Allison Transmission Holdings, Inc.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Allison Transmissions' second quarter 2019 earnings conference call. My name is Shari. 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 team from Allison Transmissions will conduct a question and answer session, and the conference call participants will be given instructions at that time. As a reminder, this conference call is being recorded. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I would now like to turn the 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 second quarter 2019 earnings conference call. With me this morning are Dave Graziosi, our President and Chief Executive Officer, and Fred Bowley, our Senior 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 August 8th. 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 second 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 FCC. 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 second quarter 2019 earnings press release. Today's call is set to end at 8.45 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 Gazziosi will provide you with an overview of our second quarter results. Fred Boley will then review the second quarter financial performance and the 2019 guidance update. Finally, Dave will conclude the prepared remarks prior to commencing the Q&A. Now I'll turn the call over to Dave Gazziosi.

Thank you, Ray. Good morning, and thank you for joining us. We are pleased to report that second quarter 2019 results exceeded our expectations and the guidance ranges provided to the market on April 23rd. Year-over-year net sales increased 4% to a quarterly record of $737 million. Second quarter net income was $181 million. Adjusted EBITDA was another quarterly record of $308 million, and diluted EPS increased 13% to $1.46 per share. We are pleased to report that Allison continues to execute its well-defined approach to capital structure and allocation, settling $235 million of share repurchases and paying a dividend of 15 cents per share during the second quarter. Additionally, in May, the Board of Directors approved a $1 billion increase in the existing stock repurchase authorization resulting in $1.16 billion of remaining authorized share repurchase capacity as of the end of the quarter. Finally, given second quarter 2019 results and current end market conditions, we are raising our full year 2019 guidance for net sales, net income, adjusted EBITDA, net cash provided by operating activities, and adjusted free cash flow. Fred will discuss the guidance update in more detail momentarily. Please turn to slide five of the presentation for the Q2 2019 performance summary. Net sales increased 4% to $737 million compared to the same period in 2018, principally driven by higher demand in the North America on-highway end market, led by the continued execution of our growth initiatives and market share gains in Class 4-5 truck. The increase in net sales is also attributed to higher demand in the outside North America off-highway end market, partially offset by lower demand in the North America off-highway and service parts, support equipment, and other end markets. Gross margin for the quarter was 52.8%, an increase of 20 basis points as compared to 52.6% for the same period in 2018, principally driven by increased net sales and price increases on certain products. Net income for the quarter was $181 million compared to $174 million for the same period in 2018. The increase was principally driven by increased gross profit, partially offset by increased product initiative spending and increased interest expense. Adjusted EBITDA for the quarter was $308 million or 41.8% of net sales compared to $297 million also 41.8% of net sales for the same period in 2018. The increase in adjusted EBITDA was principally driven by increased gross profit, partially offset by increased product initiative spending. Now I'll turn the call over to Fred. Thank you, Dave.