Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Jul. 16, 2018 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 | |
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 Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 130,467,369 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Current Assets | ||
Cash and cash equivalents | $ 96 | $ 199 |
Accounts receivable - net of allowance for doubtful accounts of $1 and $0, respectively | 328 | 221 |
Inventories | 170 | 154 |
Income taxes receivable | 15 | 33 |
Other current assets | 24 | 25 |
Total Current Assets | 633 | 632 |
Property, plant and equipment, net | 442 | 448 |
Intangible assets, net | 1,109 | 1,153 |
Goodwill | 1,941 | 1,941 |
Other non-current assets | 46 | 31 |
TOTAL ASSETS | 4,171 | 4,205 |
Current Liabilities | ||
Accounts payable | 210 | 159 |
Product warranty liability | 28 | 22 |
Current portion of long-term debt | 0 | 12 |
Deferred revenue | 38 | 41 |
Other current liabilities | 166 | 183 |
Total Current Liabilities | 442 | 417 |
Product warranty liability | 37 | 33 |
Deferred revenue | 87 | 75 |
Long-term debt | 2,520 | 2,534 |
Deferred income taxes | 301 | 276 |
Other non-current liabilities | 182 | 181 |
TOTAL LIABILITIES | 3,569 | 3,516 |
Commitments and contingencies (see NOTE O) | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding | 0 | 0 |
Paid in capital | 1,764 | 1,758 |
Accumulated deficit | (1,136) | (1,055) |
Accumulated other comprehensive loss, net of tax | (27) | (15) |
TOTAL STOCKHOLDERS' EQUITY | 602 | 689 |
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY | 4,171 | 4,205 |
Voting Common Stock | ||
STOCKHOLDERS' EQUITY | ||
Common stock | 1 | 1 |
Non-voting Common Stock | ||
STOCKHOLDERS' EQUITY | ||
Common stock | $ 0 | $ 0 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Allowance for doubtful accounts receivables | $ 1 | $ 0 |
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 | 131,226,301 | 139,990,865 |
Common stock, shares outstanding | 131,226,301 | 139,990,865 |
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 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Net sales | $ 711 | $ 580 | $ 1,374 | $ 1,079 |
Cost of sales | 337 | 290 | 658 | 538 |
Gross profit | 374 | 290 | 716 | 541 |
Selling, general and administrative | 93 | 88 | 185 | 167 |
Engineering - research and development | 33 | 25 | 61 | 48 |
Operating income | 248 | 177 | 470 | 326 |
Interest expense, net | (30) | (27) | (60) | (52) |
Other income (expense), net | 4 | (4) | 3 | (1) |
Income before income taxes | 222 | 146 | 413 | 273 |
Income tax expense | (48) | (51) | (88) | (95) |
Net income | $ 174 | $ 95 | $ 325 | $ 178 |
Basic earnings per share attributable to common stockholders | $ 1.30 | $ 0.63 | $ 2.37 | $ 1.16 |
Diluted earnings per share attributable to common stockholders | 1.29 | 0.63 | 2.37 | 1.15 |
Dividends declared per common share | $ 0.15 | $ 0.15 | $ 0.30 | $ 0.30 |
Comprehensive income, net of tax | $ 158 | $ 98 | $ 313 | $ 184 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 325 | $ 178 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Amortization of intangible assets | 44 | 45 |
Depreciation of property, plant and equipment | 39 | 39 |
Deferred income taxes | 25 | 44 |
Stock-based compensation | 6 | 6 |
Amortization of deferred financing costs | 3 | 3 |
Allowance for doubtful accounts | 1 | 0 |
Unrealized gain on derivatives | (6) | |
Other | 3 | 3 |
Changes in assets and liabilities: | ||
Accounts receivable | (110) | (74) |
Inventories | (17) | (19) |
Accounts payable | 46 | 43 |
Other assets and liabilities | 1 | 15 |
Net cash provided by operating activities | 366 | 277 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Additions of long-lived assets | (29) | (20) |
Investments in technology-related initiatives | (3) | |
Net cash used for investing activities | (29) | (23) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Repurchases of common stock | (370) | (539) |
Dividend payments | (41) | (46) |
Payments on long-term debt | (28) | (6) |
Proceeds from exercise of stock options | 5 | 11 |
Taxes paid related to net share settlement of equity awards | (4) | (1) |
Debt financing fees | (1) | 0 |
Borrowings on revolving credit facility | 330 | |
Repayments on revolving credit facility | (125) | |
Net cash used for financing activities | (439) | (376) |
Effect of exchange rate changes on cash | (1) | 2 |
Net decrease in cash and cash equivalents | (103) | (120) |
Cash and cash equivalents at beginning of period | 199 | 205 |
Cash and cash equivalents at end of period | 96 | 85 |
Supplemental disclosures: | ||
Interest paid | 57 | 55 |
Income taxes paid | $ 46 | $ 34 |
OVERVIEW
OVERVIEW | 6 Months Ended |
Jun. 30, 2018 | |
OVERVIEW | NOTE A. 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 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 | 6 Months Ended |
Jun. 30, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The condensed consolidated financial statements have been prepared in accordance with accounting principles for interim financial information and with the instructions to Form 10-Q S-X. These condensed consolidated financial statements present the financial position, results of comprehensive income and cash flows of the Company. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Form 10-K 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 post-retirement 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. Recently Adopted Accounting Pronouncements In August 2017, the Financial Accounting Standards Board (“FASB”) issued authoritative accounting guidance on accounting for derivative and hedge instruments. Among other things, the guidance allows the initial hedge effectiveness assessment to be performed by the end of the quarter in which the hedge is designated, permits a qualitative assessment for certain hedges if an expectation of high effectiveness can be supported throughout the term of the hedge, and removes the requirement to record ineffectiveness on cash flow hedges immediately through earnings when the hedge is highly effective. The guidance was early adopted by the Company effective April 1, 2018 and applied upon entering into interest rate swaps designated as cash flow hedges during the period ended June 30, 2018. When adopted in an interim period, the guidance is required to be reflected as of the beginning of the year of adoption. The Company has not previously designated any derivative instruments as hedging instruments, and thus, the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. 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 and did not 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 post-retirement 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 and did not 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 and did not have a material impact on the Company’s consolidated financial statements. In May 2014, the FASB issued authoritative accounting guidance on a company’s accounting for revenue from contracts with customers, which guidance was subsequently 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 was adopted by the Company effective January 1, 2018 on a modified retrospective basis. See Note C, “Revenue” for information regarding the impact of the adoption of this guidance. Recently Issued Accounting Pronouncements In June 2018, the FASB issued authoritative accounting guidance on accounting for nonemployee awards for goods or services received by a company. The guidance will be effective for the Company in fiscal year 2019, but early adoption is permitted. Management is currently evaluating the impact of this guidance on the Company’s consolidated financial statements. In February 2018, the FASB issued authoritative accounting guidance on transfers of stranded balances in accumulated other comprehensive loss to retained earnings. The passage of the U.S. Tax Cuts and Jobs Act by the U.S. federal government in December 2017 and existing GAAP requirements to adjust deferred tax assets and liabilities for changes in tax laws or rates created stranded balances in accumulated other comprehensive loss on deferred tax assets and liabilities previously recorded as a component to accumulated other comprehensive loss. The guidance applies to companies affected by these stranded balances and allows a reclassification of these balances to retained earnings. The guidance will be effective for the Company in fiscal year 2019, but early adoption is permitted. The guidance can be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the U.S. Tax Cuts and Jobs Act is recognized. Management is currently evaluating affected balances recorded in accumulated other comprehensive loss and expects the impact of this guidance on the Company’s consolidated financial statements to be an immaterial adjustment to retained earnings. In February 2016, the FASB issued authoritative accounting guidance on lease accounting. The guidance requires lessees to present right-of-use |
REVENUE
REVENUE | 6 Months Ended |
Jun. 30, 2018 | |
REVENUE | NOTE C. REVENUE Adoption of New Revenue Guidance New authoritative accounting guidance for revenue was adopted by the Company effective January 1, 2018 using the modified retrospective approach. Current period results are presented in conformity with the new authoritative accounting guidance, while prior period results are presented in conformity with prior accounting guidance. In accordance with the modified retrospective approach, the Company recorded a one-time non-current During the three months ended June 30, 2018, neither net sales nor deferred revenue were impacted by the application of this guidance. During the six months ended June 30, 2018, the Company increased net sales by $1 million, and decreased non-current Under the new authoritative accounting guidance, revenue is recognized as each distinct performance obligation within a contract is satisfied. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. The Company enters into long-term supply agreements (“LTSAs”) and distributor agreements with certain customers. The LTSAs and distributor agreements do not include committed volumes until underlying purchase orders are issued; therefore, the Company determined that purchase orders are the contract with a customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when the performance obligation is satisfied, as there is no right of return. Many of the Company’s contracts have a single performance obligation, as the promise to transfer the individual good or service is not separately identifiable from other promises in the contracts and is, therefore, not distinct. Some of our contracts have multiple performance obligations, most commonly the sale of both a transmission and ETC. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using a ratable allocation based on the standalone selling price of each distinct good or service in the contract. The Company may also use volume based discounts and rebates as marketing incentives in the sales of both transmissions and service parts, which are accounted for as variable consideration. The Company records the impact of the incentives as a reduction to revenue when it is determined that the adjustment is not likely to reverse, historically on a quarterly basis. Due to the typically short duration of purchase orders and minimal number of open contracts with variable consideration at any point in time, the impact of variable consideration is immaterial. If it were to become material, the Company would explain the methods, assumptions and estimates used to determine the consideration allocated to each performance obligation. The Company estimates the impact of all other incentives based on the related sales and market conditions in the end market vocation. Net sales are made on credit terms, generally 30 days, based on an assessment of the customer’s creditworthiness. For certain goods or services, the Company receives consideration prior to satisfying the related performance obligation. Such consideration is recorded as a contract liability in current and non-current Disaggregated Revenue 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. The following presents disaggregated revenue by categories that best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors (dollars in millions): Three months Six months ended June 30, North America On-Highway $ 343 $ 682 North America Off-Highway 31 64 Defense 43 80 Outside North America On-Highway 101 192 Outside North America Off-Highway 24 36 Service Parts, Support Equipment and Other 169 320 Total Net Sales $ 711 $ 1,374 Disaggregated revenue by end market is further described as follows: North America On-Highway Revenue from the North America On-Highway Class 4-5, Class 6-7 On-Highway North America Off-Highway Revenue from the North America Off-Highway Defense Revenue from the Defense end market is driven by sales of transmissions to the U.S. Government or its contractors and sales to certain government contractors outside of North America for use in both wheeled and tracked defense vehicle applications. Revenue is recognized at the point in time when control passes to the customer, which is based on shipping terms when the order is fulfilled by the Company. Periodically, the Company and the U.S. Government will enter into a bill-and-hold Outside North America On-Highway Revenue from the Outside North America On-Highway Outside North America Off-Highway Revenue from the Outside North America Off-Highway Service Parts, Support Equipment and Other Revenue from the Service Parts, Support Equipment and Other end market is primarily derived from the sale of transmission parts and fluid purchased for the normal maintenance and repair needs of products in service and the sale of ETC contracts which extend the warranty coverages of transmissions beyond the standard warranty period. Revenue is recognized on sales of service parts and support equipment at the point in time when control passes to the customer, which is based on shipping terms when the order is fulfilled by the Company. Revenue from the sale of ETC contracts is recognized ratably over the time period that corresponds with the period of coverage, as the Company has determined this method best depicts the progress towards satisfaction of its performance obligation. ETC contracts are sold in one to five year durations within the North America On-Highway, On-Highway, Off-Highway Off-Highway |
INVENTORIES
INVENTORIES | 6 Months Ended |
Jun. 30, 2018 | |
INVENTORIES | NOTE D. INVENTORIES Inventories consisted of the following components (dollars in millions): June 30, December 31, Purchased parts and raw materials $ 83 $ 79 Work in progress 10 6 Service parts 45 46 Finished goods 32 23 Total inventories $ 170 $ 154 Inventory components shipped to third parties, primarily cores, parts to re-manufacturers, |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 6 Months Ended |
Jun. 30, 2018 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | NOTE E. GOODWILL AND OTHER INTANGIBLE ASSETS As of June 30, 2018 and December 31, 2017, the carrying amount of the Company’s Goodwill was $1,941 million. The following presents a summary of other intangible assets (dollars in millions): June 30, 2018 December 31, 2017 Intangible Accumulated Intangible Intangible Accumulated Intangible Other intangible assets: Trade name $ 790 $ — $ 790 $ 790 $ — $ 790 Customer relationships — commercial 832 (597 ) 235 832 (573 ) 259 Proprietary technology 476 (415 ) 61 476 (396 ) 80 Customer relationships — defense 62 (39 ) 23 62 (38 ) 24 Patented technology — defense 28 (28 ) — 28 (28 ) — Non-compete 17 (17 ) — 17 (17 ) — Tooling rights 5 (5 ) — 5 (5 ) — Total $ 2,210 $ (1,101 ) $ 1,109 $ 2,210 $ (1,057 ) $ 1,153 As of June 30, 2018 and December 31, 2017, the net carrying value of the Company’s Goodwill and Other intangible assets, net was $3,050 million and $3,094 million, respectively. Amortization expense related to other intangible assets for the next five fiscal years is expected to be (dollars in millions): 2019 2020 2021 2022 2023 Amortization expense $ 86 $ 50 $ 45 $ 43 $ 42 |
FAIR VALUE OF FINANCIAL INSTRUM
FAIR VALUE OF FINANCIAL INSTRUMENTS | 6 Months Ended |
Jun. 30, 2018 | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | NOTE F. 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 June 30, 2018 and December 31, 2017, 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, derivative instruments, assets held in a rabbi trust and a deferred compensation obligation. The Company’s cash equivalents consist of short-term U.S. government backed securities. The Company’s derivative instruments consist of interest rate swaps. The Company’s assets held in the rabbi trust consist principally of publicly available mutual funds and target date retirement funds. The Company’s deferred compensation obligation is directly related to the fair value of assets held in the rabbi trust. The Company’s valuation techniques used to calculate the fair value of cash and cash equivalents, assets held in the rabbi trust and the deferred compensation obligation represent a market approach in active markets for identical assets that qualify as Level 1 in the fair value hierarchy. The Company’s valuation techniques used to calculate the fair value of derivative instruments represent a market approach with observable inputs that qualify as Level 2 in the fair value hierarchy. The Company uses valuations from the issuing financial institutions for the fair value measurement of interest rate swaps. The floating-to-fixed non-current The following table summarizes the fair value of the Company’s financial assets and (liabilities) as of June 30, 2018 and December 31, 2017 (dollars in millions): Fair Value Measurements Using Quoted Prices in Active Significant Other TOTAL June 30, 2018 December 31, June 30, 2018 December 31, June 30, 2018 December 31, Cash equivalents $ 2 $ 50 $ — $ — $ 2 $ 50 Rabbi trust assets 10 8 — — 10 8 Deferred compensation obligation (10 ) (8 ) — — (10 ) (8 ) Derivative liabilities — — (2 ) — (2 ) — Total $ 2 $ 50 $ (2 ) $ — $ — $ 50 |
DEBT
DEBT | 6 Months Ended |
Jun. 30, 2018 | |
DEBT | NOTE G. DEBT Long-term debt and maturities are as follows (dollars in millions): June 30, December 31, Long-term debt: Senior Secured Credit Facility Term B-3 $ 1,148 $ 1,176 Senior Notes, fixed 5.0%, due 2024 1,000 1,000 Senior Notes, fixed 4.75%, due 2027 400 400 Total long-term debt $ 2,548 $ 2,576 Less: current maturities of long-term debt — 12 deferred financing costs, net 28 30 Total long-term debt, net $ 2,520 $ 2,534 As of June 30, 2018, the Company had $2,548 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 June 30, 2018 was $2,507 million. The fair value is based on quoted Level 2 market prices of the Company’s debt as of June 30, 2018. It is not expected that the Company would be able to repurchase all 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. In March 2018, 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 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. As of June 30, 2018, the Company had $533 million available under the Revolving Credit Facility, net of $17 million in letters of credit. Revolving Credit Facility 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 Facility 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 June 30, 2018, the Company had no amounts outstanding under the Revolving Credit Facility; however, the Company would have been in compliance with the maximum total senior secured leverage ratio, achieving a 1.03x 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 remain in effect as long as the Company achieves a total leverage ratio at or below the related threshold. As of June 30, 2018, the Company’s total leverage ratio was 2.40x. 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 June 30, 2018, the Company was in compliance with all covenants under the Senior Secured Credit Facility. 5.0% Senior Notes 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 June 30, 2018, the Company was in compliance with all covenants under the indenture governing the 5.0% Senior Notes. 4.75% Senior Notes 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 June 30, 2018, the Company was in compliance with all covenants under the indenture governing the 4.75% Senior Notes. |
DERIVATIVES
DERIVATIVES | 6 Months Ended |
Jun. 30, 2018 | |
DERIVATIVES | NOTE H. DERIVATIVES The Company is subject to interest rate risk related to the Senior Secured Credit Facility and enters into interest rate swaps that are based on the LIBOR to manage a portion of this exposure. The derivative instruments are not for speculative purposes and are designated as cash flow hedges. The Company holds interest rate swaps designated as cash flow hedges that qualify for hedge accounting under the hypothetical derivative method. Fair value adjustments are recorded as a component of accumulated other comprehensive loss (“AOCL”) in the Condensed Consolidated Balance Sheets. Balances in AOCL are reclassified to other comprehensive income when transactions related to the underlying risk are settled. As of June 30, 2018, the Company held interest rate swaps effective from September 2019 to September 2022 with notional values totaling $250 million and a weighted average LIBOR fixed rate of 3.01% and interest rate swaps effective from September 2019 to September 2025 with notional values totaling $250 million and a weighted average LIBOR fixed rate of 3.04%. See NOTE F “Fair Value of Financial Instruments” for information regarding the fair value of the Company’s interest rate swaps. The following tabular disclosures further describe the Company’s interest rate derivatives qualifying and designated for hedge accounting and their impact on the financial condition of the Company (dollars in millions): June 30, 2018 Balance Sheet Location Fair Value Derivatives designated as hedging instruments: Interest rate swaps Other non-current liabilities $ (2 ) Total derivatives designated as hedging instruments $ (2 ) The balance of losses recorded in AOCL as of June 30, 2018 was $2 million. See NOTE N “Accumulated Other Comprehensive Loss” for information regarding activity recorded as a component of AOCL during the three and six months ended June 30, 2018. The Company had no losses recorded in accumulated other comprehensive loss expected to be reclassified to other comprehensive income within the next twelve months as of June 30, 2018. |
PRODUCT WARRANTY LIABILITIES
PRODUCT WARRANTY LIABILITIES | 6 Months Ended |
Jun. 30, 2018 | |
PRODUCT WARRANTY LIABILITIES | NOTE I. PRODUCT WARRANTY LIABILITIES As of June 30, 2018, the current and non-current non-current Product warranty liability activities consist of the following (dollars in millions): Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Beginning balance $ 62 $ 58 $ 55 $ 63 Payments (10 ) (8 ) (19 ) (15 ) Increase in liability (warranty issued during period) 12 5 21 9 Net adjustments to liability 1 — 8 (2 ) Ending balance $ 65 $ 55 $ 65 $ 55 |
DEFERRED REVENUE
DEFERRED REVENUE | 6 Months Ended |
Jun. 30, 2018 | |
DEFERRED REVENUE | NOTE J. DEFERRED REVENUE As of June 30, 2018, current and non-current non-current Deferred revenue activity consists of the following (dollars in millions): Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Beginning balance $ 112 $ 96 $ 110 $ 94 Increases 23 6 33 14 Revenue earned (10 ) (6 ) (18 ) (12 ) Ending balance $ 125 $ 96 $ 125 $ 96 Deferred revenue recorded in current and non-current non-current |
OTHER CURRENT LIABILITIES
OTHER CURRENT LIABILITIES | 6 Months Ended |
Jun. 30, 2018 | |
OTHER CURRENT LIABILITIES | NOTE K. OTHER CURRENT LIABILITIES Other current liabilities consist of the following (dollars in millions): As of As of Payroll and related costs $ 52 $ 73 Sales allowances 40 34 Accrued interest payable 18 19 Vendor buyback obligation 15 14 Taxes payable 14 10 Defense price reduction reserve 9 9 UAW Local 933 retirement incentive 6 — Non-trade 3 8 Other accruals 9 16 Total $ 166 $ 183 |
EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS | 6 Months Ended |
Jun. 30, 2018 | |
EMPLOYEE BENEFIT PLANS | NOTE L. EMPLOYEE BENEFIT PLANS Components of net periodic benefit cost (credit) consist of the following (dollars in millions): Pension Plans Post-retirement Benefits Three months ended June 30, Three months ended June 30, 2018 2017 2018 2017 Net periodic benefit cost: Service cost $ 3 $ 3 $ 1 $ 1 Interest cost 1 1 1 1 Expected return on assets (2 ) (2 ) — — Prior service cost — — (4 ) (1 ) Net periodic benefit cost (credit) $ 2 $ 2 $ (2 ) $ 1 Pension Plans Post-retirement Benefits Six months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Net periodic benefit cost: Service cost $ 6 $ 6 $ 1 $ 1 Interest cost 3 3 2 3 Expected return on assets (4 ) (4 ) — — Prior service cost — — (7 ) (2 ) Net periodic benefit cost (credit) $ 5 $ 5 $ (4 ) $ 2 The components of net periodic benefit costs other than the service cost component are included in other income (expense), net in the Condensed Consolidated Statements of Comprehensive Income. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2018 | |
INCOME TAXES | NOTE M. INCOME TAXES For the three and six months ended June 30, 2018, the Company recorded total tax expense of $48 million and $88 million, respectively. The effective tax rate for the three and six months ended June 30, 2018 was 22% and 21%, respectively. For the three and six months ended June 30, 2017, the Company recorded total tax expense of $51 million and $95 million, respectively. The effective tax rate for both the three and six months ended June 30, 2017 was 35%. The decrease in the effective tax rate was principally driven by the U.S. Tax Cuts and Jobs Act enacted into law in 2017. In 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the U.S. Tax Cuts and Jobs Act. The Company recognized the income tax effects of the U.S. Tax Cuts and Jobs Act for the year ended December 31, 2017, the reporting period in which the U.S. Tax Cuts and Jobs Act was signed into law, in accordance with SAB 118. As such, the Company’s financial results reflect the income tax effects of the U.S. Tax Cuts and Jobs Act and provisional amounts for those specific income tax effects of the U.S. Tax Cuts and Jobs Act that could be reasonably estimated. During both the three and six months ended June 30, 2018, there were no changes made to the provisional amounts recognized in 2017. The Company will continue to analyze the effects of the U.S. Tax Cuts and Jobs Act and any impact on its financial statements will be recorded in the period identified. The need to establish a valuation allowance against the deferred tax assets is assessed periodically based on a more-likely-than-not The Company continues to provide for a valuation allowance on certain of its foreign deferred tax assets. The Company has determined, based on the evaluation of both objective and subjective evidence available, that this valuation allowance is necessary and that it is more likely than not that the deferred tax assets are not fully realizable. In accordance with the FASB’s authoritative guidance on accounting for uncertainty in income taxes, the Company has recorded a liability for unrecognized tax benefits related to a 2010 Research & Development Credit as of June 30, 2018 and December 31, 2017. The accounting guidance prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. All of the Company’s returns will remain subject to examination by the various taxing authorities for the duration of the applicable statute of limitations (generally three years from the later of the date of filing or the due date of the return). |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE LOSS | 6 Months Ended |
Jun. 30, 2018 | |
ACCUMULATED OTHER COMPREHENSIVE LOSS | NOTE N. ACCUMULATED OTHER COMPREHENSIVE LOSS The following tables reconcile changes in AOCL by component (net of tax, dollars in millions): Three months ended Available-for- sale Defined Derivatives Foreign Total AOCL as of March 31, 2017 $ (7 ) $ (19 ) $ — $ (34 ) $ (60 ) Other comprehensive income before reclassifications — — — 4 4 Amounts reclassified from AOCL — (1 ) — — (1 ) Income tax (1 ) 1 — — — Net current period other comprehensive (loss) income $ (1 ) $ — $ — $ 4 $ 3 AOCL as of June 30, 2017 $ (8 ) $ (19 ) $ — $ (30 ) $ (57 ) AOCL as of March 31, 2018 $ — $ 5 $ — $ (16 ) $ (11 ) Other comprehensive loss before reclassifications — — (2 ) (12 ) (14 ) Amounts reclassified from AOCL — (4 ) — — (4 ) Income tax — 2 — — 2 Net current period other comprehensive loss $ — $ (2 ) $ (2 ) $ (12 ) $ (16 ) AOCL as of June 30, 2018 $ — $ 3 $ (2 ) $ (28 ) $ (27 ) Six months ended Available-for- Defined Derivatives Foreign Total AOCL as of December 31, 2016 $ (7 ) $ (18 ) $ — $ (38 ) $ (63 ) Other comprehensive (loss) income before reclassifications (1 ) — — 8 7 Amounts reclassified from AOCL — (2 ) — — (2 ) Income tax — 1 — — 1 Net current period other comprehensive (loss) income $ (1 ) $ (1 ) $ — $ 8 $ 6 AOCL as of June 30, 2017 $ (8 ) $ (19 ) $ — $ (30 ) $ (57 ) AOCL as of December 31, 2017 $ — $ 8 $ — $ (23 ) $ (15 ) Other comprehensive loss before reclassifications — — (2 ) (5 ) (7 ) Amounts reclassified from AOCL — (7 ) — — (7 ) Income tax — 2 — — 2 Net current period other comprehensive loss $ — $ (5 ) $ (2 ) $ (5 ) $ (12 ) AOCL as of June 30, 2018 $ — $ 3 $ (2 ) $ (28 ) $ (27 ) Amounts reclassified from AOCL Affected line item in the Condensed AOCL Components Three months Three months Amortization of benefit items: Prior service cost $ 3 $ 1 Cost of sales 1 — Selling, general and administrative Total reclassifications, before tax $ 4 $ 1 Income before income taxes Income tax (2 ) (1 ) Income tax expense Total reclassifications, net of tax $ 2 $ — Amounts reclassified from AOCL Affected line item in the Condensed AOCL Components Six months Six months Amortization of defined benefit pension items: Prior service cost $ 6 $ 2 Cost of sales 1 — Selling, general and administrative Total reclassifications, before tax $ 7 $ 2 Income before income taxes Income tax (2 ) (1 ) Income tax expense Total reclassifications, net of tax $ 5 $ 1 Prior service cost is included in the computation of the Company’s net periodic benefit cost. See NOTE L, “Employee Benefit Plans” for additional details. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2018 | |
COMMITMENTS AND CONTINGENCIES | NOTE O. COMMITMENTS AND CONTINGENCIES 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 June 30, 2018, 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 condensed 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. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 6 Months Ended |
Jun. 30, 2018 | |
EARNINGS PER SHARE | NOTE P. 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. For the three and six months ended both June 30, 2018 and June 30, 2017, there were no outstanding stock options excluded from the diluted EPS calculation because they were anti-dilutive. The following table reconciles the numerators and denominators used to calculate basic EPS and diluted EPS (in millions, except per share data): Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Net income $ 174 $ 95 $ 325 $ 178 Weighted average shares of common stock outstanding 134 151 137 154 Dilutive effect of stock-based awards 1 1 — 1 Diluted weighted average shares of common stock outstanding 135 152 137 155 Basic earnings per share attributable to common stockholders $ 1.30 $ 0.63 $ 2.37 $ 1.16 Diluted earnings per share attributable to common stockholders $ 1.29 $ 0.63 $ 2.37 $ 1.15 |
COMMON STOCK
COMMON STOCK | 6 Months Ended |
Jun. 30, 2018 | |
COMMON STOCK | NOTE Q. COMMON STOCK The Company’s current stock repurchase program was announced on November 14, 2016 when the Board of Directors authorized the Company to repurchase up to $1,000 million of its common stock on the open market or through privately negotiated transactions through December 31, 2019. On November 8, 2017, the Board of Directors authorized the Company to repurchase an additional $500 million of its common stock, bringing the total amount authorized under the current stock repurchase program to $1,500 million through December 31, 2019. The timing and amount of stock purchases are subject to market conditions and corporate needs. This stock repurchase program may be extended, modified, suspended or discontinued at any time at the Company’s discretion. During the three and six months ended June 30, 2018, the Company repurchased $244 million and $370 million, respectively, of its common stock under the repurchase program, leaving $184 million of authorized repurchases remaining under the current stock repurchase program as of June 30, 2018. |
CERTAIN RELATIONSHIPS AND RELAT
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2018 | |
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS | NOTE R. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS 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. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2018 | |
SUBSEQUENT EVENTS | NOTE S. SUBSEQUENT EVENTS On July 30, 2018, the Company announced that its Board of Directors had approved a new authorization under the Company’s current stock repurchase program for the repurchase of up to an additional $500 million of the Company’s outstanding common stock and had removed the termination date of the program. The new authorization brings the total amount authorized under the program to $2,000 million. |
SUMMARY OF SIGNIFICANT ACCOUN25
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The condensed consolidated financial statements have been prepared in accordance with accounting principles for interim financial information and with the instructions to Form 10-Q S-X. These condensed consolidated financial statements present the financial position, results of comprehensive income and cash flows of the Company. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Form 10-K |
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 post-retirement 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. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In August 2017, the Financial Accounting Standards Board (“FASB”) issued authoritative accounting guidance on accounting for derivative and hedge instruments. Among other things, the guidance allows the initial hedge effectiveness assessment to be performed by the end of the quarter in which the hedge is designated, permits a qualitative assessment for certain hedges if an expectation of high effectiveness can be supported throughout the term of the hedge, and removes the requirement to record ineffectiveness on cash flow hedges immediately through earnings when the hedge is highly effective. The guidance was early adopted by the Company effective April 1, 2018 and applied upon entering into interest rate swaps designated as cash flow hedges during the period ended June 30, 2018. When adopted in an interim period, the guidance is required to be reflected as of the beginning of the year of adoption. The Company has not previously designated any derivative instruments as hedging instruments, and thus, the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. 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 and did not 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 post-retirement 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 and did not 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 and did not have a material impact on the Company’s consolidated financial statements. In May 2014, the FASB issued authoritative accounting guidance on a company’s accounting for revenue from contracts with customers, which guidance was subsequently 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 was adopted by the Company effective January 1, 2018 on a modified retrospective basis. See Note C, “Revenue” for information regarding the impact of the adoption of this guidance. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In June 2018, the FASB issued authoritative accounting guidance on accounting for nonemployee awards for goods or services received by a company. The guidance will be effective for the Company in fiscal year 2019, but early adoption is permitted. Management is currently evaluating the impact of this guidance on the Company’s consolidated financial statements. In February 2018, the FASB issued authoritative accounting guidance on transfers of stranded balances in accumulated other comprehensive loss to retained earnings. The passage of the U.S. Tax Cuts and Jobs Act by the U.S. federal government in December 2017 and existing GAAP requirements to adjust deferred tax assets and liabilities for changes in tax laws or rates created stranded balances in accumulated other comprehensive loss on deferred tax assets and liabilities previously recorded as a component to accumulated other comprehensive loss. The guidance applies to companies affected by these stranded balances and allows a reclassification of these balances to retained earnings. The guidance will be effective for the Company in fiscal year 2019, but early adoption is permitted. The guidance can be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the U.S. Tax Cuts and Jobs Act is recognized. Management is currently evaluating affected balances recorded in accumulated other comprehensive loss and expects the impact of this guidance on the Company’s consolidated financial statements to be an immaterial adjustment to retained earnings. In February 2016, the FASB issued authoritative accounting guidance on lease accounting. The guidance requires lessees to present right-of-use |
REVENUE (Tables)
REVENUE (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Disaggregated Revenue by Categories | The following presents disaggregated revenue by categories that best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors (dollars in millions): Three months Six months ended June 30, North America On-Highway $ 343 $ 682 North America Off-Highway 31 64 Defense 43 80 Outside North America On-Highway 101 192 Outside North America Off-Highway 24 36 Service Parts, Support Equipment and Other 169 320 Total Net Sales $ 711 $ 1,374 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Components of Inventories | Inventories consisted of the following components (dollars in millions): June 30, December 31, Purchased parts and raw materials $ 83 $ 79 Work in progress 10 6 Service parts 45 46 Finished goods 32 23 Total inventories $ 170 $ 154 |
GOODWILL AND OTHER INTANGIBLE28
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Summary of Other Intangible Assets | The following presents a summary of other intangible assets (dollars in millions): June 30, 2018 December 31, 2017 Intangible Accumulated Intangible Intangible Accumulated Intangible Other intangible assets: Trade name $ 790 $ — $ 790 $ 790 $ — $ 790 Customer relationships — commercial 832 (597 ) 235 832 (573 ) 259 Proprietary technology 476 (415 ) 61 476 (396 ) 80 Customer relationships — defense 62 (39 ) 23 62 (38 ) 24 Patented technology — defense 28 (28 ) — 28 (28 ) — Non-compete 17 (17 ) — 17 (17 ) — Tooling rights 5 (5 ) — 5 (5 ) — Total $ 2,210 $ (1,101 ) $ 1,109 $ 2,210 $ (1,057 ) $ 1,153 |
Amortization Expense Related to Other Intangible Assets for Next Five Fiscal Years | Amortization expense related to other intangible assets for the next five fiscal years is expected to be (dollars in millions): 2019 2020 2021 2022 2023 Amortization expense $ 86 $ 50 $ 45 $ 43 $ 42 |
FAIR VALUE OF FINANCIAL INSTR29
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
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 June 30, 2018 and December 31, 2017 (dollars in millions): Fair Value Measurements Using Quoted Prices in Active Significant Other TOTAL June 30, 2018 December 31, June 30, 2018 December 31, June 30, 2018 December 31, Cash equivalents $ 2 $ 50 $ — $ — $ 2 $ 50 Rabbi trust assets 10 8 — — 10 8 Deferred compensation obligation (10 ) (8 ) — — (10 ) (8 ) Derivative liabilities — — (2 ) — (2 ) — Total $ 2 $ 50 $ (2 ) $ — $ — $ 50 |
DEBT (Tables)
DEBT (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Summary of Long-Term Debt and Maturities | Long-term debt and maturities are as follows (dollars in millions): June 30, December 31, Long-term debt: Senior Secured Credit Facility Term B-3 $ 1,148 $ 1,176 Senior Notes, fixed 5.0%, due 2024 1,000 1,000 Senior Notes, fixed 4.75%, due 2027 400 400 Total long-term debt $ 2,548 $ 2,576 Less: current maturities of long-term debt — 12 deferred financing costs, net 28 30 Total long-term debt, net $ 2,520 $ 2,534 |
DERIVATIVES (Tables)
DERIVATIVES (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Derivative Instruments and their Impact on the Financial Condition | The following tabular disclosures further describe the Company’s interest rate derivatives qualifying and designated for hedge accounting and their impact on the financial condition of the Company (dollars in millions): June 30, 2018 Balance Sheet Location Fair Value Derivatives designated as hedging instruments: Interest rate swaps Other non-current liabilities $ (2 ) Total derivatives designated as hedging instruments $ (2 ) |
PRODUCT WARRANTY LIABILITIES (T
PRODUCT WARRANTY LIABILITIES (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Product Warranty Liability Activities | Product warranty liability activities consist of the following (dollars in millions): Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Beginning balance $ 62 $ 58 $ 55 $ 63 Payments (10 ) (8 ) (19 ) (15 ) Increase in liability (warranty issued during period) 12 5 21 9 Net adjustments to liability 1 — 8 (2 ) Ending balance $ 65 $ 55 $ 65 $ 55 |
DEFERRED REVENUE (Tables)
DEFERRED REVENUE (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Deferred Revenue for Extended Transmission Coverage Activity | Deferred revenue activity consists of the following (dollars in millions): Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Beginning balance $ 112 $ 96 $ 110 $ 94 Increases 23 6 33 14 Revenue earned (10 ) (6 ) (18 ) (12 ) Ending balance $ 125 $ 96 $ 125 $ 96 |
OTHER CURRENT LIABILITIES (Tabl
OTHER CURRENT LIABILITIES (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Summary of Other Current Liabilities | Other current liabilities consist of the following (dollars in millions): As of As of Payroll and related costs $ 52 $ 73 Sales allowances 40 34 Accrued interest payable 18 19 Vendor buyback obligation 15 14 Taxes payable 14 10 Defense price reduction reserve 9 9 UAW Local 933 retirement incentive 6 — Non-trade 3 8 Other accruals 9 16 Total $ 166 $ 183 |
EMPLOYEE BENEFIT PLANS (Tables)
EMPLOYEE BENEFIT PLANS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Components of Net Periodic Benefit Cost (credit) | Components of net periodic benefit cost (credit) consist of the following (dollars in millions): Pension Plans Post-retirement Benefits Three months ended June 30, Three months ended June 30, 2018 2017 2018 2017 Net periodic benefit cost: Service cost $ 3 $ 3 $ 1 $ 1 Interest cost 1 1 1 1 Expected return on assets (2 ) (2 ) — — Prior service cost — — (4 ) (1 ) Net periodic benefit cost (credit) $ 2 $ 2 $ (2 ) $ 1 Pension Plans Post-retirement Benefits Six months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Net periodic benefit cost: Service cost $ 6 $ 6 $ 1 $ 1 Interest cost 3 3 2 3 Expected return on assets (4 ) (4 ) — — Prior service cost — — (7 ) (2 ) Net periodic benefit cost (credit) $ 5 $ 5 $ (4 ) $ 2 |
ACCUMULATED OTHER COMPREHENSI36
ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Changes in Accumulated Other Comprehensive Loss by Component | The following tables reconcile changes in AOCL by component (net of tax, dollars in millions): Three months ended Available-for- sale Defined Derivatives Foreign Total AOCL as of March 31, 2017 $ (7 ) $ (19 ) $ — $ (34 ) $ (60 ) Other comprehensive income before reclassifications — — — 4 4 Amounts reclassified from AOCL — (1 ) — — (1 ) Income tax (1 ) 1 — — — Net current period other comprehensive (loss) income $ (1 ) $ — $ — $ 4 $ 3 AOCL as of June 30, 2017 $ (8 ) $ (19 ) $ — $ (30 ) $ (57 ) AOCL as of March 31, 2018 $ — $ 5 $ — $ (16 ) $ (11 ) Other comprehensive loss before reclassifications — — (2 ) (12 ) (14 ) Amounts reclassified from AOCL — (4 ) — — (4 ) Income tax — 2 — — 2 Net current period other comprehensive loss $ — $ (2 ) $ (2 ) $ (12 ) $ (16 ) AOCL as of June 30, 2018 $ — $ 3 $ (2 ) $ (28 ) $ (27 ) Six months ended Available-for- Defined Derivatives Foreign Total AOCL as of December 31, 2016 $ (7 ) $ (18 ) $ — $ (38 ) $ (63 ) Other comprehensive (loss) income before reclassifications (1 ) — — 8 7 Amounts reclassified from AOCL — (2 ) — — (2 ) Income tax — 1 — — 1 Net current period other comprehensive (loss) income $ (1 ) $ (1 ) $ — $ 8 $ 6 AOCL as of June 30, 2017 $ (8 ) $ (19 ) $ — $ (30 ) $ (57 ) AOCL as of December 31, 2017 $ — $ 8 $ — $ (23 ) $ (15 ) Other comprehensive loss before reclassifications — — (2 ) (5 ) (7 ) Amounts reclassified from AOCL — (7 ) — — (7 ) Income tax — 2 — — 2 Net current period other comprehensive loss $ — $ (5 ) $ (2 ) $ (5 ) $ (12 ) AOCL as of June 30, 2018 $ — $ 3 $ (2 ) $ (28 ) $ (27 ) Amounts reclassified from AOCL Affected line item in the Condensed AOCL Components Three months Three months Amortization of benefit items: Prior service cost $ 3 $ 1 Cost of sales 1 — Selling, general and administrative Total reclassifications, before tax $ 4 $ 1 Income before income taxes Income tax (2 ) (1 ) Income tax expense Total reclassifications, net of tax $ 2 $ — Amounts reclassified from AOCL Affected line item in the Condensed AOCL Components Six months Six months Amortization of defined benefit pension items: Prior service cost $ 6 $ 2 Cost of sales 1 — Selling, general and administrative Total reclassifications, before tax $ 7 $ 2 Income before income taxes Income tax (2 ) (1 ) Income tax expense Total reclassifications, net of tax $ 5 $ 1 Prior service cost is included in the computation of the Company’s net periodic benefit cost. See NOTE L, “Employee Benefit Plans” for additional details. |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
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): Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Net income $ 174 $ 95 $ 325 $ 178 Weighted average shares of common stock outstanding 134 151 137 154 Dilutive effect of stock-based awards 1 1 — 1 Diluted weighted average shares of common stock outstanding 135 152 137 155 Basic earnings per share attributable to common stockholders $ 1.30 $ 0.63 $ 2.37 $ 1.16 Diluted earnings per share attributable to common stockholders $ 1.29 $ 0.63 $ 2.37 $ 1.15 |
Overview - Additional Informati
Overview - Additional Information (Detail) | 6 Months Ended |
Jun. 30, 2018EmployeeCustomerProduct | |
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 |
Sales Revenue, Net | North America | Geographic Concentration Risk | |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items] | |
Concentration of risk, percentage | 79.00% |
Revenue - Additional Informatio
Revenue - Additional Information (Detail) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)Segment | Jun. 30, 2017USD ($) | Jan. 01, 2018USD ($) | |
Deferred Revenue Arrangement [Line Items] | |||||
Deferred revenue current liabilities | $ 38 | $ 28 | $ 38 | $ 28 | |
Deferred revenue non-current liabilities | 87 | 68 | 87 | 68 | |
Net sales | 711 | $ 580 | 1,374 | $ 1,079 | |
Contract assets | $ 0 | $ 0 | |||
Credit term period | 30 days | ||||
Number of operating segment | Segment | 1 | ||||
Number of reportable segment | Segment | 1 | ||||
Minimum | |||||
Deferred Revenue Arrangement [Line Items] | |||||
Duration of contract sold | 1 year | ||||
Maximum | |||||
Deferred Revenue Arrangement [Line Items] | |||||
Duration of contract sold | 5 years | ||||
Adoption of New Revenue Guidance | |||||
Deferred Revenue Arrangement [Line Items] | |||||
Increase in retained earnings | $ 5 | ||||
Deferred revenue current liabilities | (2) | ||||
Deferred revenue non-current liabilities | $ (4) | ||||
Accounting Standards Update 2014-09 | |||||
Deferred Revenue Arrangement [Line Items] | |||||
Net sales | $ 1 | ||||
Accounting Standards Update 2014-09 | Non-current Deferred Revenue | |||||
Deferred Revenue Arrangement [Line Items] | |||||
Increase (decrease) in deferred revenue non-current liabilities | $ (1) |
Revenue - Disaggregated Revenue
Revenue - Disaggregated Revenue by Categories (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Disaggregation of Revenue [Line Items] | ||||
Total Net Sales | $ 711 | $ 580 | $ 1,374 | $ 1,079 |
North America On-Highway | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Net Sales | 343 | 682 | ||
North America Electric Hybrid-Propulsion Systems for Transit Bus | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Net Sales | 31 | 64 | ||
North America Off-Highway | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Net Sales | 43 | 80 | ||
Defense | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Net Sales | 101 | 192 | ||
Outside North America On-Highway | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Net Sales | 24 | 36 | ||
Service Parts, Support Equipment and Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Net Sales | $ 169 | $ 320 |
Components of Inventories (Deta
Components of Inventories (Detail) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Inventory [Line Items] | ||
Purchased parts and raw materials | $ 83 | $ 79 |
Work in progress | 10 | 6 |
Service parts | 45 | 46 |
Finished goods | 32 | 23 |
Total inventories | $ 170 | $ 154 |
Goodwill and Other Intangible42
Goodwill and Other Intangible Assets - Additional Information (Detail) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Goodwill [Line Items] | ||
Goodwill | $ 1,941 | $ 1,941 |
Net carrying value of Goodwill and other intangible assets | $ 3,050 | $ 3,094 |
Summary of Other Intangible Ass
Summary of Other Intangible Assets (Detail) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Intangible assets, gross | $ 2,210 | $ 2,210 |
Trade name | 790 | 790 |
Accumulated amortization | (1,101) | (1,057) |
Intangible assets, net | 1,109 | 1,153 |
Customer relationships - commercial | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Intangible assets, gross | 832 | 832 |
Accumulated amortization | (597) | (573) |
Intangible assets, net | 235 | 259 |
Proprietary technology | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Intangible assets, gross | 476 | 476 |
Accumulated amortization | (415) | (396) |
Intangible assets, net | 61 | 80 |
Customer relationships - defense | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Intangible assets, gross | 62 | 62 |
Accumulated amortization | (39) | (38) |
Intangible assets, net | 23 | 24 |
Patented technology - defense | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Intangible assets, gross | 28 | 28 |
Accumulated amortization | (28) | (28) |
Non-compete agreement | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Intangible assets, gross | 17 | 17 |
Accumulated amortization | (17) | (17) |
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 | Jun. 30, 2018USD ($) |
Finite-Lived Intangible Assets | |
2,019 | $ 86 |
2,020 | 50 |
2,021 | 45 |
2,022 | 43 |
2,023 | $ 42 |
Fair Value of Financial Instr45
Fair Value of Financial Instruments - Additional Information (Detail) - Fair Value, Inputs, Level 3 [Member] - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
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 | Jun. 30, 2018 | Dec. 31, 2017 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents | $ 2 | $ 50 |
Rabbi trust assets | 10 | 8 |
Deferred compensation obligation | (10) | (8) |
Derivative liabilities | (2) | |
Total | 50 | |
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 | 2 | 50 |
Rabbi trust assets | 10 | 8 |
Deferred compensation obligation | (10) | (8) |
Total | 2 | $ 50 |
Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative liabilities | (2) | |
Total | $ (2) |
Summary of Long-Term Debt and M
Summary of Long-Term Debt and Maturities (Detail) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Debt Instrument [Line Items] | ||
Total long-term debt | $ 2,548 | $ 2,576 |
Less: current maturities of long-term debt | 0 | 12 |
Less: deferred financing costs, net | 28 | 30 |
Total long-term debt, net | 2,520 | 2,534 |
Senior Secured Credit Facility Term B-3 Loan, variable due 2022 | ||
Debt Instrument [Line Items] | ||
Total long-term debt | 1,148 | 1,176 |
5.0% Senior Notes due 2024 | ||
Debt Instrument [Line Items] | ||
Total long-term debt | 1,000 | 1,000 |
4.75% Senior Notes due 2027 | ||
Debt Instrument [Line Items] | ||
Total long-term debt | $ 400 | $ 400 |
Summary of Long-Term Debt and48
Summary of Long-Term Debt and Maturities (Parenthetical) (Detail) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
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% |
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 | 2,027 |
Debt - Additional Information (
Debt - Additional Information (Detail) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Mar. 31, 2018 | Mar. 31, 2017 | Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2018 | Dec. 31, 2016 | Dec. 31, 2017 | Sep. 30, 2017 | Aug. 31, 2017 | |
Debt Instrument [Line Items] | |||||||||
Total long-term debt | $ 2,548,000,000 | $ 2,548,000,000 | $ 2,576,000,000 | ||||||
Fair value of long-term debt obligations | $ 2,507,000,000 | $ 2,507,000,000 | |||||||
Total leverage ratio | 240.00% | 240.00% | |||||||
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 | $ 533,000,000 | |||||||
Maximum amount of letters of credit commitments available under the revolving credit facility | 75,000,000 | 75,000,000 | |||||||
Letters of Credit | $ 17,000,000 | $ 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 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% | 550.00% | |||||||
Achieved senior secured leverage ratio | 103.00% | 103.00% | |||||||
Senior secured leverage ratio for applicable margin reduction | 400.00% | 400.00% | |||||||
Total leverage ratio for applicable margin reduction | 400.00% | 400.00% | |||||||
Total leverage ratio for commitment fee reduction | 350.00% | 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 | $ 1,148,000,000 | $ 1,148,000,000 | $ 1,176,000,000 | ||||||
Change in applicable margin over base rate | 0.25% | 0.50% | |||||||
Applicable margin over base rate | 0.50% | ||||||||
Debt financing fees | $ 1,000,000 | $ 1,000,000 | |||||||
Debt instrument effective interest rate | 3.85% | 3.85% | |||||||
Principal payments on term loans | $ 3,000,000 | ||||||||
Voluntary prepayments of principal amount | $ 25,000,000 | ||||||||
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% | 0.75% | 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 | 1.75% | ||||||||
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 | $ 1,000,000,000 | ||||||
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% | 4.75% | ||||||
Total long-term debt | $ 400,000,000 | $ 400,000,000 | $ 400,000,000 |
Derivatives - Additional Inform
Derivatives - Additional Information (Detail) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Accumulated comprehensive loss | $ (27,000,000) | $ (15,000,000) |
Accumulated other comprehensive loss, be Reclassified During Next 12 Months | $ 0 | |
Interest Rate Swap A [Member] | ||
Derivative, Maturity Date, Range Start | 2019-09 | |
Derivative, Maturity Date, Range End | 2022-09 | |
Notional Amount | $ 250,000,000 | |
Interest Rate Swap A [Member] | LIBOR | ||
Derivative, Fixed Interest Rate | 3.01% | |
Interest Rate Swap B [Member] | ||
Derivative, Maturity Date, Range Start | 2019-09 | |
Derivative, Maturity Date, Range End | 2025-09 | |
Notional Amount | $ 250,000,000 | |
Interest Rate Swap B [Member] | LIBOR | ||
Derivative, Fixed Interest Rate | 3.04% | |
Accumulated Derivatives Qualifying As Hedges | ||
Accumulated comprehensive loss | $ (2,000,000) |
Derivative Instruments and thei
Derivative Instruments and their Impact on the Financial Condition (Detail) - Derivatives designated as hedging instruments - Interest Rate Swaps $ in Millions | Jun. 30, 2018USD ($) |
Derivative [Line Items] | |
Total derivatives designated as hedging instruments | $ (2) |
Other non-current liabilities | |
Derivative [Line Items] | |
Derivative Liability, Fair Value | $ (2) |
Product Warranty Liabilities -
Product Warranty Liabilities - Additional Information (Detail) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 | Jun. 30, 2017 |
Guarantor Obligations [Line Items] | |||
Product warranty liability, current | $ 28 | $ 22 | $ 21 |
Product warranty liability, non-current | $ 37 | $ 33 | $ 34 |
Product Warranty Liability Acti
Product Warranty Liability Activities (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Guarantor Obligations [Line Items] | ||||
Beginning balance | $ 62 | $ 58 | $ 55 | $ 63 |
Payments | (10) | (8) | (19) | (15) |
Increase in liability (warranty issued during period) | 12 | 5 | 21 | 9 |
Net adjustments to liability | 1 | 8 | (2) | |
Ending balance | $ 65 | $ 55 | $ 65 | $ 55 |
Deferred Revenue - Additional I
Deferred Revenue - Additional Information (Detail) - USD ($) $ in Millions | Jun. 30, 2018 | Jun. 30, 2017 |
Deferred Revenue Arrangement [Line Items] | ||
Deferred revenue current liabilities | $ 38 | $ 28 |
Deferred revenue non-current liabilities | 87 | 68 |
Extended Transmission Coverage ("ETC") | ||
Deferred Revenue Arrangement [Line Items] | ||
Deferred revenue current liabilities | 29 | 27 |
Deferred revenue non-current liabilities | $ 71 | $ 68 |
Deferred Revenue Activity (Deta
Deferred Revenue Activity (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Deferred Revenue Arrangement [Line Items] | ||||
Beginning balance | $ 112 | $ 96 | $ 110 | $ 94 |
Increases | 23 | 6 | 33 | 14 |
Revenue earned | (10) | (6) | (18) | (12) |
Ending balance | $ 125 | $ 96 | $ 125 | $ 96 |
Summary of Other Current Liabil
Summary of Other Current Liabilities (Detail) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Other Current Liabilities [Line Items] | ||
Payroll and related costs | $ 52 | $ 73 |
Sales allowances | 40 | 34 |
Accrued interest payable | 18 | 19 |
Vendor buyback obligation | 15 | 14 |
Taxes payable | 14 | 10 |
Defense price reduction reserve | 9 | 9 |
UAW Local 933 retirement incentive | 6 | |
Non-trade payables | 3 | 8 |
Other accruals | 9 | 16 |
Total | $ 166 | $ 183 |
Components of Net Periodic Bene
Components of Net Periodic Benefit Cost (credit) (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Pension Plans | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | $ 3 | $ 3 | $ 6 | $ 6 |
Interest cost | 1 | 1 | 3 | 3 |
Expected return on assets | (2) | (2) | (4) | (4) |
Net periodic benefit cost (credit) | 2 | 2 | 5 | 5 |
Post-retirement Benefits | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | 1 | 1 | 1 | 1 |
Interest cost | 1 | 1 | 2 | 3 |
Prior service cost | (4) | (1) | (7) | (2) |
Net periodic benefit cost (credit) | $ (2) | $ 1 | $ (4) | $ 2 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Income Taxes [Line Items] | ||||
Income tax expense | $ 48 | $ 51 | $ 88 | $ 95 |
Effective tax rate | 22.00% | 35.00% | 21.00% | 35.00% |
Changes in Accumulated Other Co
Changes in Accumulated Other Comprehensive Loss by Component (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning balance of AOCL | $ 689 | |||
Other comprehensive (loss) income before reclassifications | $ (14) | $ 4 | (7) | $ 7 |
Amounts reclassified from AOCL | (4) | (1) | (7) | (2) |
Income tax | 2 | 2 | 1 | |
Net current period other comprehensive (loss) income | (16) | 3 | (12) | 6 |
Total AOCL | 602 | 602 | ||
Accumulated Net Unrealized Investment Gain (Loss) | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning balance of AOCL | (7) | (7) | ||
Other comprehensive (loss) income before reclassifications | (1) | |||
Income tax | (1) | |||
Net current period other comprehensive (loss) income | (1) | (1) | ||
Total AOCL | (8) | (8) | ||
Accumulated Defined Benefit Plans Adjustment | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning balance of AOCL | 5 | (19) | 8 | (18) |
Amounts reclassified from AOCL | (4) | (1) | (7) | (2) |
Income tax | 2 | 1 | 2 | 1 |
Net current period other comprehensive (loss) income | (2) | (5) | (1) | |
Total AOCL | 3 | (19) | 3 | (19) |
Accumulated Translation Adjustment | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning balance of AOCL | (16) | (34) | (23) | (38) |
Other comprehensive (loss) income before reclassifications | (12) | 4 | (5) | 8 |
Net current period other comprehensive (loss) income | (12) | 4 | (5) | 8 |
Total AOCL | (28) | (30) | (28) | (30) |
Accumulated Other Comprehensive Loss, net of tax | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning balance of AOCL | (11) | (60) | (15) | (63) |
Total AOCL | (27) | $ (57) | (27) | $ (57) |
Accumulated Derivatives Qualifying As Hedges | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Other comprehensive (loss) income before reclassifications | (2) | (2) | ||
Net current period other comprehensive (loss) income | (2) | (2) | ||
Total AOCL | $ (2) | $ (2) |
Amounts reclassified from AOCL
Amounts reclassified from AOCL (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Cost of sales | $ 337 | $ 290 | $ 658 | $ 538 |
Selling, general and administrative | (93) | (88) | (185) | (167) |
Income before income taxes | 222 | 146 | 413 | 273 |
Income tax | (48) | (51) | (88) | (95) |
Total reclassifications, net of tax | 174 | 95 | 325 | 178 |
Reclassified from AOCL | Prior service cost | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Cost of sales | 3 | 1 | 6 | 2 |
Selling, general and administrative | 1 | 1 | ||
Reclassified from AOCL | Accumulated Defined Benefit Plans Adjustment | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Income before income taxes | 4 | 1 | 7 | 2 |
Income tax | (2) | $ (1) | (2) | (1) |
Total reclassifications, net of tax | $ 2 | $ 5 | $ 1 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Detail) $ in Millions | Jun. 30, 2018USD ($) |
Commitments and Contingencies Disclosure [Line Items] | |
Environmental liability | $ 13 |
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 | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Computation of Earnings Per Share [Line Items] | ||||
Net income | $ 174 | $ 95 | $ 325 | $ 178 |
Weighted average shares of common stock outstanding | 134 | 151 | 137 | 154 |
Dilutive effect of stock-based awards | 1 | 1 | 1 | |
Diluted weighted average shares of common stock outstanding | 135 | 152 | 137 | 155 |
Basic earnings per share attributable to common stockholders | $ 1.30 | $ 0.63 | $ 2.37 | $ 1.16 |
Diluted earnings per share attributable to common stockholders | $ 1.29 | $ 0.63 | $ 2.37 | $ 1.15 |
Common Stock - Additional Infor
Common Stock - Additional Information (Detail) - 2016 Repurchase Program - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2018 | Nov. 08, 2017 | Nov. 14, 2016 | |
Common Stock Disclosure [Line Items] | ||||
Common stock, repurchases authorized | $ 184,000,000 | $ 184,000,000 | ||
Stock repurchase program, authorized amount | $ 1,500,000,000 | $ 1,000,000,000 | ||
Stock repurchase program, increase in authorized amount | $ 500,000,000 | |||
Common stock, repurchased during the period | $ 244,000,000 | $ 370,000,000 |
Certain Relationships and Rel64
Certain Relationships and Related Party Transactions - Additional Information (Detail) - ValueAct Capital Master Fund, L.P $ in Millions | Feb. 03, 2017USD ($)shares |
Related Party Transaction [Line Items] | |
Common stock repurchased during the period, shares | shares | 10,525,204 |
Common stock repurchased during the period, value | $ | $ 363 |
Repurchase agreement closing date | Feb. 8, 2017 |
Subsequent Events - Additional
Subsequent Events - Additional Information (Detail) - 2016 Repurchase Program - USD ($) | Jul. 30, 2018 | Nov. 08, 2017 | Nov. 14, 2016 |
Subsequent Event [Line Items] | |||
Common stock repurchased during the period, value | $ 500,000,000 | ||
Stock repurchase program, authorized amount | $ 1,500,000,000 | $ 1,000,000,000 | |
Subsequent Event | |||
Subsequent Event [Line Items] | |||
Common stock repurchased during the period, value | $ 500,000,000 | ||
Stock repurchase program, authorized amount | $ 2,000,000,000 |