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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, 2020

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, 2020, there were 112,670,802 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 - 39

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

40

 

 

 

Item 4.

Controls and Procedures

41

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

42

 

 

 

Item 1A.

Risk Factors

42

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

43

 

 

 

Item 6.

Exhibits

44

 

 

 

 

Signatures

45

 

 

 

 

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,

2020

 

 

December 31,

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

251

 

 

$

192

 

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

 

 

245

 

 

 

253

 

Inventories

 

 

177

 

 

 

199

 

Other current assets

 

 

37

 

 

 

42

 

Total Current Assets

 

 

710

 

 

 

686

 

Property, plant and equipment, net

 

 

636

 

 

 

616

 

Intangible assets, net

 

 

975

 

 

 

1,042

 

Goodwill

 

 

2,063

 

 

 

2,041

 

Other non-current assets

 

 

62

 

 

 

65

 

TOTAL ASSETS

 

$

4,446

 

 

$

4,450

 

LIABILITIES

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

133

 

 

$

150

 

Product warranty liability

 

 

34

 

 

 

24

 

Current portion of long-term debt

 

 

6

 

 

 

6

 

Deferred revenue

 

 

33

 

 

 

35

 

Other current liabilities

 

 

176

 

 

 

202

 

Total Current Liabilities

 

 

382

 

 

 

417

 

Product warranty liability

 

 

31

 

 

 

28

 

Deferred revenue

 

 

107

 

 

 

104

 

Long-term debt

 

 

2,510

 

 

 

2,512

 

Deferred income taxes

 

 

424

 

 

 

387

 

Other non-current liabilities

 

 

246

 

 

 

221

 

TOTAL LIABILITIES

 

 

3,700

 

 

 

3,669

 

Commitments and contingencies (see NOTE P)

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Common stock, $0.01 par value, 1,880,000,000 shares authorized, 112,779,811 shares issued and outstanding and 118,199,782 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

 

 

1,812

 

 

 

1,802

 

Accumulated deficit

 

 

(985

)

 

 

(970

)

Accumulated other comprehensive loss, net of tax

 

 

(82

)

 

 

(52

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

746

 

 

 

781

 

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY

 

$

4,446

 

 

$

4,450

 

 

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,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net sales

 

$

532

 

 

$

669

 

 

$

1,546

 

 

$

2,081

 

Cost of sales

 

 

278

 

 

 

321

 

 

 

801

 

 

 

985

 

Gross profit

 

 

254

 

 

 

348

 

 

 

745

 

 

 

1,096

 

Selling, general and administrative

 

 

93

 

 

 

85

 

 

 

237

 

 

 

262

 

Engineering — research and development

 

 

33

 

 

 

39

 

 

 

107

 

 

 

107

 

Operating income

 

 

128

 

 

 

224

 

 

 

401

 

 

 

727

 

Interest expense, net

 

 

(34

)

 

 

(32

)

 

 

(100

)

 

 

(101

)

Other income, net

 

 

4

 

 

 

2

 

 

 

8

 

 

 

8

 

Income before income taxes

 

 

98

 

 

 

194

 

 

 

309

 

 

 

634

 

Income tax expense

 

 

(21

)

 

 

(45

)

 

 

(70

)

 

 

(137

)

Net income

 

$

77

 

 

$

149

 

 

$

239

 

 

$

497

 

Basic earnings per share attributable to common stockholders

 

$

0.68

 

 

$

1.24

 

 

$

2.10

 

 

$

4.04

 

Diluted earnings per share attributable to common stockholders

 

$

0.68

 

 

$

1.23

 

 

$

2.10

 

 

$

4.01

 

Comprehensive income, net of tax

 

$

80

 

 

$

136

 

 

$

209

 

 

$

467

 

 

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,

 

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

239

 

 

$

497

 

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

 

 

 

 

 

 

 

 

Depreciation of property, plant and equipment

 

 

71

 

 

 

57

 

Deferred income taxes

 

 

46

 

 

 

61

 

Amortization of intangible assets

 

 

40

 

 

 

65

 

Stock-based compensation

 

 

11

 

 

 

10

 

Amortization of deferred financing costs

 

 

3

 

 

 

4

 

Expenses related to long-term debt refinancing

 

 

 

 

 

5

 

Allowance for doubtful accounts

 

 

 

 

 

1

 

Other

 

 

3

 

 

 

(1

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

8

 

 

 

(40

)

Inventories

 

 

22

 

 

 

(20

)

Accounts payable

 

 

(34

)

 

 

2

 

Other assets and liabilities

 

 

(11

)

 

 

4

 

Net cash provided by operating activities

 

 

398

 

 

 

645

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Additions of long-lived assets

 

 

(80

)

 

 

(91

)

Business acquisitions

 

 

4

 

 

 

(232

)

Net cash used for investing activities

 

 

(76

)

 

 

(323

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Borrowings on revolving credit facility

 

 

800

 

 

 

90

 

Payments on revolving credit facility

 

 

(800

)

 

 

(90

)

Repurchases of common stock

 

 

(196

)

 

 

(331

)

Dividend payments

 

 

(58

)

 

 

(55

)

Payments on long-term debt

 

 

(5

)

 

 

(1,149

)

Payment of acquisition-related contingent liability

 

 

(3

)

 

 

 

Taxes paid related to net share settlement of equity awards

 

 

(2

)

 

 

(4

)

Proceeds from exercise of stock options

 

 

1

 

 

 

4

 

Issuance of long-term debt

 

 

 

 

 

1,148

 

Debt financing fees

 

 

 

 

 

(12

)

Net cash used for financing activities

 

 

(263

)

 

 

(399

)

Effect of exchange rate changes on cash

 

 

 

 

 

(2

)

Net increase (decrease) in cash and cash equivalents

 

 

59

 

 

 

(79

)

Cash and cash equivalents at beginning of period

 

 

192

 

 

 

231

 

Cash and cash equivalents at end of period

 

$

251

 

 

$

152

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

Interest paid

 

$

73

 

 

$

63

 

Income taxes paid

 

$

13

 

 

$

84

 

 

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, 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

)

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

 

Balance at June 30, 2020

 

$

1

 

 

$

 

 

$

 

 

$

1,806

 

 

$

(1,027

)

 

$

(85

)

 

$

695

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Pension and OPEB liability adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

2

 

Interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

3

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16

)

 

 

 

 

 

(16

)

Dividends on common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(19

)

 

 

 

 

 

(19

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

77

 

 

 

 

 

 

77

 

Balance at September 30, 2020

 

$

1

 

 

$

 

 

$

 

 

$

1,812

 

 

$

(985

)

 

$

(82

)

 

$

746

 

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, 2018

 

$

1

 

 

$

 

 

$

 

 

$

1,788

 

 

$

(1,100

)

 

$

(30

)

 

$

659

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

 

 

 

10

 

Pension and OPEB liability adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

1

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

(5

)

Available-for-sale securities and interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26

)

 

 

(26

)

Issuance of common stock

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(331

)

 

 

 

 

 

(331

)

Dividends on common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(55

)

 

 

 

 

 

(55

)

Impact of adopting accounting standards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

 

 

 

(8

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

497

 

 

 

 

 

 

497

 

Balance at September 30, 2019

 

$

1

 

 

$

 

 

$

 

 

$

1,799

 

 

$

(997

)

 

$

(60

)

 

$

743

 

Balance at December 31, 2019

 

$

1

 

 

$

 

 

$

 

 

$

1,802

 

 

$

(970

)

 

$

(52

)

 

$

781

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

11

 

Pension and OPEB liability adjustment