Allison Transmission (ALSN) 8-K Allison Transmission Announces Record Results for Full Year 2018

Exhibit 99.1

Allison Transmission Announces Record Results for Full Year 2018

• Record Full Year 2018: Net Sales $2,713 million, Net Income $639 million, Adjusted EBITDA $1,128 million, Net Cash Provided by Operating Activities $837 million, Adjusted Free Cash Flow $737 million

• Fourth Quarter 2018: Net Sales $647 million, Net Income $147 million, Adjusted EBITDA $261 million, Net Cash Provided by Operating Activities $232 million, Adjusted Free Cash Flow $184 million

INDIANAPOLIS, February 25, 2019 – Allison Transmission Holdings Inc. (NYSE: ALSN), the largest global provider of commercial duty fully-automatic transmissions,today reported net sales for the fourth quarter of $647 million, a 10 percent increase from the same period in 2017. The increase in net sales was principally driven by higher demand in the Outside North AmericaOff-Highway and North AmericaOn-Highway end markets.

Net Income for the quarter was $147 million compared to $215 million for the same period in 2017. Fourth quarter 2017 included aone-time income tax benefit of $152 million as a result of the U.S. Tax Cuts and Jobs Act enacted into law in December 2017. Adjusted EBITDA, anon-GAAP financial measure, for the quarter was $261 million compared to $210 million for the same period in 2017. Net Cash Provided by Operating Activities for the quarter was $232 million compared to $166 million for the same period in 2017. Adjusted Free Cash Flow, anon-GAAP financial measure, for the quarter was $184 million compared to $115 million for the same period in 2017.

David S. Graziosi, President and Chief Executive Officer of Allison Transmission commented, “I am pleased to report that 2018 was a record year for Allison Transmission. Full year results exceeded our initial Net Sales guidance ranges across all of our end markets. Furthermore, Allison achieved record levels of Net Sales, Net Income, Adjusted EBITDA, Net Cash Provided by Operating Activities and Adjusted Free Cash Flow. Full year net sales growth of 20 percent was surpassed, by even stronger growth in Net Income, up 27 percent, Diluted EPS, up 42 percent and Adjusted EBITDA, up 30 percent. And notably, double digit growth was realized in the Outside North AmericaOn-Highway end market for the third consecutive year.” Graziosi continued, “Throughout the year, we continued our well-defined approach to capital structure and allocation. During the fourth quarter, we paid a dividend of $0.15 per share and settled $153 million of share repurchases, resulting in $609 million of total share repurchases in 2018 or approximately 10% of our outstanding shares.”

Fourth Quarter Net Sales by End Market

End Market	Q4 2018 Net Sales ($M)		Q4 2017 Net Sales ($M)		% Variance
North AmericaOn-Highway (a)	$	303	$	287		6	%
North AmericaOff-Highway	$	17	$	28		(39	%)
Defense	$	36	$	25		44	%
Outside North AmericaOn-Highway	$	95	$	98		(3	%)
Outside North AmericaOff-Highway	$	47	$	11		327	%
Service Parts, Support Equipment & Other	$	149	$	139		7	%
Total Net Sales	$	647	$	588		10	%

(a) North AmericaOn-Highwayend-market net sales are inclusive of net sales for North America Electric Hybrid-Propulsion Systems for Transit Bus.

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Fourth Quarter Highlights

North AmericaOn-Highway end market net sales were up 6 percent from the same period in 2017 principally driven by higher demand for Rugged Duty Series and Highway Series models and down 9 percent on a sequential basis principally driven by lower demand for Rugged Duty Series and Pupil Transport/Shuttle Series models.

North AmericaOff-Highway end market net sales were down $11 million from the same period in 2017 and up $5 million sequentially, in both cases principally driven by fluctuations in demand from hydraulic fracturing applications.

Defense end market net sales were up $11 million from the same period in 2017 principally driven by higher Tracked demand and down $6 million on a sequential basis principally driven by lower Wheeled and Tracked demand.

Outside North AmericaOn-Highway end market net sales were down 3 percent from the same period in 2017 principally driven by lower demand in South America and Asia and down 1 percent sequentially.

Outside North AmericaOff-Highway end market net sales were up $36 million from the same period in 2017 principally driven by improved demand in the energy, mining and construction sectors and up $1 million on a sequential basis.

Service Parts, Support Equipment & Other end market net sales were up 7 percent from the same period in 2017 principally driven by higher demand for North AmericaOn-Highway service parts and global support equipment and down 9 percent sequentially principally driven by lower demand for North America service parts.

Gross profit for the quarter was $338 million, an increase of 17 percent from $288 million for the same period in 2017. Gross margin for the quarter was 52.2 percent, an increase of 320 basis points from a gross margin of 49.0 percent for the same period in 2017. The increase in gross profit from the same period in 2017 was principally driven by increased net sales, price increases on certain products and favorable material costs.

Selling, general and administrative expenses for the quarter were $90 million, a decrease of $7 million from $97 million for the same period in 2017. The decrease was principally driven by unfavorable product warranty adjustments in 2017 that did not recur in 2018.

Engineering – research and development expenses for the quarter were $37 million, an increase of $6 million from $31 million for the same period in 2017. The increase was principally driven by increased product initiatives spending.

As a result of continued weak demand conditions for the TC10 transmission we ceased production and recorded a corresponding $4 million impairment loss compared to a $32 million impairment loss for the same period in 2017.

Income tax expense for the quarter was $27 million compared to a $131 million benefit for the same period in 2017. The change was principally driven by aone-time income tax benefit resulting from a decrease in deferred tax liabilities in 2017 as a result of the U.S. Tax Cuts and Jobs Act enacted into law in December 2017 and increased taxable income partially offset by a decrease in effective tax rate as a result of the U.S. Tax Cuts and Jobs Act.

Net income for the quarter was $147 million compared to $215 million for the same period in 2017. The decrease was principally driven by the enactment of the U.S. Tax Cuts and Jobs Act in December 2017, increased product initiatives spending and increased interest expense partially offset by increased gross profit, decreased loss associated with the impairment of long-lived assets, decreased technology-related investment expense and decreased selling, general and administrative expenses.

Net cash provided by operating activities was $232 million compared to $166 million for the same period in 2017. The increase was principally driven by increased gross profit, decreased cash income taxes and decreased cash interest expense partially offset by increased product initiatives spending.

Fourth QuarterNon-GAAP Financial Measures

Adjusted EBITDA for the quarter was $261 million compared to $210 million for the same period in 2017, an increase of $51 million. The increase in Adjusted EBITDA was principally driven by increased gross profit and decreased selling, general and administrative expenses partially offset by increased product initiatives spending.

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Adjusted Free Cash Flow for the quarter was $184 million compared to $115 million for the same period in 2017, an increase of $69 million. The increase was driven by increased cash provided by operating activities and decreased capital expenditures.

Full Year 2019 Guidance

Allison expects 2019 net sales to be in the range of $2,580 to $2,680 million, Net Income in the range of $535 to $585 million, Adjusted EBITDA in the range of $1,000 to $1,060 million, Net Cash Provided by Operating Activities in the range of $710 to $750 million, Adjusted Free Cash Flow in the range of $550 to $600 million and cash income taxes in the range of $100 to $110 million.

Our 2019 net sales guidance reflects lower demand in the North AmericaOff-Highway and Service Parts, Support Equipment & Other end markets principally driven by hydraulic fracturing applications partially offset by increased demand in the North AmericaOn-Highway end market, price increases on certain products and continued execution of our growth initiatives.

Although we are not providing specific first quarter 2019 guidance, Allison does expect first quarter net sales to be flat from the same period in 2018 principally driven by increased demand expected in the North AmericaOn-Highway end market offset by decreased demand expected in the North AmericaOff-Highway and Service Parts, Support Equipment & Other end markets.

Conference Call and Webcast

The company will host a conference call at 8:00 a.m. ET on Tuesday, February 26 to discuss its fourth quarter and full year 2018 results and full year 2019 guidance. Thedial-in number is1-201-389-0878 and the U.S. toll-freedial-in number is1-877-425-9470. A live webcast of the conference call will also be available online at http://ir.allisontransmission.com.

For those unable to participate on the conference call, a replay will be available from 11:00 a.m. ET on February 26 until 11:59 p.m. ET on March 5. The replaydial-in number is1-844-512-2921 and the international replaydial-in number is1-412-317-6671. The replay passcode is 13686313.

About Allison Transmission

Allison Transmission (NYSE: ALSN) is the world’s largest manufacturer of fully automatic transmissions for medium- and heavy-duty commercial vehicles and is a leader in electric hybrid-propulsion systems for city buses. Allison transmissions are used in a variety of applications including refuse, construction, fire, distribution, bus, motorhomes, defense and energy. Founded in 1915, the company is headquartered in Indianapolis, Indiana, USA and employs approximately 2,700 people worldwide. With a market presence in more than 80 countries, Allison has regional headquarters in the Netherlands, China and Brazil with manufacturing facilities in the U.S., Hungary and India. Allison also has approximately 1,400 independent distributor and dealer locations worldwide. For more information, visit allisontransmission.com.

Forward-Looking Statements

This press release contains forward-looking statements. All statements other than statements of historical fact contained in this press release are forward-looking statements, including all statements regarding future financial results. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plans,” “project,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “forecast,” “could,” “potential,” “continue” or the negative of these terms or other similar terms or phrases. Forward-looking statements are not guarantees of future performance and involve known and unknown risks. Factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made include, but are not limited to: our participation in markets that are competitive; the highly cyclical industries in which certain of our end users operate; uncertainty in the global regulatory and business environments in which we operate; our ability to prepare for, respond to and successfully achieve our objectives relating to technological and market developments, competitive threats and changing customer needs; the concentration of our net sales in our top five customers and the loss of any one of these; the failure of markets outside North America to increase adoption of fully-automatic transmissions; U.S. and foreign defense spending; general economic and industry conditions; increases in cost, disruption of supply or shortage of raw materials or components used in our products; the discovery of defects in our products, resulting in delays in new model launches, recall campaigns and/or increased warranty costs and reduction in future sales or damage to our brand and reputation; risks associated with our international operations, including increased trade protectionism; labor strikes, work stoppages or similar labor disputes, which could significantly disrupt our operations or those of our principal customers; risks related to our substantial indebtedness; our intention to pay dividends and repurchase shares of our common stock and other risks and uncertainties associated with our business

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described in our Annual Report on Form10-K, Quarterly Reports on Form10-Q and Current Reports on Form8-K. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that the expectations will be attained or that any deviation will not be material. All information is as of the date of this press release, and we undertake no obligation to update any forward-looking statement to conform the statement to actual results or changes in expectations.

Use ofNon-GAAP Financial Measures

This press release contains information about Allison’s financial results and forward-looking estimates of financial results which are not presented in accordance with accounting principles generally accepted in the United States (“GAAP”). Suchnon-GAAP financial measures are reconciled to their closest GAAP financial measures at the end of this press release.Non-GAAP financial measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures of other companies.

We use Adjusted EBITDA and Adjusted EBITDA as a percent of net sales to measure our operating profitability. We believe that Adjusted EBITDA and Adjusted EBITDA as a percent of net sales provide management, investors and creditors with useful measures of the operational results of our business and increase theperiod-to-period comparability of our operating profitability and comparability with other companies. Adjusted EBITDA as a percent of net sales is also used in the calculation of management’s incentive compensation program. The most directly comparable GAAP measure to Adjusted EBITDA is Net income. The most directly comparable GAAP measure to Adjusted EBITDA as a percent of net sales is Net Income as a percent of net sales. Adjusted EBITDA is calculated as the earnings before interest expense, income tax expense, amortization of intangible assets, depreciation of property, plant and equipment and other adjustments as defined by Allison Transmission, Inc.’s, the Company’s wholly-owned subsidiary, Senior Secured Credit Facility TermB-3 Loan due 2022. Adjusted EBITDA as a percent of net sales is calculated as Adjusted EBITDA divided by net sales.

We use Adjusted Free Cash Flow to evaluate the amount of cash generated by our business that, after the capital investment needed to maintain and grow our business and certain mandatory debt service requirements, can be used for the repayment of debt, stockholder distributions and strategic opportunities, including investing in our business. We believe that Adjusted Free Cash Flow enhances the understanding of the cash flows of our business for management, investors and creditors. Adjusted Free Cash Flow is also used in the calculation of management’s incentive compensation program. The most directly comparable GAAP measure to Adjusted Free Cash Flow is Net cash provided by operating activities. Adjusted Free Cash Flow is calculated as Net cash provided by operating activities after additions of long-lived assets.

Attachment

• Condensed Consolidated Statements of Operations

• Condensed Consolidated Balance Sheets

• Condensed Consolidated Statements of Cash Flows

• Reconciliation of GAAP toNon-GAAP Financial Measures

• Reconciliation of GAAP toNon-GAAP Financial Measures for Full Year Guidance

Contacts

Investor Relations

ir@allisontransmission.com

(317)242-3078

Media Relations

media@allisontransmission.com

(317)242-5000

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Allison Transmission Holdings, Inc.

Condensed Consolidated Statements of Operations

(Unaudited, dollars in millions, except per share data)

	Three months ended December 31,						Twelve months ended December 31,
	2018			2017			2018			2017
Net sales	$	647		$	588		$	2,713		$	2,262
Cost of sales		309			300			1,291			1,131
Gross profit		338			288			1,422			1,131
Selling, general and administrative		90			97			364			342
Engineering - research and development		37			31			131			105
Loss associated with impairment of long-lived assets		4			32			4			32
Operating income		207			128			923			652
Interest expense, net		(31	)		(25	)		(121	)		(103	)
Other (expense) income, net		(2	)		(19	)		3			(22	)
Income before income taxes		174			84			805			527
Income tax (expense) benefit		(27	)		131			(166	)		(23	)
Net income	$	147		$	215		$	639		$	504
Basic earnings per share attributable to common stockholders	$	1.15		$	1.52		$	4.81		$	3.38
Diluted earnings per share attributable to common stockholders	$	1.14		$	1.51		$	4.78		$	3.36

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Allison Transmission Holdings, Inc.

Condensed Consolidated Balance Sheets

(Unaudited, dollars in millions)

	December 31,		December 31,
	2018		2017
ASSETS
Current Assets
Cash and cash equivalents	$	231	$	199
Accounts receivable		279		221
Inventories		170		154
Income taxes receivable		16		33
Other current assets		29		25
Total Current Assets		725		632
Property, plant and equipment, net		466		448
Intangible assets, net		1,066		1,153
Goodwill		1,941		1,941
Othernon-current assets		39		31
TOTAL ASSETS	$	4,237	$	4,205
LIABILITIES
Current Liabilities
Accounts payable	$	169	$	159
Product warranty liability		26		22
Current portion of long-term debt		—		12
Deferred revenue		34		41
Other current liabilities		197		183
Total Current Liabilities		426		417
Product warranty liability		40		33
Deferred revenue		88		75
Long-term debt		2,523		2,534
Deferred income taxes		329		276
Othernon-current liabilities		172		181
TOTAL LIABILITIES		3,578		3,516
TOTAL STOCKHOLDERS’ EQUITY		659		689
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	$	4,237	$	4,205

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Allison Transmission Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited, dollars in millions)

	Three months ended December 31,						Twelve months ended December 31,
	2018			2017			2018			2017
Net cash provided by operating activities	$	232		$	166		$	837		$	658
Net cash used for investing activities (a)		(51	)		(51	)		(103	)		(94	)
Net cash used for financing activities		(171	)		(127	)		(700	)		(574	)
Effect of exchange rate changes on cash		—			1			(2	)		4
Net increase (decrease) in cash and cash equivalents		10			(11	)		32			(6	)
Cash and cash equivalents at beginning of period		221			210			199			205
Cash and cash equivalents at end of period	$	231		$	199		$	231		$	199
Supplemental disclosures:
Interest paid	$	47		$	53		$	115		$	124
Income taxes paid	$	21		$	31		$	101		$	96
(a) Additions of long-lived assets	$	(48	)	$	(51	)	$	(100	)	$	(91	)

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Allison Transmission Holdings, Inc.

Reconciliation of GAAP toNon-GAAP Financial Measures

(Unaudited, dollars in millions)

	Three months ended						Twelve months ended
	December 31,						December 31,
	2018			2017			2018			2017
Net income (GAAP)	$	147		$	215		$	639		$	504
plus:
Income tax expense (benefit)		27			(131	)		166			23
Interest expense, net		31			25			121			103
Amortization of intangible assets		21			23			87			90
Depreciation of property, plant and equipment		19			20			77			80
UAW Local 933 retirement incentive (a)		8			—			15			—
Stock-based compensation expense (b)		4			4			13			12
Loss associated with impairment of long-lived assets (c)		4			32			4			32
Unrealized (gain) loss on foreign exchange (d)		(3	)		(1	)		3			—
Technology-related investment expense (e)		3			13			3			16
UAW Local 933 contract signing bonus (f)		—			10			—			10
Dual power inverter module units extended coverage (g)		—			—			—			(2	)
Adjusted EBITDA(Non-GAAP)	$	261		$	210		$	1,128		$	868
Net sales (GAAP)	$	647		$	588		$	2,713		$	2,262
Net income as a percent of net sales (GAAP)		22.7	%		36.6	%		23.6	%		22.3	%
Adjusted EBITDA as a percent of net sales(Non-GAAP)		40.3	%		35.7	%		41.6	%		38.4	%
Net Cash Provided by Operating Activities (GAAP)	$	232		$	166		$	837		$	658
Deductions to Reconcile to Adjusted Free Cash Flow:
Additions of long-lived assets		(48	)		(51	)		(100	)		(91	)
Adjusted Free Cash Flow(Non-GAAP)	$	184		$	115		$	737		$	567

(a) Represents a charge (recorded in Cost of sales) related to a retirement incentive program for certain employees represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) pursuant to the UAW Local 933 collective bargaining agreement effective through November 2023.

(b) Represents employee stock compensation expense (recorded in Cost of sales, Selling, general and administrative, and Engineering – research and development).

(c) Represents charges associated with the impairment of long-lived assets related to the production of the TC10 transmission.

(d) Represents (gains) losses (recorded in Other (expense) income, net) on intercompany financing transactions related to investments in plant assets for our India facility.

(e) Represents a charge (recorded in Other (expense) income, net) for investments inco-development agreements to expand our position in transmission technologies.

(f) Represents a bonus (recorded in Cost of sales, Selling, general and administrative, and Engineering – research and development) to eligible employees recorded in the fourth quarter of 2017 as a result of UAW Local 933 represented employees ratifying asix-year collective bargaining agreement effective through November 2023.

(g) Represents an adjustment (recorded in Selling, general and administrative) associated with the Dual Power Inverter Module (“DPIM”) extended coverage program liability. The DPIM liability will continue to be reviewed for any changes in estimates as additional claims data and field information become available.

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Allison Transmission Holdings, Inc.

Reconciliation of GAAP toNon-GAAP Financial Measures for Full Year Guidance

(Unaudited, dollars in millions)

	Guidance
	Year Ending December 31, 2019
	Low			High
Net Income (GAAP)	$	535		$	585
plus:
Income tax expense		158			168
Interest expense, net		126			126
Depreciation and amortization		157			157
UAW Local 933 retirement incentive (a)		9			9
Stock-based compensation expense (b)		15			15
Adjusted EBITDA(Non-GAAP)	$	1,000		$	1,060
Net Cash Provided by Operating Activities (GAAP)	$	710		$	750
Deductions to Reconcile to Adjusted Free Cash Flow:
Additions of long-lived assets		(160	)		(150	)
Adjusted Free Cash Flow(Non-GAAP)	$	550		$	600

(a) Represents a charge (recorded in Cost of sales) related to a retirement incentive program for certain employees represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) pursuant to the UAW Local 933 collective bargaining agreement effective through November 2023.

(b) Represents employee stock compensation expense (recorded in Cost of sales, Selling, general and administrative, and Engineering – research and development).

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