Allison Transmission Holdings Inc (ALSN) 2016 Q1 法說會逐字稿

Good morning. Welcome to Allison Transmission's first-quarter 2016 results conference call. My name is Melissa and I will be your conference operator today.

(Operator instructions)

As a reminder, this conference is being recorded.

(Operator instructions)

I would now like to turn the conference over to Fred Bohley, the Company's Vice President of Finance. Please go ahead, sir.

Thank you, Melissa. Good morning and thank you for joining us on our first-quarter 2016 results conference call. With me this morning are Larry Dewey, Allison Transmission's Chairman and Chief Executive Officer, and Dave Graziosi, Allison Transmission's President and Chief Financial Officer.

As a reminder, this call, webcast and 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 May 3.

As shown on page 2 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 2016 results press release and our annual report on form 10-K for the year ended December 31, 2015, 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 express today.

In addition, as noted on page 3 of the presentation, some of the 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 2016 results press release.

Today's call is set to end at 9:00 AM Eastern time. In order to maximize participation opportunities on the call, we'll take one question from each analyst.

Please turn to slide 4 of the presentation for the call agenda. Now I'll turn the call over to Larry Dewey.

Thank you, Fred. Good morning and thank you for joining us today. On today's call I will provide you with an overview of our first-quarter performance including net sales by end market. Dave will review the first quarter financial performance including adjusted EBITDA and adjusted free cash flow. I'll wrap up the prepared comments with the full-year, 2016 guidance update prior to Q&A.

We're pleased to report that Allison's first-quarter 2016 results are within the full-year guidance range as we provided to the market on February 8. The year-over-year reductions in the global off-highway and service parts support equipment and other end markets net sales are consistent with the previously contemplated impact of low energy and commodity prices. During the first quarter, Allison also continued to demonstrate solid operating margins and free cash flow while executing its prudent approach to capital structure and allocation.

Please turn to slide 5 of the presentation for the Q1 2016 performance summary. Net sales decreased 8% from the same period in 2015 principally driven by lower demand in the global off-highway and service parts support equipment and other end markets. Gross margin for the quarter was 46.5%, a decrease of 100 basis points from a gross margin of 47.5% for the same period in 2015, principally driven by decreased net sales partially offset by favorable material costs and lower manufacturing expense commensurate with the decreased net sales. Adjusted net income decreased $41 million from the same period in 2015, principally driven by decreased net sales, stockholder activism expense, Dual Power Inverter Module or DPIM, extended coverage program adjustments, increased cash interest expense and unfavorable product warranty adjustments partially offset by favorable material costs and lower manufacturing expense.

Please turn to slide 6 of the presentation for the Q1 2016 sales performance summary. North America on Highway end market net sales were down 4% from the same period in 2015, principally driven by lower demand for rugged duty series models. North America Hybrid Propulsion Systems for Transit Bus end market net sales were down 6% from the same period in 2015, principally driven by lower demand due to engine emissions improvements and non-hybrid alternatives that generally require a fully automatic transmission. North America Off-Highway end market net sales were down 77% from the same period in 2015, principally driven by lower demand from hydraulic fracturing applications. Defense end market net sales were flat with the same period in 2015 principally driven by higher demand for Wheeled Defense offset by lower demand for Tracked Defense.

Outside North America On-Highway end market net sales were up 23% from the same period in 2015, principally driven by higher demand in Europe and Japan. Outside North America Off-Highway end market net sales were down 81% from the same period in 2015 principally driven by lower demand in the energy and mining sectors. Service parts, support equipment and other end market net sales were down 13% from the same period in 2015, principally driven by lower demand for global off-highway service parts, partially offset by higher demand for global on-highway service parts.

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

Thank you, Larry. Please turn to slide 7 of the presentation for the Q1 2016 financial performance summary. Given Larry's comments I'll focus on other income statement line items and adjusted EBITDA.

Selling general and expenses increased $6 million after excluding the stockholder activism expenses of $4 million from the same period in 2015. The increase was principally driven by a favorable 2015 adjustment related to the DPIM extended coverage program and unfavorable 2016 adjustment related to the DPIM extended coverage program and unfavorable product warranty adjustments.

Engineering research and development expenses were flat with the same period in 2015. Interest expense net decreased $3 million from the same period in 2015 principally driven by debt repayments and refinancing, partially offset by unfavorable mark to market adjustments for our interest rate derivatives. Cash interest expense increased $3 million from the same period in 2015, principally driven by the second quarter 2015 refinancing of our 7 1/8% senior notes that paid interest in May and November with additional term loan B3 borrowing that pays interest monthly.

Income tax expense for the first quarter of 2016 was $28 million, resulting in an effective tax rate of 36.9% versus an effective tax rate of 36.8% for the same period in 2015. Diluted earnings per share for the quarter was $0.33 excluding stockholder activism expenses of $0.01 and mark-to-market adjustments for our interest rate derivatives of $0.04.

Adjusted EBITDA for the quarter was $162 million or 35.1% of net sales compared to $190 million or 37.7% of net sales for the same period in 2015. The decrease is principally driven by decreased net sales and unfavorable product warranty adjustments partially offset by favorable material costs and lower manufacturing expense.

Please turn to slide 8 of the presentation for the Q1 2016 cash flow performance summary. Net cash provided by operating activities increased $27 million from the same period in 2015, principally driven by decreased operating working capital, lower incentive compensation payouts and decreased excess tax benefit from stock-based compensation, partially offset by decreased net sales and increased cash interest expense.

Adjusted free cash flow increased $15 million from the same period in 2015 principally driven by increased net cash provided by operating activities, partially offset by increased capital expenditures and decreased excess tax benefit from stock-based compensation. Allison continued its prudent approach to capital structure and allocation during the first quarter by settling $33 million of share repurchases, paying a dividend of $0.15 per share and repaying $6 million of debt. We ended the quarter with a net leverage of 3.03%, $299 million of cash, $461 million of revolver availability and $161 million of authorized share repurchases capacity.

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

Please turn to slide 9 of the presentation for the full-year 2016 guidance update. We anticipate no meaningful relief from the global off-highway end market challenges and are affirming our full-year guidance ranges released to the market on February 8. Net sales decrease of 6.5% to 9.5% year-over-year and adjusted EBITDA margin of 32.5% to 34% and adjusted free cash flow of $400 million to $450 million, capital expenditures of $65 million to $75 million and cash income taxes of $10 million to $15 million. Although we're not providing specific second quarter 2016 guidance, Allison does expect second quarter net sales to be down year over year and up sequentially.

This concludes our prepared remarks. Melissa, please open the call to questions.

Thank you.

(Operator instructions)

Ross Gilardi, Bank of America Merrill Lynch.

Good morning. Thank you. Larry, can you just talk a little bit more about the recent Board changes and what they mean for the Company? You have got some more outsiders on the Board right now. Is there a push for Management to pursue any new strategies, a different capital allocation approach that would be a notable change from what the Company's already doing?

You know, in March, in fact on the 14th, we announced the additional changes that you're referring to and really those continue our efforts that we've made over the past couple of years to refresh, transform and strengthen the composition of the Board, as the sponsors have sold down there their investments.

And as you noted we added some significant industrial operational expertise and Asian business acumen by expanding the Board. We added two seats and we appointed Stan Askren and Richard Lavin as directors, and then of course on this year's ballot we've also provided our shareholders the opportunity to vote on a candidate who provides additional shareholder representation by nominating Jamie Starr of Longview Asset Management to fill the vacancy created by Greg Ledford's retirement.

And then we also announced some changes to adopt best in class corporate governance practices. We amended our bylaws to immediately implement the majority voting standard in an uncontested director election. Also provide proxy access to qualified shareholders at the 2017 annual meeting, and then we submitted a charter amendment to our stockholders that if approved will implement the annual election of our directors starting at our annual meeting next year.

So we will end up with a Board made up of 11 directors, 10 of whom are independents and 6 of that 10 who have joined the Board in the past two years including Greg Spivy, a value acted of course as I previously mentioned assuming he's elected, Jamie Starr of Longview Asset Management. So it's really part of the transition of the Board.

We continue as you might imagine to have dialogue over capital allocation. I would say at this point in time we, if we had made changes, we would announce those but we continue to march and continue to look and see what is the most prudent course of action relative to capital allocation.

Again, from an operating standpoint, as we've said on a number of occasions, our task is to drive the results and then put that in front of the Board and then the Board can decide on behalf of all stockholders what's the best use of the capital that we are generating.

Thanks very much.

Thank you. Jerry Revich, Goldman Sachs.

Good morning, everyone. Dave, can you talk about the EBITDA bridge in the quarter? What was the headwind from the warranty charge that you took in the first quarter of this year, and what's the outlook for warranties from here? And can you talk about if pricing was a benefit to margins on a year-over-year basis? Thanks.

Sure. The warranty adjustments, again, talking EBITDA bridge so it excludes the DPIM charges and credits that we mentioned here on the call. As you know in prior quarters and our results, we typically look at our warranty accruals on a quarterly basis that's based on extensive product experience use in the field, et cetera, so I would not describe anything in the quarter as unusual.

Our normal cadence is to make adjustments whether those are up or down. Unfortunately in the first quarter there were a number of situations where as we updated our experience we recorded some additional provisions. I would say overall for the year our expectations have not changed significantly relative to warranty.

On the price side, as we talked about on the fourth quarter call, for full-year we're in the range of $5 million to $10 million for total price year over year. First quarter frankly being leanest of the four quarters relative to price just given the activity level that we had in the first quarter of last year, as you recall significant price appreciation last year and some of that was run-rated, frankly, from 2014. So, again, were not changing the guide relative to price for full year or warranty for that matter.

And Jerry, one thing I'll add, this is Larry. When we look at situations we feel very good about the quality of improvements we have made. We did have for the adjustments that we made, we did have a couple of situations, spills as we call them, that we had identified actually last year and as we continue to look at it we take a very aggressive approach to going after those on behalf of the customer.

And so as we looked at where we were at we said, look, we think that we're going to need a little more in those funds to go after that and maintain the Allison brand promise in the field and that's really where it comes from. It's not a fundamental change in the run rate. It's really directed towards very specific field action activities and we think we've got our arms around that, but we are going after it very aggressively.

Thank you.

Thank you. Robert Wertheimer, Barclays.

Good morning, everybody. My question is on if you have a view on US inventories in straight truck. Inventories have come off a bit which is nice. Still at pretty elevated levels. I'm not sure if we know what the right level is in a low interest rate environment how far do you think inventories might come, and whether they'll be fleshed-out this year.

You're probably look at the same charts I'm looking at right now relative to the class 6 /7 truck inventory retail sales ratio and the class 8 straight truck inventory. Those are a couple that we pay the closest attention to because they are a big part. We have seen -- you could argue that class 8 has moved around a fair amount but it's within the range, but if it's a higher range -- class 6/7 it looks to be in a little better shape from the normal.

I think the low interest rates does make that situation a little less painful to folks, and so you probably alter the fundamental equation of cost of inventory versus the lost sale perspective and so people are probably carrying a little more. We would expect -- and we talked about this, we talked that we thought early in the year that folks would be taking some actions to bring that down a little closer to the target point, the center point of the range.

We've seen a few corrections in recent months but were not where we need to be now. It's end of April, so I guess we've got a couple months in the quarter, in the half, but I would say that we would expect that it probably will take a little longer than the first half for folks to bring that in line.

Thanks.

Thank you. Jamie Cook, Credit Suisse.

Good morning. I guess a couple questions. One, parts was down again meaningfully this quarter. Can you just talk about what you're seeing in the different divisions, or the different segments, and whether you're seeing any signs of bottoming maybe in the off-highway markets, and I know the rest of the world on highway markets were pretty good.

And then Dave, I guess my other question is as you sit here and you think about where we are in 2016, and maybe it's too premature to talk about 2017, but based on your view of the Business today, do you think there are incremental cost cutting opportunities that Allison can undergo? Or do you feel like most of these markets are pretty bottomed out, that we won't have to think about that as we approach 2017? Thanks.

In terms of parts as we talked about here for first quarter, really consistent with our thoughts around that. On-highway a bit better, off-highway continuing to be challenged. That's probably a nice way of putting that. The reality is we think about just looking at the pieces for North America, off-highway, service, we expect reasonably flat results Q2 through Q4 with Q1 levels.

As we look outside of North America again, pretty flat across the quarters so, overall, as I said, a bit softer then I believe we expected for full year at some level. We continue to spend a fair bit of time addressing inventories in the channel and trying to figure out where those sit as we had talked about on the fourth quarter call.

There was the issue raised about hearing some things from the channel. Maybe a bit better than people were expecting. The reality as we said at the time that was not really consistent with what we're seeing, and I think bluntly stated, as we look at the balance of the year it continues to be extremely challenged. Overall, expectations are down significantly year over year as we talked about on the fourth quarter call.

And again, we'll keep an eye on things but it becomes very much a post-2016 world to focus on at this point in terms of aftermarket. So, we'll get to that. To your question in terms of 2016 versus 2017, we continue to keep a close eye on cost as we talked about on the fourth quarter call.

There's some cadence of that as we so-called earn our way into the year and see how business conditions are presenting themselves and opportunities for that matter to Allison. So as we said earlier, our thought process is we are going to get after the opportunities that are meaningful and that are a good investment but, again, we're taking a very cautious view as the year rolls out here from a cost perspective.

There's a number of things that we can do with levers in the Business from a cost perspective. We've done some of that already. There are other opportunities there but frankly, some of that is going to be tied to the volume cadence that we see.

We continue to constrain output through Manning and that's largely a variable process for us to look at on a very consistent basis. Beyond that, we will scale spending to whatever the business conditions are presented to the Business. But overall, we are not going to move away from our focus on strategic initiatives and more importantly some of the growth initiatives we've launched here more recently.

Okay. Thanks. I will get back in queue.

Thank you. Larry De Maria, William Blair.

Good morning, everybody. Just a question on the EBITDA margin cadence throughout the year. Obviously margin went down your over year, but still pretty solid and you noticed sales will increase sequentially in the second quarter.

So when should we start to see these lower margins throughout the year to get you down towards the guidance level? Can you give us some help on the cadence of margins throughout the year?

Sure. As we typically see with the business there is some seasonality. Our sales in first half are usually higher than in the second half. There are number of reasons for that. We don't see this year playing out any differently from that perspective in terms of run rating.

As we talked about with the Q2 expectations on sales, we would look at that as probably one of the higher or the highest quarter for the year at this stage. Certainly second-half tailing off a bit. And as I said there's seasonality in there. If you look at the margins they typically are going to follow, for the most part, volumes.

So when you look at first half, second-half, we do have EBITDA margins higher in the first half than the second half and historically I think, as you know, our Q4 results typically are some of the lower EBITDA margins because of the amount of down days, holidays, et cetera that are baked into the fourth quarter. Again, we don't expect that to be a different outcome for this year.

And if that was to change dramatically would it just be simply the result of volumes being better or do we think it could be outside pressure on aftermarket if markets stabilize and get a little bit better this year?

The key story with aftermarket this year is really off-highway and as I said earlier, I would like to tell you that there's a better opportunity there near-term but we tried to be as transparent as possible and I will tell you there's nothing that we are aware of that would lead you to that conclusion at this point for 2016. So we continue to have very low expectations for off-highway aftermarket this year.

Got it. Thank you.

Thank you. Ann Duignan, JPMorgan.

Good morning, everyone. Can you update us on the launch of the TC10. I think I noticed yesterday that PACCAR is now offering the product in their lineup?

As you know, we've been releasing in Navistar vehicles with the N13 engine in the last several months. They've announced and in fact are taking orders with the Cummins ISX 15 as well, as in Navistar. And then as you correctly noted here, I think it was last Thursday, PACCAR announced the engineering program leading to a release in the Kenworth T680 and T880 as well as the Peterbilt 567 and 579 with both PACCAR and Cummins engines.

So that engineering program has begun. We are very actively engaged with them. There will be validation and some work that needs to occur here and they're accordingly haven't announced the exact timing of production release, but the fact is we're en route towards that end.

Okay. Appreciate that. And just a quick follow up to the service segment. Are you seeing any pickup in demand on the back of the highway bill or too early to tell or can you make the connection?

The overall classic straight truck, everyone is trying to get a handle on how far down that's going to be year over year in terms of the total market size, so we haven't seen yet any appreciable difference there. We did have within our planning some increase in share as we continue to drive programs like the pay dirt program which is targeted towards construction.

We have seen good results from that this year so one of the things we got to do as part of our back cast process is as we look at the share numbers, and that's really what we're after when we do that, and of course the denominator is what was the industry volumes so we might gain some insights at that point in time as to any impact, but we don't have that as we sit here today.

Okay. I appreciate that. Thank you.

Thank you. Tim Thien, Citigroup.

Dave, just to come back one more time on aftermarket just in light of your caution on off-highway. Do you still feel that the down 6% for the full-year is still an appropriate number to be thinking about?

Yes, I would say that there's some light offset to what we've seen more recently in terms of the off-highway business but overall it's in that range.

Okay. Got it. And then Larry, maybe just talk a little bit about if you've seen any gain any releases in the international markets, that place, that number can bounce around a bit. But it looks like you're maybe starting to get some traction in addition to a little bit more -- a little better tone just in terms of what some of the European truck and bus makers are saying. So maybe just a word on the international on-highway markets, please?

Sure. In terms of the releases, as you know we've probably over-focused on some of that. It's necessary but the release is not enough. And we in the past have gotten a number of releases and what we've really stepped back on is there needs to be, certainly a focus on releases but really driving those releases through the OEM into the end markets, and I would say as far as releases we've certainly seen some of the positioning in China refuse, some of the positioning in India truck, Europe a big change is the MAM.

When I was over there, gosh, a lot of years ago, more than I care to comment we were chasing MAM and then the guys have finally broken through there, so that's a big one. Both in Europe as well as a Latin America, in terms of releases.

I would say probably the volume drivers are more the focus on the end-users. Europe, there's some pickup in delivery activity, some construction activity, continued efforts there. China, small volumes but starting in the refuse space starting to see some of that same thing in Latin America.

So there's -- probably one of the big ones is Japan where we have had some breakthroughs in the rental market there. Rental vehicles cracked a couple of big accounts and then that's generating into some market momentum which is driving some of their numbers.

So while we continue to focus of course on releases, it really is step one of a three-step process, secure the release, promote the release through the OEM and then sell the end-user. And we're as part of our growth initiatives really putting a lot of attention to the second and third steps in that process.

Thank you. Neil Frohnapple, Longbow Research.

Congrats on a great quarter, guys. I think you previously expected engineering expenses for 2016 to be down in the $5 million range year over year. Does the TC10 time release at PACCAR change this outlook at all? And just a brief follow-up, would you still expect SG&A to be flattish with 2015 including a few of the one timers that occurred in the first quarter?

Hello Neil, this is Fred. On the engineering, the expectation is still flattish throughout 2016 with really no meaningful adjustment needed with the TC10 activities at PACCAR. From an SG&A standpoint, we would still expect consistent with what we talked about on the Q4 call.

Really if you look SG&A, I think if you exclude the stockholder activism expense from the first quarter, it's going to be pretty level at that point as you model out Q2 through Q4.

Thanks for the help, Fred.

Thank you. Joe O'Dea, Vertical Research Partners.

Good morning. It sounds like relative to the initial outlook and maybe the service side a little bit later but offset with some of the North America On-Highway. Maybe just whether you can confirm that, and then within the North America On-Highway it seemed like bus was particularly strong on the build front, and is that related to state budgets and spend picking up there? Or was there something timing related that was beneficial in the quarter?

As we look at the quarter, I think you hit it right on the head. We've seen a little bit of headwind in the parts driven by the off-highway, certainly off-highway continues to be challenged.

The two positives, North America On-Highway is a large piece of the overall end market mix. And then of course the performance in Outside North America On-Highway, so those were kind of the pluses there.

As we look forward, and the comment on the bus, certainly have seen, and we're speaking school bus here, we have seen some higher numbers there. What we would -- what we're looking at very closely is the issue of timing versus an absolute level. We are not seeing the data which would suggest the overall demand is going to be higher. So then we are viewing it as, at this time, as a timing issue.

Now obviously we'll watch the out months and see how that schedule goes, but all of the OEMs in that space are taking higher levels of schedules than what you would see normally on a seasonality basis vis-a-vis an overall total forecast for the year. So right now we're looking at it as largely timing. We'll certainly apprise folks if we think it results in a meaningful change to the overall volume for the year as we watch the out month schedules roll in.

Okay. Thanks very much.

Thank you. Alex Potter, Piper Jaffray.

Thanks. Was wondering if you could comment a bit on competing technology. Dual clutches, AMTs, and then also I recently started getting a little bit more noise from a couple OEMs regarding fully electric buses.

I'd be interested in getting your commentary on whether you think any of those technologies have a leg to stand on, whether there's any updated thoughts on any of that? Thanks.

Let's take them in turn there. Relative to AMTs, they certainly represent an improvement over a manual transmission. Although in medium duty, they kind of penetrated to, say call it low double digits. Then they kind of receded back into low single digits.

That's been part of our share increase over the last couple of years where we've come out of the high 60s, back through what had been the previous high of low 70s into I think we estimate about 76% in 2015. So we've been able to demonstrate the relative value there in the class 6/7 in truck.

Obviously the battleground now is in the class 8 tractor market where we're coming in actually with our 3000 Highway series with some of the baby 8s as we call them, smaller engines. That's been a nice little pickup for us.

Then of course the TC10 coming into that space. And one of the things that we continue to focus on is what is the value proposition relative to the fuel efficiency of the TC10, the customers have been very pleased with that.

We've had a number of fleets, the number of fleets continues to increase as of early this month. We've had almost 100 discrete customers, 209 fleets where some of those customers had multiple fleets and about 15% of them have already reordered. So we're seeing a nice acceptance there and will continue to drive that process. So that's the AMT.

As far as the DCT, probably the thing that I could say that would be fair to acknowledge for them is the launch capability is a lot better than the AMT. So that's a plus. Having said that, the DCT does rely on a clutch to start the vehicle, and so they limit the clutch engagement torque at start and launch to avoid burning the clutch, and that results in a lower launch capability which then over a start/stop cycle, which is where it's targeted, ends up with a differential in productivity that we think plays well for us.

We'll be coming forward with updated and validated testing relative to fuel economy and we're pretty confident what that's going to show. So we'll be going to the market with that.

We have given the long-standing total cost of ownership and our knowledge of the duty cycles and the durability of the Allison. We've come out with a seven-year coverage in the school bus space that we think will be very attractive. In fact as we understand it, a number of a school districts are writing that into their specs, and what we offer that for is frankly a fraction of what the DCT suppliers offering it for. So that just widens the value proposition we think that we have.

As far as the electric vehicles, certainly there's a lot of excitement over that. Reminiscent of all the excitement for hybrids perhaps. Where you see it most significantly is in China whereby government fiat they are directing the purchase of what they call new energy vehicles. Most of which are electric.

That has negatively impacted some of the volumes that we've had there in Transit Bus. On the one hand if in that context, if the government says that the sun is going to rise at midnight, you'd better be putting your suntan lotion on at 11:45. So clearly there's a legislative, or really not even legislative, a directive to purchase that.

That is changing. Some of the subsidies have altered the economics of that proposition where a new energy vehicle or an electric bus costs significantly less than a conventional, much less a hybrid. So, that was something which certainly encouraged the properties or supported the properties in meeting the direction from the central government. That's changing.

Those subsidies are going to go towards building infrastructure and so the incentive for the actual vehicle purchase is going to change. That probably, given the direction from the government, isn't going to significantly alter the near-term mix.

What we are seeing, however, as we somewhat expected frankly, is that the vehicles themselves, if you understand the limitations of battery technology, at least as it exists today, the vehicles themselves are not living up to in a number of cases the standards of performance that the customers had been used to in a conventional vehicle. Whether it's the ability to handle the route or whether it's the uptime as a result of some of the challenges of a fully electric vehicle.

So, there's a number of issues that are yet to play out but clearly there's a lot of interest. We have, in fact I'll be getting update later this week on what we might do to position a variant of our product into that space.

The challenge becomes, a lot of these are like science fair projects and you can dump a ton of money into what is a very, very small volume of vehicles. And so we want to do it smart. We want to be there so that if some of the technical advancements are there, particularly relative to battery technology, that we're positioned for it.

But we also want to do it in a responsible manner. So those -- that's kind of how we're thinking about some of the electric vehicles.

Thank you very much. I appreciate all the color.

Thank you. Mr. Dewey, there are no further questions at this time. I'd like to turn the floor back to you for any final remarks.

Well certainly we appreciate everyone's time this morning and the support and interest that you've shown in Allison, and we'll look forward to updating you with the second quarter call here in about three months. So, have a great day.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.