Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Feb. 02, 2018 | Jun. 30, 2017 | |
Document Information [Line Items] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2017 | ||
Document Fiscal Year Focus | 2,017 | ||
Document Fiscal Period Focus | FY | ||
Trading Symbol | ALSN | ||
Entity Registrant Name | ALLISON TRANSMISSION HOLDINGS INC | ||
Entity Central Index Key | 1,411,207 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 140,066,567 | ||
Entity Public Float | $ 5,575 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Current Assets | ||
Cash and cash equivalents | $ 199 | $ 205 |
Accounts receivable | 221 | 197 |
Inventories | 154 | 126 |
Income taxes receivable | 33 | 3 |
Other current assets | 25 | 17 |
Total Current Assets | 632 | 548 |
Property, plant and equipment, net | 448 | 464 |
Intangible assets, net | 1,153 | 1,242 |
Goodwill | 1,941 | 1,941 |
Other non-current assets | 31 | 24 |
TOTAL ASSETS | 4,205 | 4,219 |
Current Liabilities | ||
Accounts payable | 159 | 128 |
Product warranty liability | 22 | 25 |
Current portion of long-term debt | 12 | 12 |
Deferred revenue | 41 | 27 |
Other current liabilities | 183 | 150 |
Total Current Liabilities | 417 | 342 |
Product warranty liability | 33 | 38 |
Deferred revenue | 75 | 66 |
Long-term debt | 2,534 | 2,147 |
Deferred income taxes | 276 | 312 |
Other non-current liabilities | 181 | 233 |
TOTAL LIABILITIES | 3,516 | 3,138 |
Commitments and Contingencies (see NOTE 16) | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding | ||
Paid in capital | 1,758 | 1,728 |
Accumulated deficit | (1,055) | (586) |
Accumulated other comprehensive loss, net of tax | (15) | (63) |
TOTAL STOCKHOLDERS' EQUITY | 689 | 1,081 |
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY | 4,205 | 4,219 |
Voting Common Stock | ||
STOCKHOLDERS' EQUITY | ||
Common stock | 1 | 2 |
Non-voting Common Stock | ||
STOCKHOLDERS' EQUITY | ||
Common stock | $ 0 | $ 0 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 100,000,000 | 100,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Voting Common Stock | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 1,880,000,000 | 1,880,000,000 |
Common stock, shares issued | 139,990,865 | 163,795,604 |
Common stock, shares outstanding | 139,990,865 | 163,795,604 |
Non-voting Common Stock | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 0 | 0 |
Common stock, shares outstanding | 0 | 0 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Net sales | $ 2,262 | $ 1,840 | $ 1,986 |
Cost of sales | 1,131 | 976 | 1,052 |
Gross profit | 1,131 | 864 | 934 |
Selling, general and administrative | 342 | 324 | 317 |
Engineering - research and development | 105 | 88 | 93 |
Loss associated with impairment of long-lived assets | 32 | 1 | |
Trade name impairment | 80 | ||
Environmental remediation | 14 | ||
Operating income | 652 | 452 | 429 |
Interest expense, net | (103) | (101) | (114) |
Expenses related to long-term debt refinancing | (12) | (26) | |
Other (expense) income, net | (22) | 2 | |
Income before income taxes | 527 | 341 | 289 |
Income tax expense | (23) | (126) | (107) |
Net income | $ 504 | $ 215 | $ 182 |
Basic earnings per share attributable to common stockholders | $ 3.38 | $ 1.28 | $ 1.03 |
Diluted earnings per share attributable to common stockholders | 3.36 | 1.27 | 1.03 |
Dividends declared per common share | $ 0.60 | $ 0.60 | $ 0.60 |
Other comprehensive income (loss), net of tax: | |||
Foreign currency translation | $ 15 | $ (6) | $ (11) |
Pension and OPEB liability adjustment | 26 | 3 | (3) |
Available-for-sale securities | 7 | (1) | (5) |
Total other comprehensive income (loss), net of tax | 48 | (4) | (19) |
Comprehensive income | $ 552 | $ 211 | $ 163 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net income | $ 504 | $ 215 | $ 182 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Amortization of intangible assets | 90 | 92 | 97 |
Depreciation of property, plant and equipment | 80 | 84 | 88 |
Deferred income taxes | (50) | 114 | 96 |
Loss associated with impairment of long-lived assets | 32 | 1 | |
Unrealized (gain) loss on derivatives | (29) | (1) | 15 |
Impairment loss on investments in technology-related initiatives | 16 | 1 | |
Stock-based compensation | 12 | 9 | 10 |
Amortization of deferred financing costs | 6 | 7 | 8 |
Expenses related to long-term debt refinancing | 11 | 26 | |
Excess tax benefit from stock-based compensation | (18) | (6) | (8) |
Trade name impairment | 80 | ||
Other | 1 | 1 | |
Changes in assets and liabilities: | |||
Accounts receivable | (19) | (3) | 9 |
Inventories | (25) | 15 | (2) |
Accounts payable | 30 | 2 | (25) |
Other assets and liabilities | 11 | 50 | 2 |
Net cash provided by operating activities | 658 | 591 | 580 |
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Additions of long-lived assets | (91) | (71) | (58) |
Investments in technology-related initiatives | (3) | (1) | (2) |
Net cash used for investing activities | (94) | (72) | (60) |
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Repurchases of common stock | (885) | (256) | (306) |
Borrowings on revolving credit facility | 415 | ||
Repayments on revolving credit facility | (415) | ||
Issuance of long-term debt | 400 | 1,000 | 470 |
Dividend payments | (89) | (100) | (106) |
Proceeds from exercise of stock options | 19 | 24 | 23 |
Payments on long-term debt | (12) | (1,215) | (117) |
Debt financing fees | (6) | (21) | (9) |
Taxes paid related to net share settlement of equity awards | (1) | (2) | (2) |
Excess tax benefit from stock-based compensation | 6 | 8 | |
Repurchases and redemption of long-term debt | (490) | ||
Net cash used for financing activities | (574) | (564) | (529) |
Effect of exchange rate changes on cash | 4 | (2) | (2) |
Net decrease in cash and cash equivalents | (6) | (47) | (11) |
Cash and cash equivalents at beginning of period | 205 | 252 | 263 |
Cash and cash equivalents at end of period | 199 | 205 | 252 |
Supplemental disclosures: | |||
Interest paid | 124 | 78 | 97 |
Income taxes paid | $ 96 | $ 13 | $ 5 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) $ in Millions | Total | Common Stock | Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss, net of tax |
Balance at Dec. 31, 2014 | $ 1,398 | $ 2 | $ 1,651 | $ (215) | $ (40) |
Stock-based compensation | 10 | 10 | |||
Pension and OPEB liability adjustment | (3) | (3) | |||
Foreign currency translation adjustment | (11) | (11) | |||
Available-for-sale securities | (5) | (5) | |||
Issuance of common stock | 21 | 21 | |||
Repurchase of common stock | (306) | (306) | |||
Dividends on common stock | (106) | (106) | |||
Excess tax benefit from stock-based compensation | 8 | 8 | |||
Net income | 182 | 182 | |||
Balance at Dec. 31, 2015 | 1,188 | 2 | 1,690 | (445) | (59) |
Stock-based compensation | 9 | 9 | |||
Pension and OPEB liability adjustment | 3 | 3 | |||
Foreign currency translation adjustment | (6) | (6) | |||
Available-for-sale securities | (1) | (1) | |||
Issuance of common stock | 23 | 23 | |||
Repurchase of common stock | (256) | (256) | |||
Dividends on common stock | (100) | (100) | |||
Excess tax benefit from stock-based compensation | 6 | 6 | |||
Net income | 215 | 215 | |||
Balance at Dec. 31, 2016 | 1,081 | 2 | 1,728 | (586) | (63) |
Stock-based compensation | 12 | 12 | |||
Pension and OPEB liability adjustment | 26 | 26 | |||
Foreign currency translation adjustment | 15 | 15 | |||
Available-for-sale securities | 7 | 7 | |||
Issuance of common stock | 18 | 18 | |||
Repurchase of common stock | (885) | (1) | (884) | ||
Dividends on common stock | (89) | (89) | |||
Net income | 504 | 504 | |||
Balance at Dec. 31, 2017 | $ 689 | $ 1 | $ 1,758 | $ (1,055) | $ (15) |
OVERVIEW
OVERVIEW | 12 Months Ended |
Dec. 31, 2017 | |
OVERVIEW | NOTE 1. OVERVIEW Overview Allison Transmission Holdings, Inc. and its subsidiaries (“Allison” or the “Company”) design and manufacture commercial and defense fully-automatic transmissions. The business was founded in 1915 and has been headquartered in Indianapolis, Indiana since inception. Allison was an operating unit of General Motors Corporation (“Old GM”) from 1929 until 2007, when Allison once again became a stand-alone company. In March 2012, Allison began trading on the New York Stock Exchange under the symbol, “ALSN”. The Company has approximately 2,700 employees and 13 different transmission product lines. Although approximately 79% of revenues were generated in North America in 2017, the Company has a global presence by serving customers in Europe, Asia, South America and Africa. The Company serves customers through an independent network of approximately 1,400 independent distributor and dealer locations worldwide. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The information herein reflects all normal recurring material adjustments, which are, in the opinion of management, necessary for a fair statement of the results for the periods presented. The consolidated financial statements herein consist of all wholly-owned domestic and foreign subsidiaries with all significant intercompany transactions eliminated. These consolidated financial statements present the financial position, results of comprehensive income, cash flows and statements of equity. The presentation of certain prior year disclosures has been modified to conform to the current year presentation, as commencing in the first quarter of 2017, the Company elected to report financial data in whole millions of dollars, except as otherwise noted. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses. Estimates include, but are not limited to, sales allowances, government price adjustments, fair market values and future cash flows associated with goodwill, indefinite life intangibles, long-lived asset impairment tests, useful lives for depreciation and amortization, warranty liabilities, environmental liabilities, determination of discount and other assumptions for pension and other postretirement benefit expense, income taxes and deferred tax valuation allowances, derivative valuation, and contingencies. The Company’s accounting policies involve the application of judgments and assumptions made by management that include inherent risks and uncertainties. Actual results could differ materially from these estimates. Changes in estimates are recorded in results of operations in the period that the events or circumstances giving rise to such changes occur. Segment Reporting In accordance with the Financial Accounting Standards Board’s (“FASB”) authoritative accounting guidance on segment reporting, the Company has one operating segment and reportable segment. The Company is in one line of business, which is the manufacture and distribution of fully-automatic transmissions. Cash and Cash Equivalents Cash equivalents are defined as short-term, highly-liquid investments with original maturities of 90 days or less. Under the Company’s cash management system, checks issued but not presented to banks may result in book overdraft balances for accounting purposes and are classified within Accounts payable in the Consolidated Balance Sheets. The change in book overdrafts is reported as a component of operating cash flows for Accounts payable. Marketable Securities The Company determines the appropriate classification of all marketable securities as “held-to-maturity,” “available-for-sale” re-evaluates Trading securities are carried at fair value with the unrealized gain or loss recognized in Other (expense) income, net. The fair value of the Company’s investment securities is determined by currently available market prices. See NOTE 6 “Fair Value of Financial Instruments” for more details. Inventories Inventories are stated at the lower of cost and net realizable value. The Company determines cost using the first-in, first-out Property, Plant and Equipment Property, plant and equipment are recorded at cost less accumulated depreciation. Depreciation expense is recorded using the straight-line method over the following estimated lives: Range in Years Land improvements 5 – 30 Buildings and building improvements 10 – 40 Machinery and equipment 2 – 20 Software 2 – 5 Special tools 2 – 10 Software represents the costs of software developed or obtained for internal use. Software costs are amortized on a straight-line basis over their estimated useful lives. Software assets are reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable over the remaining lives of the assets. Upgrades and enhancements are capitalized if they result in added functionality, which enables the software to perform tasks it was previously incapable of performing. Software maintenance, training, data conversion and business process reengineering costs are expensed in the period in which they are incurred. Special tooling represents the costs to design and develop tools, dies, jigs and other items owned by the Company and used in the manufacture of components by suppliers under long-term supply agreements. Special tooling is depreciated over the tool’s expected life. Special tooling used in the development of new technology is expensed as incurred. Engineering, testing and other costs incurred in the design and development of production parts are expensed as incurred. Impairment of Long-Lived Assets The carrying value of long-lived assets is evaluated whenever events or circumstances indicate that the carrying value of an asset may not be recoverable. Events or circumstances that would result in an impairment review primarily include a significant change in the use of an asset or the planned sale or disposal of an asset. The asset would be considered impaired when there is no future use planned for the asset or the future net undiscounted cash flows generated by the asset or asset group are less than its carrying value. An impairment loss would be recognized based on the amount by which the carrying value exceeds fair value. Assumptions and estimates used to determine cash flows in the evaluation of impairment and the fair values used to determine the impairment are subject to a degree of judgment and complexity. Any changes to the assumptions and estimates resulting from changes in actual results or market conditions from those anticipated may affect the carrying value of long-lived assets and could result in an impairment charge. As a result of events and circumstances in the fourth quarter of 2017, the Company reviewed certain of its long-lived assets related to the production of the TC10 product, resulting in a $32 million impairment loss recorded for the year ended December 31, 2017. Continued weak demand conditions for the TC10 product contributed to the future cash flows of the related assets being less than the carrying value of those assets. There were no impairment charges for the year ended December 31, 2016. The Company recorded a $1 million impairment loss during 2015 on certain of its long-lived assets related to the production of the H3000 and H4000 electric hybrid-propulsion systems. Deteriorating market conditions for hybrid-propulsion vehicles, principally as a result of decreased fuel costs, alternative fuels and other technologies, significantly contributed to the future cash flows of the related assets being less than the carrying value of those assets. Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price paid over the fair value of net assets acquired. In accordance with the FASB’s authoritative accounting guidance on goodwill, the Company does not amortize goodwill but rather evaluates it for impairment on an annual basis, or more often if events or circumstances change that could cause goodwill to become impaired. Goodwill is tested for impairment at the reporting unit level, which is the same as the Company’s one operating and reportable segment. The Company does not aggregate any components into its reporting unit. The Company has elected to perform its annual goodwill impairment test on October 31 of every year using a multi-step impairment test. In Step 0, the Company has the option to evaluate various qualitative factors to determine the likelihood of impairment. If determined that the fair value is more likely than not less than the carrying value, then the Company is required to perform Step 1. If the Company does not elect to perform Step 0, it can voluntarily proceed directly to Step 1. In Step 1, the Company performs a quantitative analysis to compare the fair value of its reporting unit to its carrying value including goodwill. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not considered impaired, and the Company is not required to perform further testing. If the carrying value of a reporting unit’s goodwill exceeds its carrying value of net assets, then the Company would record an impairment loss equal to the difference. Goodwill impairment testing for 2017 was performed using the Step 0 analysis of certain trends and factors. The Company’s qualitative assessment included an assessment of business changes, economic outlook, financial trends and forecasts, growth rates, credit ratings, equity ratings, discount rates, industry data and other relevant qualitative factors. Events or circumstances that could unfavorably impact the key assumptions include lower net sales driven by market conditions, our inability to execute on marketing programs and/or growth initiatives, lower gross margins as a result of market conditions or failure to obtain forecasted cost reductions, or a higher discount rate as a result of market conditions. While unpredictable and inherently uncertain, the Company believes the forecast estimates were reasonable and incorporate assumptions that similar market participants would use in their estimates of fair value. These trends and factors were compared to, and based on, the assumptions used in prior years. After reviewing various qualitative factors, the Company’s 2017 annual goodwill impairment test indicated that the fair value of the reporting unit more likely than not exceeded its carrying value, indicating no impairment. Refer to NOTE 5 “Goodwill and Other Intangible Assets” for further information. Other intangible assets have both indefinite and finite useful lives. Intangible assets with indefinite useful lives, such as the Company’s trade name, are not amortized but are tested annually for impairment. The Company has elected to perform our annual trade name impairment test on October 31 of every year and follow a similar multi-step impairment test to that performed on goodwill. Events or circumstances that could unfavorably impact the key assumptions include lower net sales driven by market conditions, our inability to execute on marketing programs and/or delay in introduction of new products, and higher discount rate as a result of market conditions. While unpredictable and inherently uncertain, the Company believes the forecast estimates are reasonable and incorporate those assumptions that similar market participants would use in their estimates of fair value. After reviewing various qualitative factors, the Company’s annual 2017 trade name impairment test, as of October 31, 2017, indicated that the fair value of the trade name more likely than not exceeded its carrying value, indicating no impairment. Refer to NOTE 5 “Goodwill and Other Intangible Assets” for further information. Intangible assets with finite lives are amortized over their estimated useful lives and reviewed for impairment when circumstances change that would create a triggering event. Customer relationships are amortized over the life in which expected benefits are to be consumed. The other remaining finite life intangibles are amortized on a straight-line basis over their useful lives. The Company evaluates the remaining useful life of the other intangible assets on a periodic basis to determine whether events or circumstances warrant a revision to the remaining useful life. Assumptions and estimates about future values and remaining useful lives of the Company’s intangible and other long-lived assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors, such as changes in the Company’s business strategy and internal forecasts. Although management believes the historical assumptions and estimates are reasonable and appropriate, different assumptions and estimates could materially impact the Company’s reported financial results. NOTE 5 “Goodwill and Other Intangible Assets” provides further information. Deferred Financing Costs The debt issuance costs related to line-of-credit non-current Financial Instruments The Company’s cash equivalents are invested in U.S. government backed securities and recorded at fair value in the Consolidated Balance Sheets. The carrying values of accounts receivable and accounts payable approximate fair value due to their short-term nature. The Company’s financial derivative instruments, including interest rate swaps and foreign currency and commodity forward contracts are carried at fair value on the Consolidated Balance Sheets. Refer to NOTE 6 “Fair Value of Financial Instruments” for more detail. The Company’s long-term debt obligations are carried at historical amounts with the Company providing fair value disclosure in NOTE 7 “Debt”. Insurable Liabilities The Company records liabilities for its medical, workers’ compensation, long-term disability, product, general and auto liabilities. The determination of these liabilities and related expenses is dependent on claims experience. For most of these liabilities, claims incurred but not yet reported are estimated based upon historical claims experience. Revenue Recognition The Company records sales when title has transferred to the customer, there is evidence of an agreement, the sales price is fixed or determinable, delivery has occurred or services have been rendered, and collectability is reasonably assured. The Company sells extended transmission coverage (“ETC”) for which sales are deferred. ETC sales are recognized ratably over the period of the ETC, which typically ranges from two to five years after initial sale. Costs associated with ETC programs are recorded as incurred during the extended period. Distributor and customer sales incentives, consisting of allowances and other rebates, are estimated at the time of sale based upon the Company’s history and experience and are recorded as a reduction to Net sales. Incentive programs are generally product specific or region specific. Some factors used in estimating the cost of incentives include the number of transmissions that will be affected by the incentive program and rate of acceptance of any incentive program. If the actual number of affected transmissions differs from this estimate, or if a different mix of incentives is actually paid, the impact on Net sales would be recorded in the period that the change was identified. Consideration given to commercial customers recorded as a reduction of Net sales in the Consolidated Statements of Comprehensive Income included $66 million, $58 million, and $47 million for the years ended December 31, 2017, 2016 and 2015, respectively. Sales under U.S. government production contracts are recorded when the product is accepted, title has transferred to the U.S. government, the sales price is fixed or determinable, delivery has occurred, and any other terms of the contract have been met. Deferred revenue arises from cash received in advance of the culmination of the earnings process and is recognized as revenue in future periods when the applicable revenue recognition criteria have been met. Under the terms of previous U.S. government contracts, there were certain price reduction clauses and provisions for potential price reductions which were estimated at the time of sale based upon the Company’s history and experience and were recorded as a reduction to Net sales. Potential reductions may be attributed to a change in projected sales volumes or plant efficiencies which impact overall costs. As of each of December 31, 2017 and 2016, the Company had $56 million recorded in the price reduction reserve account. The Company engages in licensing agreements with certain third parties for the use of the Company’s intellectual property. Deferred revenue arises from cash received in advance of the period of use of the intellectual property. Revenue is recognized over the license period as it is earned. The Company classifies shipping and handling billed to customers in Net sales and shipping and handling costs in Cost of sales, in accordance with authoritative accounting guidance. The Company contracts with various third parties to provide engineering services. These services are recorded as Net sales in accordance with the terms of the contract. The saleable engineering recorded was $3 million, $3 million and $4 million for the years ended December 31, 2017, 2016 and 2015, respectively. The associated costs are recorded in Cost of sales. Warranty Provisions for estimated expenses related to product warranties are made at the time products are sold. Warranty claims arise when a transmission fails while in service during the relevant warranty period. The warranty reserve is adjusted in Selling, general and administrative based on the Company’s current and historical warranty claims paid and associated repair costs. These estimates are established using historical information including the nature, frequency, and average cost of warranty claims and are adjusted as actual information becomes available. From time to time, the Company may initiate a specific field action program. As a result of the uncertainty surrounding the nature and frequency of specific field action programs, the liability for such programs is recorded when the Company commits to an action. The Company reviews and assesses the liability for these programs on a quarterly basis. The Company also assesses its ability to recover certain costs from its suppliers and records a receivable from the supplier when it believes a recovery is probable. Warranty costs may differ from those estimated if actual claim rates are higher or lower than our historical rates. Research and Development The Company incurs costs in connection with research and development programs that are expected to contribute to future earnings. Such costs are charged to Engineering — research and development as incurred. Environmental The Company accrues costs related to environmental matters when it is probable that the Company has incurred a liability related to a contaminated site and the costs can be reasonably estimated. For additional information, see NOTE 16 “Commitments and Contingencies”. Foreign Currency Translation Most of the subsidiaries outside the United States prepare financial statements in currencies other than the U.S. Dollar. The functional currency for all of these subsidiaries is the local currency, except for the Company’s Hong Kong and Middle East subsidiaries which currently use the U.S. Dollar as their functional currency. Balances are translated at period-end Derivative Instruments In the normal course of business, the Company is exposed to fluctuations in interest rates, foreign currency exchange rates, and commodity prices. The risk is managed through the use of financial derivative instruments including interest rate swaps and commodity and foreign currency forward contracts, when appropriate. Despite the fact that the Company either has not elected or does not qualify for hedge accounting treatment on all of its derivative instruments, the contracts are used strictly as an economic hedge and not for speculative purposes. As necessary, the Company adjusts the values of the derivative instruments for counter-party or credit risk. NOTE 8 “Derivatives” provides further information on the accounting treatment of the Company’s derivative instruments. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The future tax benefits associated with operating loss and tax credit carryforwards are recognized as deferred tax assets. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The need to establish a valuation allowance against the deferred tax assets is assessed periodically based on a more-likely-than-not Stock-Based Compensation In March 2015, the Company’s Board of Directors adopted and, in May 2015, the Company’s stockholders approved the Allison Transmission Holdings, Inc. 2015 Equity Incentive Award Plan (“2015 Plan”), which became effective on May 14, 2015. Under the 2015 Plan, certain employees (including executive officers), consultants and directors are eligible to receive equity-based compensation, including non-qualified Prior to the adoption of the 2015 Plan, the Company’s equity-based awards were granted under the Allison Transmission Holdings, Inc. 2011 Equity Incentive Award Plan (“2011 Plan”) and the Equity Incentive Plan of Allison Transmission Holdings, Inc. (“Equity Plan” and, together with the 2011 Plan, the “Prior Plans”). As of the effective date of the 2015 Plan, no new awards will be granted under the Prior Plans, but the Prior Plans will continue to govern the equity awards issued under the Prior Plans. RSUs are recorded at fair market value at the date of grant and vest upon continued performance of services by the RSU holders over one to three years. Restricted stock awards are recorded at fair market value at the date of grant and the restrictions lapse upon continued performance by the restricted stock holders on the vest date which generally occurs over one, two or three years. Performance awards are recorded at fair value based on a Monte-Carlo pricing model and the restrictions lapse on the date the Compensation Committee of the Board of Directors determines the number of shares that shall vest based on the total stockholder return of the Company relative to the specified peer group. Non-qualified The Company has made a policy election under applicable accounting guidance to account for forfeitures as a reduction of stock-based compensation expense when the forfeiture actually occurs. Restricted stock and RSUs were granted to certain employees and directors at fair market value on the date of grant. The restrictions lapse upon continued performance by the restricted stock or RSU holders on the vest date which generally occurs over one, two or three years. Restricted stock and RSU incentive compensation expense recorded was $7 million, $2 million and $2 million for the years ended December 31, 2017, 2016 and 2015, respectively. Performance awards were granted to certain employees at fair value at the date of grant. The Company records the fair value of each performance award based on a Monte-Carlo pricing model. Performance award incentive compensation expense recorded was $3 million, $1 million and $1 million for the years ended December 31, 2017, 2016 and 2015, respectively. Stock options were granted to certain employees at fair value on the date of grant using a Black-Scholes option pricing model. Stock option incentive compensation expense recorded was $2 million, $3 million and $4 million for the years ended December 31, 2017, 2016 and 2015, respectively. Pension and Post-retirement Benefit Plans For pension and other post-retirement benefits (“OPEB”) plans in which employees participate, costs are determined within the FASB’s authoritative accounting guidance set forth in employers’ defined benefit pensions including accounting for settlements and curtailments of defined benefit pension plans, termination of benefits and accounting for post-retirement benefits other than pensions. In accordance with the authoritative accounting guidance, the Company recognizes the funded status of its defined benefit pension plans and OPEB plan in its Consolidated Balance Sheets with a corresponding adjustment to AOCL, net of tax. Post-retirement benefit costs consist of service cost and interest cost on accrued obligations. Actuarial gains and losses on liabilities together with any prior service costs are charged (or credited) to income over the average remaining service lives of employees. The benefit cost components shown in the Consolidated Statements of Comprehensive Income are based upon various actuarial assumptions and methodologies as prescribed by authoritative accounting guidance. These assumptions include discount rates, expected return on plan assets, health care cost trend rates, inflation, rate of compensation increases, population demographics, mortality rates and other factors. The Company reviews all actuarial assumptions on an annual basis. Changes in key economic indicators can change these assumptions. These assumptions, along with the actual value of assets at the measurement date, will impact the calculation of pension expenses for the year. Recently Adopted Accounting Pronouncements In May 2017, the FASB issued authoritative accounting guidance on accounting for modifications to the terms of employee stock compensation. The guidance clarifies which changes to terms or conditions of share-based payment awards require the entity to apply modification accounting. The guidance was adopted by the Company effective January 1, 2018. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements. In March 2017, the FASB issued authoritative accounting guidance on the presentation of net periodic pension costs and net periodic postretirement benefit costs. The guidance clarifies the presentation of component costs within an employer’s financial statements and restricts component costs eligible for capitalization to the service cost component. The guidance was adopted by the Company effective January 1, 2018. In January 2017, the FASB issued authoritative accounting guidance on evaluation of goodwill for impairment. The guidance modifies the approach to assessing impairment from testing the implied fair value goodwill to testing the fair value of the reporting unit carrying the goodwill, which eliminates Step 2 of the prior evaluation guidance. The intent of this amendment is to reduce the cost and complexity of evaluating goodwill. The guidance was early adopted by the Company effective July 1, 2017. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements. In October 2016, the FASB issued authoritative accounting guidance on the income tax consequences of intra-company transfers other than inventory. This guidance addresses the timing of the recognition of current and deferred income taxes. Under this guidance, the recognition of current or deferred income taxes will occur at the time of the transfer of the asset. The guidance was adopted by the Company effective January 1, 2018. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements. In August 2016, the FASB issued authoritative accounting guidance on the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The guidance specifically addresses cash flow issues with the objective of reducing the diversity in practice. The guidance was adopted by the Company effective January 1, 2018. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements. In March 2016, the FASB issued authoritative accounting guidance on share-based payment awards to employees. The guidance involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance was adopted by the Company effective January 1, 2017. Management recorded an excess tax benefit of $18 million to income tax expense and as a component of operating cash flows for the year ended December 31, 2017, and made the accounting policy election to account for forfeitures in stock-based compensation as they occur. In January 2016, the FASB issued authoritative accounting guidance on the classification of equity securities with readily determinable fair values into different categories (e.g. trading or available-for-sale) In July 2015, the FASB issued authoritative accounting guidance to simplify the measurement of inventory. The guidance requires that inventory be measured at the lower of cost and net realizable value. When evidence exists that the net realizable value of inventory is lower than its cost, the difference shall be recognized as a loss in earnings in the period in which it occurs. Inventory measured using last-in, first-out In May 2014, the FASB issued authoritative accounting guidance on a company’s accounting for revenue from contracts with customers, which guidance has subsequently been amended. The guidance applies to all companies that enter into contracts with customers to transfer goods, services or nonfinancial assets. The guidance requires these companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, timing, amount and uncertainty of revenue that is recognized. The guidance allows either full or modified retrospective adoption. The guidance was adopted by the Company effective January 1, 2018 using the modified retrospective approach. Management expects that the revenue streams that will be impacted by the guidance, although immaterially, relate to non-standard Recently Issued Accounting Pronouncements In February 2016, the FASB issued authoritative accounting guidance on lease accounting. The guidance requires lessees to present right-of-use |
INVENTORIES
INVENTORIES | 12 Months Ended |
Dec. 31, 2017 | |
INVENTORIES | NOTE 3. INVENTORIES Inventories consisted of the following components (dollars in millions): December 31, December 31, Purchased parts and raw materials $ 79 $ 57 Work in progress 6 5 Service parts 46 43 Finished goods 23 21 Total inventories $ 154 $ 126 Inventory components shipped to third parties, primarily cores, parts to re-manufacturers, |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2017 | |
PROPERTY, PLANT AND EQUIPMENT | NOTE 4. PROPERTY, PLANT AND EQUIPMENT The cost and accumulated depreciation of property, plant and equipment are as follows (dollars in millions): December 31, December 31, Land and land improvements $ 24 $ 25 Buildings and building improvements 322 303 Machinery and equipment 601 590 Software 136 128 Special tools 169 157 Construction in progress 46 46 Total property, plant and equipment 1,298 1,249 Accumulated depreciation (850 ) (785 ) Property, plant and equipment, net $ 448 $ 464 Depreciation of property, plant and equipment was $80 million, $84 million and $88 million for the years ended December 31, 2017, 2016 and 2015, respectively. As a result of events and circumstances in the fourth quarter of 2017, the Company reviewed certain machinery and equipment and special tools related to the production of the TC10 product. The Company completed a test for recoverability using the undiscounted cash flows of the TC10 product line. Due to continued weak demand conditions for the TC10 product, the future undiscounted cash flows of the related assets were less than the carrying value of those assets. The Company used a market approach to determine the fair value of the assets, resulting in a $32 million loss for the year ended December 31, 2017. During 2015, the Company recorded an impairment of certain machinery and equipment and special tools associated with the production of the H3000 and H4000 electric hybrid-propulsion systems. See NOTE 2 “Summary of Significant Accounting Policies”, Impairment of Long-Lived Assets |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2017 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | NOTE 5. GOODWILL AND OTHER INTANGIBLE ASSETS As of December 31, 2017 and 2016, the carrying amount of the Company’s Goodwill was $1,941 million. The following presents a summary of other intangible assets (dollars in millions): December 31, 2017 December 31, 2016 Intangible Accumulated Intangible Intangible Accumulated Intangible Other intangible assets: Trade name $ 790 $ — $ 790 $ 790 $ — $ 790 Customer relationships – commercial 832 (573 ) 259 832 (526 ) 306 Proprietary technology 476 (396 ) 80 476 (358 ) 118 Customer relationships – defense 62 (38 ) 24 62 (35 ) 27 Non-compete 17 (17 ) — 17 (16 ) 1 Patented technology – defense 28 (28 ) — 28 (28 ) — Tooling rights 5 (5 ) — 5 (5 ) — Total $ 2,210 $ (1,057 ) $ 1,153 $ 2,210 $ (968 ) $ 1,242 Amortization of intangible assets was $90 million, $92 million and $97 million for the years ended December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017 and 2016, the net carrying value of the Company’s Goodwill and Other intangible assets, net was $3,094 million and $3,183 million, respectively. The Company’s 2017 annual goodwill impairment test indicated that the fair value of the reporting unit exceeded its carrying value, indicating no impairment. As of December 31, 2015, the Company recorded a trade name impairment charge of $80 million. The impairment charge was a result of a decline in forecasted net sales for certain of the Company’s end markets. The trade name impairment did not result in any other charges to goodwill, other intangible assets or long-lived assets. Amortization expense related to other intangible assets for the next five years is expected to be (dollars in millions): 2018 2019 2020 2021 2022 Amortization expense $ 87 $ 86 $ 50 $ 45 $ 43 |
FAIR VALUE OF FINANCIAL INSTRUM
FAIR VALUE OF FINANCIAL INSTRUMENTS | 12 Months Ended |
Dec. 31, 2017 | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS In accordance with the FASB’s authoritative accounting guidance on fair value measurements, fair value is the price (exit price) that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company primarily applies the market approach for recurring fair value measurements and utilizes the best available information that maximizes the use of observable inputs and minimizes the use of unobservable inputs. The Company is able to classify fair value balances based on the observability of those inputs. The accounting guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy defined by the relevant guidance are as follows: Level 1 — Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, listed equities and publicly traded bonds. Level 2 — Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes financial instruments that are valued using quoted prices in markets that are not active and those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Level 3 — Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. At each balance sheet date, the Company performs an analysis of all instruments subject to authoritative accounting guidance and includes, in Level 3, all of those whose fair value is based on significant unobservable inputs. As of December 31, 2017 and 2016, the Company did not have any Level 3 financial assets or liabilities. The Company’s assets and liabilities that are measured at fair value include cash equivalents, available-for-sale available-for-sale The Company’s valuation techniques used to calculate the fair value of cash and cash equivalents, available-for-sale The Company uses valuations from the issuing financial institution for the fair value measurement of interest rate derivatives. The Company corroborates the valuation through the use of third-party valuation services using a standard replacement valuation model. The floating-to-fixed non-current The following table summarizes the fair value of the Company’s financial assets and (liabilities) as of December 31 (dollars in millions): Fair Value Measurements Using Quoted Prices in Active Significant Other TOTAL 2017 2016 2017 2016 2017 2016 Cash equivalents $ 50 $ 81 $ — $ — $ 50 $ 81 Rabbi trust assets 8 5 — — 8 5 Deferred compensation obligation (8 ) (5 ) — — (8 ) (5 ) Available-for-sale — 2 — — — 2 Derivative liabilities, net — — — (29 ) — (29 ) Total $ 50 $ 83 $ — $ (29 ) $ 50 $ 54 |
DEBT
DEBT | 12 Months Ended |
Dec. 31, 2017 | |
DEBT | NOTE 7. DEBT Long-term debt and maturities are as follows (dollars in millions): December 31, December 31, Long-term debt: Senior Secured Credit Facility Term B-3 $ 1,176 $ 1,188 Senior Notes, fixed 5.0%, due 2024 1,000 1,000 Senior Notes, fixed 4.75%, due 2027 400 — Total long-term debt $ 2,576 $ 2,188 Less: current maturities of long-term debt 12 12 deferred financing costs, net (see NOTE 2) 30 29 Total long-term debt, net $ 2,534 $ 2,147 Principal payments required on long-term debt during the next five years are as follows: (dollars in millions) 2018 2019 2020 2021 2022 Payments $ 12 $ 12 $ 12 $ 12 $ 1,128 As of December 31, 2017, the Company had $2,576 million of indebtedness associated with Allison Transmission, Inc.’s (“ATI”), the Company’s wholly-owned subsidiary, 5.0% Senior Notes due September 2024 (“5.0% Senior Notes”), ATI’s 4.75% Senior Notes due October 2027 (“4.75% Senior Notes”) and ATI’s Senior Secured Credit Facility (“Senior Secured Credit Facility”), which consists of the Senior Secured Credit Facility Term B-3 B-3 The fair value of the Company’s long-term debt obligations as of December 31, 2017 was $2,622 million. The fair value is based on quoted Level 2 market prices of the Company’s debt as of December 31, 2017. It is not expected that the Company would be able to repurchase a significant amount of its debt at these levels. The difference between the fair value and carrying value of the long-term debt is driven primarily by trends in the financial markets. Senior Secured Credit Facility In March 2017, ATI entered into an amendment with the term loan lenders under its Senior Secured Credit Facility to lower the applicable margins on the Term B-3 B-3 In September 2017, ATI entered into a joinder agreement with the lenders under its Senior Secured Credit Facility to increase the available commitments under the Revolving Credit Facility from $450 million to $550 million. The joinder agreement was treated as a modification to the Revolving Credit Facility under GAAP. The Senior Secured Credit Facility is collateralized by a lien on substantially all assets of the Company including all of ATI’s capital stock and all of the capital stock or other equity interest held by the Company, ATI and each of the Company’s existing and future U.S. subsidiary guarantors (subject to certain limitations for equity interests of foreign subsidiaries and other exceptions set forth in the terms of the Senior Secured Credit Facility). Interest on the Term B-3 all-in B-3 B-3 non-ordinary B-3 non-ordinary The Senior Secured Credit Facility also provides a Revolving Credit Facility, net of an allowance for up to $75 million in outstanding letters of credit commitments. Throughout the year ended December 31, 2017, the Company made periodic withdrawals and payments on the Revolving Credit Facility as part of its debt management plans. The maximum amount outstanding at any time during the year ended December 31, 2017 on the Revolving Credit Facility was $300 million. As of December 31, 2017, the Company had $533 million available under the Revolving Credit Facility, net of $17 million in letters of credit. Revolving credit borrowings bear interest at a variable base rate plus an applicable margin based on the Company’s total leverage ratio. Interest on the Revolving Credit Facility is either (a) 1.75% over the LIBOR or (b) 0.75% over the greater of the prime lending rate in effect on such day and the federal funds effective rate published by the Federal Reserve Bank of New York plus 0.5%, provided that neither is below 1.75%. In addition, there is an annual commitment fee, based on the Company’s total leverage ratio, on the average unused revolving credit borrowings available under the Revolving Credit Facility. Revolving credit borrowings are payable at the option of the Company throughout the term of the Senior Secured Credit Facility with the balance due in September 2021. The Senior Secured Credit Facility requires the Company to maintain a specified maximum total senior secured leverage ratio of 5.50x when revolving loan commitments remain outstanding on the Revolving Credit Facility at the end of a fiscal quarter. As of December 31, 2017, the Company had no revolving loans outstanding; however the Company would have been in compliance with the maximum total senior secured leverage ratio, achieving a 1.13x ratio. Additionally, within the terms of the Senior Secured Credit Facility, a senior secured leverage ratio at or below 4.00x results in the elimination of excess cash flow payments on the Senior Secured Credit Facility for the applicable year. The Senior Secured Credit Facility also provides certain financial incentives based on our total leverage ratio. A total leverage ratio at or below 4.00x results in a 25 basis point reduction to the applicable margin on the Revolving Credit Facility, and a total leverage ratio at or below 3.50x results in a 12.5 basis point reduction to the Revolving Credit Facility commitment fee and an additional 25 basis point reduction to the applicable margin on the Revolving Credit Facility. These reductions would remain in effect as long as the Company achieves a total leverage ratio at or below the related threshold. As of December 31, 2017, the Company’s total leverage ratio was 2.74x. In addition, the Senior Secured Credit Facility, among other things, includes customary restrictions (subject to certain exceptions) on the Company’s ability to incur certain indebtedness, grant certain liens, make certain investments, declare or pay certain dividends, or repurchase shares of the Company’s common stock. As of December 31, 2017, the Company is in compliance with all covenants under the Senior Secured Credit Facility. 5.0% Senior Notes In September 2016, ATI completed an offering of $1,000 million of the 5.0% Senior Notes. The 5.0% Senior Notes were offered in a private placement exempt from registration under the Securities Act of 1933, as amended. The proceeds from the offering, together with cash on hand, were used to repay $1,200 million of the Term B-3 ATI may from time to time seek to retire the 5.0% Senior Notes through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, contractual redemptions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. Prior to October 1, 2019, ATI may redeem up to 40% of the 5.0% Senior Notes by paying a price equal to 100% of the principal amount being redeemed plus the applicable “make-whole” premium. At any time on or after October 1, 2019, ATI may redeem some or all of the 5.0% Senior Notes at specified redemption prices in the governing indenture. The 5.0% Senior Notes are unsecured and are guaranteed by each of ATI’s domestic subsidiaries that is a borrower under or guarantees the Senior Secured Credit Facility and are unconditionally guaranteed, jointly and severally, by any of ATI’s future domestic subsidiaries that are borrowers under or guarantee the Senior Secured Credit Facility. None of ATI’s domestic subsidiaries currently guarantee its obligations under the Senior Secured Credit Facility, and therefore none of ATI’s domestic subsidiaries currently guarantee the 5.0% Senior Notes. The indenture governing the 5.0% Senior Notes contains negative covenants restricting or limiting the Company’s ability to, among other things: incur or guarantee additional indebtedness, incur liens, pay dividends on, redeem or repurchase the Company’s capital stock, make certain investments, permit payment or dividend restrictions on certain of the Company’s subsidiaries, sell assets, engage in certain transactions with affiliates, and consolidate or merge or sell all or substantially all of the Company’s assets. As of December 31, 2017, the Company was in compliance with all covenants under the indenture governing the 5.0% Senior Notes. 4.75% Senior Notes In September 2017, ATI completed an offering of $400 million of 4.75% Senior Notes. The 4.75% Senior Notes were offered in a private placement exempt from registration under the Securities Act of 1933, as amended. The proceeds from the offering were used for general corporate purposes and to pay related transaction fees and expenses. As a result of the offering, the Company recorded approximately $5 million as deferred financing fees in the Consolidated Balance Sheets. ATI may from time to time seek to retire the 4.75% Senior Notes through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, contractual redemptions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. Prior to October 1, 2020, ATI may redeem up to 40% of the 4.75% Senior Notes by paying a price equal to 104.75% of the principal amount being redeemed. Prior to October 1, 2022, ATI may redeem some or all of the 4.75% Senior Notes by paying a price equal to 100.00% of the principal amount being redeemed, plus a “make-whole” premium. At any time on or after October 1, 2022, ATI may redeem some or all of the 4.75% Senior Notes at specified redemption prices in the governing indenture. The 4.75% Senior Notes are unsecured and are guaranteed by each of ATI’s domestic subsidiaries that is a borrower under or guarantees the Senior Secured Credit Facility and are unconditionally guaranteed, jointly and severally, by any of ATI’s future domestic subsidiaries that are borrowers under or guarantee the Senior Secured Credit Facility. None of ATI’s domestic subsidiaries currently guarantee its obligations under the Senior Secured Credit Facility, and therefore none of ATI’s domestic subsidiaries currently guarantee the 4.75% Senior Notes. The indenture governing the 4.75% Senior Notes contains negative covenants restricting or limiting the Company’s ability to, among other things: incur or guarantee additional indebtedness, incur liens, pay dividends on, redeem or repurchase the Company’s capital stock, make certain investments, permit payment or dividend restrictions on certain of the Company’s subsidiaries, sell assets, engage in certain transactions with affiliates, and consolidate or merge or sell all or substantially all of the Company’s assets. As of December 31, 2017, the Company was in compliance with all covenants under the indenture governing the 4.75% Senior Notes. |
DERIVATIVES
DERIVATIVES | 12 Months Ended |
Dec. 31, 2017 | |
DERIVATIVES | NOTE 8. DERIVATIVES The Company is exposed to certain financial risk from volatility in interest rates, foreign exchange rates and commodity prices. The risk is managed through the use of financial derivative instruments including interest rate swaps, foreign currency swaps and commodity swaps, when appropriate. Currently, the Company does not have any derivative instruments. The Company’s derivative instruments outstanding during 2017 were used strictly as an economic hedge and not for speculative purposes. As necessary, the Company adjusts the values of the derivative instruments for counter-party or credit risk. Interest Rate The Company is subject to interest rate risk related to the Senior Secured Credit Facility and entered into interest rate swap contracts that were based on the LIBOR to manage a portion of this exposure. The Company did not elect hedge accounting treatment for these derivatives, and as a result, fair value adjustments were charged directly to Interest expense, net in the Consolidated Statements of Comprehensive Income. During December 2017, the Company terminated the interest rate swap contracts. A summary of the Company’s interest rate derivatives as of December 31, 2017 and 2016 follows (dollars in millions): December 31, 2017 December 31, 2016 Notional Fair Value Notional Fair Value 3.44% Interest Rate Swap L, Aug 2016 – Aug 2019* $ — — $ 75 (4 ) 3.43% Interest Rate Swap M, Aug 2016 – Aug 2019* — — 100 (5 ) 3.37% Interest Rate Swap N, Aug 2016 – Aug 2019* — — 75 (3 ) 3.19% Interest Rate Swap O, Aug 2016 – Aug 2019* — — 75 (3 ) 3.08% Interest Rate Swap P, Aug 2016 – Aug 2019* — — 75 (3 ) 2.99% Interest Rate Swap Q, Aug 2016 – Aug 2019* — — 50 (2 ) 2.98% Interest Rate Swap R, Aug 2016 – Aug 2019* — — 50 (2 ) 2.73% Interest Rate Swap S, Aug 2016 – Aug 2019* — — 50 (1 ) 2.74% Interest Rate Swap T, Aug 2016 – Aug 2019* — — 75 (2 ) 2.66% Interest Rate Swap U, Aug 2016 – Aug 2019* — — 50 (1 ) 2.60% Interest Rate Swap V, Aug 2016 – Aug 2019* — — 50 (1 ) 2.40% Interest Rate Swap W, Aug 2016 – Aug 2019* — — 25 (1 ) 2.25% Interest Rate Swap X, Aug 2016 – Aug 2019* — — 50 (1 ) * includes LIBOR floor of 1.00% $ — $ — $ 800 $ (29 ) The following tabular disclosures further describe the Company’s interest rate derivative instruments and their impact on the financial condition of the Company (dollars in millions): December 31, 2017 December 31, 2016 Balance Sheet Location Fair Value Balance Sheet Location Fair Value Derivatives not designated as hedging instruments Interest rate swaps Other current $ — Other current $ (11 ) Other non-current liabilities — Other non-current liabilities (18 ) Total derivatives not designated as hedging instruments $ — $ (29 ) The following tabular disclosure describes the location and impact on the Company’s results of operations related to gain (loss) on interest rate derivatives (dollars in millions): December 31, December 31, December 31, Location of impact on results of operations Interest income (expense),net $ 16 $ — $ (14 ) |
PRODUCT WARRANTY LIABILITIES
PRODUCT WARRANTY LIABILITIES | 12 Months Ended |
Dec. 31, 2017 | |
PRODUCT WARRANTY LIABILITIES | NOTE 9. PRODUCT WARRANTY LIABILITIES As of December 31, 2017, the current and non-current non-current Year ended Year ended Year ended Beginning balance $ 63 $ 79 $ 84 Payments (30 ) (35 ) (33 ) Increase in liability (warranty issued during period) 18 16 21 Net adjustments to liability 4 3 6 Accretion (for predecessor liabilities) — — 1 Ending balance $ 55 $ 63 $ 79 During 2017, 2016 and 2015, the Company recorded approximately $1 million, $1 million and $9 million, respectively, of adjustments to the product warranty liabilities as a result of specific field action programs. As a result of the uncertainty surrounding the nature and frequency of specific field action programs, these liabilities will change as additional field information becomes available. The remaining adjustments to the total liability in 2017, 2016 and 2015, excluding the Dual Power Inverter Module (“DPIM”) as discussed below, were the result of general changes in estimates for various products as additional claims data and field information became available. Dual Power Inverter Module During June 2007, Old GM recognized the estimated cost of replacing the DPIM used on H 40/50 EP electric hybrid systems. Certain units were falling short of their expected service life and the Company’s predecessor, Allison Transmission, an operating unit of Old GM, decided to cover repair or replacement for an extended period. The Company is responsible for the first $12 million of qualified cost while General Motors Company (“GM”) is responsible for the next $34 million of costs, with any amount over $46 million being shared one-third two-thirds |
DEFERRED REVENUE
DEFERRED REVENUE | 12 Months Ended |
Dec. 31, 2017 | |
DEFERRED REVENUE | NOTE 10. DEFERRED REVENUE As of December 31, 2017, the current and non-current non-current Year ended Year ended Year ended Beginning balance $ 93 $ 79 $ 69 Increases 52 37 32 Revenue earned (29 ) (23 ) (22 ) Ending balance $ 116 $ 93 $ 79 Deferred revenue recorded in current and non-current non-current |
OTHER (EXPENSE) INCOME, NET
OTHER (EXPENSE) INCOME, NET | 12 Months Ended |
Dec. 31, 2017 | |
OTHER (EXPENSE) INCOME, NET | NOTE 11. OTHER (EXPENSE) INCOME, NET Other (expense) income, net consists of the following (dollars in millions): Years ended December 31, 2017 2016 2015 Technology-related investment expense $ (16 ) $ (1 ) $ — Vendor settlements (5 ) 1 3 Other (1 ) 2 (3 ) Total $ (22 ) $ 2 $ — |
OTHER CURRENT LIABILITIES
OTHER CURRENT LIABILITIES | 12 Months Ended |
Dec. 31, 2017 | |
OTHER CURRENT LIABILITIES | NOTE 12. OTHER CURRENT LIABILITIES Other current liabilities consist of the following (dollars in millions): As of As of Payroll and related costs $ 73 $ 52 Sales allowances 34 24 Accrued interest payable 19 17 Vendor buyback obligation 14 13 Taxes payable 10 10 Defense price reduction reserve 9 9 Non-trade 8 4 Derivative liabilities — 11 Other accruals 16 10 Total $ 183 $ 150 |
EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS | 12 Months Ended |
Dec. 31, 2017 | |
EMPLOYEE BENEFIT PLANS | NOTE 13. EMPLOYEE BENEFIT PLANS The Company’s hourly defined benefit pension plan generally provides benefits of negotiated, stated amounts for each year of service as well as significant supplemental benefits for employees who retire with 30 years of service before normal retirement age. Any difference between actual and expected returns on assets during a year and actuarial gains and losses on liabilities together with any prior service costs are charged (or credited) to income over the average remaining service lives of employees. The benefit cost components shown in the Consolidated Statements of Comprehensive Income are based upon certain data specific to the Company, actuarial assumptions that were used for accounting disclosures, and certain allocation methodologies such as population demographics. For all hourly employees hired after May 18, 2008, the defined benefit pension plan was replaced with a defined contribution pension plan, and the company-sponsored retiree healthcare was also eliminated for those hired after May 18, 2008. The charge to expense for the hourly defined contribution pension plan was $2 million for each of the years ended December 31, 2017, 2016 and 2015. The Company’s salaried defined benefit plan covering salaried employees with a service date prior to January 1, 2001 is generally based on years of service and compensation history. Any difference between actual and expected returns on assets during a year and actuarial gains and losses on liabilities together with any prior service costs are charged (or credited) to income over the average remaining service lives of employees. The benefit cost components shown in the Consolidated Statements of Comprehensive Income are based upon certain data specific to the Company, actuarial assumptions that were used for accounting disclosures, and certain allocation methodologies such as population demographics. The Company’s salaried defined contribution retirement savings plan requires the Company to match employee contributions up to certain predefined limits based upon eligible base salary. In addition to the matching contribution, the Company is required to make a contribution equal to 1% of eligible base salary for salaried employees with a service date on or after January 1, 1993 to cover certain benefits in retirement that are different from salaried employees with a service date prior to January 1, 1993. In addition, for salaried employees with a service date on or after January 1, 2001, the Company is required to contribute to its defined contribution retirement savings plan an amount equal to 4% of eligible base salary under the program. The charge to expense for the salaried defined contribution retirement savings plan was $6 million for each of the years ended December 31, 2017, 2016 and 2015. The Company is also responsible for OPEB costs (medical, dental, vision, and life insurance) for hourly employees hired prior to May 19, 2008. Post-retirement benefit costs consist of service cost and interest cost on accrued obligations. Actuarial gains and losses on liabilities and any prior service costs are charged (or credited) to income over the average remaining service lives of employees. The benefit cost components shown in the Consolidated Statements of Comprehensive Income are based upon certain data specific to the Company, actuarial assumptions that were used for OPEB accounting disclosures, and certain allocation methodologies such as population demographics. The plan is unfunded and any future payments will be funded by the Company’s operating cash flows. As of December 31, 2017 and 2016, the Company had an estimated OPEB liability for hourly employees hired prior to May 19, 2008, excluding those employees eligible to retire at the time of the sale of the Company, of $102 million and $144 million, respectively. As part of the Affordable Care Act enacted in 2010, the Company has evaluated the impact on “High-cost Health Plans” in which employers offering health plan coverage exceeding certain thresholds must pay an excise tax equal to 40% of the value of the plan that exceeds the threshold amount. As a result of the excise tax, the Company has recorded $2 million in its OPEB liability as of both December 31, 2017 and 2016 with a corresponding adjustment to AOCL, net of tax. The Company provides contributions to certain international benefit plans; however, these contributions are not material for the periods presented. For all pension and OPEB plans in which employees participate, costs are determined within the FASB’s authoritative accounting guidance set forth on employers’ defined benefit pensions including accounting for settlements and curtailments of defined benefit pension plans, termination of benefits and accounting for post-retirement benefits other than pensions. In accordance with the authoritative accounting guidance, the Company recognizes the funded status of its defined benefit pension plans and OPEB plan in its Consolidated Balance Sheets with a corresponding adjustment to AOCL, net of tax. Information about the net periodic benefit cost and other changes recognized in AOCL for the pension and post-retirement benefit plans is as follows (dollars in millions): Pension Plans Post-retirement Benefits Year ended Year ended Year ended Year ended Year ended Year ended Net Periodic Benefit Cost: Service cost $ 12 $ 13 $ 14 $ 2 $ 2 $ 2 Interest cost 6 6 5 6 7 5 Expected return on assets (7 ) (7 ) (8 ) — — — Prior service credit — — — (4 ) (4 ) (3 ) Net Periodic Benefit Cost $ 11 $ 12 $ 11 $ 4 $ 5 $ 4 Other changes recognized in other comprehensive income: Prior service cost (credit) $ 1 $ (5 ) $ — $ (73 ) $ — $ — Net loss (gain) 8 8 (4 ) 24 (11 ) 4 Amortizations — — — 4 4 4 Total recognized – other comprehensive income $ 9 $ 3 $ (4 ) $ (45 ) $ (7 ) $ 8 The table below provides the weighted-average actuarial assumptions used to determine the net periodic benefit cost. Pension Plans Post-retirement Benefits Year ended Year ended Year ended Year ended Year ended Year ended Discount rate 4.10 % 4.40 % 3.90 % 4.30 % 4.60 % 4.00 % Rate of compensation increase (salaried) 3.00 % 3.00 % 3.00 % N/A N/A N/A Expected return on assets 4.70 % 4.70 % 6.25 % N/A N/A N/A The table below provides the weighted-average actuarial assumptions used to determine the benefit obligations of the Company’s plans. Pension Plans Post-retirement Benefits As of December 31, 2017 2016 2017 2016 Discount rate 3.50 % 4.10 % 3.60 % 4.30 % Rate of compensation increase (salaried) 3.00 % 3.00 % N/A N/A The Company’s pension and OPEB costs are calculated using various actuarial assumptions and methodologies as prescribed by authoritative accounting guidance. These assumptions include discount rates, expected return on plan assets, health care cost trend rates, inflation, rate of compensation increases, mortality rates and other factors. The Company reviews all actuarial assumptions on an annual basis. The discount rate is used to determine the present value of the Company’s benefit obligations. The Company’s discount rate is determined by matching the plans’ projected cash flows to a yield curve based on long-term, fixed income debt instruments available as of the measurement date of December 31, 2017. The overall expected rate of return on plan assets is based upon historical and expected future returns consistent with the expected benefit duration of the plan for each asset group adjusted for investment and administrative fees. Health care cost trends are used to project future post-retirement benefits payable from the Company’s plans. For the Company’s December 31, 2017 obligations, future post-retirement medical care costs and prescription drug costs were forecasted assuming an initial annual increase of 5.20%, decreasing to 4.50% by the year 2036. As health care costs trends have a significant effect on the amounts reported, an increase and decrease of one-percentage-point 1% Increase 1% Decrease Effect on total of service and interest cost $ 2 $ (1 ) Effect on post-retirement benefit obligation $ 15 $ (12 ) The following table provides a reconciliation of the changes in the net benefit obligations and fair value of plan assets for the years ended December 31, 2017, 2016 and 2015 (dollars in millions): Pension Plans Post-retirement Benefits Year ended Year ended Year ended Year ended Year ended Year ended Benefit Obligations: Net benefit obligation at beginning of year $ 155 $ 140 $ 134 $ 144 $ 147 $ 136 Service cost 12 13 14 2 2 2 Interest cost 6 6 5 6 7 5 Plan Amendments 1 (5 ) — (73 ) — — Benefits paid (7 ) (7 ) (2 ) (2 ) (1 ) (1 ) Actuarial loss (gain) 14 8 (11 ) 25 (11 ) 5 Net benefit obligation at end of year $ 181 $ 155 $ 140 $ 102 $ 144 $ 147 Fair Value of Plan Assets: Fair value of plan assets at beginning of year $ 150 $ 140 $ 135 $ — $ — $ — Actual return on plan assets 14 6 2 — — — Employer contributions 31 11 5 2 1 1 Benefits paid (7 ) (7 ) (2 ) (2 ) (1 ) (1 ) Fair value of plan assets at end of year $ 188 $ 150 $ 140 $ — $ — $ — Net Funded Status $ 7 $ (5 ) $ — $ (102 ) $ (144 ) $ (147 ) The Company’s OPEB plan was amended to reflect certain limitations on participants’ annual benefits that were included in the new collective bargaining agreement ratified by International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) Local 933 in December 2017. The Company’s pension plan assets mostly consist of diversified equity securities and diversified debt securities. The fair values of plan assets for the Company’s pension plans as of December 31, 2017 and 2016 are as follows (dollars in millions): Fair Value Measurements Using Quoted Prices in Active Significant Other TOTAL 2017 2016 2017 2016 2017 2016 Diversified debt securities $ 26 $ 12 $ 128 $ 112 $ 154 $ 124 Diversified equity securities 20 22 8 — 28 22 Cash equivalents 6 4 — — 6 4 Total $ 52 $ 38 $ 136 $ 112 $ 188 $ 150 The Company’s investment strategy with respect to pension plan assets is to invest the assets in accordance with laws and regulations. The long-term primary objectives for the Company’s pension assets are to provide results that meet or exceed the plans’ actuarially assumed long-term rate of return without subjecting the funds to undue risk. To achieve these objectives the Company has established the following targets: Target Asset Category Hourly Salary Cash equivalents 2 % 2 % Diversified equity securities 15 15 Diversified debt securities 83 83 Total 100 % 100 % Through 2017, the Company’s investment committee has continued to evaluate the investments and take steps toward the established targets. The following table discloses the amounts recognized in the balance sheet and in AOCL at December 31, 2017 and 2016, on a pre-tax Pension Plans Post-retirement Benefits As of December 31, 2017 2016 2017 2016 Amounts Recognized in Balance Sheet: Noncurrent assets $ 7 $ — $ — $ — Current liabilities — — (3 ) (2 ) Noncurrent liabilities — (5 ) (99 ) (142 ) Total asset (liability) $ 7 $ (5 ) $ (102 ) $ (144 ) Accumulated Other Comprehensive Loss: Prior service credit $ 4 $ 5 $ 84 $ 15 Actuarial (loss) gain (11 ) (3 ) (10 ) 15 Total $ (7 ) $ 2 $ 74 $ 30 The amounts in AOCL expected to be amortized and recognized as a component of net periodic benefit cost in 2018 are as follows (dollars in millions): 2018 Pension Post-retirement Prior service credit $ 1 $ 13 Actuarial loss (1 ) — Total $ — $ 13 The accumulated benefit obligation for the Company’s pension plans as of December 31, 2017 and 2016 was $177 million and $151 million, respectively. As of December 31, 2017 and 2016, the projected benefit obligation, the accumulated benefit obligation, and the fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets and for pension plans with an accumulated benefit obligation in excess of plan assets were as follows (dollars in millions): Hourly Plan Salary Plan As of December 31, 2017 2016 2017 2016 Plans with projected benefit obligation in excess of plan assets: Projected benefit obligation N/A 1 $ 76 N/A 1 $ 78 Fair value of plan assets N/A 1 $ 75 N/A 1 $ 75 Plans with accumulated benefit obligation in excess of plan assets: Accumulated benefit obligation N/A 1 $ 76 N/A 1 N/A 2 Fair value of plan assets N/A 1 $ 75 N/A 1 N/A 2 1 As of December 31, 2017, the hourly defined benefit pension plan had plan assets greater than the projected benefit obligation and the accumulated benefit obligation. As of December 31, 2017, the salary defined benefit pension plan had plan assets greater than the projected benefit obligation and accumulated benefit obligation. 2 As of December 31, 2016, the salary defined benefit pension plan had plan assets greater than the accumulated benefit obligation. Information about expected cash flows for the Company’s pension and post-retirement benefit plans is as follows (dollars in millions): Pension Post-retirement Employer Contributions: 2018 expected contributions $ — $ 3 Expected Benefit Payments: 2018 9 3 2019 10 3 2020 11 4 2021 12 5 2022 13 5 2023-2027 68 27 Expected benefit payments for pension and post-retirement benefits will be paid from plan trusts or corporate assets. The Company’s funding policy is to contribute amounts annually that are at least equal to the amounts required by applicable laws and regulations or to directly fund payments to plan participants. Additional discretionary contributions will be made when deemed appropriate to meet the Company’s long-term obligation to the plans. In June 2012, the Company established a non-qualified |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2017 | |
INCOME TAXES | NOTE 14. INCOME TAXES Income before income taxes included the following (dollars in millions): Years ended December 31, 2017 2016 2015 U.S. income $ 491 $ 309 $ 261 Foreign income 36 32 28 Total $ 527 $ 341 $ 289 The provision for income tax expense was estimated as follows (dollars in millions): Years ended December 31, 2017 2016 2015 Estimated current income taxes: U.S. federal $ 61 $ 2 $ 3 Foreign 7 8 6 U.S. state and local 5 2 2 Total Current 73 12 11 Deferred income tax (credit) expense, net: U.S. federal (44 ) 107 90 Foreign 1 — — U.S. state and local (7 ) 7 6 Total Deferred (50 ) 114 96 Total income tax expense $ 23 $ 126 $ 107 On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was enacted into law. The Tax Act makes broad and complex changes to the U.S. tax code that impact the Company, most notably a reduction of the U.S. corporate income tax rate from 35% to 21% for tax years beginning after December 31, 2017. The Tax Act also makes other changes including, but not limited to, the acceleration of depreciation for certain assets placed into service after September 27, 2017 as well as a one-time On December 22, 2017, the United States Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. The Company recognized the income tax effects of the Tax Act for the year ended December 31, 2017, the reporting period in which the Tax Act was signed into law, in accordance with SAB 118. As such, the Company’s financial results reflect the income tax effects of the Tax Act and provisional amounts for those specific income tax effects of the Tax Act that could be reasonably estimated. In accordance with SAB 118, the Company recorded a $157 million deferred tax benefit related to the re-measurement A reconciliation of the provision for income tax expense compared with the amounts at the U.S. federal statutory rate is as follows (dollars in millions): Years ended December 31, 2017 2016 2015 Tax at U.S. statutory income tax rate $ 185 $ 120 $ 101 Impact related to Tax Act (155 ) — — Tax credits (21 ) — — Foreign rate differential (5 ) (5 ) (3 ) Non-deductible 7 5 4 Valuation allowance 3 1 (1 ) State tax expense 10 6 5 Adjustment to deferred tax expense — — 1 Other adjustments (1 ) (1 ) — Total income tax expense $ 23 $ 126 $ 107 The effective tax rate for the year ended December 31, 2017 was 4%, as compared with 37% in 2017. The lower rate is principally due to $155 million of tax benefit recorded in connection with the Tax Act, largely due to the $157 million decrease in net deferred tax liabilities to reflect the decrease in the corporate income tax rate from 35% to 21%. Deferred income tax assets and liabilities as of December 31, 2017 and 2016 reflect the effect of temporary differences between amounts of assets, liabilities and equity for financial reporting purposes and the bases of such assets, liabilities and equity as measured by tax laws, as well as tax loss and tax credit carry forwards. Net deferred tax assets and liabilities are classified as non-current re-measured re-measurement As of December 31, 2017, the Company had approximately $62 million of undistributed earnings in foreign subsidiaries which were subject to the one-time one-time Temporary differences and carryforwards that gave rise to deferred tax assets and liabilities included the following (dollars in millions): As of As of Deferred tax assets: Intangibles $ 35 $ 64 Deferred revenue 25 35 Other accrued liabilities 18 34 Operating loss carryforwards 12 14 Warranty accrual 11 22 Stock-based compensation 6 8 Sales allowances and rebates 6 7 Inventories 5 6 Technology-related investments 4 9 Capital loss carryforwards 3 — Environmental remediation 3 5 Unrealized loss on interest rate derivatives 1 11 Post-retirement — 12 Tax credits — 8 Other 4 8 Total Deferred tax assets 133 243 Valuation allowances (9 ) (5 ) Deferred tax liabilities: Goodwill (287 ) (409 ) Trade name (96 ) (122 ) Property, plant and equipment (7 ) (15 ) Post-retirement (4 ) — Other (3 ) (2 ) Total Deferred tax liabilities (397 ) (548 ) Net Deferred tax liability $ (273 ) $ (310 ) The estimated net operating loss carryforwards as of December 31, 2017 relate solely to U.S. state net operating loss carryforwards. Substantially all state operating loss carryforwards will not expire until 2027-2032. Management has determined, based on an evaluation of available objective and subjective evidence, that it is more likely than not that certain foreign deferred tax assets and an anticipated capital loss carryforward will not be realized; therefore these deferred tax assets are offset with a valuation allowance of $9 million and $5 million as of December 31, 2017 and 2016, respectively. In accordance with the FASB’s authoritative accounting guidance on accounting for income taxes, the Company records uncertain tax positions on the basis of a two-step more-likely-than-not December 31, 2015 $ 2 Increases in unrecognized tax benefits as a result of current year activity — December 31, 2016 $ 2 Increases in unrecognized tax benefits as a result of current year activity — December 31, 2017 $ 2 For the years ended December 31, 2017, 2016 and 2015, the Company recognized no interest and penalties in the Consolidated Statements of Comprehensive Income because either no uncertain tax positions were identified or the penalties and interest anticipated were not material in all the periods presented. The Company follows a policy of recording any interest or penalties in Income tax expense. Management does not anticipate any significant changes in unrecognized tax benefits within the coming year. There was $2 million as of both December 31, 2017 and 2016 of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate. All of the Company’s returns, once filed, will remain subject to examination by the various taxing authorities for the duration of the applicable statute of limitations (generally three years from the earlier of the date of filing or the due date of the return). |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE LOSS | 12 Months Ended |
Dec. 31, 2017 | |
ACCUMULATED OTHER COMPREHENSIVE LOSS | NOTE 15. ACCUMULATED OTHER COMPREHENSIVE LOSS The changes in components of AOCL consisted of the following (dollars in millions): Before Tax Tax (Expense) After Tax Balance at December 31, 2014 $ 5 $ (45 ) $ (40 ) Foreign currency translation (11 ) — (11 ) Pension and OPEB liability adjustment (3 ) — (3 ) Available-for-sale (8 ) 3 (5 ) Net current period other comprehensive loss $ (22 ) $ 3 $ (19 ) Balance at December 31, 2015 $ (17 ) $ (42 ) $ (59 ) Foreign currency translation (6 ) — (6 ) Pension and OPEB liability adjustment 4 (2 ) 2 Available-for-sale (1 ) 1 — Net current period other comprehensive loss $ (3 ) $ (1 ) $ (4 ) Balance at December 31, 2016 $ (20 ) $ (43 ) $ (63 ) Foreign currency translation 15 — 15 Pension and OPEB liability adjustment 34 (8 ) 26 Available-for-sale 11 (4 ) 7 Net current period other comprehensive loss $ 60 $ (12 ) $ 48 Balance at December 31, 2017 $ 40 $ (55 ) $ (15 ) The following table shows the location in the Consolidated Statements of Comprehensive Income affected by reclassifications from AOCL (dollars in millions): For the year ended December 31, 2015 AOCL Components Amount Affected line item in the consolidated statements of comprehensive income Amortization of defined benefit pension items: Prior service credit $ 3 Cost of sales — Selling, general and — Engineering – research and Actuarial gain — Cost of sales Total reclassifications, before tax 3 Income before income Income tax expense (1 ) Tax expense Total reclassifications $ 2 Net of tax For the year ended December 31, 2016 AOCL Components Amount Affected line item in the consolidated statements of comprehensive income Amortization of defined benefit pension items: Prior service credit $ 3 Cost of sales — Selling, general and — Engineering – research and Actuarial gain 1 Cost of sales — Selling, general and — Engineering – research and Total reclassifications, before tax 4 Income before income Income tax expense (2 ) Tax expense Total reclassifications $ 2 Net of tax For the year ended December 31, 2017 AOCL Components Amount Affected line item in the consolidated statements of comprehensive income Amortization of defined benefit pension items: Prior service credit $ 3 Cost of sales 1 Selling, general and — Engineering – research and Actuarial gain — Cost of sales Total reclassifications, before tax 4 Income before income Income tax expense (1 ) Tax expense Total reclassifications $ 3 Net of tax Prior service cost and actuarial loss are included in the computation of the Company’s net periodic benefit cost. Please see NOTE 13 “Employee Benefit Plans” for additional details. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | NOTE 16. COMMITMENTS AND CONTINGENCIES Operating Leases The Company leases certain facilities under various operating leases. Rent expense under the non-cancelable As of December 31, 2017, future payments under non-cancelable 2018 $ 4 2019 2 2020 2 2021 1 2022 1 Thereafter 1 Total $ 11 Environmental Matters The Company has an agreement with the Environmental Protection Agency to perform remedial activities at the Company’s Indianapolis, Indiana manufacturing facilities related to historical soil and groundwater contamination. As of December 31, 2017, the Company had a liability recorded in the amount of $13 million. Claims, Disputes, and Litigation The Company is party to various legal actions and administrative proceedings and subject to various claims arising in the ordinary course of business. These proceedings primarily involve commercial claims, product liability claims, personal injury claims and workers’ compensation claims. The Company believes that the ultimate liability, if any, in excess of amounts already provided for in the consolidated financial statements or covered by insurance on the disposition of these matters will not have a material adverse effect on the financial position, results of operations or cash flows of the Company. |
CONCENTRATION OF RISK
CONCENTRATION OF RISK | 12 Months Ended |
Dec. 31, 2017 | |
CONCENTRATION OF RISK | NOTE 17. CONCENTRATION OF RISK As of December 31, 2017 and 2016, the Company employed approximately 2,700 employees with 89% of those employees in the U.S. Approximately 59% and 58% of the Company’s U.S. employees were represented by unions and subject to a collective bargaining agreement as of December 31, 2017 and 2016, respectively. In addition, many of the hourly employees outside the U.S. are represented by various unions. The Company is currently operating under a collective bargaining agreement with UAW Local 933 that expires in November 2023. Three customers accounted for greater than 10% of net sales within the last three years presented. Years ended December 31, % of net sales 2017 2016 2015 Daimler AG 20 % 21 % 21 % Navistar, Inc. 8 % 9 % 10 % Volvo Group 8 % 8 % 10 % No other customers accounted for more than 10% of net sales of the Company during the years ended December 31, 2017, 2016 or 2015. Three customers accounted for greater than 10% of outstanding accounts receivable within the last two years presented. % of accounts receivable As of As of Kirby Corporation 1 15 % 4 % Volvo Group 11 % 6 % Daimler AG 7 % 19 % 1 As of December 31, 2017, Kirby Corporation (“Kirby”) was the parent company of customers United Engines LLC and Stewart & Stevenson LLC. As of December 31, 2016, Kirby was the parent company of United Engines LLC. No other customers accounted for more than 10% of the outstanding accounts receivable as of December 31, 2017 or December 31, 2016. No supplier accounted for greater than 10% of materials purchased during the years ended December 31, 2017, 2016 or 2015. |
CERTAIN RELATIONSHIPS AND RELAT
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2017 | |
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS | NOTE 18. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS Senior Notes Held by Executive Officers In May 2015, the Company redeemed $100,000 and $450,000 of ATI’s 7.125% Senior Notes held by Lawrence E. Dewey, Chairman and Chief Executive Officer, and David S. Graziosi, President and Chief Financial Officer, respectively, at the specified redemption price in the governing indenture equal to 103.563% of the principal amount plus any accrued and unpaid interest. Repurchase of Common Stock held by ValueAct Capital Master Fund On February 3, 2017, the Company entered into a stock repurchase agreement with ValueAct Capital Master Fund, L.P., a related party, to repurchase 10,525,204 shares of the Company’s common stock for approximately $363 million. The shares were repurchased under the stock repurchase program approved by the Board of Directors in November 2016. The purchase closed on February 8, 2017 and was funded with cash on hand and borrowings under the Revolving Credit Facility. The shares were subsequently retired. Sales to Customer Indirectly Owned by Director During 2017, the Company had net sales of less than $30 million to Gillig LLC (“Gillig”) and less than $6 million to General Dynamics Corporation (“GD”). James A. Star, a member of the Company’s Board of Directors, has an indirect material interest in Gillig as a result of trusts for the benefit of his wife and children collectively owning an approximately 5% interest in the entities that directly and indirectly own Gillig LLC. In addition, all of the remaining direct and indirect interests in Gillig LLC are owned by trusts for the benefit of members of Mr. Star’s wife’s immediate and extended family. Mr. Star also has an indirect material interest in GD as a result of trusts for the benefit of his wife, children and members of his wife’s family collectively owning approximately 10% of the outstanding shares of common stock of GD. |
COMMON STOCK
COMMON STOCK | 12 Months Ended |
Dec. 31, 2017 | |
COMMON STOCK | NOTE 19. COMMON STOCK On November 14, 2016, the Company’s Board of Directors authorized the Company to repurchase up to $1,000 million of its common stock pursuant to a stock repurchase program (“2016 Repurchase Program”). On November 8, 2017, the Company’s Board of Directors increased the authorization by $500 million bringing the total amount authorized under the 2016 Repurchase Program to $1,500 million. The terms of the 2016 Repurchase Program provide that the Company may repurchase shares of our common stock, from time to time depending on market conditions and corporate needs, in the open market or through privately negotiated transactions in accordance with Rule 10b-18 During 2017, the Company purchased approximately $885 million of its common stock under the 2016 Repurchase Program. All transactions during 2017 were settled in cash during the same period. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 12 Months Ended |
Dec. 31, 2017 | |
EARNINGS PER SHARE | NOTE 20. EARNINGS PER SHARE The Company presents both basic and diluted earnings per share (“EPS”) amounts. Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted EPS is calculated by dividing net income by the weighted average number of common shares and common equivalent shares outstanding during the reporting period that are calculated using the treasury stock method for stock-based awards. The treasury stock method assumes that the Company uses the proceeds from the exercise of awards to repurchase common stock at the average market price during the period. The assumed proceeds under the treasury stock method include the purchase price that the grantee will pay in the future and compensation cost for future service that the Company has not yet recognized. As of December 31, 2017, 2016, and 2015, the Company had 0.2 million, 0.2 million, and 0.7 million outstanding stock options that were not included in the diluted EPS calculation because they were anti-dilutive. Basic and diluted EPS for the full-year is calculated using the weighted average shares of common stock outstanding during the year while quarterly basic and diluted EPS is calculated using the weighted average shares of common stock outstanding during the quarter; therefore, the sum of the four quarters’ EPS may not equal full-year EPS. The following table reconciles the numerators and denominators used to calculate basic EPS and diluted EPS (in millions, except per share data): Years ended December 31, 2017 2016 2015 Net income $ 504 $ 215 $ 182 Weighted average shares of common stock outstanding 149 168 176 Dilutive effect stock-based awards 1 1 1 Diluted weighted average shares of common stock outstanding 150 169 177 Basic earnings per share attributable to common stockholders $ 3.38 $ 1.28 $ 1.03 Diluted earnings per share attributable to common stockholders $ 3.36 $ 1.27 $ 1.03 |
GEOGRAPHIC INFORMATION
GEOGRAPHIC INFORMATION | 12 Months Ended |
Dec. 31, 2017 | |
GEOGRAPHIC INFORMATION | NOTE 21. GEOGRAPHIC INFORMATION The Company had the following net sales by country (dollars in millions): Years ended December 31, 2017 2016 2015 United States $ 1,614 $ 1,277 $ 1,460 Canada 125 115 96 Japan 75 70 49 China 62 50 64 Germany 45 53 40 Mexico 39 41 36 United Kingdom 36 28 44 Netherlands 30 27 19 Turkey 28 26 30 Other 208 153 148 Total $ 2,262 $ 1,840 $ 1,986 The Company had the following net long-lived assets by country (dollars in millions): Years ended December 31, 2017 2016 2015 United States $ 400 $ 412 $ 419 India 32 36 43 Hungary 12 11 13 Others 4 5 5 Total $ 448 $ 464 $ 480 |
QUARTERLY FINANCIAL INFORMATION
QUARTERLY FINANCIAL INFORMATION | 12 Months Ended |
Dec. 31, 2017 | |
QUARTERLY FINANCIAL INFORMATION | NOTE 22. QUARTERLY FINANCIAL INFORMATION The following is a summary of the unaudited quarterly results of operations. The Company believes that all adjustments considered necessary for a fair presentation in accordance with GAAP have been included (unaudited, in millions, except per share data). Quarters ended, March 31 June 30 September 30 December 31 2017 Net sales $ 499 $ 580 $ 595 $ 588 Gross profit 251 290 302 288 Operating income 149 177 198 128 Income before income taxes 127 146 170 84 Net income 83 95 111 215 Basic earnings per share $ 0.53 $ 0.63 $ 0.75 $ 1.52 Diluted earnings per share $ 0.52 $ 0.63 $ 0.75 $ 1.51 2016 Net sales $ 462 $ 475 $ 434 $ 469 Gross profit 215 227 204 218 Operating income 111 127 104 110 Income before income taxes 77 99 71 94 Net income 48 61 45 61 Basic earnings per share $ 0.28 $ 0.36 $ 0.27 $ 0.37 Diluted earnings per share $ 0.28 $ 0.36 $ 0.27 $ 0.36 |
Schedule I-Parent Company only
Schedule I-Parent Company only Balance Sheets | 12 Months Ended |
Dec. 31, 2017 | |
Schedule I-Parent Company only Balance Sheets | Allison Transmission Holdings, Inc. Schedule I—Parent Company only Balance Sheets (dollars in millions) December 31, 2017 December 31, 2016 ASSETS Current Assets: Cash $ — $ — Total Current Assets — — Investments in and advances to subsidiaries 689 1,081 TOTAL ASSETS $ 689 $ 1,081 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ — $ — Total Current Liabilities — — Capital stock 1 2 Paid in capital 1,758 1,728 Treasury stock — — Accumulated deficit (1,055 ) (586 ) Accumulated other comprehensive loss, net of tax (15 ) (63 ) TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 689 $ 1,081 The accompanying note is an integral part of the Parent Company only financial statements. Allison Transmission Holdings, Inc. Schedule I—Parent Company only Statements of Comprehensive Income (dollars in millions) Years ended December 31, 2017 2016 2015 Net sales $ — $ — $ — General and administrative fees — — — Total operating income — — — Other income: Equity earnings of consolidated subsidiary 504 215 182 Income before income taxes 504 215 182 Income tax expense — — — Net income $ 504 $ 215 $ 182 Comprehensive income $ 552 $ 211 $ 163 The accompanying note is an integral part of the Parent Company only financial statements. Allison Transmission Holdings, Inc. Schedule I—Parent Company only Statements of Cash Flows (dollars in millions) Years ended December 31, 2017 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 504 $ 215 $ 182 Deduct items included in net income not providing cash: Equity in earnings in consolidated subsidiary (504 ) (215 ) (182 ) Net cash provided by operating activities — — — CASH FLOWS FROM INVESTING ACTIVITIES: Investments in subsidiaries (19 ) (24 ) (23 ) Dividends 89 100 106 Net cash provided by investing activities 70 76 83 CASH FLOWS FROM FINANCING ACTIVITIES: Capital contributions 19 24 23 Dividends (89 ) (100 ) (106 ) Net cash used in financing activities (70 ) (76 ) (83 ) Net increase (decrease) during period — — — Cash and cash equivalents at beginning of period — — — Cash and cash equivalents at end of period $ — $ — $ — |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 12 Months Ended |
Dec. 31, 2017 | |
Parent Company | |
BASIS OF PRESENTATION | NOTE 1—BASIS OF PRESENTATION Allison Transmission Holdings, Inc. (the “Parent Company”) is a holding company that conducts all of its business operations through its subsidiaries. There are restrictions on the Parent Company’s ability to obtain funds from its subsidiaries through dividends (refer to NOTE 7 “Debt” of the Consolidated Financial Statements). The entire amount of our consolidated net assets was subject to restrictions on payment of dividends at the end of December 31, 2017, 2016 and 2015. Accordingly, these financial statements have been presented on a “parent-only” basis. Under a parent-only presentation, the Parent Company’s investments in its consolidated subsidiaries are presented under the equity method of accounting. These parent-only financial statements should be read in conjunction with Allison Transmission Holdings, Inc.’s audited Consolidated Financial Statements included elsewhere herein. |
SUMMARY OF SIGNIFICANT ACCOUN31
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The information herein reflects all normal recurring material adjustments, which are, in the opinion of management, necessary for a fair statement of the results for the periods presented. The consolidated financial statements herein consist of all wholly-owned domestic and foreign subsidiaries with all significant intercompany transactions eliminated. These consolidated financial statements present the financial position, results of comprehensive income, cash flows and statements of equity. The presentation of certain prior year disclosures has been modified to conform to the current year presentation, as commencing in the first quarter of 2017, the Company elected to report financial data in whole millions of dollars, except as otherwise noted. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses. Estimates include, but are not limited to, sales allowances, government price adjustments, fair market values and future cash flows associated with goodwill, indefinite life intangibles, long-lived asset impairment tests, useful lives for depreciation and amortization, warranty liabilities, environmental liabilities, determination of discount and other assumptions for pension and other postretirement benefit expense, income taxes and deferred tax valuation allowances, derivative valuation, and contingencies. The Company’s accounting policies involve the application of judgments and assumptions made by management that include inherent risks and uncertainties. Actual results could differ materially from these estimates. Changes in estimates are recorded in results of operations in the period that the events or circumstances giving rise to such changes occur. |
Segment Reporting | Segment Reporting In accordance with the Financial Accounting Standards Board’s (“FASB”) authoritative accounting guidance on segment reporting, the Company has one operating segment and reportable segment. The Company is in one line of business, which is the manufacture and distribution of fully-automatic transmissions. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash equivalents are defined as short-term, highly-liquid investments with original maturities of 90 days or less. Under the Company’s cash management system, checks issued but not presented to banks may result in book overdraft balances for accounting purposes and are classified within Accounts payable in the Consolidated Balance Sheets. The change in book overdrafts is reported as a component of operating cash flows for Accounts payable. |
Marketable Securities | Marketable Securities The Company determines the appropriate classification of all marketable securities as “held-to-maturity,” “available-for-sale” re-evaluates Trading securities are carried at fair value with the unrealized gain or loss recognized in Other (expense) income, net. The fair value of the Company’s investment securities is determined by currently available market prices. See NOTE 6 “Fair Value of Financial Instruments” for more details. |
Inventories | Inventories Inventories are stated at the lower of cost and net realizable value. The Company determines cost using the first-in, first-out |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment are recorded at cost less accumulated depreciation. Depreciation expense is recorded using the straight-line method over the following estimated lives: Range in Years Land improvements 5 – 30 Buildings and building improvements 10 – 40 Machinery and equipment 2 – 20 Software 2 – 5 Special tools 2 – 10 Software represents the costs of software developed or obtained for internal use. Software costs are amortized on a straight-line basis over their estimated useful lives. Software assets are reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable over the remaining lives of the assets. Upgrades and enhancements are capitalized if they result in added functionality, which enables the software to perform tasks it was previously incapable of performing. Software maintenance, training, data conversion and business process reengineering costs are expensed in the period in which they are incurred. Special tooling represents the costs to design and develop tools, dies, jigs and other items owned by the Company and used in the manufacture of components by suppliers under long-term supply agreements. Special tooling is depreciated over the tool’s expected life. Special tooling used in the development of new technology is expensed as incurred. Engineering, testing and other costs incurred in the design and development of production parts are expensed as incurred. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The carrying value of long-lived assets is evaluated whenever events or circumstances indicate that the carrying value of an asset may not be recoverable. Events or circumstances that would result in an impairment review primarily include a significant change in the use of an asset or the planned sale or disposal of an asset. The asset would be considered impaired when there is no future use planned for the asset or the future net undiscounted cash flows generated by the asset or asset group are less than its carrying value. An impairment loss would be recognized based on the amount by which the carrying value exceeds fair value. Assumptions and estimates used to determine cash flows in the evaluation of impairment and the fair values used to determine the impairment are subject to a degree of judgment and complexity. Any changes to the assumptions and estimates resulting from changes in actual results or market conditions from those anticipated may affect the carrying value of long-lived assets and could result in an impairment charge. As a result of events and circumstances in the fourth quarter of 2017, the Company reviewed certain of its long-lived assets related to the production of the TC10 product, resulting in a $32 million impairment loss recorded for the year ended December 31, 2017. Continued weak demand conditions for the TC10 product contributed to the future cash flows of the related assets being less than the carrying value of those assets. There were no impairment charges for the year ended December 31, 2016. The Company recorded a $1 million impairment loss during 2015 on certain of its long-lived assets related to the production of the H3000 and H4000 electric hybrid-propulsion systems. Deteriorating market conditions for hybrid-propulsion vehicles, principally as a result of decreased fuel costs, alternative fuels and other technologies, significantly contributed to the future cash flows of the related assets being less than the carrying value of those assets. |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price paid over the fair value of net assets acquired. In accordance with the FASB’s authoritative accounting guidance on goodwill, the Company does not amortize goodwill but rather evaluates it for impairment on an annual basis, or more often if events or circumstances change that could cause goodwill to become impaired. Goodwill is tested for impairment at the reporting unit level, which is the same as the Company’s one operating and reportable segment. The Company does not aggregate any components into its reporting unit. The Company has elected to perform its annual goodwill impairment test on October 31 of every year using a multi-step impairment test. In Step 0, the Company has the option to evaluate various qualitative factors to determine the likelihood of impairment. If determined that the fair value is more likely than not less than the carrying value, then the Company is required to perform Step 1. If the Company does not elect to perform Step 0, it can voluntarily proceed directly to Step 1. In Step 1, the Company performs a quantitative analysis to compare the fair value of its reporting unit to its carrying value including goodwill. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not considered impaired, and the Company is not required to perform further testing. If the carrying value of a reporting unit’s goodwill exceeds its carrying value of net assets, then the Company would record an impairment loss equal to the difference. Goodwill impairment testing for 2017 was performed using the Step 0 analysis of certain trends and factors. The Company’s qualitative assessment included an assessment of business changes, economic outlook, financial trends and forecasts, growth rates, credit ratings, equity ratings, discount rates, industry data and other relevant qualitative factors. Events or circumstances that could unfavorably impact the key assumptions include lower net sales driven by market conditions, our inability to execute on marketing programs and/or growth initiatives, lower gross margins as a result of market conditions or failure to obtain forecasted cost reductions, or a higher discount rate as a result of market conditions. While unpredictable and inherently uncertain, the Company believes the forecast estimates were reasonable and incorporate assumptions that similar market participants would use in their estimates of fair value. These trends and factors were compared to, and based on, the assumptions used in prior years. After reviewing various qualitative factors, the Company’s 2017 annual goodwill impairment test indicated that the fair value of the reporting unit more likely than not exceeded its carrying value, indicating no impairment. Refer to NOTE 5 “Goodwill and Other Intangible Assets” for further information. Other intangible assets have both indefinite and finite useful lives. Intangible assets with indefinite useful lives, such as the Company’s trade name, are not amortized but are tested annually for impairment. The Company has elected to perform our annual trade name impairment test on October 31 of every year and follow a similar multi-step impairment test to that performed on goodwill. Events or circumstances that could unfavorably impact the key assumptions include lower net sales driven by market conditions, our inability to execute on marketing programs and/or delay in introduction of new products, and higher discount rate as a result of market conditions. While unpredictable and inherently uncertain, the Company believes the forecast estimates are reasonable and incorporate those assumptions that similar market participants would use in their estimates of fair value. After reviewing various qualitative factors, the Company’s annual 2017 trade name impairment test, as of October 31, 2017, indicated that the fair value of the trade name more likely than not exceeded its carrying value, indicating no impairment. Refer to NOTE 5 “Goodwill and Other Intangible Assets” for further information. Intangible assets with finite lives are amortized over their estimated useful lives and reviewed for impairment when circumstances change that would create a triggering event. Customer relationships are amortized over the life in which expected benefits are to be consumed. The other remaining finite life intangibles are amortized on a straight-line basis over their useful lives. The Company evaluates the remaining useful life of the other intangible assets on a periodic basis to determine whether events or circumstances warrant a revision to the remaining useful life. Assumptions and estimates about future values and remaining useful lives of the Company’s intangible and other long-lived assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors, such as changes in the Company’s business strategy and internal forecasts. Although management believes the historical assumptions and estimates are reasonable and appropriate, different assumptions and estimates could materially impact the Company’s reported financial results. NOTE 5 “Goodwill and Other Intangible Assets” provides further information. |
Deferred Financing Costs | Deferred Financing Costs The debt issuance costs related to line-of-credit non-current |
Financial Instruments | Financial Instruments The Company’s cash equivalents are invested in U.S. government backed securities and recorded at fair value in the Consolidated Balance Sheets. The carrying values of accounts receivable and accounts payable approximate fair value due to their short-term nature. The Company’s financial derivative instruments, including interest rate swaps and foreign currency and commodity forward contracts are carried at fair value on the Consolidated Balance Sheets. Refer to NOTE 6 “Fair Value of Financial Instruments” for more detail. The Company’s long-term debt obligations are carried at historical amounts with the Company providing fair value disclosure in NOTE 7 “Debt”. |
Insurable Liabilities | Insurable Liabilities The Company records liabilities for its medical, workers’ compensation, long-term disability, product, general and auto liabilities. The determination of these liabilities and related expenses is dependent on claims experience. For most of these liabilities, claims incurred but not yet reported are estimated based upon historical claims experience. |
Revenue Recognition | Revenue Recognition The Company records sales when title has transferred to the customer, there is evidence of an agreement, the sales price is fixed or determinable, delivery has occurred or services have been rendered, and collectability is reasonably assured. The Company sells extended transmission coverage (“ETC”) for which sales are deferred. ETC sales are recognized ratably over the period of the ETC, which typically ranges from two to five years after initial sale. Costs associated with ETC programs are recorded as incurred during the extended period. Distributor and customer sales incentives, consisting of allowances and other rebates, are estimated at the time of sale based upon the Company’s history and experience and are recorded as a reduction to Net sales. Incentive programs are generally product specific or region specific. Some factors used in estimating the cost of incentives include the number of transmissions that will be affected by the incentive program and rate of acceptance of any incentive program. If the actual number of affected transmissions differs from this estimate, or if a different mix of incentives is actually paid, the impact on Net sales would be recorded in the period that the change was identified. Consideration given to commercial customers recorded as a reduction of Net sales in the Consolidated Statements of Comprehensive Income included $66 million, $58 million, and $47 million for the years ended December 31, 2017, 2016 and 2015, respectively. Sales under U.S. government production contracts are recorded when the product is accepted, title has transferred to the U.S. government, the sales price is fixed or determinable, delivery has occurred, and any other terms of the contract have been met. Deferred revenue arises from cash received in advance of the culmination of the earnings process and is recognized as revenue in future periods when the applicable revenue recognition criteria have been met. Under the terms of previous U.S. government contracts, there were certain price reduction clauses and provisions for potential price reductions which were estimated at the time of sale based upon the Company’s history and experience and were recorded as a reduction to Net sales. Potential reductions may be attributed to a change in projected sales volumes or plant efficiencies which impact overall costs. As of each of December 31, 2017 and 2016, the Company had $56 million recorded in the price reduction reserve account. The Company engages in licensing agreements with certain third parties for the use of the Company’s intellectual property. Deferred revenue arises from cash received in advance of the period of use of the intellectual property. Revenue is recognized over the license period as it is earned. The Company classifies shipping and handling billed to customers in Net sales and shipping and handling costs in Cost of sales, in accordance with authoritative accounting guidance. The Company contracts with various third parties to provide engineering services. These services are recorded as Net sales in accordance with the terms of the contract. The saleable engineering recorded was $3 million, $3 million and $4 million for the years ended December 31, 2017, 2016 and 2015, respectively. The associated costs are recorded in Cost of sales. |
Warranty | Warranty Provisions for estimated expenses related to product warranties are made at the time products are sold. Warranty claims arise when a transmission fails while in service during the relevant warranty period. The warranty reserve is adjusted in Selling, general and administrative based on the Company’s current and historical warranty claims paid and associated repair costs. These estimates are established using historical information including the nature, frequency, and average cost of warranty claims and are adjusted as actual information becomes available. From time to time, the Company may initiate a specific field action program. As a result of the uncertainty surrounding the nature and frequency of specific field action programs, the liability for such programs is recorded when the Company commits to an action. The Company reviews and assesses the liability for these programs on a quarterly basis. The Company also assesses its ability to recover certain costs from its suppliers and records a receivable from the supplier when it believes a recovery is probable. Warranty costs may differ from those estimated if actual claim rates are higher or lower than our historical rates. |
Research and Development | Research and Development The Company incurs costs in connection with research and development programs that are expected to contribute to future earnings. Such costs are charged to Engineering — research and development as incurred. |
Environmental | Environmental The Company accrues costs related to environmental matters when it is probable that the Company has incurred a liability related to a contaminated site and the costs can be reasonably estimated. For additional information, see NOTE 16 “Commitments and Contingencies”. |
Foreign Currency Translation | Foreign Currency Translation Most of the subsidiaries outside the United States prepare financial statements in currencies other than the U.S. Dollar. The functional currency for all of these subsidiaries is the local currency, except for the Company’s Hong Kong and Middle East subsidiaries which currently use the U.S. Dollar as their functional currency. Balances are translated at period-end |
Derivative Instruments | Derivative Instruments In the normal course of business, the Company is exposed to fluctuations in interest rates, foreign currency exchange rates, and commodity prices. The risk is managed through the use of financial derivative instruments including interest rate swaps and commodity and foreign currency forward contracts, when appropriate. Despite the fact that the Company either has not elected or does not qualify for hedge accounting treatment on all of its derivative instruments, the contracts are used strictly as an economic hedge and not for speculative purposes. As necessary, the Company adjusts the values of the derivative instruments for counter-party or credit risk. NOTE 8 “Derivatives” provides further information on the accounting treatment of the Company’s derivative instruments. |
Income Taxes | Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The future tax benefits associated with operating loss and tax credit carryforwards are recognized as deferred tax assets. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The need to establish a valuation allowance against the deferred tax assets is assessed periodically based on a more-likely-than-not |
Stock-Based Compensation | Stock-Based Compensation In March 2015, the Company’s Board of Directors adopted and, in May 2015, the Company’s stockholders approved the Allison Transmission Holdings, Inc. 2015 Equity Incentive Award Plan (“2015 Plan”), which became effective on May 14, 2015. Under the 2015 Plan, certain employees (including executive officers), consultants and directors are eligible to receive equity-based compensation, including non-qualified Prior to the adoption of the 2015 Plan, the Company’s equity-based awards were granted under the Allison Transmission Holdings, Inc. 2011 Equity Incentive Award Plan (“2011 Plan”) and the Equity Incentive Plan of Allison Transmission Holdings, Inc. (“Equity Plan” and, together with the 2011 Plan, the “Prior Plans”). As of the effective date of the 2015 Plan, no new awards will be granted under the Prior Plans, but the Prior Plans will continue to govern the equity awards issued under the Prior Plans. RSUs are recorded at fair market value at the date of grant and vest upon continued performance of services by the RSU holders over one to three years. Restricted stock awards are recorded at fair market value at the date of grant and the restrictions lapse upon continued performance by the restricted stock holders on the vest date which generally occurs over one, two or three years. Performance awards are recorded at fair value based on a Monte-Carlo pricing model and the restrictions lapse on the date the Compensation Committee of the Board of Directors determines the number of shares that shall vest based on the total stockholder return of the Company relative to the specified peer group. Non-qualified The Company has made a policy election under applicable accounting guidance to account for forfeitures as a reduction of stock-based compensation expense when the forfeiture actually occurs. Restricted stock and RSUs were granted to certain employees and directors at fair market value on the date of grant. The restrictions lapse upon continued performance by the restricted stock or RSU holders on the vest date which generally occurs over one, two or three years. Restricted stock and RSU incentive compensation expense recorded was $7 million, $2 million and $2 million for the years ended December 31, 2017, 2016 and 2015, respectively. Performance awards were granted to certain employees at fair value at the date of grant. The Company records the fair value of each performance award based on a Monte-Carlo pricing model. Performance award incentive compensation expense recorded was $3 million, $1 million and $1 million for the years ended December 31, 2017, 2016 and 2015, respectively. Stock options were granted to certain employees at fair value on the date of grant using a Black-Scholes option pricing model. Stock option incentive compensation expense recorded was $2 million, $3 million and $4 million for the years ended December 31, 2017, 2016 and 2015, respectively. |
Pension and Post-retirement Benefit Plans | Pension and Post-retirement Benefit Plans For pension and other post-retirement benefits (“OPEB”) plans in which employees participate, costs are determined within the FASB’s authoritative accounting guidance set forth in employers’ defined benefit pensions including accounting for settlements and curtailments of defined benefit pension plans, termination of benefits and accounting for post-retirement benefits other than pensions. In accordance with the authoritative accounting guidance, the Company recognizes the funded status of its defined benefit pension plans and OPEB plan in its Consolidated Balance Sheets with a corresponding adjustment to AOCL, net of tax. Post-retirement benefit costs consist of service cost and interest cost on accrued obligations. Actuarial gains and losses on liabilities together with any prior service costs are charged (or credited) to income over the average remaining service lives of employees. The benefit cost components shown in the Consolidated Statements of Comprehensive Income are based upon various actuarial assumptions and methodologies as prescribed by authoritative accounting guidance. These assumptions include discount rates, expected return on plan assets, health care cost trend rates, inflation, rate of compensation increases, population demographics, mortality rates and other factors. The Company reviews all actuarial assumptions on an annual basis. Changes in key economic indicators can change these assumptions. These assumptions, along with the actual value of assets at the measurement date, will impact the calculation of pension expenses for the year. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In May 2017, the FASB issued authoritative accounting guidance on accounting for modifications to the terms of employee stock compensation. The guidance clarifies which changes to terms or conditions of share-based payment awards require the entity to apply modification accounting. The guidance was adopted by the Company effective January 1, 2018. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements. In March 2017, the FASB issued authoritative accounting guidance on the presentation of net periodic pension costs and net periodic postretirement benefit costs. The guidance clarifies the presentation of component costs within an employer’s financial statements and restricts component costs eligible for capitalization to the service cost component. The guidance was adopted by the Company effective January 1, 2018. In January 2017, the FASB issued authoritative accounting guidance on evaluation of goodwill for impairment. The guidance modifies the approach to assessing impairment from testing the implied fair value goodwill to testing the fair value of the reporting unit carrying the goodwill, which eliminates Step 2 of the prior evaluation guidance. The intent of this amendment is to reduce the cost and complexity of evaluating goodwill. The guidance was early adopted by the Company effective July 1, 2017. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements. In October 2016, the FASB issued authoritative accounting guidance on the income tax consequences of intra-company transfers other than inventory. This guidance addresses the timing of the recognition of current and deferred income taxes. Under this guidance, the recognition of current or deferred income taxes will occur at the time of the transfer of the asset. The guidance was adopted by the Company effective January 1, 2018. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements. In August 2016, the FASB issued authoritative accounting guidance on the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The guidance specifically addresses cash flow issues with the objective of reducing the diversity in practice. The guidance was adopted by the Company effective January 1, 2018. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements. In March 2016, the FASB issued authoritative accounting guidance on share-based payment awards to employees. The guidance involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance was adopted by the Company effective January 1, 2017. Management recorded an excess tax benefit of $18 million to income tax expense and as a component of operating cash flows for the year ended December 31, 2017, and made the accounting policy election to account for forfeitures in stock-based compensation as they occur. In January 2016, the FASB issued authoritative accounting guidance on the classification of equity securities with readily determinable fair values into different categories (e.g. trading or available-for-sale) In July 2015, the FASB issued authoritative accounting guidance to simplify the measurement of inventory. The guidance requires that inventory be measured at the lower of cost and net realizable value. When evidence exists that the net realizable value of inventory is lower than its cost, the difference shall be recognized as a loss in earnings in the period in which it occurs. Inventory measured using last-in, first-out In May 2014, the FASB issued authoritative accounting guidance on a company’s accounting for revenue from contracts with customers, which guidance has subsequently been amended. The guidance applies to all companies that enter into contracts with customers to transfer goods, services or nonfinancial assets. The guidance requires these companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, timing, amount and uncertainty of revenue that is recognized. The guidance allows either full or modified retrospective adoption. The guidance was adopted by the Company effective January 1, 2018 using the modified retrospective approach. Management expects that the revenue streams that will be impacted by the guidance, although immaterially, relate to non-standard |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In February 2016, the FASB issued authoritative accounting guidance on lease accounting. The guidance requires lessees to present right-of-use |
SUMMARY OF SIGNIFICANT ACCOUN32
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property And Equipment Estimated Useful Lives | Depreciation expense is recorded using the straight-line method over the following estimated lives: Range in Years Land improvements 5 – 30 Buildings and building improvements 10 – 40 Machinery and equipment 2 – 20 Software 2 – 5 Special tools 2 – 10 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Components of Inventories | Inventories consisted of the following components (dollars in millions): December 31, December 31, Purchased parts and raw materials $ 79 $ 57 Work in progress 6 5 Service parts 46 43 Finished goods 23 21 Total inventories $ 154 $ 126 |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property Plant and Equipment Cost and Accumulated Depreciation | The cost and accumulated depreciation of property, plant and equipment are as follows (dollars in millions): December 31, December 31, Land and land improvements $ 24 $ 25 Buildings and building improvements 322 303 Machinery and equipment 601 590 Software 136 128 Special tools 169 157 Construction in progress 46 46 Total property, plant and equipment 1,298 1,249 Accumulated depreciation (850 ) (785 ) Property, plant and equipment, net $ 448 $ 464 |
GOODWILL AND OTHER INTANGIBLE35
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Summary of Other Intangible Assets | The following presents a summary of other intangible assets (dollars in millions): December 31, 2017 December 31, 2016 Intangible Accumulated Intangible Intangible Accumulated Intangible Other intangible assets: Trade name $ 790 $ — $ 790 $ 790 $ — $ 790 Customer relationships – commercial 832 (573 ) 259 832 (526 ) 306 Proprietary technology 476 (396 ) 80 476 (358 ) 118 Customer relationships – defense 62 (38 ) 24 62 (35 ) 27 Non-compete 17 (17 ) — 17 (16 ) 1 Patented technology – defense 28 (28 ) — 28 (28 ) — Tooling rights 5 (5 ) — 5 (5 ) — Total $ 2,210 $ (1,057 ) $ 1,153 $ 2,210 $ (968 ) $ 1,242 |
Amortization Expense Related to Other Intangible Assets for Next Five Fiscal Years | Amortization expense related to other intangible assets for the next five years is expected to be (dollars in millions): 2018 2019 2020 2021 2022 Amortization expense $ 87 $ 86 $ 50 $ 45 $ 43 |
FAIR VALUE OF FINANCIAL INSTR36
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Summary of Fair Value of Financial Assets and (Liabilities) | The following table summarizes the fair value of the Company’s financial assets and (liabilities) as of December 31 (dollars in millions): Fair Value Measurements Using Quoted Prices in Active Significant Other TOTAL 2017 2016 2017 2016 2017 2016 Cash equivalents $ 50 $ 81 $ — $ — $ 50 $ 81 Rabbi trust assets 8 5 — — 8 5 Deferred compensation obligation (8 ) (5 ) — — (8 ) (5 ) Available-for-sale — 2 — — — 2 Derivative liabilities, net — — — (29 ) — (29 ) Total $ 50 $ 83 $ — $ (29 ) $ 50 $ 54 |
DEBT (Tables)
DEBT (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Summary of Long-Term Debt and Maturities | Long-term debt and maturities are as follows (dollars in millions): December 31, December 31, Long-term debt: Senior Secured Credit Facility Term B-3 $ 1,176 $ 1,188 Senior Notes, fixed 5.0%, due 2024 1,000 1,000 Senior Notes, fixed 4.75%, due 2027 400 — Total long-term debt $ 2,576 $ 2,188 Less: current maturities of long-term debt 12 12 deferred financing costs, net (see NOTE 2) 30 29 Total long-term debt, net $ 2,534 $ 2,147 |
Principal Payments Required on Long Term Debt | Principal payments required on long-term debt during the next five years are as follows: (dollars in millions) 2018 2019 2020 2021 2022 Payments $ 12 $ 12 $ 12 $ 12 $ 1,128 |
DERIVATIVES (Tables)
DERIVATIVES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Summary of Company's Interest Rate Derivatives | A summary of the Company’s interest rate derivatives as of December 31, 2017 and 2016 follows (dollars in millions): December 31, 2017 December 31, 2016 Notional Fair Value Notional Fair Value 3.44% Interest Rate Swap L, Aug 2016 – Aug 2019* $ — — $ 75 (4 ) 3.43% Interest Rate Swap M, Aug 2016 – Aug 2019* — — 100 (5 ) 3.37% Interest Rate Swap N, Aug 2016 – Aug 2019* — — 75 (3 ) 3.19% Interest Rate Swap O, Aug 2016 – Aug 2019* — — 75 (3 ) 3.08% Interest Rate Swap P, Aug 2016 – Aug 2019* — — 75 (3 ) 2.99% Interest Rate Swap Q, Aug 2016 – Aug 2019* — — 50 (2 ) 2.98% Interest Rate Swap R, Aug 2016 – Aug 2019* — — 50 (2 ) 2.73% Interest Rate Swap S, Aug 2016 – Aug 2019* — — 50 (1 ) 2.74% Interest Rate Swap T, Aug 2016 – Aug 2019* — — 75 (2 ) 2.66% Interest Rate Swap U, Aug 2016 – Aug 2019* — — 50 (1 ) 2.60% Interest Rate Swap V, Aug 2016 – Aug 2019* — — 50 (1 ) 2.40% Interest Rate Swap W, Aug 2016 – Aug 2019* — — 25 (1 ) 2.25% Interest Rate Swap X, Aug 2016 – Aug 2019* — — 50 (1 ) * includes LIBOR floor of 1.00% $ — $ — $ 800 $ (29 ) |
Derivative Instruments and their Impact on the Financial Condition | The following tabular disclosures further describe the Company’s interest rate derivative instruments and their impact on the financial condition of the Company (dollars in millions): December 31, 2017 December 31, 2016 Balance Sheet Location Fair Value Balance Sheet Location Fair Value Derivatives not designated as hedging instruments Interest rate swaps Other current $ — Other current $ (11 ) Other non-current liabilities — Other non-current liabilities (18 ) Total derivatives not designated as hedging instruments $ — $ (29 ) |
Summary of Gain (Loss) on Interest Rate Derivatives | The following tabular disclosure describes the location and impact on the Company’s results of operations related to gain (loss) on interest rate derivatives (dollars in millions): December 31, December 31, December 31, Location of impact on results of operations Interest income (expense),net $ 16 $ — $ (14 ) |
PRODUCT WARRANTY LIABILITIES (T
PRODUCT WARRANTY LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Product Warranty Liability Activities | Product warranty liability activities consist of the following (dollars in millions): Year ended Year ended Year ended Beginning balance $ 63 $ 79 $ 84 Payments (30 ) (35 ) (33 ) Increase in liability (warranty issued during period) 18 16 21 Net adjustments to liability 4 3 6 Accretion (for predecessor liabilities) — — 1 Ending balance $ 55 $ 63 $ 79 |
DEFERRED REVENUE (Tables)
DEFERRED REVENUE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Deferred Revenue for Extended Transmission Coverage Activity | Deferred revenue activity consists of the following (dollars in millions): Year ended Year ended Year ended Beginning balance $ 93 $ 79 $ 69 Increases 52 37 32 Revenue earned (29 ) (23 ) (22 ) Ending balance $ 116 $ 93 $ 79 |
OTHER (EXPENSE) INCOME, NET (Ta
OTHER (EXPENSE) INCOME, NET (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Computation of Other (Expense) Income, Net | Other (expense) income, net consists of the following (dollars in millions): Years ended December 31, 2017 2016 2015 Technology-related investment expense $ (16 ) $ (1 ) $ — Vendor settlements (5 ) 1 3 Other (1 ) 2 (3 ) Total $ (22 ) $ 2 $ — |
OTHER CURRENT LIABILITIES (Tabl
OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Summary of Other Current Liabilities | Other current liabilities consist of the following (dollars in millions): As of As of Payroll and related costs $ 73 $ 52 Sales allowances 34 24 Accrued interest payable 19 17 Vendor buyback obligation 14 13 Taxes payable 10 10 Defense price reduction reserve 9 9 Non-trade 8 4 Derivative liabilities — 11 Other accruals 16 10 Total $ 183 $ 150 |
EMPLOYEE BENEFIT PLANS (Tables)
EMPLOYEE BENEFIT PLANS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Net Periodic Benefit Costs | Information about the net periodic benefit cost and other changes recognized in AOCL for the pension and post-retirement benefit plans is as follows (dollars in millions): Pension Plans Post-retirement Benefits Year ended Year ended Year ended Year ended Year ended Year ended Net Periodic Benefit Cost: Service cost $ 12 $ 13 $ 14 $ 2 $ 2 $ 2 Interest cost 6 6 5 6 7 5 Expected return on assets (7 ) (7 ) (8 ) — — — Prior service credit — — — (4 ) (4 ) (3 ) Net Periodic Benefit Cost $ 11 $ 12 $ 11 $ 4 $ 5 $ 4 Other changes recognized in other comprehensive income: Prior service cost (credit) $ 1 $ (5 ) $ — $ (73 ) $ — $ — Net loss (gain) 8 8 (4 ) 24 (11 ) 4 Amortizations — — — 4 4 4 Total recognized – other comprehensive income $ 9 $ 3 $ (4 ) $ (45 ) $ (7 ) $ 8 |
Health Care Costs Trends | As health care costs trends have a significant effect on the amounts reported, an increase and decrease of one-percentage-point 1% Increase 1% Decrease Effect on total of service and interest cost $ 2 $ (1 ) Effect on post-retirement benefit obligation $ 15 $ (12 ) |
Reconciliation of Changes in Net Benefit Obligations and Fair Value of Plan Assets | The following table provides a reconciliation of the changes in the net benefit obligations and fair value of plan assets for the years ended December 31, 2017, 2016 and 2015 (dollars in millions): Pension Plans Post-retirement Benefits Year ended Year ended Year ended Year ended Year ended Year ended Benefit Obligations: Net benefit obligation at beginning of year $ 155 $ 140 $ 134 $ 144 $ 147 $ 136 Service cost 12 13 14 2 2 2 Interest cost 6 6 5 6 7 5 Plan Amendments 1 (5 ) — (73 ) — — Benefits paid (7 ) (7 ) (2 ) (2 ) (1 ) (1 ) Actuarial loss (gain) 14 8 (11 ) 25 (11 ) 5 Net benefit obligation at end of year $ 181 $ 155 $ 140 $ 102 $ 144 $ 147 Fair Value of Plan Assets: Fair value of plan assets at beginning of year $ 150 $ 140 $ 135 $ — $ — $ — Actual return on plan assets 14 6 2 — — — Employer contributions 31 11 5 2 1 1 Benefits paid (7 ) (7 ) (2 ) (2 ) (1 ) (1 ) Fair value of plan assets at end of year $ 188 $ 150 $ 140 $ — $ — $ — Net Funded Status $ 7 $ (5 ) $ — $ (102 ) $ (144 ) $ (147 ) |
Fair Value of Plan Assets | The fair values of plan assets for the Company’s pension plans as of December 31, 2017 and 2016 are as follows (dollars in millions): Fair Value Measurements Using Quoted Prices in Active Significant Other TOTAL 2017 2016 2017 2016 2017 2016 Diversified debt securities $ 26 $ 12 $ 128 $ 112 $ 154 $ 124 Diversified equity securities 20 22 8 — 28 22 Cash equivalents 6 4 — — 6 4 Total $ 52 $ 38 $ 136 $ 112 $ 188 $ 150 |
Schedule of Allocation of Plan Assets | To achieve these objectives the Company has established the following targets: Target Asset Category Hourly Salary Cash equivalents 2 % 2 % Diversified equity securities 15 15 Diversified debt securities 83 83 Total 100 % 100 % |
Amounts Recognized in Balance Sheet and in Accumulated Other Comprehensive Income AOCI | The following table discloses the amounts recognized in the balance sheet and in AOCL at December 31, 2017 and 2016, on a pre-tax Pension Plans Post-retirement Benefits As of December 31, 2017 2016 2017 2016 Amounts Recognized in Balance Sheet: Noncurrent assets $ 7 $ — $ — $ — Current liabilities — — (3 ) (2 ) Noncurrent liabilities — (5 ) (99 ) (142 ) Total asset (liability) $ 7 $ (5 ) $ (102 ) $ (144 ) Accumulated Other Comprehensive Loss: Prior service credit $ 4 $ 5 $ 84 $ 15 Actuarial (loss) gain (11 ) (3 ) (10 ) 15 Total $ (7 ) $ 2 $ 74 $ 30 |
Amounts in Accumulated Other Comprehensive Loss AOCL Expected to be Amortized and Recognized as Component of Net Periodic Benefit Cost in 2017 | The amounts in AOCL expected to be amortized and recognized as a component of net periodic benefit cost in 2018 are as follows (dollars in millions): 2018 Pension Post-retirement Prior service credit $ 1 $ 13 Actuarial loss (1 ) — Total $ — $ 13 |
Projected and Accumulated Benefit Obligation and Fair Value of Plan Assets for Pension Plans with Projected Benefit Obligation in Excess of Plan Assets | As of December 31, 2017 and 2016, the projected benefit obligation, the accumulated benefit obligation, and the fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets and for pension plans with an accumulated benefit obligation in excess of plan assets were as follows (dollars in millions): Hourly Plan Salary Plan As of December 31, 2017 2016 2017 2016 Plans with projected benefit obligation in excess of plan assets: Projected benefit obligation N/A 1 $ 76 N/A 1 $ 78 Fair value of plan assets N/A 1 $ 75 N/A 1 $ 75 Plans with accumulated benefit obligation in excess of plan assets: Accumulated benefit obligation N/A 1 $ 76 N/A 1 N/A 2 Fair value of plan assets N/A 1 $ 75 N/A 1 N/A 2 1 As of December 31, 2017, the hourly defined benefit pension plan had plan assets greater than the projected benefit obligation and the accumulated benefit obligation. As of December 31, 2017, the salary defined benefit pension plan had plan assets greater than the projected benefit obligation and accumulated benefit obligation. 2 As of December 31, 2016, the salary defined benefit pension plan had plan assets greater than the accumulated benefit obligation. |
Expected Cash Flows for Pension and Post-Retirement Benefit Plans | Information about expected cash flows for the Company’s pension and post-retirement benefit plans is as follows (dollars in millions): Pension Post-retirement Employer Contributions: 2018 expected contributions $ — $ 3 Expected Benefit Payments: 2018 9 3 2019 10 3 2020 11 4 2021 12 5 2022 13 5 2023-2027 68 27 |
Benefit Obligation | |
Weighted-Average Actuarial Assumptions | The table below provides the weighted-average actuarial assumptions used to determine the benefit obligations of the Company’s plans. Pension Plans Post-retirement Benefits As of December 31, 2017 2016 2017 2016 Discount rate 3.50 % 4.10 % 3.60 % 4.30 % Rate of compensation increase (salaried) 3.00 % 3.00 % N/A N/A |
Benefit Cost | |
Weighted-Average Actuarial Assumptions | The table below provides the weighted-average actuarial assumptions used to determine the net periodic benefit cost. Pension Plans Post-retirement Benefits Year ended Year ended Year ended Year ended Year ended Year ended Discount rate 4.10 % 4.40 % 3.90 % 4.30 % 4.60 % 4.00 % Rate of compensation increase (salaried) 3.00 % 3.00 % 3.00 % N/A N/A N/A Expected return on assets 4.70 % 4.70 % 6.25 % N/A N/A N/A |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Loss Before Income Taxes | Income before income taxes included the following (dollars in millions): Years ended December 31, 2017 2016 2015 U.S. income $ 491 $ 309 $ 261 Foreign income 36 32 28 Total $ 527 $ 341 $ 289 |
Provision for Income Tax Expense | The provision for income tax expense was estimated as follows (dollars in millions): Years ended December 31, 2017 2016 2015 Estimated current income taxes: U.S. federal $ 61 $ 2 $ 3 Foreign 7 8 6 U.S. state and local 5 2 2 Total Current 73 12 11 Deferred income tax (credit) expense, net: U.S. federal (44 ) 107 90 Foreign 1 — — U.S. state and local (7 ) 7 6 Total Deferred (50 ) 114 96 Total income tax expense $ 23 $ 126 $ 107 |
Reconciliation of Provision for Income Tax Expense | A reconciliation of the provision for income tax expense compared with the amounts at the U.S. federal statutory rate is as follows (dollars in millions): Years ended December 31, 2017 2016 2015 Tax at U.S. statutory income tax rate $ 185 $ 120 $ 101 Impact related to Tax Act (155 ) — — Tax credits (21 ) — — Foreign rate differential (5 ) (5 ) (3 ) Non-deductible 7 5 4 Valuation allowance 3 1 (1 ) State tax expense 10 6 5 Adjustment to deferred tax expense — — 1 Other adjustments (1 ) (1 ) — Total income tax expense $ 23 $ 126 $ 107 |
Deferred Tax Assets and Liabilities | Temporary differences and carryforwards that gave rise to deferred tax assets and liabilities included the following (dollars in millions): As of As of Deferred tax assets: Intangibles $ 35 $ 64 Deferred revenue 25 35 Other accrued liabilities 18 34 Operating loss carryforwards 12 14 Warranty accrual 11 22 Stock-based compensation 6 8 Sales allowances and rebates 6 7 Inventories 5 6 Technology-related investments 4 9 Capital loss carryforwards 3 — Environmental remediation 3 5 Unrealized loss on interest rate derivatives 1 11 Post-retirement — 12 Tax credits — 8 Other 4 8 Total Deferred tax assets 133 243 Valuation allowances (9 ) (5 ) Deferred tax liabilities: Goodwill (287 ) (409 ) Trade name (96 ) (122 ) Property, plant and equipment (7 ) (15 ) Post-retirement (4 ) — Other (3 ) (2 ) Total Deferred tax liabilities (397 ) (548 ) Net Deferred tax liability $ (273 ) $ (310 ) |
Liability for Unrecognized Tax Benefit | The change in the liability for unrecognized tax benefits are as follows (dollars in millions): December 31, 2015 $ 2 Increases in unrecognized tax benefits as a result of current year activity — December 31, 2016 $ 2 Increases in unrecognized tax benefits as a result of current year activity — December 31, 2017 $ 2 |
ACCUMULATED OTHER COMPREHENSI45
ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Changes in Components of AOCL | The changes in components of AOCL consisted of the following (dollars in millions): Before Tax Tax (Expense) After Tax Balance at December 31, 2014 $ 5 $ (45 ) $ (40 ) Foreign currency translation (11 ) — (11 ) Pension and OPEB liability adjustment (3 ) — (3 ) Available-for-sale (8 ) 3 (5 ) Net current period other comprehensive loss $ (22 ) $ 3 $ (19 ) Balance at December 31, 2015 $ (17 ) $ (42 ) $ (59 ) Foreign currency translation (6 ) — (6 ) Pension and OPEB liability adjustment 4 (2 ) 2 Available-for-sale (1 ) 1 — Net current period other comprehensive loss $ (3 ) $ (1 ) $ (4 ) Balance at December 31, 2016 $ (20 ) $ (43 ) $ (63 ) Foreign currency translation 15 — 15 Pension and OPEB liability adjustment 34 (8 ) 26 Available-for-sale 11 (4 ) 7 Net current period other comprehensive loss $ 60 $ (12 ) $ 48 Balance at December 31, 2017 $ 40 $ (55 ) $ (15 ) |
Consolidated Statements of Comprehensive Income Affected by Reclassifications from by AOCL | The following table shows the location in the Consolidated Statements of Comprehensive Income affected by reclassifications from AOCL (dollars in millions): For the year ended December 31, 2015 AOCL Components Amount Affected line item in the consolidated statements of comprehensive income Amortization of defined benefit pension items: Prior service credit $ 3 Cost of sales — Selling, general and — Engineering – research and Actuarial gain — Cost of sales Total reclassifications, before tax 3 Income before income Income tax expense (1 ) Tax expense Total reclassifications $ 2 Net of tax For the year ended December 31, 2016 AOCL Components Amount Affected line item in the consolidated statements of comprehensive income Amortization of defined benefit pension items: Prior service credit $ 3 Cost of sales — Selling, general and — Engineering – research and Actuarial gain 1 Cost of sales — Selling, general and — Engineering – research and Total reclassifications, before tax 4 Income before income Income tax expense (2 ) Tax expense Total reclassifications $ 2 Net of tax For the year ended December 31, 2017 AOCL Components Amount Affected line item in the consolidated statements of comprehensive income Amortization of defined benefit pension items: Prior service credit $ 3 Cost of sales 1 Selling, general and — Engineering – research and Actuarial gain — Cost of sales Total reclassifications, before tax 4 Income before income Income tax expense (1 ) Tax expense Total reclassifications $ 3 Net of tax |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Future Payments under Non-Cancelable Operating Leases | As of December 31, 2017, future payments under non-cancelable 2018 $ 4 2019 2 2020 2 2021 1 2022 1 Thereafter 1 Total $ 11 |
CONCENTRATION OF RISK (Tables)
CONCENTRATION OF RISK (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Schedules of Concentration of Risk by Risk Factor | Three customers accounted for greater than 10% of net sales within the last three years presented. Years ended December 31, % of net sales 2017 2016 2015 Daimler AG 20 % 21 % 21 % Navistar, Inc. 8 % 9 % 10 % Volvo Group 8 % 8 % 10 % No other customers accounted for more than 10% of net sales of the Company during the years ended December 31, 2017, 2016 or 2015. Three customers accounted for greater than 10% of outstanding accounts receivable within the last two years presented. % of accounts receivable As of As of Kirby Corporation 1 15 % 4 % Volvo Group 11 % 6 % Daimler AG 7 % 19 % 1 As of December 31, 2017, Kirby Corporation (“Kirby”) was the parent company of customers United Engines LLC and Stewart & Stevenson LLC. As of December 31, 2016, Kirby was the parent company of United Engines LLC. |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Reconciliation of Numerators and Denominators Used to Calculate Basic EPS and Diluted EPS | The following table reconciles the numerators and denominators used to calculate basic EPS and diluted EPS (in millions, except per share data): Years ended December 31, 2017 2016 2015 Net income $ 504 $ 215 $ 182 Weighted average shares of common stock outstanding 149 168 176 Dilutive effect stock-based awards 1 1 1 Diluted weighted average shares of common stock outstanding 150 169 177 Basic earnings per share attributable to common stockholders $ 3.38 $ 1.28 $ 1.03 Diluted earnings per share attributable to common stockholders $ 3.36 $ 1.27 $ 1.03 |
GEOGRAPHIC INFORMATION (Tables)
GEOGRAPHIC INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Net Sales by Country | The Company had the following net sales by country (dollars in millions): Years ended December 31, 2017 2016 2015 United States $ 1,614 $ 1,277 $ 1,460 Canada 125 115 96 Japan 75 70 49 China 62 50 64 Germany 45 53 40 Mexico 39 41 36 United Kingdom 36 28 44 Netherlands 30 27 19 Turkey 28 26 30 Other 208 153 148 Total $ 2,262 $ 1,840 $ 1,986 |
Schedule of Disclosure of Long-Lived Assets by Geographic Location | The Company had the following net long-lived assets by country (dollars in millions): Years ended December 31, 2017 2016 2015 United States $ 400 $ 412 $ 419 India 32 36 43 Hungary 12 11 13 Others 4 5 5 Total $ 448 $ 464 $ 480 |
QUARTERLY FINANCIAL INFORMATI50
QUARTERLY FINANCIAL INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Quarterly Data | The following is a summary of the unaudited quarterly results of operations. The Company believes that all adjustments considered necessary for a fair presentation in accordance with GAAP have been included (unaudited, in millions, except per share data). Quarters ended, March 31 June 30 September 30 December 31 2017 Net sales $ 499 $ 580 $ 595 $ 588 Gross profit 251 290 302 288 Operating income 149 177 198 128 Income before income taxes 127 146 170 84 Net income 83 95 111 215 Basic earnings per share $ 0.53 $ 0.63 $ 0.75 $ 1.52 Diluted earnings per share $ 0.52 $ 0.63 $ 0.75 $ 1.51 2016 Net sales $ 462 $ 475 $ 434 $ 469 Gross profit 215 227 204 218 Operating income 111 127 104 110 Income before income taxes 77 99 71 94 Net income 48 61 45 61 Basic earnings per share $ 0.28 $ 0.36 $ 0.27 $ 0.37 Diluted earnings per share $ 0.28 $ 0.36 $ 0.27 $ 0.36 |
Overview - Additional Informati
Overview - Additional Information (Detail) | 12 Months Ended | |
Dec. 31, 2017EmployeeCustomerProduct | Dec. 31, 2016Employee | |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items] | ||
Transmission product lines | Product | 13 | |
Worldwide independent distributor and dealer locations | Customer | 1,400 | |
Number of employees | Employee | 2,700 | 2,700 |
Sales Revenue, Net | North America | Geographic Concentration Risk | ||
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items] | ||
Concentration of risk, percentage | 79.00% |
Summary of Significant Accoun52
Summary of Significant Accounting Policies - Additional Information (Detail) shares in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2017USD ($)Segment | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Mar. 31, 2015shares | |
Summary Of Significant Accounting Policies [Line Items] | ||||
Number of operating segment | Segment | 1 | |||
Number of reportable segment | Segment | 1 | |||
Loss associated with impairment of long-lived assets | $ 32 | $ 1 | ||
Asset impairment charge | $ 0 | |||
Amortization of deferred financing costs | 6 | 7 | 8 | |
Sales incentives | 66 | 58 | 47 | |
Military price reduction reserve | 56 | 56 | ||
Engineering services revenue | 3 | 3 | 4 | |
Aggregate number of shares of common stock available for issuance under the 2015 Plan | shares | 15.3 | |||
Incentive compensation expense | 2 | 3 | 4 | |
Excess tax benefit from stock-based compensation | 18 | 6 | 8 | |
Restricted Stock And Restricted Stock Unit | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Incentive compensation expense | 7 | 2 | 2 | |
Performance Awards | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Incentive compensation expense | $ 3 | $ 1 | $ 1 | |
Vesting Schedule One | Restricted Stock And Restricted Stock Unit | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Option vesting period | 1 year | |||
Vesting Schedule One | Restricted Stock Units (RSUs) | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Option vesting period | 1 year | |||
Vesting Schedule One | Restricted Stock | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Option vesting period | 1 year | |||
Vesting Schedule Two | Restricted Stock And Restricted Stock Unit | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Option vesting period | 2 years | |||
Vesting Schedule Two | Restricted Stock Units (RSUs) | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Option vesting period | 2 years | |||
Vesting Schedule Two | Restricted Stock | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Option vesting period | 2 years | |||
Vesting Schedule Three | Restricted Stock And Restricted Stock Unit | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Option vesting period | 3 years | |||
Vesting Schedule Three | Restricted Stock Units (RSUs) | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Option vesting period | 3 years | |||
Vesting Schedule Three | Restricted Stock | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Option vesting period | 3 years | |||
Minimum | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Extended Transmission Coverage sales, recognition period | 2 years | |||
Maximum | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Extended Transmission Coverage sales, recognition period | 5 years |
Property Plant and Equipment Es
Property Plant and Equipment Estimated Lives (Detail) | 12 Months Ended |
Dec. 31, 2017 | |
Land Improvements | Minimum | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, estimated Lives | 5 years |
Land Improvements | Maximum | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, estimated Lives | 30 years |
Building and Building Improvements | Minimum | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, estimated Lives | 10 years |
Building and Building Improvements | Maximum | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, estimated Lives | 40 years |
Machinery and Equipment | Minimum | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, estimated Lives | 2 years |
Machinery and Equipment | Maximum | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, estimated Lives | 20 years |
Software | Minimum | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, estimated Lives | 2 years |
Software | Maximum | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, estimated Lives | 5 years |
Special tools | Minimum | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, estimated Lives | 2 years |
Special tools | Maximum | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, estimated Lives | 10 years |
Components of Inventories (Deta
Components of Inventories (Detail) - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Inventory [Line Items] | ||
Purchased parts and raw materials | $ 79 | $ 57 |
Work in progress | 6 | 5 |
Service parts | 46 | 43 |
Finished goods | 23 | 21 |
Total inventories | $ 154 | $ 126 |
Property Plant and Equipment Co
Property Plant and Equipment Cost and Accumulated Depreciation (Detail) - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Property, Plant and Equipment [Line Items] | |||
Construction in progress | $ 46 | $ 46 | |
Property and equipment, gross | 1,298 | 1,249 | |
Accumulated depreciation | (850) | (785) | |
Property, plant and equipment, net | 448 | 464 | $ 480 |
Land Improvements | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 24 | 25 | |
Building and Building Improvements | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 322 | 303 | |
Machinery and Equipment | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 601 | 590 | |
Software | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 136 | 128 | |
Special tools | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | $ 169 | $ 157 |
Property Plant and Equipment -
Property Plant and Equipment - Additional Information (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Property, Plant and Equipment [Line Items] | |||
Depreciation of property, plant and equipment | $ 80 | $ 84 | $ 88 |
Loss associated with impairment of long-lived assets | $ 32 | $ 1 |
Goodwill and Other Intangible57
Goodwill and Other Intangible Assets - Additional Information (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Goodwill [Line Items] | |||
Goodwill | $ 1,941 | $ 1,941 | |
Amortization of intangible assets | 90 | 92 | $ 97 |
Net carrying value of Goodwill and other intangible assets | $ 3,094 | $ 3,183 | |
Trade name impairment | $ 80 |
Summary of Other Intangible Ass
Summary of Other Intangible Assets (Detail) - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Trade name | $ 790 | $ 790 |
Intangible assets, gross | 2,210 | 2,210 |
Accumulated amortization | (1,057) | (968) |
Intangible assets, net | 1,153 | 1,242 |
Customer relationships - commercial | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Intangible assets, gross | 832 | 832 |
Accumulated amortization | (573) | (526) |
Intangible assets, net | 259 | 306 |
Proprietary technology | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Intangible assets, gross | 476 | 476 |
Accumulated amortization | (396) | (358) |
Intangible assets, net | 80 | 118 |
Customer relationships - defense | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Intangible assets, gross | 62 | 62 |
Accumulated amortization | (38) | (35) |
Intangible assets, net | 24 | 27 |
Non-compete agreement | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Intangible assets, gross | 17 | 17 |
Accumulated amortization | (17) | (16) |
Intangible assets, net | 1 | |
Patented technology - defense | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Intangible assets, gross | 28 | 28 |
Accumulated amortization | (28) | (28) |
Tooling rights | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Intangible assets, gross | 5 | 5 |
Accumulated amortization | $ (5) | $ (5) |
Amortization Expense Related to
Amortization Expense Related to Other Intangible Assets for Next Five Fiscal Years (Detail) $ in Millions | Dec. 31, 2017USD ($) |
Finite-Lived Intangible Assets | |
2,018 | $ 87 |
2,019 | 86 |
2,020 | 50 |
2,021 | 45 |
2,022 | $ 43 |
Fair Value of Financial Instr60
Fair Value of Financial Instruments - Additional Information (Detail) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Torotrak shares fair value | $ 0 | $ 2,000,000 |
Loss on sale shares | (13,000,000) | |
Fair Value, Inputs, Level 3 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Financial assets | 0 | 0 |
Financial liabilities | $ 0 | $ 0 |
Summary of Fair Value of Financ
Summary of Fair Value of Financial Assets and (Liabilities) (Detail) - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents | $ 50 | $ 81 |
Rabbi trust assets | 8 | 5 |
Deferred compensation obligation | (8) | (5) |
Available-for-sale securities | 0 | 2 |
Derivative liabilities, net | (29) | |
Total | 50 | 54 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents | 50 | 81 |
Rabbi trust assets | 8 | 5 |
Deferred compensation obligation | (8) | (5) |
Available-for-sale securities | 2 | |
Total | $ 50 | 83 |
Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative liabilities, net | (29) | |
Total | $ (29) |
Summary of Long-Term Debt and M
Summary of Long-Term Debt and Maturities (Detail) - USD ($) $ in Millions | Dec. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 |
Debt Instrument [Line Items] | ||||
Total long-term debt | $ 2,576 | $ 2,188 | ||
Less: current maturities of long-term debt | 12 | 12 | ||
Less: deferred financing costs, net (see NOTE 2) | 30 | 29 | ||
Total long-term debt, net | 2,534 | 2,147 | ||
Senior Secured Credit Facility Term B-3 Loan, variable due 2022 | ||||
Debt Instrument [Line Items] | ||||
Total long-term debt | 1,176 | 1,188 | ||
5.0% Senior Notes due 2024 | ||||
Debt Instrument [Line Items] | ||||
Total long-term debt | 1,000 | $ 1,000 | ||
Less: deferred financing costs, net (see NOTE 2) | $ 13 | |||
4.75% Senior Notes due 2027 | ||||
Debt Instrument [Line Items] | ||||
Total long-term debt | $ 400 | $ 400 | ||
Less: deferred financing costs, net (see NOTE 2) | $ 5 |
Summary of Long-Term Debt and63
Summary of Long-Term Debt and Maturities (Parenthetical) (Detail) | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Senior Secured Credit Facility Term B-3 Loan, variable due 2022 | ||||
Debt Instrument [Line Items] | ||||
Debt instrument, due date | 2,022 | 2,022 | ||
5.0% Senior Notes due 2024 | ||||
Debt Instrument [Line Items] | ||||
Debt instrument, stated interest rate | 5.00% | 5.00% | 5.00% | |
Debt instrument, due date | 2,024 | 2,024 | ||
4.75% Senior Notes due 2027 | ||||
Debt Instrument [Line Items] | ||||
Debt instrument, stated interest rate | 4.75% | 4.75% | ||
Debt instrument, due date | 2,027 |
Principal Payments Required on
Principal Payments Required on Long Term Debt (Detail) $ in Millions | Dec. 31, 2017USD ($) |
Long Term Debt [Line Items] | |
2,018 | $ 12 |
2,019 | 12 |
2,020 | 12 |
2,021 | 12 |
2,022 | $ 1,128 |
Debt - Additional Information (
Debt - Additional Information (Detail) - USD ($) | 1 Months Ended | 12 Months Ended | |||||
Mar. 31, 2017 | Sep. 30, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2017 | Aug. 31, 2017 | |
Debt Instrument [Line Items] | |||||||
Total long-term debt | $ 2,576,000,000 | $ 2,188,000,000 | |||||
Fair value of long-term debt obligations | $ 2,622,000,000 | ||||||
Total leverage ratio | 274.00% | ||||||
Repurchase and redemption of long-term debt | $ 490,000,000 | ||||||
Deferred financing costs, net | $ 30,000,000 | 29,000,000 | |||||
Revolving Credit Facility, variable, due 2021 | |||||||
Debt Instrument [Line Items] | |||||||
Maximum revolving credit facility | $ 550,000,000 | $ 450,000,000 | |||||
Available revolving credit facility | 533,000,000 | ||||||
Maximum amount of letters of credit commitments available under the revolving credit facility | 75,000,000 | ||||||
Revolving credit facility, maximum amount outstanding | 300,000,000 | ||||||
Letters of Credit | $ 17,000,000 | ||||||
Maturity date of revolving credit borrowings | 2021-09 | ||||||
Basis point reduction to applicable margin, resulting from total leverage ratio below minimum | 0.25% | ||||||
Basis point reduction to commitment fee, resulting from total leverage ratio below minimum | 0.125% | ||||||
Additional basis point reduction to applicable margin, resulting from total leverage ratio below minimum | 0.25% | ||||||
Revolving Loans Outstanding | $ 0 | ||||||
Revolving Credit Facility, variable, due 2021 | greater of the prime lending rate or federal funds | |||||||
Debt Instrument [Line Items] | |||||||
Applicable margin over base rate | 0.50% | ||||||
Revolving Credit Facility, variable, due 2021 | greater of the prime lending rate or federal funds | Minimum | |||||||
Debt Instrument [Line Items] | |||||||
Applicable margin over base rate | 0.75% | ||||||
Debt instrument, floor rate | 1.75% | ||||||
Revolving Credit Facility, variable, due 2021 | LIBOR | |||||||
Debt Instrument [Line Items] | |||||||
Applicable margin over base rate | 1.75% | ||||||
Senior Secured Credit Facility | |||||||
Debt Instrument [Line Items] | |||||||
Required senior secured leverage ratio | 550.00% | ||||||
Achieved senior secured leverage ratio | 113.00% | ||||||
Senior secured leverage ratio for applicable margin reduction | 400.00% | ||||||
Total leverage ratio for applicable margin reduction | 400.00% | ||||||
Total leverage ratio for commitment fee reduction | 350.00% | ||||||
Senior Secured Credit Facility Term B-3 Loan, variable due 2022 | |||||||
Debt Instrument [Line Items] | |||||||
Debt instrument maturity month and year | 2022-09 | ||||||
Total long-term debt | $ 1,176,000,000 | $ 1,188,000,000 | |||||
Debt financing fees | $ 1,000,000 | ||||||
Debt instrument effective interest rate | 3.57% | ||||||
Principal payments on term loans | $ 3,000,000 | ||||||
Senior Secured Credit Facility Term B-3 Loan, variable due 2022 | greater of the prime lending rate or federal funds | |||||||
Debt Instrument [Line Items] | |||||||
Applicable margin over base rate | 0.50% | 0.50% | |||||
Senior Secured Credit Facility Term B-3 Loan, variable due 2022 | greater of the prime lending rate or federal funds | Minimum | |||||||
Debt Instrument [Line Items] | |||||||
Applicable margin over base rate | 1.00% | 1.00% | 1.75% | ||||
Debt instrument, floor rate | 1.00% | ||||||
Senior Secured Credit Facility Term B-3 Loan, variable due 2022 | LIBOR | |||||||
Debt Instrument [Line Items] | |||||||
Applicable margin over base rate | 2.00% | ||||||
4.75% Senior Notes due 2027 | |||||||
Debt Instrument [Line Items] | |||||||
Debt instrument maturity month and year | 2027-10 | ||||||
Debt instrument, interest rate, stated percentage | 4.75% | 4.75% | |||||
Total long-term debt | $ 400,000,000 | $ 400,000,000 | |||||
Deferred financing costs, net | $ 5,000,000 | ||||||
4.75% Senior Notes due 2027 | Debt Instrument, Redemption, Period One | |||||||
Debt Instrument [Line Items] | |||||||
Debt instrument redemption redeemable prior date | Oct. 1, 2020 | ||||||
Debt Instrument, redemption price, percentage | 104.75% | ||||||
4.75% Senior Notes due 2027 | Debt Instrument, Redemption, Period Two | |||||||
Debt Instrument [Line Items] | |||||||
Debt instrument redemption redeemable prior date | Oct. 1, 2022 | ||||||
Debt Instrument, redemption price, percentage | 100.00% | ||||||
4.75% Senior Notes due 2027 | Maximum | Debt Instrument, Redemption, Period One | |||||||
Debt Instrument [Line Items] | |||||||
Debt Instrument, redemption Price, percentage of principal amount redeemed | 40.00% | ||||||
5.0% Senior Notes due 2024 | |||||||
Debt Instrument [Line Items] | |||||||
Debt instrument maturity month and year | 2024-09 | ||||||
Debt instrument, interest rate, stated percentage | 5.00% | 5.00% | 5.00% | ||||
Total long-term debt | $ 1,000,000,000 | $ 1,000,000,000 | |||||
Deferred financing costs, net | $ 13,000,000 | ||||||
Debt instrument redemption redeemable prior date | Oct. 1, 2019 | ||||||
Debt Instrument, redemption price, percentage | 100.00% | ||||||
5.0% Senior Notes due 2024 | Maximum | |||||||
Debt Instrument [Line Items] | |||||||
Debt Instrument, redemption Price, percentage of principal amount redeemed | 40.00% | ||||||
Senior Secured Credit Facility Term B-3 Loan, variable, due 2019 | |||||||
Debt Instrument [Line Items] | |||||||
Total long-term debt | 1,000,000,000 | ||||||
Repurchase and redemption of long-term debt | $ 1,200,000,000 |
Derivatives - Additional Inform
Derivatives - Additional Information (Detail) | Dec. 31, 2017Derivative |
Number of derivative instruments held | 0 |
Summary of Company's Interest R
Summary of Company's Interest Rate Derivatives (Detail) - Derivatives not designated as hedging instruments | Dec. 31, 2016USD ($) | |
Derivatives, Fair Value [Line Items] | ||
Fair Value | $ (29,000,000) | |
Interest Rate Swap L | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | 75,000,000 | [1] |
Fair Value | (4,000,000) | [1] |
Interest Rate Swap M | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | 100,000,000 | [1] |
Fair Value | (5,000,000) | [1] |
Interest Rate Swap N | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | 75,000,000 | [1] |
Fair Value | (3,000,000) | [1] |
Interest Rate Swap O | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | 75,000,000 | [1] |
Fair Value | (3,000,000) | [1] |
Interest Rate Swap P | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | 75,000,000 | [1] |
Fair Value | (3,000,000) | [1] |
Interest Rate Swap Q | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | 50,000,000 | [1] |
Fair Value | (2,000,000) | [1] |
Interest Rate Swap R | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | 50,000,000 | [1] |
Fair Value | (2,000,000) | [1] |
Interest Rate Swap S | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | 50,000,000 | [1] |
Fair Value | (1,000,000) | [1] |
Interest Rate Swap T | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | 75,000,000 | [1] |
Fair Value | (2,000,000) | [1] |
Interest Rate Swap U | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | 50,000,000 | [1] |
Fair Value | (1,000,000) | [1] |
Interest Rate Swap V | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | 50,000,000 | [1] |
Fair Value | (1,000,000) | [1] |
Interest Rate Swap W | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | 25,000,000 | [1] |
Fair Value | (1,000,000) | [1] |
Interest Rate Swap X | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | 50,000,000 | [1] |
Fair Value | (1,000,000) | [1] |
Interest Rate Swaps | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | $ 800,000,000 | |
[1] | includes LIBOR floor of 1.00% |
Summary of Company's Interest68
Summary of Company's Interest Rate Derivatives (Parenthetical) (Detail) - Derivatives not designated as hedging instruments | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
LIBOR | ||
Derivatives, Fair Value [Line Items] | ||
LIBOR floor | 1.00% | 1.00% |
Interest Rate Swap L | ||
Derivatives, Fair Value [Line Items] | ||
Derivative, Fixed Interest Rate | 3.44% | 3.44% |
Derivative, Maturity Date, Range Start | 2016-08 | |
Derivative, Maturity Date, Range End | 2019-08 | |
Interest Rate Swap M | ||
Derivatives, Fair Value [Line Items] | ||
Derivative, Fixed Interest Rate | 3.43% | 3.43% |
Derivative, Maturity Date, Range Start | 2016-08 | |
Derivative, Maturity Date, Range End | 2019-08 | |
Interest Rate Swap N | ||
Derivatives, Fair Value [Line Items] | ||
Derivative, Fixed Interest Rate | 3.37% | 3.37% |
Derivative, Maturity Date, Range Start | 2016-08 | |
Derivative, Maturity Date, Range End | 2019-08 | |
Interest Rate Swap O | ||
Derivatives, Fair Value [Line Items] | ||
Derivative, Fixed Interest Rate | 3.19% | 3.19% |
Derivative, Maturity Date, Range Start | 2016-08 | |
Derivative, Maturity Date, Range End | 2019-08 | |
Interest Rate Swap P | ||
Derivatives, Fair Value [Line Items] | ||
Derivative, Fixed Interest Rate | 3.08% | 3.08% |
Derivative, Maturity Date, Range Start | 2016-08 | |
Derivative, Maturity Date, Range End | 2019-08 | |
Interest Rate Swap Q | ||
Derivatives, Fair Value [Line Items] | ||
Derivative, Fixed Interest Rate | 2.99% | 2.99% |
Derivative, Maturity Date, Range Start | 2016-08 | |
Derivative, Maturity Date, Range End | 2019-08 | |
Interest Rate Swap R | ||
Derivatives, Fair Value [Line Items] | ||
Derivative, Fixed Interest Rate | 2.98% | 2.98% |
Derivative, Maturity Date, Range Start | 2016-08 | |
Derivative, Maturity Date, Range End | 2019-08 | |
Interest Rate Swap S | ||
Derivatives, Fair Value [Line Items] | ||
Derivative, Fixed Interest Rate | 2.73% | 2.73% |
Derivative, Maturity Date, Range Start | 2016-08 | |
Derivative, Maturity Date, Range End | 2019-08 | |
Interest Rate Swap T | ||
Derivatives, Fair Value [Line Items] | ||
Derivative, Fixed Interest Rate | 2.74% | 2.74% |
Derivative, Maturity Date, Range Start | 2016-08 | |
Derivative, Maturity Date, Range End | 2019-08 | |
Interest Rate Swap U | ||
Derivatives, Fair Value [Line Items] | ||
Derivative, Fixed Interest Rate | 2.66% | 2.66% |
Derivative, Maturity Date, Range Start | 2016-08 | |
Derivative, Maturity Date, Range End | 2019-08 | |
Interest Rate Swap V | ||
Derivatives, Fair Value [Line Items] | ||
Derivative, Fixed Interest Rate | 2.60% | 2.60% |
Derivative, Maturity Date, Range Start | 2016-08 | |
Derivative, Maturity Date, Range End | 2019-08 | |
Interest Rate Swap W | ||
Derivatives, Fair Value [Line Items] | ||
Derivative, Fixed Interest Rate | 2.40% | 2.40% |
Derivative, Maturity Date, Range Start | 2016-08 | |
Derivative, Maturity Date, Range End | 2019-08 | |
Interest Rate Swap X | ||
Derivatives, Fair Value [Line Items] | ||
Derivative, Fixed Interest Rate | 2.25% | 2.25% |
Derivative, Maturity Date, Range Start | 2016-08 | |
Derivative, Maturity Date, Range End | 2019-08 |
Derivative Instruments and thei
Derivative Instruments and their Impact on the Financial Condition (Detail) - Derivatives not designated as hedging instruments $ in Millions | Dec. 31, 2016USD ($) |
Derivative [Line Items] | |
Total derivatives not designated as hedging instruments | $ (29) |
Interest Rate Swaps | Other current liabilities | |
Derivative [Line Items] | |
Derivative Liability, Fair Value | (11) |
Interest Rate Swaps | Other non-current liabilities | |
Derivative [Line Items] | |
Derivative Liability, Fair Value | $ (18) |
Summary of Gain (Loss) on Inter
Summary of Gain (Loss) on Interest Rate Derivatives (Detail) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2015 | |
Derivatives not designated as hedging instruments | Interest rate contracts | Interest income (expense), net | ||
Derivative [Line Items] | ||
Gain (loss) on derivatives | $ 16 | $ (14) |
Product Warranty Liabilities -
Product Warranty Liabilities - Additional Information (Detail) - USD ($) $ in Millions | 1 Months Ended | 12 Months Ended | |||
Jun. 30, 2007 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Guarantor Obligations [Line Items] | |||||
Product warranty liability, current | $ 22 | $ 25 | |||
Product warranty liability, non-current | 33 | 38 | |||
Adjustments to product warranty liabilities | 1 | 1 | $ 9 | ||
Warranty liability | 55 | 63 | $ 79 | $ 84 | |
Dual Power Inverter Module | |||||
Guarantor Obligations [Line Items] | |||||
Product warranty, qualified cost | $ 12 | ||||
Product warranty, qualified cost sharing ratio for any amount over $46 million | 33.33% | ||||
Warranty liability | 4 | 6 | |||
Dual Power Inverter Module | General Motors | |||||
Guarantor Obligations [Line Items] | |||||
Product warranty, qualified cost | $ 34 | ||||
Product warranty, qualified cost sharing ratio for any amount over $46 million | 66.67% | ||||
Other receivable | $ 3 | $ 3 | |||
Dual Power Inverter Module | Product Warranty | |||||
Guarantor Obligations [Line Items] | |||||
Product warranty, qualified cost | $ 46 |
Product Warranty Liability Acti
Product Warranty Liability Activities (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Guarantor Obligations [Line Items] | |||
Beginning balance | $ 63 | $ 79 | $ 84 |
Payments | (30) | (35) | (33) |
Increase in liability (warranty issued during period) | 18 | 16 | 21 |
Net adjustments to liability | 4 | 3 | 6 |
Accretion (for predecessor liabilities) | 1 | ||
Ending balance | $ 55 | $ 63 | $ 79 |
Deferred Revenue - Additional I
Deferred Revenue - Additional Information (Detail) - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Deferred Revenue Arrangement [Line Items] | ||
Deferred revenue current liabilities | $ 41 | $ 27 |
Deferred revenue non-current liabilities | 75 | 66 |
Extended Transmission Coverage ("ETC") | ||
Deferred Revenue Arrangement [Line Items] | ||
Deferred revenue current liabilities | 30 | 26 |
Deferred revenue non-current liabilities | $ 72 | $ 66 |
Deferred Revenue Activity (Deta
Deferred Revenue Activity (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Deferred Revenue Arrangement [Line Items] | |||
Beginning balance | $ 93 | $ 79 | $ 69 |
Increases | 52 | 37 | 32 |
Revenue earned | (29) | (23) | (22) |
Ending balance | $ 116 | $ 93 | $ 79 |
Other (Expense) Income, Net (De
Other (Expense) Income, Net (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Components of Other Income (Expense) [Line Items] | |||
Technology-related investment expense | $ (16) | $ (1) | |
Vendor settlements | (5) | 1 | $ 3 |
Other | (1) | 2 | $ (3) |
Total | $ (22) | $ 2 |
Summary of Other Current Liabil
Summary of Other Current Liabilities (Detail) - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Other Current Liabilities [Line Items] | ||
Payroll and related costs | $ 73 | $ 52 |
Sales allowances | 34 | 24 |
Accrued interest payable | 19 | 17 |
Vendor buyback obligation | 14 | 13 |
Taxes payable | 10 | 10 |
Defense price reduction reserve | 9 | 9 |
Non-trade payables | 8 | 4 |
Derivative liabilities | 11 | |
Other accruals | 16 | 10 |
Total | $ 183 | $ 150 |
Employee Benefit Plans - Additi
Employee Benefit Plans - Additional Information (Detail) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Defined Benefit Plan Disclosure [Line Items] | ||||
Excise tax as a percentage of value of plan that exceeds the threshold amount | 40.00% | |||
Effect of excise tax on post-retirement benefit obligation | $ 2 | $ 2 | ||
Accumulated benefit obligation | 177 | 151 | ||
Deferred compensation obligation | 8 | 5 | ||
Nonqualified Deferred Compensation Plan | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Deferred compensation expense | 0 | 0 | $ 0 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Deferred compensation obligation | 8 | 5 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Nonqualified Deferred Compensation Plan | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Rabbi trust assets | 8 | 5 | ||
Deferred compensation obligation | $ 8 | 5 | ||
Hourly Plan | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Defined benefit plan, service period before normal retirement age | 30 years | |||
Defined contribution plan expense | $ 2 | 2 | 2 | |
Future Post Retirement Medical Care Costs and Prescription Drug Costs | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Health care cost trend rate | 5.20% | |||
Health care cost ultimate trend rate | 4.50% | |||
Health care cost ultimate trend year | 2,036 | |||
Salary Plan | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Defined contribution plan expense | $ 6 | 6 | 6 | |
Defined contribution plan, employer contribution for employee with severance date on or after January 1, 1993 | 1.00% | |||
Defined contribution plan, employer matching contribution | 4.00% | |||
Post-retirement Benefits | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Net benefit obligation | $ 102 | $ 144 | $ 147 | $ 136 |
Employee Benefit Plans (Detail)
Employee Benefit Plans (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Defined Benefit Plan Disclosure [Line Items] | |||
Total recognized - other comprehensive income | $ (26) | $ (3) | $ 3 |
Pension Plans | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Service cost | 12 | 13 | 14 |
Interest cost | 6 | 6 | 5 |
Expected return on assets | (7) | (7) | (8) |
Net Periodic Benefit Cost | 11 | 12 | 11 |
Prior service cost (credit) | 1 | (5) | |
Net loss (gain) | 8 | 8 | (4) |
Total recognized - other comprehensive income | 9 | 3 | (4) |
Post-retirement Benefits | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Service cost | 2 | 2 | 2 |
Interest cost | 6 | 7 | 5 |
Prior service credit | (4) | (4) | (3) |
Net Periodic Benefit Cost | 4 | 5 | 4 |
Prior service cost (credit) | (73) | ||
Net loss (gain) | 24 | (11) | 4 |
Amortizations | 4 | 4 | 4 |
Total recognized - other comprehensive income | $ (45) | $ (7) | $ 8 |
Weighted-Average Actuarial Assu
Weighted-Average Actuarial Assumptions Used to Determine Net Periodic Benefit Cost (Detail) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Pension Plans | |||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |||
Discount rate | 4.10% | 4.40% | 3.90% |
Rate of compensation increase (salaried) | 3.00% | 3.00% | 3.00% |
Expected return on assets | 4.70% | 4.70% | 6.25% |
Post-retirement Benefits | |||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |||
Discount rate | 4.30% | 4.60% | 4.00% |
Weighted-Average Actuarial As80
Weighted-Average Actuarial Assumptions Used to Determine Benefit Obligations (Detail) | Dec. 31, 2017 | Dec. 31, 2016 |
Pension Plans | ||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||
Discount rate | 3.50% | 4.10% |
Rate of compensation increase (salaried) | 3.00% | 3.00% |
Post-retirement Benefits | ||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||
Discount rate | 3.60% | 4.30% |
Health Care Costs Trends (Detai
Health Care Costs Trends (Detail) $ in Millions | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |
Effect of 1% increase on total of service and interest cost | $ 2 |
Effect of 1% increase on post-retirement benefit obligation | 15 |
Effect of 1% decrease on total of service and interest cost | (1) |
Effect of 1% decrease on post-retirement benefit obligation | $ (12) |
Reconciliation of Changes in Ne
Reconciliation of Changes in Net Benefit Obligations and Fair Value of Plan Assets (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Pension Plans | |||
Benefit Obligations: | |||
Net benefit obligation at beginning of year | $ 155 | $ 140 | $ 134 |
Service cost | 12 | 13 | 14 |
Interest cost | 6 | 6 | 5 |
Plan Amendments | 1 | (5) | |
Benefits paid | (7) | (7) | (2) |
Actuarial loss (gain) | 14 | 8 | (11) |
Net benefit obligation at end of year | 181 | 155 | 140 |
Fair Value of Plan Assets: | |||
Fair value of plan assets at beginning of year | 150 | 140 | 135 |
Actual return on plan assets | 14 | 6 | 2 |
Employer contributions | 31 | 11 | 5 |
Benefits paid | (7) | (7) | (2) |
Fair value of plan assets at end of year | 188 | 150 | 140 |
Net Funded Status | 7 | (5) | |
Post-retirement Benefits | |||
Benefit Obligations: | |||
Net benefit obligation at beginning of year | 144 | 147 | 136 |
Service cost | 2 | 2 | 2 |
Interest cost | 6 | 7 | 5 |
Plan Amendments | (73) | ||
Benefits paid | (2) | (1) | (1) |
Actuarial loss (gain) | 25 | (11) | 5 |
Net benefit obligation at end of year | 102 | 144 | 147 |
Fair Value of Plan Assets: | |||
Employer contributions | 2 | 1 | 1 |
Benefits paid | (2) | (1) | (1) |
Net Funded Status | $ (102) | $ (144) | $ (147) |
Fair Value of Plan Assets by As
Fair Value of Plan Assets by Asset Category (Detail) - Pension Plans - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Fair Value of Plan Assets | $ 188 | $ 150 | $ 140 | $ 135 |
Diversified debt Securities | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Fair Value of Plan Assets | 154 | 124 | ||
Diversified equity Securities | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Fair Value of Plan Assets | 28 | 22 | ||
Cash and Cash Equivalents | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Fair Value of Plan Assets | 6 | 4 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Fair Value of Plan Assets | 52 | 38 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Diversified debt Securities | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Fair Value of Plan Assets | 26 | 12 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Diversified equity Securities | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Fair Value of Plan Assets | 20 | 22 | ||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Cash and Cash Equivalents | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Fair Value of Plan Assets | 6 | 4 | ||
Significant Other Observable Inputs (Level 2) | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Fair Value of Plan Assets | 136 | 112 | ||
Significant Other Observable Inputs (Level 2) | Diversified debt Securities | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Fair Value of Plan Assets | 128 | $ 112 | ||
Significant Other Observable Inputs (Level 2) | Diversified equity Securities | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Fair Value of Plan Assets | $ 8 |
Plan Asset Allocation (Detail)
Plan Asset Allocation (Detail) | Dec. 31, 2017 |
Hourly Plan | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |
Target allocation | 100.00% |
Hourly Plan | Cash and Cash Equivalents | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |
Target allocation | 2.00% |
Hourly Plan | Diversified equity Securities | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |
Target allocation | 15.00% |
Hourly Plan | Diversified debt Securities | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |
Target allocation | 83.00% |
Salary Plan | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |
Target allocation | 100.00% |
Salary Plan | Cash and Cash Equivalents | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |
Target allocation | 2.00% |
Salary Plan | Diversified equity Securities | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |
Target allocation | 15.00% |
Salary Plan | Diversified debt Securities | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |
Target allocation | 83.00% |
Amounts Recognized in Balance S
Amounts Recognized in Balance Sheet and Accumulated Other Comprehensive Income AOCI (Detail) - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Pension Plans | |||
Amounts Recognized in Balance Sheet: | |||
Noncurrent assets | $ 7 | ||
Noncurrent liabilities | $ (5) | ||
Total asset (liability) | 7 | (5) | |
Accumulated Other Comprehensive Loss: | |||
Prior service credit | 4 | 5 | |
Actuarial (loss) gain | (11) | (3) | |
Total | (7) | 2 | |
Post-retirement Benefits | |||
Amounts Recognized in Balance Sheet: | |||
Current liabilities | (3) | (2) | |
Noncurrent liabilities | (99) | (142) | |
Total asset (liability) | (102) | (144) | $ (147) |
Accumulated Other Comprehensive Loss: | |||
Prior service credit | 84 | 15 | |
Actuarial (loss) gain | (10) | 15 | |
Total | $ 74 | $ 30 |
Amounts in Accumulated Other Co
Amounts in Accumulated Other Comprehensive Loss AOCL Expected to be Amortized and Recognized as Component of Net Periodic Benefit Cost in 2017 (Detail) $ in Millions | Dec. 31, 2017USD ($) |
Pension Plans | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |
Prior service credit | $ 1 |
Actuarial loss | (1) |
Post-retirement Benefits | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |
Prior service credit | 13 |
Total | $ 13 |
Projected and Accumulated Benef
Projected and Accumulated Benefit Obligation and Fair Value of Plan Assets for Pension Plans with Projected Benefit Obligation in Excess of Plan Assets (Detail) $ in Millions | Dec. 31, 2016USD ($) |
Hourly Plan | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |
Projected benefit obligation | $ 76 |
Fair value of plan assets | 75 |
Accumulated benefit obligation | 76 |
Fair value of plan assets | 75 |
Salary Plan | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |
Projected benefit obligation | 78 |
Fair value of plan assets | $ 75 |
Expected Cash Flows for Pension
Expected Cash Flows for Pension and Post-Retirement Benefit Plans (Detail) $ in Millions | Dec. 31, 2017USD ($) |
Pension Plans | |
Expected Benefit Payments: | |
2,018 | $ 9 |
2,019 | 10 |
2,020 | 11 |
2,021 | 12 |
2,022 | 13 |
2023-2027 | 68 |
Post-retirement Benefits | |
Employer Contributions: | |
2018 expected contributions | 3 |
Expected Benefit Payments: | |
2,018 | 3 |
2,019 | 3 |
2,020 | 4 |
2,021 | 5 |
2,022 | 5 |
2023-2027 | $ 27 |
Income Before Income Taxes (Det
Income Before Income Taxes (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Schedule of Components of Income Before Income Tax Expense (Benefit) [Line Items] | |||
U.S. income | $ 491 | $ 309 | $ 261 |
Foreign income | 36 | 32 | 28 |
Total | $ 527 | $ 341 | $ 289 |
Provision for Income Tax Expens
Provision for Income Tax Expense (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Estimated current income taxes: | |||
U.S. federal | $ 61 | $ 2 | $ 3 |
Foreign | 7 | 8 | 6 |
U.S. state and local | 5 | 2 | 2 |
Total Current | 73 | 12 | 11 |
Deferred income tax (credit) expense, net: | |||
U.S. federal | (44) | 107 | 90 |
Foreign | 1 | ||
U.S. state and local | (7) | 7 | 6 |
Total Deferred | (50) | 114 | 96 |
Total income tax expense | $ 23 | $ 126 | $ 107 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Income Taxes [Line Items] | ||||
Corporate tax rate | 35.00% | |||
Deferred income tax expense (benefit) in connection with tax act | $ (157,000,000) | |||
Tax expense recorded on repatriation of foreign earnings | $ 5,000,000 | |||
Effective income tax rate reconciliation, percent | 4.00% | |||
Income tax expense (benefit) in connection with tax act | $ (155,000,000) | |||
Net undistributed earnings in foreign subsidiaries | 62,000,000 | |||
Deemed repatriation tax | $ 5,000,000 | |||
Period of paying deemed repatriation tax | 8 years | |||
Tax liability associated with foreign subsidiaries | $ 2,000,000 | |||
Valuation allowances | 9,000,000 | $ 5,000,000 | ||
Unrecognized tax benefits, income tax penalties and interest accrued | 0 | 0 | $ 0 | |
Unrecognized tax benefits that, if recognized, would affect the annual effective tax rate | $ 2,000,000 | $ 2,000,000 | ||
Scenario, Forecast [Member] | ||||
Income Taxes [Line Items] | ||||
Corporate tax rate | 21.00% | |||
Minimum | ||||
Income Taxes [Line Items] | ||||
Net operating loss carryforwards, expiration year | 2,027 | |||
Maximum | ||||
Income Taxes [Line Items] | ||||
Net operating loss carryforwards, expiration year | 2,032 |
Reconciliation of Provision for
Reconciliation of Provision for Income Tax Expense (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Reconciliation of Provision of Income Taxes [Line Items] | |||
Tax at U.S. statutory income tax rate | $ 185 | $ 120 | $ 101 |
Impact related to Tax Act | (155) | ||
Tax credits | (21) | ||
Foreign rate differential | (5) | (5) | (3) |
Non-deductible expenses | 7 | 5 | 4 |
Valuation allowance | 3 | 1 | (1) |
State tax expense | 10 | 6 | 5 |
Adjustment to deferred tax expense | 1 | ||
Other adjustments | (1) | (1) | |
Total income tax expense | $ 23 | $ 126 | $ 107 |
Deferred Tax Assets and Liabili
Deferred Tax Assets and Liabilities (Detail) - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Deferred tax assets: | ||
Intangibles | $ 35 | $ 64 |
Deferred revenue | 25 | 35 |
Other accrued liabilities | 18 | 34 |
Operating loss carryforwards | 12 | 14 |
Warranty accrual | 11 | 22 |
Stock-based compensation | 6 | 8 |
Sales allowances and rebates | 6 | 7 |
Inventories | 5 | 6 |
Technology-related investments | 4 | 9 |
Capital loss carryforwards | 3 | |
Environmental remediation | 3 | 5 |
Unrealized loss on interest rate derivatives | 1 | 11 |
Post-retirement | 12 | |
Tax credits | 8 | |
Other | 4 | 8 |
Total Deferred tax assets | 133 | 243 |
Valuation allowances | (9) | (5) |
Deferred tax liabilities: | ||
Goodwill | (287) | (409) |
Trade name | (96) | (122) |
Property, plant and equipment | (7) | (15) |
Post-retirement | (4) | |
Other | (3) | (2) |
Total Deferred tax liabilities | (397) | (548) |
Net Deferred tax liability | $ (273) | $ (310) |
Liability for Unrecognized Tax
Liability for Unrecognized Tax Benefit (Detail) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Contingency [Line Items] | ||
Unrecognized Tax Benefits, Beginning Balance | $ 2 | $ 2 |
Increases in unrecognized tax benefits as a result of current year activity | 0 | 0 |
Unrecognized Tax Benefits, Ending Balance | $ 2 | $ 2 |
Changes in Components of AOCL (
Changes in Components of AOCL (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Beginning balance | $ (20) | $ (17) | $ 5 |
Foreign currency translation, before tax | 15 | (6) | (11) |
Pension and OPEB liability adjustment, before tax | 34 | 4 | (3) |
Available-for-sale securities, before tax | 11 | (1) | (8) |
Net current period other comprehensive income (loss) | 60 | (3) | (22) |
Ending balance | 40 | (20) | (17) |
Beginning balance | (43) | (42) | (45) |
Foreign currency translation, tax expense | 0 | 0 | 0 |
Pension and OPEB liability adjustment, tax expense | (8) | (2) | |
Available-for-sale securities, tax expense | (4) | 1 | 3 |
Net current period other comprehensive income (loss) | (12) | (1) | 3 |
Ending balance | (55) | (43) | (42) |
Beginning Balance | (63) | (59) | (40) |
Foreign currency translation, after tax | 15 | (6) | (11) |
Pension and OPEB liability adjustment, after tax | 26 | 2 | (3) |
Available-for-sale securities, after tax | 7 | (1) | (5) |
Total other comprehensive income (loss), net of tax | 48 | (4) | (19) |
Ending balance | $ (15) | $ (63) | $ (59) |
Consolidated Statements of Co96
Consolidated Statements of Comprehensive Income affected by reclassifications from AOCL (Detail) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||||||
Cost of sales | $ 1,131 | $ 976 | $ 1,052 | ||||||||
Selling, general and administrative expenses | 342 | 324 | 317 | ||||||||
Engineering - research and development | 105 | 88 | 93 | ||||||||
Income before income taxes | $ 84 | $ 170 | $ 146 | $ 127 | $ 94 | $ 71 | $ 99 | $ 77 | 527 | 341 | 289 |
Income tax expense | (23) | (126) | (107) | ||||||||
Total reclassifications | $ 215 | $ 111 | $ 95 | $ 83 | $ 61 | $ 45 | $ 61 | $ 48 | 504 | 215 | 182 |
Reclassified from AOCL | Prior service cost | |||||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||||||
Cost of sales | 3 | 3 | 3 | ||||||||
Selling, general and administrative expenses | 1 | ||||||||||
Engineering - research and development | 0 | 0 | 0 | ||||||||
Reclassified from AOCL | Actuarial loss | |||||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||||||
Cost of sales | 1 | ||||||||||
Engineering - research and development | 0 | 0 | 0 | ||||||||
Reclassified from AOCL | Accumulated Defined Benefit Plans Adjustment | |||||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||||||
Income before income taxes | 4 | 4 | 3 | ||||||||
Income tax expense | (1) | (2) | (1) | ||||||||
Total reclassifications | $ 3 | $ 2 | $ 2 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Line Items] | |||
Rent expense | $ 5 | $ 5 | $ 5 |
Environmental liability | $ 13 |
Future Payments under Non-Cance
Future Payments under Non-Cancelable Operating Leases (Detail) $ in Millions | Dec. 31, 2017USD ($) |
Operating Leased Assets [Line Items] | |
2,018 | $ 4 |
2,019 | 2 |
2,020 | 2 |
2,021 | 1 |
2,022 | 1 |
Thereafter | 1 |
Total | $ 11 |
Concentration of Risk - Additio
Concentration of Risk - Additional Information (Detail) | 12 Months Ended | ||
Dec. 31, 2017EmployeeCustomer | Dec. 31, 2016EmployeeCustomer | Dec. 31, 2015Customer | |
Concentration Risk [Line Items] | |||
Number of employees | Employee | 2,700 | 2,700 | |
Collective bargaining agreement, expiration date | 2023-11 | ||
Employees in the U.S | UNITED STATES | Labor Force Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 89.00% | 89.00% | |
Workforce Subject to Collective Bargaining Arrangements [Member] | UNITED STATES | Unionized employees subject to collective bargaining agreement | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 59.00% | 58.00% | |
Sales Revenue, Goods, Net | Customer Concentration Risk | |||
Concentration Risk [Line Items] | |||
Number of significant customers | 3 | 3 | 3 |
Accounts Receivable | Credit Concentration Risk | |||
Concentration Risk [Line Items] | |||
Number of significant customers | 3 | 3 |
Customers Accounted for Greater
Customers Accounted for Greater Than Ten Percent of Net Sales (Detail) - Sales Revenue, Net - Customer Concentration Risk | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Daimler AG | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 20.00% | 21.00% | 21.00% |
Navistar Inc | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 8.00% | 9.00% | 10.00% |
Volvo Group | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 8.00% | 8.00% | 10.00% |
Customers Accounted for Grea101
Customers Accounted for Greater Than Ten Percent of Accounts Receivable (Detail) - Accounts Receivable - Credit Concentration Risk | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | ||
Kirby Corporation [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | [1] | 15.00% | 4.00% |
Volvo Group | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 11.00% | 6.00% | |
Daimler AG | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 7.00% | 19.00% | |
[1] | As of December 31, 2017, Kirby Corporation ("Kirby") was the parent company of customers United Engines LLC and Stewart & Stevenson LLC. As of December 31, 2016, Kirby was the parent company of United Engines LLC. |
Certain Relationships and Re102
Certain Relationships and Related Party Transactions - Additional Information (Detail) - USD ($) | Feb. 03, 2017 | May 31, 2015 | Dec. 31, 2017 |
Fixed 7.125% Senior Notes | |||
Related Party Transaction [Line Items] | |||
Senior Notes, stated interest rate | 7.125% | ||
Percentage of principal amount redeemed | 103.563% | ||
ValueAct Capital Master Fund, L.P | |||
Related Party Transaction [Line Items] | |||
Common stock repurchased during the period, shares | 10,525,204 | ||
Common stock repurchased during the period, value | $ 363,000,000 | ||
Repurchase agreement closing date | Feb. 8, 2017 | ||
Lawrence E. Dewey | Fixed 7.125% Senior Notes | |||
Related Party Transaction [Line Items] | |||
Senior notes held by executive officers | $ 100,000 | ||
David S. Graziosi | Fixed 7.125% Senior Notes | |||
Related Party Transaction [Line Items] | |||
Senior notes held by executive officers | $ 450,000 | ||
James A. Star | Gillig | |||
Related Party Transaction [Line Items] | |||
Percentage of ownership interest | 5.00% | ||
James A. Star | Gillig | Maximum | |||
Related Party Transaction [Line Items] | |||
Net sales from related parties | $ 30,000,000 | ||
James A. Star | GD | |||
Related Party Transaction [Line Items] | |||
Percentage of ownership interest | 10.00% | ||
James A. Star | GD | Maximum | |||
Related Party Transaction [Line Items] | |||
Net sales from related parties | $ 6,000,000 |
Common Stock - Additional Infor
Common Stock - Additional Information (Detail) - 2016 Repurchase Program - USD ($) | Nov. 14, 2016 | Dec. 31, 2017 | Nov. 08, 2017 |
Common Stock Disclosure [Line Items] | |||
Common stock, repurchases authorized | $ 1,000,000,000 | $ 500,000,000 | |
Stock repurchase program, authorized amount | $ 1,500,000,000 | ||
Stock repurchase program expiration date | Dec. 31, 2019 | ||
Common stock, repurchased during the period | $ 885,000,000 |
Earnings Per Share - Additional
Earnings Per Share - Additional Information (Detail) - shares shares in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Anti-dilutive stock options not included in the diluted EPS computation | 0.2 | 0.2 | 0.7 |
Reconciliation of Numerators an
Reconciliation of Numerators and Denominators Used to Calculate Basic EPS and Diluted EPS (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Computation of Earnings Per Share [Line Items] | |||||||||||
Net income | $ 215 | $ 111 | $ 95 | $ 83 | $ 61 | $ 45 | $ 61 | $ 48 | $ 504 | $ 215 | $ 182 |
Weighted average shares of common stock outstanding | 149 | 168 | 176 | ||||||||
Dilutive effect stock-based awards | 1 | 1 | 1 | ||||||||
Diluted weighted average shares of common stock outstanding | 150 | 169 | 177 | ||||||||
Basic earnings per share attributable to common stockholders | $ 1.52 | $ 0.75 | $ 0.63 | $ 0.53 | $ 0.37 | $ 0.27 | $ 0.36 | $ 0.28 | $ 3.38 | $ 1.28 | $ 1.03 |
Diluted earnings per share attributable to common stockholders | $ 1.51 | $ 0.75 | $ 0.63 | $ 0.52 | $ 0.36 | $ 0.27 | $ 0.36 | $ 0.28 | $ 3.36 | $ 1.27 | $ 1.03 |
Net Sales by Country (Detail)
Net Sales by Country (Detail) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Total net sales | $ 588 | $ 595 | $ 580 | $ 499 | $ 469 | $ 434 | $ 475 | $ 462 | $ 2,262 | $ 1,840 | $ 1,986 |
UNITED STATES | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Total net sales | 1,614 | 1,277 | 1,460 | ||||||||
CANADA | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Total net sales | 125 | 115 | 96 | ||||||||
JAPAN | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Total net sales | 75 | 70 | 49 | ||||||||
GERMANY | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Total net sales | 45 | 53 | 40 | ||||||||
CHINA | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Total net sales | 62 | 50 | 64 | ||||||||
MEXICO | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Total net sales | 39 | 41 | 36 | ||||||||
UNITED KINGDOM | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Total net sales | 36 | 28 | 44 | ||||||||
Other Countries | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Total net sales | 208 | 153 | 148 | ||||||||
NETHERLANDS | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Total net sales | 30 | 27 | 19 | ||||||||
TURKEY | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Total net sales | $ 28 | $ 26 | $ 30 |
Net Long-Lived Assets by Countr
Net Long-Lived Assets by Country (Detail) - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Property, plant and equipment, net | $ 448 | $ 464 | $ 480 |
UNITED STATES | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Property, plant and equipment, net | 400 | 412 | 419 |
INDIA | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Property, plant and equipment, net | 32 | 36 | 43 |
HUNGARY | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Property, plant and equipment, net | 12 | 11 | 13 |
Other Countries | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Property, plant and equipment, net | $ 4 | $ 5 | $ 5 |
Quarterly Financial Informat108
Quarterly Financial Information (Detail) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Quarterly Financial Information [Line Items] | |||||||||||
Net sales | $ 588 | $ 595 | $ 580 | $ 499 | $ 469 | $ 434 | $ 475 | $ 462 | $ 2,262 | $ 1,840 | $ 1,986 |
Gross profit | 288 | 302 | 290 | 251 | 218 | 204 | 227 | 215 | 1,131 | 864 | 934 |
Operating income | 128 | 198 | 177 | 149 | 110 | 104 | 127 | 111 | 652 | 452 | 429 |
Income before income taxes | 84 | 170 | 146 | 127 | 94 | 71 | 99 | 77 | 527 | 341 | 289 |
Net income | $ 215 | $ 111 | $ 95 | $ 83 | $ 61 | $ 45 | $ 61 | $ 48 | $ 504 | $ 215 | $ 182 |
Basic earnings per share | $ 1.52 | $ 0.75 | $ 0.63 | $ 0.53 | $ 0.37 | $ 0.27 | $ 0.36 | $ 0.28 | $ 3.38 | $ 1.28 | $ 1.03 |
Diluted earnings per share | $ 1.51 | $ 0.75 | $ 0.63 | $ 0.52 | $ 0.36 | $ 0.27 | $ 0.36 | $ 0.28 | $ 3.36 | $ 1.27 | $ 1.03 |
Schedule I Parent Company Only
Schedule I Parent Company Only Balance Sheets (Detail) - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Current Assets: | ||||
Cash | $ 199 | $ 205 | $ 252 | $ 263 |
Total Current Assets | 632 | 548 | ||
TOTAL ASSETS | 4,205 | 4,219 | ||
Current Liabilities: | ||||
Accounts payable | 159 | 128 | ||
Total Current Liabilities | 417 | 342 | ||
Capital stock | 689 | 1,081 | 1,188 | 1,398 |
Paid in capital | 1,758 | 1,728 | ||
Accumulated deficit | (1,055) | (586) | ||
Accumulated other comprehensive loss, net of tax | (15) | (63) | (59) | (40) |
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY | 4,205 | 4,219 | ||
Parent Company | ||||
Current Assets: | ||||
Cash | 0 | 0 | $ 0 | $ 0 |
Total Current Assets | 0 | 0 | ||
Investments in and advances to subsidiaries | 689 | 1,081 | ||
TOTAL ASSETS | 689 | 1,081 | ||
Current Liabilities: | ||||
Accounts payable | 0 | 0 | ||
Total Current Liabilities | 0 | 0 | ||
Capital stock | 1 | 2 | ||
Paid in capital | 1,758 | 1,728 | ||
Treasury stock | 0 | 0 | ||
Accumulated deficit | (1,055) | (586) | ||
Accumulated other comprehensive loss, net of tax | (15) | (63) | ||
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY | $ 689 | $ 1,081 |
Schedule I Parent Company On110
Schedule I Parent Company Only Statements of Comprehensive Income (Detail) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Condensed Financial Statements, Captions [Line Items] | |||||||||||
Net sales | $ 588 | $ 595 | $ 580 | $ 499 | $ 469 | $ 434 | $ 475 | $ 462 | $ 2,262 | $ 1,840 | $ 1,986 |
Operating income | 128 | 198 | 177 | 149 | 110 | 104 | 127 | 111 | 652 | 452 | 429 |
Other income: | |||||||||||
Income before income taxes | 84 | 170 | 146 | 127 | 94 | 71 | 99 | 77 | 527 | 341 | 289 |
Income tax expense | (23) | (126) | (107) | ||||||||
Net income | $ 215 | $ 111 | $ 95 | $ 83 | $ 61 | $ 45 | $ 61 | $ 48 | 504 | 215 | 182 |
Comprehensive income | 552 | 211 | 163 | ||||||||
Parent Company | |||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||
Net sales | 0 | 0 | 0 | ||||||||
General and administrative fees | 0 | 0 | 0 | ||||||||
Operating income | 0 | 0 | 0 | ||||||||
Other income: | |||||||||||
Equity earnings of consolidated subsidiary | 504 | 215 | 182 | ||||||||
Income before income taxes | 504 | 215 | 182 | ||||||||
Income tax expense | 0 | 0 | 0 | ||||||||
Net income | 504 | 215 | 182 | ||||||||
Comprehensive income | $ 552 | $ 211 | $ 163 |
Schedule I Parent Company on111
Schedule I Parent Company only Statements of Cash Flows (Detail) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
Net income | $ 215 | $ 111 | $ 95 | $ 83 | $ 61 | $ 45 | $ 61 | $ 48 | $ 504 | $ 215 | $ 182 |
Deduct items included in net income not providing cash: | |||||||||||
Net cash provided by operating activities | 658 | 591 | 580 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
Net cash used for investing activities | (94) | (72) | (60) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Dividends | (89) | (100) | (106) | ||||||||
Net cash used for financing activities | (574) | (564) | (529) | ||||||||
Net decrease in cash and cash equivalents | (6) | (47) | (11) | ||||||||
Cash and cash equivalents at beginning of period | 205 | 252 | 205 | 252 | 263 | ||||||
Cash and cash equivalents at end of period | 199 | 205 | 199 | 205 | 252 | ||||||
Parent Company | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
Net income | 504 | 215 | 182 | ||||||||
Deduct items included in net income not providing cash: | |||||||||||
Equity in earnings in consolidated subsidiary | (504) | (215) | (182) | ||||||||
Net cash provided by operating activities | 0 | 0 | 0 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
Investments in subsidiaries | (19) | (24) | (23) | ||||||||
Dividends | 89 | 100 | 106 | ||||||||
Net cash used for investing activities | 70 | 76 | 83 | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Capital contributions | 19 | 24 | 23 | ||||||||
Dividends | (89) | (100) | (106) | ||||||||
Net cash used for financing activities | (70) | (76) | (83) | ||||||||
Net decrease in cash and cash equivalents | 0 | 0 | 0 | ||||||||
Cash and cash equivalents at beginning of period | $ 0 | $ 0 | 0 | 0 | 0 | ||||||
Cash and cash equivalents at end of period | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 |