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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, 2021

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, 2021, there were 104,260,272 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 – 23

 

 

 

Item 2.

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

24 – 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

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,

2021

 

 

December 31,

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

261

 

 

$

310

 

Accounts receivable – net of allowances for doubtful accounts of $2 and $1, respectively

 

 

257

 

 

 

228

 

Inventories

 

 

217

 

 

 

181

 

Other current assets

 

 

75

 

 

 

37

 

Total Current Assets

 

 

810

 

 

 

756

 

Property, plant and equipment, net

 

 

681

 

 

 

638

 

Intangible assets, net

 

 

928

 

 

 

963

 

Goodwill

 

 

2,064

 

 

 

2,064

 

Other non-current assets

 

 

54

 

 

 

56

 

TOTAL ASSETS

 

$

4,537

 

 

$

4,477

 

LIABILITIES

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

172

 

 

$

157

 

Product warranty liability

 

 

35

 

 

 

36

 

Current portion of long-term debt

 

 

6

 

 

 

6

 

Deferred revenue

 

 

37

 

 

 

34

 

Other current liabilities

 

 

198

 

 

 

140

 

Total Current Liabilities

 

 

448

 

 

 

373

 

Product warranty liability

 

 

23

 

 

 

30

 

Deferred revenue

 

 

101

 

 

 

109

 

Long-term debt

 

 

2,504

 

 

 

2,507

 

Deferred income taxes

 

 

506

 

 

 

442

 

Other non-current liabilities

 

 

248

 

 

 

260

 

TOTAL LIABILITIES

 

 

3,830

 

 

 

3,721

 

Commitments and contingencies (see NOTE P)

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Common stock, $0.01 par value, 1,880,000,000 shares authorized, 104,259,765 shares issued and outstanding and 112,033,477 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

 

 

1,829

 

 

 

1,818

 

Accumulated deficit

 

 

(1,038

)

 

 

(974

)

Accumulated other comprehensive loss, net of tax

 

 

(85

)

 

 

(89

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

707

 

 

 

756

 

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY

 

$

4,537

 

 

$

4,477

 

 

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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net sales

 

$

567

 

 

$

532

 

 

$

1,758

 

 

$

1,546

 

Cost of sales

 

 

306

 

 

 

278

 

 

 

918

 

 

 

801

 

Gross profit

 

 

261

 

 

 

254

 

 

 

840

 

 

 

745

 

Selling, general and administrative

 

 

73

 

 

 

93

 

 

 

226

 

 

 

237

 

Engineering — research and development

 

 

42

 

 

 

33

 

 

 

121

 

 

 

107

 

Operating income

 

 

146

 

 

 

128

 

 

 

493

 

 

 

401

 

Interest expense, net

 

 

(28

)

 

 

(34

)

 

 

(87

)

 

 

(100

)

Other income, net

 

 

6

 

 

 

4

 

 

 

12

 

 

 

8

 

Income before income taxes

 

 

124

 

 

 

98

 

 

 

418

 

 

 

309

 

Income tax expense

 

 

(30

)

 

 

(21

)

 

 

(94

)

 

 

(70

)

Net income

 

$

94

 

 

$

77

 

 

$

324

 

 

$

239

 

Basic earnings per share attributable to common stockholders

 

$

0.89

 

 

$

0.68

 

 

$

2.97

 

 

$

2.10

 

Diluted earnings per share attributable to common stockholders

 

$

0.89

 

 

$

0.68

 

 

$

2.97

 

 

$

2.10

 

Comprehensive income, net of tax

 

$

92

 

 

$

80

 

 

$

328

 

 

$

209

 

 

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,

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

324

 

 

$

239

 

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

 

 

 

 

 

 

 

 

Depreciation of property, plant and equipment

 

 

77

 

 

 

71

 

Deferred income taxes

 

 

61

 

 

 

46

 

Amortization of intangible assets

 

 

35

 

 

 

40

 

Stock-based compensation

 

 

11

 

 

 

11

 

Technology-related investments gain

 

 

(3

)

 

 

 

Amortization of deferred financing costs

 

 

2

 

 

 

3

 

Other

 

 

 

 

 

3

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(32

)

 

 

8

 

Inventories

 

 

(38

)

 

 

22

 

Accounts payable

 

 

7

 

 

 

(30

)

Other assets and liabilities

 

 

23

 

 

 

(11

)

Net cash provided by operating activities

 

 

467

 

 

 

402

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Additions of long-lived assets

 

 

(112

)

 

 

(84

)

Loans to third parties

 

 

(11

)

 

 

 

Proceeds from technology-related investments

 

 

4

 

 

 

 

Business acquisitions

 

 

 

 

 

4

 

Net cash used for investing activities

 

 

(119

)

 

 

(80

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Repurchases of common stock

 

 

(326

)

 

 

(196

)

Dividend payments

 

 

(62

)

 

 

(58

)

Payments on long-term debt

 

 

(5

)

 

 

(5

)

Payment of acquisition-related contingent liability

 

 

(3

)

 

 

(3

)

Taxes paid related to net share settlement of equity awards

 

 

(3

)

 

 

(2

)

Proceeds from exercise of stock options

 

 

3

 

 

 

1

 

Borrowings on revolving credit facility

 

 

 

 

 

800

 

Payments on revolving credit facility

 

 

 

 

 

(800

)

Net cash used for financing activities

 

 

(396

)

 

 

(263

)

Effect of exchange rate changes on cash

 

 

(1

)

 

 

 

Net (decrease) increase in cash and cash equivalents

 

 

(49

)

 

 

59

 

Cash and cash equivalents at beginning of period

 

 

310

 

 

 

192

 

Cash and cash equivalents at end of period

 

$

261

 

 

$

251

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

Interest paid

 

$

72

 

 

$

73

 

Income taxes paid

 

$

48

 

 

$

13

 

 

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, 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

 

Balance at June 30, 2021

 

$

1

 

 

$

 

 

$

 

 

$

1,826

 

 

$

(1,012

)

 

$

(83

)

 

$

732

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

Pension and OPEB liability adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

(3

)

Interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

2

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(100

)

 

 

 

 

 

(100

)

Dividends on common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20

)

 

 

 

 

 

(20

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

94

 

 

 

 

 

 

94

 

Balance at September 30, 2021

 

$

1

 

 

$

 

 

$

 

 

$

1,829

 

 

$

(1,038

)

 

$

(85

)

 

$

707

 

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, 2019

 

$

1

 

 

$

 

 

$

 

 

$

1,802

 

 

$

(970

)

 

$

(52

)

 

$

781

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

11

 

Pension and OPEB liability adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

(8

)

Interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22

)

 

 

(22

)

Issuance of common stock

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(196

)

 

 

 

 

 

(196

)

Dividends on common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(58

)

 

 

 

 

 

(58

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

239

 

 

 

 

 

 

239

 

Balance at September 30, 2020

 

$

1

 

 

$

 

 

$

 

 

$

1,812

 

 

$

(985

)

 

$

(82

)

 

$

746

 

Balance at December 31, 2020

 

$

1

 

 

$

 

 

$

 

 

$

1,818

 

 

$

(974

)

 

$

(89

)

 

$

756

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

11

 

Pension and OPEB liability adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

(5

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

(5

)

Interest rate swaps