Allison(US:ALSN)2023-07-27 16:00Financial Performance - Net sales for the six months ended June 30, 2023, increased to $1,524 million, up from $1,341 million in the same period in 2022, reflecting a 13.6% growth[15] - Net income for the six months ended June 30, 2023, rose to $345 million, compared to $251 million in 2022, marking a 37.5% increase[15] - Gross profit for the six months ended June 30, 2023, was $742 million, up from $631 million in 2022, reflecting a 17.6% growth[15] - Operating income for the six months ended June 30, 2023, increased to $472 million, compared to $389 million in 2022, a 21.3% rise[15] - Diluted earnings per share for the six months ended June 30, 2023, were $3.75, up from $2.56 in 2022, a 46.5% increase[15] - Net income rose to $175 million in Q2 2023, up from $122 million in Q2 2022[21] - Net sales for the three months ended June 30, 2023, were $783 million, compared to $664 million in the same period in 2022, representing an 18% increase[33] - Net sales for the six months ended June 30, 2023, were $1,524 million, compared to $1,341 million in the same period in 2022, representing a 14% increase[33] - Net income for Q2 2023 was $175 million, up from $122 million in Q2 2022, representing a 43.4% increase[82] - Diluted earnings per share (EPS) for Q2 2023 was $1.92, compared to $1.26 in Q2 2022, a 52.4% increase[82] - Total net sales for Q2 2023 were $783 million, up 18% from $664 million in Q2 2022[90] - Adjusted EBITDA for Q2 2023 was $288 million, up 26.9% from $227 million in Q2 2022[99] - Adjusted EBITDA as a percent of net sales improved to 36.8% in Q2 2023 from 34.2% in Q2 2022[99] - Gross profit for Q2 2023 rose by 23% to $381 million, with gross margin increasing by 190 basis points to 49% due to price increases and higher sales[107][109] - Operating income for Q2 2023 grew by 29% to $242 million, representing 31% of net sales, up from 28% in Q2 2022[104] - Net income for Q2 2023 increased by 43% to $175 million, with net income margin improving to 22% from 18% in Q2 2022[104] - For the first half of 2023, net sales increased by 14% to $1,524 million, with gross profit up 18% to $742 million and net income rising 37% to $345 million[116][120][126] Cash and Liquidity - Cash and cash equivalents increased to $351 million as of June 30, 2023, up from $232 million at the end of 2022, a 51.3% rise[12] - Net cash provided by operating activities for the six months ended June 30, 2023, was $334 million, up from $226 million in 2022, a 47.8% increase[18] - The company's cash and cash equivalents increased to $351 million as of June 30, 2023, up from $232 million at the end of 2022[127] - Adjusted free cash flow for Q2 2023 was $122 million, a significant increase from $34 million in Q2 2022[99] - Cash flows provided by operating activities for the six months ended June 30, 2023 were $334 million, compared to $226 million for the same period in 2022[138] - Cash used for investing activities for the six months ended June 30, 2023 was $41 million, compared to $68 million for the same period in 2022[140] - Cash used for financing activities for the six months ended June 30, 2023 was $174 million, compared to $162 million for the same period in 2022[141] Assets and Liabilities - Total assets grew to $4,856 million as of June 30, 2023, compared to $4,671 million at the end of 2022, a 4% increase[12] - Total current assets increased to $1,069 million as of June 30, 2023, compared to $866 million at the end of 2022, a 23.4% rise[12] - Total inventories as of June 30, 2023, were $278 million, compared to $224 million as of December 31, 2022, representing a 24% increase[36] - The carrying value of the company's Goodwill as of June 30, 2023, was $2,076 million, compared to $2,075 million as of December 31, 2022[37] - Total long-term debt as of June 30, 2023, was $2,522 million, compared to $2,525 million as of December 31, 2022[46] - The fair value of the company's long-term debt obligations as of June 30, 2023, was $2,325 million, based on quoted Level 2 market prices[46] - As of June 30, 2023, current and non-current product warranty liabilities were $25 million and $35 million, respectively[56] - As of June 30, 2023, current and non-current deferred revenue was $46 million and $93 million, respectively[58] - The weighted average discount rate on operating leases as of June 30, 2023 was 4.57%[61] - As of June 30, 2023, the Company recorded current and non-current operating lease liabilities of $4 million and $12 million, respectively[61] - Total lease payments for the remainder of 2023 to 2027 and thereafter amount to $18 billion, with a present value of lease liabilities at $16 billion[62] - ROU assets as of June 30, 2023, total $17 billion, with buildings accounting for $14 billion, land $1 billion, equipment $1 billion, and vehicles $1 billion[63] - Other current liabilities as of June 30, 2023, total $182 million, with payroll and related costs at $60 million, sales incentives at $37 million, and accrued interest payable at $24 million[67] - Total debt as of June 30, 2023 stood at $2.522 billion, including $622 million in Term Loan and $1.9 billion in Senior Notes[129] Stock Repurchases and Equity - Repurchases of common stock during the six months ended June 30, 2023, totaled $137 million, compared to $115 million in 2022[18] - Common stock issuance increased by $5 million in Q2 2023 compared to Q2 2022[21] - Stockholders' equity grew to $1,056 million in Q2 2023 from $749 million in Q2 2022[21] - Repurchase of common stock totaled $97 million in Q2 2023, compared to $34 million in Q2 2022[21] - Dividends on common stock remained consistent at $21 million in both Q2 2023 and Q2 2022[21] - Accumulated deficit decreased to $(788) million in Q2 2023 from $(1,031) million in Q2 2022[21] - Paid-in capital increased to $1,868 million in Q2 2023 from $1,839 million in Q2 2022[21] - Stock-based compensation remained steady at $6 million in both Q2 2023 and Q2 2022[21] - The company repurchased $97 million of its common stock in Q2 2023 under the Repurchase Program, leaving $898 million authorized for future repurchases[84] - The company repurchased approximately $137 million of its common stock under the Repurchase Program during the six months ended June 30, 2023, with $898 million still available under the program[135] - The company repurchased a total of 2,052,154 shares of its common stock in the three months ended June 30, 2023, at an average price of $47.27 per share[159] - The approximate dollar value of shares that may yet be purchased under the repurchase program is $898,119,727 as of June 30, 2023[159] Debt and Credit Facilities - The Company amended its Senior Secured Credit Facility in February 2023, replacing LIBOR with SOFR and adding a 0.1% credit spread adjustment to the SOFR benchmark[47] - As of June 30, 2023, the Company elected to pay the lowest all-in rate of Adjusted Term SOFR plus the applicable margin, or 6.93%, on the Term Loan[47] - The minimum required quarterly principal payment on the Term Loan through its maturity date of March 2026 is $2 million[47] - As of June 30, 2023, the Company had $645 million available under the Revolving Credit Facility, net of $5 million in letters of credit[49] - The Company held interest rate swap contracts that effectively hedge $500 million of the variable rate debt associated with the Term Loan at the Term SOFR weighted average fixed rate of 2.81% through September 2025[53] - The company made $3 million of principal payments on the Term Loan during each of the six months ended June 30, 2023 and 2022[130] - As of June 30, 2023, the company had $645 million available under the Revolving Credit Facility, net of $5 million in letters of credit, with no amounts outstanding[132] - The company's first lien net leverage ratio was 0.26x as of June 30, 2023, which is below the 4.00x threshold, eliminating excess cash flow payments on the Senior Secured Credit Facility for the applicable year[132] - The company held interest rate swap contracts effectively hedging $500 million of the variable rate debt associated with the Term Loan at a weighted average fixed rate of 2.81% through September 2025[149] Revenue by Segment - North America On-Highway revenue for the three months ended June 30, 2023, was $397 million, up 17% from $340 million in the same period in 2022[33] - Service Parts, Support Equipment, and Other revenue for the three months ended June 30, 2023, was $181 million, up 31% from $138 million in the same period in 2022[33] - North America On-Highway net sales increased 17% to $397 million in Q2 2023, driven by strong demand for medium-duty and Class 8 vocational trucks[90] - Service Parts, Support Equipment and Other net sales grew 31% to $181 million in Q2 2023, driven by higher global demand and price increases[90] - Net sales for Q2 2023 increased by 18% to $783 million compared to $664 million in Q2 2022, driven by strong demand in North America On-Highway and Service Parts markets[105] Costs and Expenses - Direct material costs accounted for 67% of total cost of sales for the six months ended June 30, 2023[92] - Engineering R&D expenses remained stable at $47 million in Q2 2023, consistent with Q2 2022 levels[111] - Other income for Q2 2023 was $2 million, a $5 million improvement from ($3) million in Q2 2022, driven by favorable foreign exchange and rabbi trust assets[113] - The effective tax rate decreased to 19% in Q2 2023 from 21% in Q2 2022, despite higher taxable income[114] - Net periodic benefit cost (credit) for pension plans for the three months ended June 30, 2023, was $1 million, and for post-retirement benefits, it was $(2) million[70] - Total income tax expense for the three and six months ended June 30, 2023, was $41 million and $83 million, respectively, with an effective tax rate of 19%[72] Foreign Exchange and Commodity Risks - Foreign currency translation adjustment resulted in a loss of $2 million in Q2 2023, compared to $8 million in Q2 2022[21] - Interest rate swaps contributed $5 million in Q2 2023, down from $6 million in Q2 2022[21] - A 10% aggregate increase or decrease in the Chinese Yuan Renminbi, Euro, Indian Rupee, and Japanese Yen would change the company's earnings, net of tax, by an estimated $6 million per year[150] - A 10% variation in the price of aluminum and steel would change the company's earnings by approximately $9 million and $12 million per year, respectively[151] Other Financial Metrics - AOCL as of June 30, 2023, was $(25) million, with interest rate swaps at $17 million and foreign currency items at $(42) million[75] - Amounts reclassified from AOCL for the three months ended June 30, 2023, were $5 million, with interest rate swaps at $3 million and prior service credit at $3 million[76] - Total reclassifications from AOCL for the six months ended June 30, 2023, were $8 million, with interest rate swaps at $5 million and prior service credit at $5 million[79] - Operating lease expense was $2 million for each of the three months ended June 30, 2023 and 2022, and $3 million for each of the six months ended June 30, 2023 and 2022[65] - New ROU assets obtained in exchange for lease obligations during the six months ended June 30, 2023, were $2 million[65] - G. Frederick Bohley, Senior Vice President, Chief Financial Officer and Treasurer, adopted a Rule 10b5-1 trading arrangement on May 30, 2023, for the potential exercise of up to 4,950 vested stock options and the associated sale of the underlying common stock[162]