Allison Transmission

View:

Download DOC

Download PDF

Download XLS

Download XBRL

alsn-10q_20200630.htm

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 June 30, 2020

☐	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 July 15, 2020, there were 113,201,844 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	41

Item 4.	Controls and Procedures	42

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	43

Item 1A.	Risk Factors	43 - 44

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 6.	Exhibits	45

	Signatures	46

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)

	June 30, 2020			December 31, 2019
ASSETS
Current Assets
Cash and cash equivalents	$	434		$	192
Accounts receivable – net of allowances for doubtful accounts of $2 and $1, respectively		212			253
Inventories		201			199
Other current assets		40			42
Total Current Assets		887			686
Property, plant and equipment, net		634			616
Intangible assets, net		986			1,042
Goodwill		2,062			2,041
Other non-current assets		64			65
TOTAL ASSETS	$	4,633		$	4,450
LIABILITIES
Current Liabilities
Accounts payable	$	138		$	150
Product warranty liability		29			24
Current portion of long-term debt		6			6
Deferred revenue		34			35
Other current liabilities		149			202
Total Current Liabilities		356			417
Product warranty liability		19			28
Deferred revenue		111			104
Long-term debt		2,786			2,512
Deferred income taxes		421			387
Other non-current liabilities		245			221
TOTAL LIABILITIES		3,938			3,669
Commitments and contingencies (see NOTE P)
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, 1,880,000,000 shares authorized, 113,200,028 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		1,806			1,802
Accumulated deficit		(1,027	)		(970	)
Accumulated other comprehensive loss, net of tax		(85	)		(52	)
TOTAL STOCKHOLDERS’ EQUITY		695			781
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	$	4,633		$	4,450

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

Table of Contents

Allison Transmission Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Income

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Net sales	$	377		$	737		$	1,014		$	1,412
Cost of sales		212			348			523			664
Gross profit		165			389			491			748
Selling, general and administrative		69			93			144			177
Engineering — research and development		38			37			74			68
Operating income		58			259			273			503
Interest expense, net		(33	)		(33	)		(66	)		(69	)
Other income, net		5			3			4			6
Income before income taxes		30			229			211			440
Income tax expense		(7	)		(48	)		(49	)		(92	)
Net income	$	23		$	181		$	162		$	348
Basic earnings per share attributable to common stockholders	$	0.20		$	1.47		$	1.42		$	2.81
Diluted earnings per share attributable to common stockholders	$	0.20		$	1.46		$	1.41		$	2.78
Comprehensive income, net of tax	$	19		$	167		$	129		$	331

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

Table of Contents

Allison Transmission Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited, dollars in millions)

	Six Months Ended June 30,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	162		$	348
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment		46			37
Deferred income taxes		43			33
Amortization of intangible assets		29			43
Stock-based compensation		5			8
Amortization of deferred financing costs		2			2
Expenses related to long-term debt refinancing		—			5
Allowance for doubtful accounts		—			2
Other		3			—
Changes in assets and liabilities:
Accounts receivable		39			(44	)
Inventories		(3	)		(16	)
Accounts payable		(33	)		23
Other assets and liabilities		(53	)		(8	)
Net cash provided by operating activities		240			433
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions	4				(133	)
Additions of long-lived assets		(49	)		(44	)
Net cash used for investing activities		(45	)		(177	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on revolving credit facility		800			90
Payments on revolving credit facility		(525	)		(90	)
Repurchases of common stock		(180	)		(285	)
Dividend payments		(39	)		(37	)
Payments on long-term debt		(3	)		(1,148	)
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 provided by (used for) financing activities		49			(334	)
Effect of exchange rate changes on cash		(2	)		—
Net increase (decrease) in cash and cash equivalents		242			(78	)
Cash and cash equivalents at beginning of period		192			231
Cash and cash equivalents at end of period	$	434		$	153
Supplemental disclosures:
Interest paid	$	65		$	53
Income taxes paid	$	8		$	55

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

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 March 31, 2019	$	1	$	—	$	—	$	1,787	$	(1,010	)	$	(33	)	$	745
Stock-based compensation		—		—		—		5		—			—			5
Pension and OPEB liability adjustment		—		—		—		—		—			(3	)		(3	)
Available-for-sale securities and interest rate swaps		—		—		—		—		—			(12	)		(12	)
Foreign currency translation adjustment		—		—		—		—		—			1			1
Issuance of common stock		—		—		—		4		—			—			4
Repurchase of common stock		—		—		—		—		(235	)		—			(235	)
Dividends on common stock		—		—		—		—		(18	)		—			(18	)
Net income		—		—		—		—		181			—			181
Balance at June 30, 2019	$	1	$	—	$	—	$	1,796	$	(1,082	)	$	(47	)	$	668
Balance at March 31, 2020	$	1	$	—	$	—	$	1,804	$	(1,031	)	$	(81	)	$	693
Stock-based compensation		—		—		—		2		—			—			2
Pension and OPEB liability adjustment		—		—		—		—		—			(2	)		(2	)
Available-for-sale securities and interest rate swaps		—		—		—		—		—			(2	)		(2	)
Dividends on common stock		—		—		—		—		(19	)		—			(19	)
Net income		—		—		—		—		23			—			23
Balance at June 30, 2020	$	1	$	—	$	—	$	1,806	$	(1,027	)	$	(85	)	$	695

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

Table of Contents

Allison Transmission Holdings, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited, dollars in millions)

	Six 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		—		—		—		8			—			—			8
Pension and OPEB liability adjustment		—		—		—		—			—			3			3
Foreign currency translation adjustment		—		—		—		—			—			1			1
Available-for-sale securities and interest rate swaps		—		—		—		—			—			(21	)		(21	)
Repurchase of common stock		—		—		—		—			(285	)		—			(285	)
Dividends on common stock		—		—		—		—			(37	)		—			(37	)
Impact of adopting accounting standards		—		—		—		—			(8	)		—			(8	)
Net income		—		—		—		—			348			—			348
Balance at June 30, 2019	$	1	$	—	$	—	$	1,796		$	(1,082	)	$	(47	)	$	668
Balance at December 31, 2019	$	1	$	—	$	—	$	1,802		$	(970	)	$	(52	)	$	781
Stock-based compensation		—		—		—		5			—			—			5
Pension and OPEB liability adjustment		—		—		—		—			—			(6	)		(6	)
Foreign currency translation adjustment		—		—		—		—			—			(2	)		(2	)
Available-for-sale securities and interest rate swaps		—		—		—		—			—			(25	)		(25	)
Issuance of common stock		—		—		—		(1	)		—			—			(1	)
Repurchase of common stock		—