Allison Transmission Holdings, Inc.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Allison Transmission's first quarter 2019 earnings conference call. My name is Shari, and I will be your conference call operator today. At this time, all participants are in a listen-only mode. After the prepared remarks, the management call host from Allison Transmission will conduct a question and answer session. In conference call, participants will be given instructions at that time. As a reminder, this conference call is being recorded. If anyone should need operator assistance during the call, please press star zero on your telephone keypad. I would now like to turn the conference call over to Mr. Ray Posada, the company's director of investor relations. Please go ahead, sir.

Thank you, Sherry. Good morning, and thank you for joining us for our first quarter 2019 earnings conference call. With me this morning are Dave Graziosi, our president and chief executive officer, and Fred Volley, our Vice President, Chief Financial Officer, and Treasurer. As a reminder, this conference call, webcast, and the presentation we are using this morning are available on the Investor Relations section of our website, allisontransmission.com. A replay of this call will be available through April 30th. As noted on page two of the presentation, many of our remarks today contain forward-looking statements based on current expectations. These forward-looking statements are subject to known and unknown risks including those set forth in our first quarter 2019 earnings press release and our annual report on Form 10-K for the year ended December 31st, 2018, and uncertainties and other factors as well as general economic conditions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those that we expressed today. In addition, as noted on page three of the presentation, Some of our remarks today contain non-GAAP financial measures as defined by the SEC. You can find reconciliations of the non-GAAP financial measures to the most comparable GAAP measures attached as an appendix to the presentation and to our first quarter 2019 earnings press release. Today's call is set to end at 9 a.m. Eastern Time. In order to maximize participation opportunities on the call, we'll take one question from each analyst. Please turn to slide four of the presentation for the call agenda. During today's call, Dave Graziosi will provide you with an overview of our first quarter results. Fred Boley will then review the first quarter financial performance and the 2019 guidance update. And finally, Dave will discuss the recently announced acquisitions and conclude the prepared remarks prior to commencing the Q&A. Now I'll turn the call over to Dave Graziosi.

Thank you, Ray. Good morning and thank you for joining us. We are pleased to report that first quarter 2019 net sales increased 2%. from the same period in 2018. Furthermore, year-over-year net sales growth was surpassed by even stronger growth in net income, up 11%, diluted EPS up 22%, and adjusted EBITDA up 5%. And notably, adjusted EBITDA as a percent of net sales reached a record 43%. During the quarter, Allison also maintained its well-defined approach to capital structure and allocation, by settling $50 million of share repurchases, paying a dividend of 15 cents per share, and refinancing our long-term debt, illustrating once again our commitment to prudent balance sheet management through a low-cost, flexible, and prepayable debt structure with long-dated maturities while simultaneously investing in our business and returning capital to our shareholders. Please turn to slide five of the presentation for the Q1 2019 performance summary. Net sales increased 2% to $675 million compared to the same period in 2018, principally driven by higher demand in the North America on-highway and outside North America off-highway end markets, partially offset by lower demand in the service parts, support equipment, and other and North America off-highway end markets. Gross margin for the quarter was 53.2%, an increase of 160 basis points, as compared to 51.6% for the same period in 2018, principally driven by a reduction in expenses related to the retirement incentive program for certain UAW Local 933 employees. increased net sales, price increases on certain products, and lower incentive compensation expense. Net income for the quarter was $167 million compared to $151 million for the same period in 2018. The increase was principally driven by increased gross profit and lower selling and general and administrative expenses, partially offset by increased interest expense and increased product initiative spending. Adjusted EBITDA for the quarter was $290 million or 43% of net sales compared to $275 million or 41.5% of net sales for the same period in 2018. The increase in adjusted EBITDA was principally driven by increased gross profit and lower selling general administrative expenses partially offset by increased product initiative spending. Now I'll turn the call over to Fred.