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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

☐	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.

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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

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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.

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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.

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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.

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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.

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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		—		—		—		—			—			14			14
Repurchase of common stock		—		—		—		—			(326	)		—			(326	)
Dividends on common stock		—		—		—		—			(62	)		—			(62