algorithms are individually tailored to ma
Slide 14: Very Diverse End Markets
Very Diverse End Markets Distribution Emergency Motorhome Rugged Duty School/Shuttle Bus Transit On-Highway British Airport Authority Global New Delhi Beijing City Transit Transit Hybrid Transit Bus Off-Highway Defense Medium- and Heavy- Tactical Aftermarket Parts, Support Equipment & Other Retran 1
Slide 15: Relationship with Industry-Leading OEMs
Over 50 Year Relationship with Industry-Leading OEMs On-Highway North America Hybrid Transit Bus Off-Highway Outside North America On-Highway Off-Highway Defense Medium- and Heavy- Tactical U.S. Government 15
Slide 16: Strong Adjusted Free Cash Flow Generation
Strong Adjusted Free Cash Flow Generation Adjusted Free Cash Flow Generation(1) ($ in millions) $540 $530 $31 $9 $407 $409 $383 $33 $20 $11 $317 $2 26.7% 25.4% 21.2% $193 19.0% 16.5% 17.7% $151 $521 $493 $70 $379 9.4% $374 $372 8.6% $315 $81 2008 2009 2010 2011 2012 2013 2014 2015 Certain Non-Recurr
Slide 17: Capital Allocation Priorities
Capital Allocation Priorities Organic revenue growth New product and technology development Prudent balance sheet management – Medium term net leverage target of 3.0 - 3.5x Return capital to shareholders – Quarterly dividend of $0.15 per share – $500 million share repurchase authorization; $
Slide 18: Free Cash Flow Utilization
Free Cash Flow Utilization Well-Defined Capital Allocation Policy Return capital to shareholders ― Quarterly dividend of $0.15 per share ― $500 million share repurchase authorization; $194M remaining through December 2016(3) Low-cost, flexible and pre-payable debt structure with longer-dated mat
Slide 19: Multiple Organic Growth Opportunities
Multiple Organic Growth Opportunities Developed Markets Opportunities Increase Penetration of Fully-Automatic Transmissions Accelerate Adoption in Emerging Markets Global Off-Highway Growth Opportunities Continue New Technology and Product Development 19
Slide 20: Developed Markets Opportunities
Developed Markets Opportunities Growth opportunity driven by maturing cyclical recovery in core North America North America Production in Allison’s Core market Addressable Market (units in 000s)(1) 1999 – 2008 Production has rebounded from cyclical 427 lows with moderate growth fueled by pick- u
Slide 21: Increase Penetration of Fully-Automatic Transmissions
Increase Penetration of Fully-Automatic Transmissions Ongoing need for productivity Penetration of Fully-Automatic Transmissions improvements On-Highway ― Better acceleration and shorter travel time Outside North America(2)(3) North America(1) result in increased miles and revenue ― Improved fuel
Slide 22: Accelerating Adoption in Emerging Markets – China
Accelerating Adoption in Emerging Markets – China Allison is the #1 supplier of fully-automatic transmissions in China as a result of targeting specific vocations ― Substantial installed base of over 60,000 transmissions in China Several million commercial vehicles produced annually of which app
Slide 23: Global Off-Highway Growth Opportunities
Global Off-Highway Growth Opportunities Energy Sectors Mining and Construction – Considerable end market cyclicality, – Considerable end market cyclicality, currently at trough levels currently at trough levels – Multiple opportunities in exploration, – NA, Europe, Middle East, Africa and China
Slide 24: Investment in Technology and Product Development
Investment in Technology and Product Development Fuel Economy – FuelSense® High Horsepower Hydraulic Fracturing Transmissions New On-Highway Product Features New 9826 and 9832 Oil Field Series (OFS) models based on six decades of industry expertise – Automatically adapts shift schedules and torq
Slide 25: Financial Overview
Financial Overview 25
Slide 26: Allison Financial Highlights
Allison Financial Highlights Strong operating margins 2015 Financial Metrics — End markets diversity (% of Net Sales) — Premium vocational pricing model — Cost controls and productivity improvements Gross Margin 47.0% — Multi-Tier UAW wage and benefits structure Low capital expenditure requireme
Slide 27: Strong Operating Margins
Strong Operating Margins Long-Term Customer Supply Agreements Manufacturing Efficiencies (hours/unit) Over 90% 1000/2000 Series 3000 Series 4000 Series Over 90% of 2015 N.A. On-Highway Unit Volume was covered by 2005 2015 long-term customer supply agreements Hours Per Unit continue to decline Workfo
Slide 28: Income Tax Attributes
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 2008-2015 ($ millions) 2008 2009 2010 2011 2012 2013 2014 2015 $4 $6 $2 $6 $11 $4 $5 $5 A
Slide 29: Summary
Summary Allison Transmission is the global leader in the markets it serves – Premier fully-automatic transmission brand – 100 year operating history Strong financial position – Industry leading EBITDA margin – Asset light business model – Significant free cash flow generation – Returning capital
Slide 30: Guidance / Supplemental Financial Data
Guidance / Supplemental Financial Data 30
Slide 31: 2016 Full Year Guidance (Published February 8, 2016)
2016 Full Year Guidance (Published February 8, 2016) Guidance Commentary Guidance reflects expectations for tempering demand conditions in the North America On-Highway end market, no meaningful relief from the global Off-Highway end market (6.5) to (9.5) challenges and divergent global economic envi
Slide 32: Historical Financial Summary
Historical Financial Summary Financial Summary In $ millions Annual 2008 2009 2010 2011 2012 2013 2014 2015 Resiliency through the 2009 Net Sales $2,061 $1,767 $1,926 $2,163 $2,142 $1,927 $2,127 $1,986 downturn, evidenced by increasing EBITDA margins % Growth (5.2%) (14.3%) 9.0% 12.3% (1.0%) (10.0
Slide 33: Allison Quarterly Sales Summary
Allison Quarterly Sales Summary Quarterly Net Sales by End Market ($ millions) 2012 2013 2014 2015 Net Sales Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 NA On-Highway $219 $217 $189 $188 $188 $216 $212 $210 $233 $243 $256 $256 $268 $277 $262 $252 NA Hybrid Transit Bus 35 18 30 32 31 27 15 32 24
Slide 34: Appendix: Non-GAAP Financial Information
Appendix: Non-GAAP Financial Information 34
Slide 35: Non-GAAP Financial Information
Non-GAAP Financial Information We use Adjusted net income, Adjusted EBITDA, Adjusted EBITDA excluding technology-related license expenses, Adjusted EBITDA margin, Adjusted EBITDA margin excluding technology-related license expenses, adjusted free cash flow and free cash flow to evaluate our performa
Slide 36: Non-GAAP Reconciliations (1 of 2)
Non-GAAP Reconciliations (1 of 2) Adjusted Net Income and Adjusted EBITDA reconciliation $ in millions, Unaudited For the year ended December 31, 2010 2011 2012 2013 2014 2015 Net income $29.6 $103.0 $514.2 $165.4 $228.6 $182.3 plus: Interest expense, net 277.5 217.3 151.2 132.9 138.4 114.5 Cash int
Slide 37: Non-GAAP Reconciliations (2 of 2)
Non-GAAP Reconciliations (2 of 2) Adjusted Free Cash Flow reconciliation $ in millions, Unaudited For the year ended December 31, 2010 2011 2012 2013 2014 2015 Net Cash Provided by Operating Activities $388.9 $469.2 $497.5 $463.5 $573.3 $579.9 (Deductions) or Additions: Long-lived assets (73.8) (96.
Slide 38: Certain Trademarks
Certain Trademarks This presentation contains trademarks, service marks, copyrights and trade names of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trademarks, service marks, copyrights or trade names to imply a relations
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