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February 26, 2019 12:15 PM, EST

Allison Transmission Reports Record Revenue, Net Income for 2018

allison A Detroit Diesel engine dealer that features Allison transmissions. (Bruce Harmon/Trans Pixs)

Allison Transmission Holdings Inc. reported record annual revenue and net income for 2018 while tax-related and interest expense factors led to mixed fourth-quarter results.

For the quarter ended Dec. 31, net income slipped to $147 million, or $1.14 per diluted share, compared with $215 million, or $1.51, a year earlier.

The decrease principally was driven by the 2017 enactment of the U.S. Tax Cuts and Jobs Act, increased product initiatives spending and increased interest expense, according to the Indianapolis-based company.

Quarterly revenue rose 10% to $647 million compared with $588 million a year earlier.

Sales in the North American on-highway market totaled $303 million, up 6% from $287 million in the 2017 period. The gain principally was spurred by higher demand for Allison’s Rugged Duty Series and Highway Series models.

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North American demand for on-highway service parts, in addition to global support, lifted the service parts, support equipment and other segments to revenue of $149 million compared with $139 million a year earlier.

North American off-highway revenue dropped 39% to $17 million amid fluctuating demand for hydraulic fracturing applications.

At the same time, off-highway revenue outside of North America jumped to $47 million compared with $11 million a year earlier on improved demand in the energy, mining and construction sectors.

Spending on research and development in the quarter increased $6 million to $37 million.

Full-year net income climbed 27% to $639 million, or $4.78, compared with $504 million, or $3.36, a year earlier.

Revenue reached $2.71 billion compared with $2.26 billion a year earlier.

“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,” Allison CEO David Graziosi said in a release.

“Furthermore, Allison achieved record levels of net sales, net income, adjusted earnings before interest, taxes, depreciation and amortization, net cash provided by operating activities and adjusted free cash flow,” he said. “Full-year net sales growth of 20% was surpassed, by even stronger growth in net income, up 27%, diluted earnings per share, up 42% and adjusted EBITDA, up 30%.”

Annual sales of North American on-highway products were $1.3 billion. Allison expects 2019 revenue in the segment to rise 6% on market share gains in Classes 4-5 trucks as a result of the recent medium-duty commercial truck launches by Chevrolet and Navistar and higher Class 8 straight truck production.

Overall, Allison forecast a softer 2019, with net income in the range of $535 million to $585 million.

Revenue is expected to be $2.58 billion to $2.68 billion — which reflects lower demand in the North American off-highway and service parts segments offset by increased demand in the North American on-highway end market, price increases on certain products and continued execution of growth initiatives.

Allison Transmission manufactures fully automatic transmissions for medium- and heavy-duty commercial vehicles, and electric hybrid-propulsion systems for city buses.