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Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File No. 001-35456

ALLISON TRANSMISSION HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

26-0414014

(State or Other Jurisdiction of Incorporation or

Organization)

(I.R.S. Employer

Identification Number)

One Allison Way

 

Indianapolis,

IN

46222

(Address of Principal Executive Offices)

(Zip Code)

 

(317) 242-5000

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Trading Symbol(s)

 

Name of Each Exchange

on which Registered

Common stock, $0.01 par value

 

ALSN

 

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No   

As of October 15, 2019, there were 119,231,473 shares of Common Stock outstanding.

 


Table of Contents

 

INDEX

 

 

 

Page

 

PART I. FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

3 - 7

 

 

 

 

Condensed Consolidated Balance Sheets

3

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income

4

 

 

 

 

Condensed Consolidated Statements of Cash Flows

5

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity

6 - 7

 

 

 

 

Notes to Condensed Consolidated Financial Statements

8 - 25

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26 - 38

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

39

 

 

 

Item 4.

Controls and Procedures

40

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

41

 

 

 

Item 1A.

Risk Factors

41

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

41

 

 

 

Item 6.

Exhibits

42

 

 

 

 

Signatures

43

 

 

 

 

2


Table of Contents

 

 

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

Allison Transmission Holdings, Inc.

Condensed Consolidated Balance Sheets

(unaudited, dollars in millions, except share and per share data)

 

 

 

September 30,

2019

 

 

December 31,

2018

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

152

 

 

$

231

 

Accounts receivable – net of allowances for doubtful accounts of $1

 

 

329

 

 

 

279

 

Inventories

 

 

209

 

 

 

170

 

Other current assets

 

 

58

 

 

 

45

 

Total Current Assets

 

 

748

 

 

 

725

 

Property, plant and equipment, net

 

 

561

 

 

 

466

 

Intangible assets, net

 

 

1,061

 

 

 

1,066

 

Goodwill

 

 

2,040

 

 

 

1,941

 

Other non-current assets

 

 

61

 

 

 

39

 

TOTAL ASSETS

 

$

4,471

 

 

$

4,237

 

LIABILITIES

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

185

 

 

$

169

 

Product warranty liability

 

 

25

 

 

 

26

 

Current portion of long-term debt

 

 

6

 

 

 

 

Deferred revenue

 

 

35

 

 

 

34

 

Other current liabilities

 

 

226

 

 

 

197

 

Total Current Liabilities

 

 

477

 

 

 

426

 

Product warranty liability

 

 

29

 

 

 

40

 

Deferred revenue

 

 

103

 

 

 

88

 

Long-term debt

 

 

2,513

 

 

 

2,523

 

Deferred income taxes

 

 

380

 

 

 

329

 

Other non-current liabilities

 

 

226

 

 

 

172

 

TOTAL LIABILITIES

 

 

3,728

 

 

 

3,578

 

Commitments and contingencies (see NOTE P)

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Common stock, $0.01 par value, 1,880,000,000 shares authorized, 119,528,870 shares issued and outstanding and 126,251,266 shares issued and outstanding, respectively

 

 

1

 

 

 

1

 

Non-voting common stock, $0.01 par value, 20,000,000 shares authorized, none issued and outstanding

 

 

 

 

 

 

Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding

 

 

 

 

 

 

Paid in capital

 

 

1,799

 

 

 

1,788

 

Accumulated deficit

 

 

(997

)

 

 

(1,100

)

Accumulated other comprehensive loss, net of tax

 

 

(60

)

 

 

(30

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

743

 

 

 

659

 

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY

 

$

4,471

 

 

$

4,237

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

3


Table of Contents

 

Allison Transmission Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Income

(unaudited, dollars in millions, except per share data)

 

 

 

Three months ended

September 30,

 

 

Nine months ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net sales

 

$

669

 

 

$

692

 

 

$

2,081

 

 

$

2,066

 

Cost of sales

 

 

321

 

 

 

324

 

 

 

985

 

 

 

982

 

Gross profit

 

 

348

 

 

 

368

 

 

 

1,096

 

 

 

1,084

 

Selling, general and administrative

 

 

85

 

 

 

89

 

 

 

262

 

 

 

274

 

Engineering — research and development

 

 

39

 

 

 

33

 

 

 

107

 

 

 

94

 

Operating income

 

 

224

 

 

 

246

 

 

 

727

 

 

 

716

 

Interest expense, net

 

 

(32

)

 

 

(30

)

 

 

(101

)

 

 

(90

)

Other income, net

 

 

2

 

 

 

2

 

 

 

8

 

 

 

5

 

Income before income taxes

 

 

194

 

 

 

218

 

 

 

634

 

 

 

631

 

Income tax expense

 

 

(45

)

 

 

(51

)

 

 

(137

)

 

 

(139

)

Net income

 

$

149

 

 

$

167

 

 

$

497

 

 

$

492

 

Basic earnings per share attributable to common stockholders

 

$

1.24

 

 

$

1.28

 

 

$

4.04

 

 

$

3.66

 

Diluted earnings per share attributable to common stockholders

 

$

1.23

 

 

$

1.27

 

 

$

4.01

 

 

$

3.64

 

Comprehensive income, net of tax

 

$

136

 

 

$

168

 

 

$

467

 

 

$

481

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

4


Table of Contents

 

Allison Transmission Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited, dollars in millions)

 

 

 

Nine months ended

September 30,

 

 

 

2019

 

 

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

497

 

 

$

492

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

65

 

 

 

66

 

Deferred income taxes

 

 

61

 

 

 

46

 

Depreciation of property, plant and equipment

 

 

57

 

 

 

58

 

Stock-based compensation

 

 

10

 

 

 

9

 

Expenses related to long-term debt refinancing

 

 

5

 

 

 

 

Amortization of deferred financing costs

 

 

4

 

 

 

5

 

Allowance for doubtful accounts

 

 

1

 

 

 

 

Other

 

 

(1

)

 

 

7

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(40

)

 

 

(117

)

Inventories

 

 

(20

)

 

 

(15

)

Accounts payable

 

 

2

 

 

 

29

 

Other assets and liabilities

 

 

4

 

 

 

25

 

Net cash provided by operating activities

 

 

645

 

 

 

605

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Business acquisitions

 

 

(232

)

 

 

 

Additions of long-lived assets

 

 

(91

)

 

 

(52

)

Net cash used for investing activities

 

 

(323

)

 

 

(52

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Payments on long-term debt

 

 

(1,149

)

 

 

(28

)

Issuance of long-term debt

 

 

1,148

 

 

 

 

Repurchases of common stock

 

 

(331

)

 

 

(456

)

Payments on revolving credit facility

 

 

(90

)

 

 

 

Borrowings on revolving credit facility

 

 

90

 

 

 

 

Dividend payments

 

 

(55

)

 

 

(61

)

Debt financing fees

 

 

(12

)

 

 

(1

)

Taxes paid related to net share settlement of equity awards

 

 

(4

)

 

 

(4

)

Proceeds from exercise of stock options

 

 

4

 

 

 

21

 

Net cash used for financing activities

 

 

(399

)

 

 

(529

)

Effect of exchange rate changes on cash

 

 

(2

)

 

 

(2

)

Net (decrease) increase in cash and cash equivalents

 

 

(79

)

 

 

22

 

Cash and cash equivalents at beginning of period

 

 

231

 

 

 

199

 

Cash and cash equivalents at end of period

 

$

152

 

 

$

221

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

Interest paid

 

$

63

 

 

$

68

 

Income taxes paid

 

$

84

 

 

$

80

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

5


Table of Contents

 

Allison Transmission Holdings, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited, dollars in millions)

 

 

 

Three months ended

 

 

 

Common Stock

 

 

Non-voting Common Stock

 

 

Preferred Stock

 

 

Paid-in Capital

 

 

Accumulated (Deficit) Income

 

 

Accumulated Other Comprehensive (Loss) Income, net of tax

 

 

Stockholders' Equity

 

Balance at June 30, 2018

 

$

1

 

 

$

 

 

$

 

 

$

1,764

 

 

$

(1,136

)

 

$

(27

)

 

$

602

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

Pension and OPEB liability adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

(3

)

Available-for-sale securities and interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

4

 

Issuance of common stock

 

 

 

 

 

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

17

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(86

)

 

 

 

 

 

(86

)

Dividends on common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20

)

 

 

 

 

 

(20

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

167

 

 

 

 

 

 

167

 

Balance at September 30, 2018

 

$

1

 

 

$

 

 

$

 

 

$

1,784

 

 

$

(1,075

)

 

$

(26

)

 

$

684

 

Balance at June 30, 2019

 

$

1

 

 

$

 

 

$

 

 

$

1,796

 

 

$

(1,082

)

 

$

(47

)

 

$

668

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

2

 

Pension and OPEB liability adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6

)

 

 

(6

)

Available-for-sale securities and interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

(5

)

Issuance of common stock

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(46

)

 

 

 

 

 

(46

)

Dividends on common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18

)

 

 

 

 

 

(18

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

149

 

 

 

 

 

 

149

 

Balance at September 30, 2019

 

$

1

 

 

$

 

 

$

 

 

$

1,799

 

 

$

(997

)

 

$

(60

)

 

$

743

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

6


Table of Contents

 

Allison Transmission Holdings, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited, dollars in millions)

 

 

 

Nine months ended

 

 

 

Common Stock

 

 

Non-voting Common Stock

 

 

Preferred Stock

 

 

Paid-in Capital

 

 

Accumulated (Deficit) Income

 

 

Accumulated Other Comprehensive (Loss) Income, net of tax

 

 

Stockholders' Equity

 

Balance at December 31, 2017

 

$

1

 

 

$

 

 

$

 

 

$

1,758

 

 

$

(1,055

)

 

$

(15

)

 

$

689

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Pension and OPEB liability adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

(8

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

(5

)

Available-for-sale securities and interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

2

 

Issuance of common stock

 

 

 

 

 

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

17

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(456

)

 

 

 

 

 

(456

)

Dividends on common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(61

)

 

 

 

 

 

(61

)

Impact of adopting accounting standards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

5

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

492

 

 

 

 

 

 

492

 

Balance at September 30, 2018

 

$

1

 

 

$

 

 

$

 

 

$

1,784

 

 

$

(1,075

)

 

$

(26

)

 

$

684

 

Balance at December 31, 2018

 

$

1

 

 

$

 

 

$

 

 

$

1,788

 

 

$

(1,100

)

 

$

(30

)

 

$

659

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

 

 

 

10

 

Pension and OPEB liability adjustment