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Allison Transmission Announces Increased Quarterly Dividend and Preliminary First Quarter 2013 Results and Affirms Full Year 2013 Guidance

Allison Transmission Holdings, Inc. (NYSE: ALSN), the world’s largest manufacturer of fully-automatic transmissions for medium- and heavy-duty commercial vehicles, medium- and heavy-tactical U.S. defense vehicles and hybrid-propulsion systems for transit buses, announced today that its Board of Directors approved an increase in its quarterly cash dividend from $0.06 to $0.12 per share on the Company’s … Continued

Allison Transmission Holdings, Inc. (NYSE: ALSN), the world’s largest manufacturer of fully-automatic transmissions for medium- and heavy-duty commercial vehicles, medium- and heavy-tactical U.S. defense vehicles and hybrid-propulsion systems for transit buses, announced today that its Board of Directors approved an increase in its quarterly cash dividend from $0.06 to $0.12 per share on the Company’s common stock and non-voting common stock and is providing preliminary estimates of certain of its financial and operations results for the three months ended March 31, 2013.

The Company’s Board of Directors declared quarterly dividends of $0.12 per share on the Company’s common stock and non-voting common stock, which is an increase from the quarterly cash dividend of $0.06 per share that began in the second quarter of 2012. Payment will be made on May 31, 2013, to stockholders of record at the close of business on May 17, 2013.

The payment of any future quarterly dividends will be at the discretion of the Board of Directors and will be dependent upon Allison Transmission’s financial position, results of operations, available cash, cash flow, capital requirements and other factors deemed relevant by the Board of Directors.

Based on currently available information, for the first quarter of 2013, we expect net sales to be in the range of $455 to $460 million and Adjusted EBITDA excluding technology-related license expenses, a non-GAAP financial measure, to be in the range of $144 to $149 million, implying an Adjusted EBITDA margin excluding technology-related license expenses, a non-GAAP financial measure, of approximately 32%. These expected results for the first quarter of 2013 are consistent with management’s expectations, and reflect considerably lower demand in the North America energy sector’s hydraulic fracturing market and the previously considered reductions in defense net sales.

In addition, we are affirming our full year 2013 guidance released to the market on February 19, 2013: net sales to decline in the range of 6 to 8 percent, Adjusted EBITDA margin excluding technology-related license expenses in the range of 32 to 34 percent, Adjusted Free Cash Flow, a non-GAAP financial measure, in the range of $325 to $375 million, capital expenditures in the range of $80 to $90 million and cash income taxes in the range of $15 to $20 million. Consistent with our previous guidance we expect low levels of demand in the North America energy sector’s hydraulic fracturing market, reductions in U.S. defense spending to longer term averages experienced during periods without active conflicts and lower demand in the North America Hybrid-Propulsion Systems for Transit Bus end market due to municipal spending constraints to lead to net sales reductions in these end markets. We also expect that the majority of the full year 2013 net sales reduction implied by the midpoint of our guidance will have occurred in the first quarter, followed by growth in the Global On-Highway end markets for the balance of the year. Our full year 2013 Adjusted EBITDA margin excluding technology-related license expenses guidance incorporates several initiatives to proactively align costs and programs across our business with Allison’s net sales guidance.

The results described above and the reconciliation below are estimated, preliminary and may change. Because we have not completed our normal quarterly closing and review procedures for the quarter ended March 31, 2013, subsequent events may occur that require adjustments to these results and there can be no assurance that the final results for the quarter ended March 31, 2013 will not differ materially from these estimates. These estimates should not be viewed as a substitute for full interim financial statements prepared in accordance with GAAP.

Adjusted EBITDA excluding technology-related license expenses, Adjusted EBITDA margin excluding technology-related license expenses and Adjusted Free Cash Flow are non-GAAP measures. Management uses Adjusted EBITDA excluding technology-related license expenses, Adjusted EBITDA margin excluding technology-related license expenses and Adjusted Free Cash Flow to evaluate and control Allison’s cash operating costs and to measure its operating profitability. We believe the presentation of Adjusted EBITDA excluding technology-related license expenses, Adjusted EBITDA margin excluding technology-related license expenses and Adjusted Free Cash Flow enhances our investors’ overall understanding of the financial performance and cash flow of our business. You should not consider Adjusted EBITDA excluding technology-related license expenses, Adjusted EBITDA margin excluding technology-related license expenses as an alternative to net income, determined in accordance with GAAP, as an indicator of operating performance. You should not consider Adjusted Free Cash Flow as an alternative to net cash provided by operating activities, determined in accordance with GAAP, as an indicator of our cash flow.

The following table reconciles the Company’s estimated net income to its estimate of Adjusted EBITDA excluding technology-related license expenses for the three months endedMarch 31, 2013based on the midpoint of the range set forth above.

 

For the three months

ended March 31,

(unaudited, in millions)20132012
Net income$       27.5$       58.0
plus:
Interest expense, net33.940.7
Income tax expense16.925.2
Amortization of intangible assets29.937.5
Depreciation of property, plant and equipment24.724.6
Fee to terminate services agreement with the Sponsors (a)16.0
Initial public offering expenses (b)5.7
Technology-related investment expense (c)2.5
Loss on repurchases of long-term debt (d)13.5
Unrealized loss (gain) on hedge contracts (e)1.9(0.7 )
Other, net (f)3.42.5
Adjusted EBITDA$     140.7$     223.0
Technology-related license expenses (g)6.0
Adjusted EBITDA excluding technology-related license expenses$     146.7$     223.0
Revenue$     457.4$     601.9
Adjusted EBITDA margin excluding technology-related license expenses32.1 %37.0 %
(a)Represents a one-time payment (recorded in other expense, net) to terminate the services agreement with affiliates of The Carlyle Group and Onex Partners.
(b)Represents fees and expenses (recorded in other expense, net) related to our initial public offering in March 2012.
(c)Represents an impairment charge (recorded in other expense, net) for an investment in co-development agreements to expand our position in transmission technologies.
(d)Represents a loss (recorded in other expense, net) realized on the redemptions and repayments of long-term debt for the three months ended March 31, 2012.
(e)Represents $1.9 million and ($0.7) million of unrealized losses/(gains) (recorded in other expense, net) on the mark-to-market of our foreign currency and commodities derivative contracts for the three months ended March 31, 2013 and 2012, respectively.
(f)Represents employee stock compensation expense and service fees (recorded in selling, general and administrative expenses) paid to the Sponsors.
(g)Represents $6.0 million (recorded in engineering – research and development) of payments for licenses to expand our position in transmission technologies.

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