ALSN - Earnings call transcript Q4 2017 | Allison Transmission Holdings, Inc.

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Operator

Welcome to Allison Transmission's fourth quarter 2017 results conference call. My name is Melissa and I'll be your conference operator today. At this time, all participants are in a listen-only mode. After the prepared remarks, the management from Allison Transmission will conduct a question-and-answer session and conference call participants will be given instructions at that time.

As a reminder, this conference call is being recorded. now turn would to conference I Mr. Instructions] like the to over [Operator company's Finance President Bohley, Vice Fred the of and Treasurer. Please sir. go ahead,

Frederick Bohley

Melissa. morning President Financial Executive is Officer, thank and and Dewey, Allison our Chief results Good Dave and joining Larry call. you, Chief Chairman conference this on XXXX fourth Graziosi, you me Officer. With and Transmission's us quarter Thank for morning Allison Transmission's

webcast Relations As available and of this a call, presentation are A Investor conference this from February AllisonTransmission.com. call on using website, XX. the this will section available we're our morning of reminder, replay be

or well As risks, noted These materialize materially estimate on factors the page actual vary economic of those from conditions. Form our in including expectations. to results and uncertainties XX-K forward-looking results forward-looking express contain prove December of those the presentation, subject one other of and on set remarks release report for XX, forth today assumptions our annual today. as current XXXX may and two or general should our based XXXX, fourth-quarter statements unknown underlying more on year press and statements these are as incorrect, ended we many Should or known uncertainties

page of of non-GAAP some by In contain addition, as noted on remarks our defined SEC. three the today the presentation, financial as measures

each for will of opportunities In take an maximize the non-GAAP the to is of to results the GAAP to slide as call presentation release. we XXXX four the on call, attached measures AM call fourth analyst. Today's X:XX reconciliations end set turn financial Eastern participation time. find to agenda. can Please You and appendix press to at one quarter question comparable from measures the the order to presentation our most

turn I'll Larry over Dewey. to call the Now,

Lawrence Dewey

joining Fred. you, Good for and everyone, you, morning us. Thank thank

Graziosi with guidance will I and up net by financial of fourth-quarter then our of to review Q&A. Dave performance call, prepared a end and technology fourth-quarter review with I'll latest you XXXX will comments sales announcements and today's results, product including market. the the During provide prior our commencing wrap an overview the

what I I'd year end activities. levels results Before gross ranges net our Full of sales noteworthy touch record Allison. for exceeded net on quarter, by the across XXXX a operating all year sales, our like achieved was provided cash to markets. start initial on net margin and guidance We of

of in In outside-North addition, Allison year realized America, consecutive second our double-digit growth end market. its on-highway

XXXX report pleased exceeded on we're the to results we to guidance provided fourth-quarter Allison's quarter, Turning October the ranges that market to XX. the

maintained to We capital and of record allocation. performance approach solid well-defined also a financial and structure our track

market driven XX% in driven hybrid South in North demand down driven service bus and On-Highway and hydraulic demand global by up intra-year end from Other were North support America in period duty period sales driven movement a with the the in December, approximately driven net summary. contract XXXX, net demand costs. end Europe Gross X,XXX a ratification hourly finally, $X.XX principally America market Allison On-Highway, of employees by were applications. of announced market same in Outside Support same paid and and repurchases. settled mining were During XXX. same tracked an for were agreement a agreement from net market North the we quarter, share demand share margin market of in of for Outside & for for the down XX.X% from higher increased XXXX period margin net QX the choice America North by principally net basis equipment. America of the XX%, in points Off-Highway by performance same parts up in million and the of the as for for brand On-Highway of period driven transit the period demand in $X Asia, higher a Net higher performance a & gross our dedicated period slide net million same sales from presentation of increase on-highway models. same and the the the North and principally turn the XXXX, in Off-Highway; driven Equipment increases America. in demand by the end XXXX, connection on end up the XXXX, systems favorable to were principally sales North the in promise. to certain rugged shipments. America orders. million America end net enabler principally in XX% material North period XXXX, principally net achievement turn principally five market series same period Off-Highway sales electric UAW QX our Local the Parts, period end be defense for employer million the principally Equipment UAW of America And XX% the XXXX, Parts, an workforce presentation Defense and timing partially was sales foundational Service our $XX in of sales commitment end driven timing unfavorable were million products, from skilled fracturing is to off-highway labor higher by Please of sector. six-year sales cost same new from principally by The $XXX driven million were America in XXXX, from XXXX, offset XX% higher $X the by same slide dividend upholds Service six North covers price of sales the XXXX, XXXX higher by XXX from up sales Please Outside $X market the quarter Other; $XX by North from with up America sales Support from for markets. propulsion end summary.

turn Now, Dave. to over the I'll call

David Graziosi

Please you, QX presentation summary. seven turn slide Thank Larry. of performance the financial for to the XXXX

items statement adjusted same general $XX lower warranty in unfavorable initiatives compensation focus compensation line by Given period product activity offset research development million principally administrative other adjustments expense. comment, spending, period Engineering, offset driven the Selling, same on driven increased partially partially expenses and Larry's expense. from XXXX, increased and XXXX, incentive by the expenses million product principally in and I income EBITDA. will commercial lower increased by by $X increased from incentive and spending,

transmission impairment we million. charge of related the assets the of of recorded and result circumstances the reviewed events to a and fourth an certain $XX of production long-lived of XXXX, TCXX quarter As in the

XX.X% increased the law increase the incentive for pension same Act, expense, was of EBITDA The quarter impairment December $XX to for product Tax incentive million associated period derivatives spending period of quarter million same expense Prior changes tax from by increase activities assets. increase XXXX increased million taxes, cash a vendor demand weak $XX available-for-sale in fourth the from XXXX recognition from and Please increase by XXXX, suspended this related the million Net principally and and Adjusted foreign spending. the unfavorable Torotrak's expense, to benefit increased expense and trading, net was XXXX funding, shares Torotrak lower from $XXX settlements fourth operating of the deferred was compensation were Interest the Act investment the in of rate for partially by mark-to-market accumulated of warranty XXXX. product by on commercial trading in the and plc in XXXX. certain adjustments activity compensation our of London recognized increased $X the tax million flow and interest the agreement principally for partially fourth product of increased for with due increased The driven by period interest incentive driven warranty Exchange principally of and assets same Cuts was the presentation exclusivity EBITDA to technology-related Stock increased December that million interest XXXX, in driven investment by non-cash spending, XXXX to in net of cash product enacted the product to spending, increased Jobs in performance lower and $XX compared increased comprehensive of for $XXX eight the million quarter net of summary. Continued slide fair the offset cash activities their spending production period a one-time product initiatives increased expense product of those income technology-related ordinary in same the increase driven or of related liabilities, by the in offset the lower income to period for unfavorable suspension investment and XXXX. in partially on expense, sales and same in income tax warranty commercial partially both principally benefit profit consisting driven as a to profit accumulated increased Income change technology-related our in a $X $X XXXX. unfavorable long-lived gross securities was expense adjustments charge income US Jobs than activities were loss technology liabilities from the Net related of transmission, compensation an is conditions million driven of turn license value adjusted TCXX compared compared XXXX. gross result was a $XXX expense, activity. period increased same profits assets by increased in or commercial increased adjustments, principally net offset other profit QX by earnings by initiatives long-lived of in million $XXX tax a well for by million the provided $XX and decreased increased million. expense million shares the contributed as expense. Other unfavorable flows increased into of sales The tax future initiatives the of Cuts and offset $XXX to decrease cash as less adjustments, enactment US for loss. spending. from carrying the value XXXX, to refinancing for being cash expense Tax The for gross XX.X%

US quarter million in capital provided including cash expenditures. net realize Jobs and fourth XXXX, the decreased $XX by enactment income of principally from the facilitated by cash transactions to activities cash decreased expenditures same higher period flow Act. During driven reductions the the by executed and tax activities free cash Allison acceleration of of XXXX, Cuts permanently Adjusted Tax certain and operating

December dividend outstanding a Also, of repurchase quarter, the As brings billion to the settling the per million approach the our of the Allison's to total the Larry XX, outstanding approximately Allison XXXX. The the capital repurchases quarter, repurchases. repurchase amount share The authorization year-to-date well-defined repurchases during December our stock structure and million $X.XX approved share board program of a for mentioned, directors $XXX paying common of as of to during company's its under our new share of through bring XXXX. current additional executing to shares XX, authorization under $X.X program allocation and million XX% up $XXX quarter an of new fourth stock. fourth continued authorized $XXX or during fourth by

facility of cash, Finally, $XXX million commitments credit million with share X.XX, of of available quarter the ended net revolving $XXX and $XXX repurchase leverage capacity. authorized million of we

turn to over Now, I'll call Larry. the back

Lawrence Dewey

innovation financial to perspective. with Thanks, on create Allison of to value solid articulated of the consistently end to markets net our than serves nine we presentation focused ourselves turn delivering for commercial our more Allison at the results drive in geographies. to leadership while emerging undertaken and any a continue to on in strategic markets priorities Allison growth wide performance economy, a guidance, markets plans market initiatives already and XXXX markets various the so. We've time growth, execute slide improved as recent commentary. history. We've remains addressable challenges do stockholders. end focused given position, opportunities find variety Please Dave. several and Today, that its propositions our reduced continuing expansion, for and priorities And core product financial greenhouse of strong other value strategic of our from to global development address fuel penetration, gases sales

across and advantage Our our research XXXX increase and markets. to in spending take end multiple development opportunities engineering will of products

and to attention production preponderance fully targeted electric conventional electrification electric targeted transmission, lately, for initiatives While as R&D has of received for and products product both recently well nine-speed hybrid decades. for the a The on in is as such our attributed it announced been has of spending as development technology propulsion increase part release in two more spending strategy XXXX. solutions

sales XXXX, For XXXX, up X% on-highway North net the in expects reflecting end X% of American be strength Allison continued the market. to range to in compared to

America Our in end sales also and assumes demand the XXXX North increased certain and increases markets and by offset on-highway, outlook price other off-highway outside support parts, partially defense equipment net in North the America service decreased end on market. demand products,

the midpoint net year higher electric are end Although a systems increase spray principally principally highlight the to America a hybrid of X/X the America Outside by providing by XXXX North midpoint does midpoint X%, Allison production. net production by Allison Outside North and sales increased full sector. and expect demand energy demand X%, the America in on-highway, for sales principally property the of fully With summary. orders. sales North increase driven bus, in the defense demand by vehicle North net classic not increase for end driven we of parts, certain expect midpoint Please driven net in America XX%, sales shipments. X principally XX%, sales parts. increase principally first-quarter North following I'd midpoint net expects XXXX, Service by principally of increased service turn off-highway increased increase equipment of off-highway, X%, decrease sales ten driven for timing we first a be same and penetration. driven automatic North increased North and up the mining guidance, X%, sales propulsion by America tracked off-highway, a markets of for expect driven demand of a America specific demand decrease slide net expects of North Allison class expects XXXX. like to sales commercial the XXXX timing transit a quarter America on-highway, principally Allison we net driven net of that, midpoint other, a increased by guidance America expect sector. on-highway midpoint of presentation the support period from markets. driven truck we assumptions principally and to transit by decreased X%, off-highway expect the we Defense, the in

be of to Adjusted be expected to our XXXX development $XXX compared X% of million an Allison's of net range range of margin million XX% million. free range to In which guidance Cash in of million. the engineering taxes and expect is EBITDA to increase range expected of end cash range flow addition to $XXX million includes the $XX expenditures million. up XX.X%, to income Capital spending XX.X% the X% sales adjusted markets. expected across $XX to in XXXX, $XX products are we the an in to and research are to in be to in $XX approximately

guidance cash taxes by approximately to a due the cash and Tax of primarily expenditures income reductions prepayment to Act. the of million $XX Jobs realize the income cash tax of reflects certain XXXX acceleration enactment XXXX Cuts facilitated Our permanently fourth quarter US

currently Allison's system, Before I'd its Since undergoing heavy-duty demonstration program. and events our several fully to production with we savings. other set benchmark product nine-speed that the saving latest development proprietary fourth our In the These will FuelSense economy with referred coupled and release we Allison's ratio, XXXX reduced provides and significant fuel technologies, software, for converter for economy. and fuel electronics I'm the designating latest a start/stop Last packages and few demonstration announcement, of automatic pleased torque hosted combined coverage, redesigned Allison gear our targeted spend transmission the fuel trucks, Max. announced industry-leading OEMs a the When automatic integral for engine XXXX our and pace and transmissions controls a we xFE, open XXXX. publicly X.X to FuelSense, fully results for some incorporate fall, deep fuel and in vehicles, an the of like extra Allison first efficiency to ratio as nine-speed buses in damper, and with announced series medium-duty nine-speed With medium of availability emissions. has technology quarter, technology review Q&A and minutes transmissions transmission and and fuel vehicles new session, first the announcements. Allison's testing

FuelSense and April on right heavy is This taken we for will to the vehicle miles. XX XXXX Ideally XXX OEM, quarter, equipped already beyond of customers Systems giving electric specific blend DynActive and beginning EMOSS week, featuring rated Prevost/Nova flexibility to Shifting gross and developed their range begin X.X and EV/ER with FuelSense in FuelSense with economy tons exceeding fuel with level, their up original to X.X software. value with March provided a vehicle GILLIG an equipped of for metric European automatic up fuel economy will Bus X% gains Transmission EMOSS in has new to the cycles, weight they testing announced more Allison FuelSense has duty later semitruck for the that suited transit demonstrated year. electric performance this X.X transmission, has applications. stop/start The customers Last offer builders fully integration of respectively. semitruck, buses Allison an combination Mobile announced that a offer

refuse semitruck, refuse dump These collection trucks, currently for use Mobile duty and Transmission EV/ER applications. include the spray and Allison developing is vehicles trucks configurations. electric to Systems construction, in addition In applications semitruck delivery EMOSS additional equipped medium trucks,

partners OEM vehicle the of innovation to commercial further to has the to optimization evolution industry. the propulsion multiple of with engage commercial and us vehicle commitment Our led accelerate

developments Allison's relate continue call to market electric prepared update and hybrid the to for open on fully propulsion as the solutions. product conventional technology our Melissa, and Over they coming electric concludes This we latest the remarks. please will quarters, questions.

Operator

first you. Leiker David of from Instructions] question question. with line Robert the Thank with your W. Our comes [Operator Please proceed Baird.

Joe Vruwink

Good Hi. This morning. David. Joe is for Vruwink

Lawrence Dewey

Joe. Hi,

Joe Vruwink

by, in can detail to dig America forecast. with X% growth for to and contribute market the a expectation your share expect maybe bit talk to for you growing on-highway about Is what price apart gains, I that a markets the particularly end North might wanted the be provide. to any what impossible guidance Just bit year, next hitting FuelSense spring? X.X in would maybe it the any you break

Lawrence Dewey

Sure.

in that growth across product applications uneven various correct North you're a is the market. than, America end noting the is class higher First, the showing class the little X/X. say, the in for X Certainly,

a driver for that's us. So,

we increase our have part We like have in forecasting, fruition to with see significant budgeting. seeing as the of plans roll of to some we come to the Obviously, areas that But drive some before not consistent share our would some and assumed activities. in. plans those traction start we

So, trying we class That's the that certainly you that. other the would and ACT is spray truck, would segments royalties of would their between see. section. include to than the certainly that we class to higher but arms FuelSense, see X don't tractor around get be X some the and total and actually the split Relative in

help. maybe you Dave, So, can

David Graziosi

the are that based market. Yes. continuing a is of to Joe, The OEMs. will – That to cadence various on be with FuelSense releases we introduce

XXXX this consider a at not view. we So, do reoccurring be would consider to I point – not

for early total that XXXX, XX-plus pricing I think range points in of, say would overall. Allison We process. in I call introduced still it, the expectations basis it's that.

we higher the As understanding certainly that results, results to see, years, you in as with of you XXXX, prior we clearly, think from have that outperformed. had QX about comparing terms that

rate. Larry's initiatives really a in as to well as OEMs those going add end launch share in said of going baseline value already the our there's executing on of we know, is as fair is pricing we're users that, be run you like Having plan So, to point, to FuelSense, year. this that number relative things that, as we that driving bit higher and frankly, later a our this to year forward believe

Joe Vruwink

those maybe America With generating North value above customers Allison QX, on had a question you've off-highway, year similar and escalating quite assuming just is on. are in competitors as next about through wears activity seeing current you then, XXXX that guidance. flat markets? million bit from What $XX And taking talk and

Lawrence Dewey

a Well, we've what is shift. baked got in

in service activity in starting of of kits. down. see in the apples most our upgrade the One piece the driver row within lot we've come biggest to of half, upgrade that net-net and units over half, there That's will a things the fairly we down. was was we're in shifting Certainly, new coming the support of a parts to unit got that expect we the the other was And first And see equipment numbers in strong. the then, parts, laid side. that first

of as Second the and we pricing. some half particularly that's moves feel isn't in crude light prudent, recent quite of of the clear some certainly on

Joe Vruwink

leave I'll Okay. it there. Thank you.

Operator

you. Thank

Our Please the next proceed from Tim with line question. your Thein with Citigroup. question comes of

Timothy Thein

to million that of you. guidance XQ Thank you’ve cash Larry's in morning. was Good there just the components help what was Dave. flow unclear expected cash I me you that in $XX interest, free it terms cash based on growth some were done in in were with of other is for and pieces that a just spend terms EBITDA to big taxes comments the XXXX? there provided Question and to and ‘XX cash or Dave tax, for square little for consider us can guess in Maybe related

David Graziosi

a good Tim, morning. It's things. of couple

side, we On the that. understanding the leading to up enactment US planning tax legislation, of the been late have

tax rate. we be right? So, the – reduction here in in team positioned a with able ourselves have permanent way the to had to You the realize the benefit, such

breaking one a as of assume being prepare in late legislation. quarterly have know, don't to ability as them Given things, estimates, news you the that, you you the on change certain

effectively the legislation weeks pay quarter, our So, was have XXXX, taxes XXXX, that, frankly, with the that to initiatives effectively executed mentioned several for into prepaying filed estimates, also secured in we I said the the and quarterly expenditures we in reduction in of use process, you and normal we a later the tax the that on as benefit taxes, Larry permanent Having but so enacted, our cash rate. the accelerate, basis.

So, XXXX that as tax against utilized prepayment our will XXXX, cash into we be move obligations.

and we prepayment year, can the if said, So, as in the base start last you rate as use from tax you that the XXXX cash legislation combine for for forecast place. new run a with

cash Heavy for So, think last the tax – of know. modeling it way rate or the broke, against rate year. receivables, cetera. we sales, we context talked rate XX% balance certainly minus would fortunate with about XX% in you I we think a reduced. would about of cash flow anything market that for et terms cash the That's million of as had in we've now plus conditions the XX% of metric quarter level. were in accordingly simple tax effective of about purposes. is and usage over is The payables The of favorable would our year, type $XXX you cash the apply that The number EBITDA,

expect, going investments meet operating as working year terms to sales the continue Larry to market in to be make flow into move on – provided this We year make certain capital guidance this that – of demand. to we able we're

XXXX working conditions out. usage laid to some So, level we capital in meet currently as do have they're demand assumed market of and

demand. relative positioning produce Beyond that, and broader meet to pretty our market and capability tell overall, to I about would good feel you we

to to call So, least we do better year, [ph], we're, on that's it, visibility at going that. starting work obviously, of, XXX have. our the that point this the But given midpoint

Timothy Thein

Okay.

impacts ones consider, just So, investment, Dave, capital clear, so no a outside cash obvious fair that's assessment? the some I'm to other of beyond working

David Graziosi

point a for to that's the say I would payments tax of of my feel execution initiatives. some will those certain the our positioning versus about And benefit accelerating midpoint for level XXXX have good think related But, about again, we the overall, XXXX in year. again, I assessment. fair that

Timothy Thein

All right. you. Thank

Frederick Bohley

side understand limitations interest we forward. on that's is tax with this One Ken, to don't thing other any the Fred. expect important deductibility is associated going

Operator

Thank you.

Ian & next Co. proceed the Oppenheimer Our Zaffino of from question question. comes your line with Please with

Ian Zaffino

again little because Thank services is services. that the of guess, that drastically driver the OE what's [ph] softness a there. business. you on the much. I great. Hi, And of Is you're leads the very projecting Question just just services, the that? strength –

picking a up services is the there up actually Now, different parts is and business on or or trailing driver is going original business the off there? is picking

Lawrence Dewey

forward to introduced new activity the move largely. the that the as configuration done pieces standpoint are we that were They've last we've Yeah, years, shed a from configuration little There the from And – more that got the off-highway that that higher variants. several to couple, here the horsepower there's that that in converting. that a we probably to units older close can over of more little of the included coming worked light kits upgrade is used on, granularity. are past up is units fielded people are

is come hold way – there's And parts. fairly fairly their flat that that'll And that they're Then support in the as deploying that. equipment sales, unit increase then, significantly. those. support guess, along rigs down I that's for would the So, the using then And – actual the with equipment piece off-highway. and of follow noteworthy, other service with the the because would that

So, the kits. flat, real there. the but the The is in and upgrade off-highway little bit And you that's that's we're that net-net under not little we're up fairly is significant. have that's down space bit a one little driver one A on-highway, – that's a considerably. one describing

Ian Zaffino

kind there? And midpoint. you you're the forward? maybe going for see great. very drivers Are were What talking about it's margin thinking what still of how that. just but guidance are Just about high, offsets then, next it's at the Okay, year, price wanted or to increases roughly the year-over-year flat

Lawrence Dewey

our here spending. substantially I'll on ours. We minute. pile R&D We Dave capitalize a expense quite not we've it. let increased do to in But

So, that's piece of it. a

David Graziosi

balance, think we as I globally. we're continuing the talked growth a of about, number initiatives to push

demand funding work the doing we're that the is out So, efficiency in now. in The that's high on for assumptions this operation team included great right year. our running given

job components relatively think reality we're nature a seeing point. is same the the to at think now. there, And of in just a At this I demand that number is the of level cost good there now. busy market I of of companies manage. right what you're trying time, So, some because right increased doing across a That's of just

a there's touches time, to a and We on imperatives. this to a same number of the drive that we're invest continue general manage But of from going and have to and at business strategic those perspective. to that inflation team working has sourcing things initiatives our and try been offset different the lot

for starting think So, for year. good point I overall, the it's a us,

Given the positioning as have, in about we we for point visibility will always we do this the market we year. good But at that conditions. feel adjust

Ian Zaffino

you Thank much. very Right.

Operator

you. Thank

comes Our Cook the next Suisse. Credit with question. Please your line of proceed with Jamie question from

Jamie Cook

morning. Good Hi.

a Just spend. little color more on the R&D

about question, the Is from is, guess, think I seen? of And a of it market. my then, given we've about continue be going the peak, of David, to takes And going said better that you the type XXXX. to then, debate increase year-over-year. just on sort or – first lot sort my forward it's term? truck, we think I you then, the think away Can about And the second there's question. the XX% over And up in is that's is that increase, hybrid think longer right spend will how versus that products? talk XXXX just way XXXX when traditional to strength as about much EV spend

in the on North your truck sort Thank where within Just America and cycle specifically? you. of we view are

David Graziosi

our essentially, consistent external Larry laid market, the at if relatively we out, expectations for forecasts. look are As addressable XXXX, with you

the we where So, them, it's about increase to number our at the be, to our of being by relatively the said, stable to in least couple external expected for cycle, point are a addressable things forecasters, market, years. globally. your we're over That of position doing next

spend, With across different R&D solutions. the we're is propulsion of investing a number fact the increase in

modern opportunities all around Larry electric as electric, proposition whether history So, We full of a see in number in our right initiatives, probably for internal or hybrid mentioned, so more now. us it's combustion, there. than it's

next-generation existing across and products, products, investing are So, improvements we enhancements.

the value for users to our to of And products end they know, with price the value propositions you lends of they product. fundamental we themselves increased that accordingly. as evolve As architecture ways our that continue our will many use

in So, something is connectivity, initiatives if that's the as and you that of where well. terms think the team again, other driving about go autonomous

being said spend Our elevated that where continue of market plan to I the would focus plan. the that's near-term our level going we all driving see again certainly initiatives R&D ultimately and consistent of that will theme been value appropriate for end-users that. an we to many our over in Larry are. But is be and there be, of opportunities those of our evolution expect is on the meet the investment to spending and as purposes. times, will demands this But the value continued collect feel able And based really be for you is to market whatever and to increased for

Jamie Cook

so changes, above technology I in and has or we stuck seeing spend you're or up sort higher, beyond XX% don't spend XXXX? clear, implied the given think levels market be million I'm to than in just to XXXX, going are $XXX at think of think, do we the you – the spend. XXXX go to But higher of this where are is trying I know, structurally what

David Graziosi

spending is The at if evolve, to about the think of existing continue everything what same. right? not proposition again terms remains products to are, the have on, You opportunities you we in those what look you're here

think, And there platforms, with with to I aligning bucketing specific activities, But opportunities. we those say, those We like, number would think is ascribing I investing. don't is fair to think investing are and it's we consistent of I different now where of across strategic start terms opportunity. and spending different very a right is of the the say, I about market. that demand So, look should our we market think, communicating what that to would are think across number needs be say, what us, a solutions. which for again, – it, it's I in

spending would in So, to we of execute all I market in will our continue on the say, investing we demand again, we're just basis. end see supportive focus across this, And we are as that we get appropriate into not to doing markets. that areas, driven. end of on-highway are again, market, as and And

think, about it's So, that in that includes we've we're there business. not much I past. are off-highway our defense of as number is, reality talked as something, markets. well as the opportunities But end the And a the funding across

Jamie Cook

thanks. Okay, I'll get back in queue.

Operator

you. Thank

Our Merrill with Gilardi Lynch. Please next your of question America comes of from Ross proceed the line question. Bank with

Ross Gilardi

you big TCXX happened for and what the part fourth for trigger do in And it The mean, What's technology-related will add-back that product? I to now expenses impairment has Allison been to add then, a that guys. you recurring? million back? Thanks, $XX that several Why obviously, for? the specifically do impairment, in a story of adjusted have XXXX. years. also be What morning. it And TCXX EBITDA quarter good investment and Hey, with

David Graziosi

the that Dave. holding a investment trading of that from from represents plc in The December in expense, technology we last Ross, loss London that shares were Torotrak were from non-cash it's year. delisted Stock Exchange

loss to recorded non-cash the comprehensive through value the other fair statement, shares of recognition So, of income were accumulated in the those in that prior income. changes

would have continuous forecasting challenging. I Relative a component the it equity be be process That think will, looking to P&L. is at always fact TCXX, our as TCXX demand. if the the the of do, we item. very have for a And conditions from you and reoccurring reclass the a of we – about a not equity, into really developed continue is, to business demand So, as

resulted ultimately future flow was cash that those assets the less value. recurring what So, for being than

take process. use our fourth the value It the was assets. we there's adjustments a look there it's for all the specifically. But requirements about unique in at the So, not the year I unique that recorded se what anything demand process is of TCXX accounting a don't back every and fair as long-lived know, for forecast that's what think to to per quarter. gets require you really

Lawrence Dewey

the Is no and slower has There's were down in in chassis. been we've Those re-released ramp for the gets one those question. a we Navistar The in development We There's no certainly AXX now got question the of went with have this LT-RH sight with chassis And chassis Larry. And OEM there of what release activity. tractor on the took their is longer couple get and there Yeah. chassis to to Navistar – a work really away. liked. released of more painful getting released line than way would it XXX and engines.

their has MX But, with would And XXX. certainly, here the of the will next obviously, know, and the difficult more the then, engines ramp than announcements have with been some focus platforms. recently be the course, then, liked. we what in there As broaden across we you And were that, portfolio, on. PACCAR ones within release

last discrete repurchased of quantities. discrete had we roughly XX of in August customers third XXX of or a XXX fleets. As year, increasing customers, have those

those there's purchases purchase, In purchases. last their increase I fact, large are now update a which very the And a initial Obviously, the week, we arithmetic it since tend at which customers, to this, company discrete is in made progression tied after repurchases But And six beverage XX% There is with the we've first additional have that be thus low that, the August. as looking of had has releases. that received, dive. to is volume. tied really far, is have the higher. doing deep to ramp mathematically we verified an XXX

Ross Gilardi

Thank you.

Operator

Thank you.

Capital with question Weber your next from comes Our Markets. Seth Please proceed RBC the with question. line of

Seth Weber

of ask to bit driving more the about us And a product how outside in America? the on-highway that think color growth? America. wanted Can we you outside the I should are North North growth which markets longer-term, implications just on little about morning. Thanks. margin good X% extending give Hey, anticipated

Lawrence Dewey

put and and as than it's to more that initiatives make in place on, been. the rigorous even here we Well, focused Dave the continue to growth more drive, touched process we that

targeting you've of take I here is results a there, maybe look under double softness a that that. of China, – some or little of with EMEA a that to at Middle it, Where going digits. that we're is significant recently. just – we the showing got we're seen Europe, you've Japan. think the we're work Africa When East, be conservatism doing to part

lot awful Australia do market do to coming a our they addition there, show that In domestic an bit. exporting and off the of product to with little we

got parade. Europe it. bit. you've a probably And Japan behind So, leading lagging probably China the

Seth Weber

this part And the implications be is far anything story? about grows as be thinking of there bigger business should to as as Thanks. margin we a

Lawrence Dewey

comment our plans can things the forecast, business, improvements as made going Well, and one we're EBITDA your the strength earlier of to I you – fair and China, in take it operating go we we that as in for think would be that to say, then refine and to financial drive was our you continue see there we on that, one And go we certainly deploying the deploy financial market to as the to, order will there build be in and of going future. that of business those it for will that China. one to number we initiatives be talk that another we penetration about the business is strength initiatives build a that R&D And is into forward. are

Seth Weber

guys. very much, guys. Thanks, Thanks

Operator

Instructions]. [Operator you. Thank

Morgan. with Our of J.P. proceed question. with Please Duignan line next your comes the from question Ann

Ann Duignan

the introduced, in. industry was was when the back Hi. the Larry, product for me it. in Releases squeezing expensive TCXX? Good there? Uptake market was morning. you slower-than-expected. you go that to went too the segment. metro And talk What where and can it I word expected. heavy slower just are thank appreciate that we Just wrong about today? than is you you think Can too for stand do

Lawrence Dewey

all And think down this route want to the until have somewhat. literally, a had on of this Navistar releases Certainly, price. be as people We and decimal before investment in depending get will above penny, We you – on when four make Certainly, exact an the plans you're and benefits a segment, out vary you places to the it routes awfully they sure they people are, carrying on to in board. really. not baseline the had what with a benefits Navistar. terms situation, a I in Well, know, have did on not PACCAR clarity the didn't application adequate of the was you in we the launch of experience launch the gap the OEMs. product plans

frankly, – been to the is, that's of part net we've bought have sophisticated that's and down their was then incented I gratifying benefits. The come mentioned to a And that and, the price. organization we able seen continue. times. be improve because since continues them people expect so, then fairly this that as come off Initially, we to they have And probably would challenge. part several fleet and repurchased, the

would I those to. I'd be So, – that the would things point

work We continue at to it.

Ann Duignan

of more vertical What you've forward difficult about market? now with drivetrains to you've integration that got got and penetrate going Cummins-Eaton make the that fact metro the even does it AMTs,

Lawrence Dewey

it's challenge. was Recall that certainly, before. to Cummins/Eaton cooperating continue going Well, to

obviously, more obviously, guess. more one combined they're challenging, in sometimes it been that combination. effective continues organization. and sometimes But the like with be I've to there, organizational there. becomes and organizations was Now, I families, That

And so, deal I an we're doing, have about say be better with. with that's to I to that feel issue the we activity some would going PACCAR. integration particularly of

in – we've that before anyway. done never engineers resident with things some doing career are our We in career my

do we're able able a to to get a by lot move to little around, for in integration AMT, – In opportunities a integrate. some of we're chassis need to we do easily. the engine there's you a good is job so, better about product news our number And easier us around is that The to once there. applications adjustment different squared and of there's pretty

Ann Duignan

time you've just where been you in foresee that product? any Do discontinue to point forced

Lawrence Dewey

what's looking situations the forward. move to say at best always going We're

but, now, market. drive it never, say to never You right we're continuing into the

Ann Duignan

back it. offline. Thank I'll Appreciate or the get line it Okay. take on you.

Operator

Buckingham our with of this Neil Please comes question. with Group. morning Frohnapple and from Ladies for your the question gentlemen, proceed final line Research

Neil Frohnapple

experience XXXX, different squeezing faster with And OEMs, would for Thanks to guys. anticipate that the look the occur help transmission you've at could me ramp for anything the this morning, Good way? launching is when releases launch. The signposts can in for nine-speed TCXX learned so along you in. you're the we product Hi. from there

Lawrence Dewey

the the close end the reverse here I at doing different close into XXXX amount learned. questions dug I'm XXX currently to of – so is answer had better a markets lessons the and with into lessons on into that speed time deep you work would it's probably say better relative Yeah, will and we little a go fair take that can so because learned. dive. I of order I've I We XXXX to in guess based to the will, spent team nine the position there I we situation that I the many here. there's a as and I ourselves now, some know, different getting of it guess, of serve if I'll think did, team, a up-offering, knowledge those.

don't to timing. one And our to upon the had So, preliminary We release the about be the with be is the want first thing going that's clear that part that of biggest as it, certainly discussions, OEMs. lackadaisical of talk that's discussions to we've a Probably difference. that. understanding lining as about with having gets XXXX, the up and we and plans well said back question, timing when based both was, the

who've So, deep folks we targeted. commitments, We've And nine the had things The had we week the clarity got et the this we where midyear. be another some in it key cetera. on got one are a agreements, speed – stand. fact, have pricing just will of review, as – guys OEM dive of releases, to clarity to

be would was a and fidelity the fair be of level as all it of on say, part will that So, us strong it a that'll TCXX. give not that, to

Neil Frohnapple

Larry. That's Okay. helpful,

expect you releases you before came TCXX, guys Because later. I and occur launches with think would the so, launched XXXX? And then product to the

there? different So, just sort of any expectations

Lawrence Dewey

we lineup – with would the OEMs' starter our that sales. of to say much would production have start prefer I

Neil Frohnapple

very Thanks much. great. Okay,

Operator

you. to turn back comments. I'll Dewey, the you floor any Thank Mr. for final

Lawrence Dewey

them know good year appreciate setting we've think, run I'll attendance I XXXX. strong Yeah. XXXX. We're Obviously, another for, brief. over. everyone's And here. I up make for

year to good that we're and within that importantly, More working results drive. the within

from you've role will kind maintain And not Allison. business ourselves that performance come but this Our our initiatives number to and to but position the the industry, for not expect in in of to XXXX, just actions of activities beyond and just drive expand it.

that's very really on here. focused And we're what aggressively so,

everyone's appreciate again, time this So, morning.

quarter first will April. look here late to call the forward We in

an the on to make guys got my sure at we've date. Looking idea

everyone. Thanks, Okay.

Operator

Thank you. teleconference. This concludes today's

your your time. Thank you participation. disconnect may at this You lines for

Allison Transmission (ALSN) 15 Feb 182017 Q4 Earnings call transcript