10-Q
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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 June 30, 2022

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)

 

https://cdn.kscope.io/6ee827b7e442d5be90d399f76cd86e17-img104402696_0.jpg 

 

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). YesNo

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). YesNo

As of July 25, 2022, there were 96,244,657 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 – 22

 

 

 

Item 2.

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

23 – 35

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36 – 37

 

 

 

Item 4.

Controls and Procedures

38

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

39

 

 

 

Item 1A.

Risk Factors

39

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

 

 

 

Item 6.

Exhibits

41

 

 

 

 

Signatures

42

 

 

 

 

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)

 

 

 

June 30,
2022

 

 

December 31,
2021

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

122

 

 

$

127

 

Accounts receivable – net of allowances for doubtful accounts of $5 and $3, respectively

 

 

363

 

 

 

301

 

Inventories

 

 

228

 

 

 

204

 

Other current assets

 

 

52

 

 

 

39

 

Total Current Assets

 

 

765

 

 

 

671

 

Property, plant and equipment, net

 

 

705

 

 

 

706

 

Intangible assets, net

 

 

901

 

 

 

917

 

Goodwill

 

 

2,076

 

 

 

2,064

 

Marketable securities

 

 

33

 

 

 

46

 

Other non-current assets

 

 

54

 

 

 

53

 

TOTAL ASSETS

 

$

4,534

 

 

$

4,457

 

LIABILITIES

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable

 

$

198

 

 

$

179

 

Product warranty liability

 

 

28

 

 

 

33

 

Current portion of long-term debt

 

 

6

 

 

 

6

 

Deferred revenue

 

 

39

 

 

 

37

 

Other current liabilities

 

 

160

 

 

 

204

 

Total Current Liabilities

 

 

431

 

 

 

459

 

Product warranty liability

 

 

25

 

 

 

20

 

Deferred revenue

 

 

96

 

 

 

99

 

Long-term debt

 

 

2,502

 

 

 

2,504

 

Deferred income taxes

 

 

530

 

 

 

514

 

Other non-current liabilities

 

 

201

 

 

 

227

 

TOTAL LIABILITIES

 

 

3,785

 

 

 

3,823

 

Commitments and contingencies (see Note P)

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Common stock, $0.01 par value, 1,880,000,000 shares authorized, 96,325,571 shares issued and outstanding and 99,262,951 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

 

 

1,839

 

 

 

1,832

 

Accumulated deficit

 

 

(1,031

)

 

 

(1,126

)

Accumulated other comprehensive loss, net of tax

 

 

(60

)

 

 

(73

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

749

 

 

 

634

 

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY

 

$

4,534

 

 

$

4,457

 

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net sales

 

$

664

 

 

$

603

 

 

$

1,341

 

 

$

1,191

 

Cost of sales

 

 

353

 

 

 

315

 

 

 

710

 

 

 

612

 

Gross profit

 

 

311

 

 

 

288

 

 

 

631

 

 

 

579

 

Selling, general and administrative

 

 

78

 

 

 

80

 

 

 

153

 

 

 

153

 

Engineering — research and development

 

 

46

 

 

 

41

 

 

 

89

 

 

 

79

 

Operating income

 

 

187

 

 

 

167

 

 

 

389

 

 

 

347

 

Interest expense, net

 

 

(30

)

 

 

(30

)

 

 

(59

)

 

 

(59

)

Other (expense) income, net

 

 

(3

)

 

 

3

 

 

 

(13

)

 

 

6

 

Income before income taxes

 

 

154

 

 

 

140

 

 

 

317

 

 

 

294

 

Income tax expense

 

 

(32

)

 

 

(30

)

 

 

(66

)

 

 

(64

)

Net income

 

$

122

 

 

$

110

 

 

$

251

 

 

$

230

 

Basic earnings per share attributable to common stockholders

 

$

1.26

 

 

$

1.01

 

 

$

2.59

 

 

$

2.09

 

Diluted earnings per share attributable to common stockholders

 

$

1.26

 

 

$

1.01

 

 

$

2.56

 

 

$

2.07

 

Comprehensive income, net of tax

 

$

118

 

 

$

113

 

 

$

264

 

 

$

236

 

 

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)

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

251

 

 

$

230

 

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

 

 

 

 

 

 

Depreciation of property, plant and equipment

 

 

53

 

 

 

51

 

Amortization of intangible assets

 

 

23

 

 

 

23

 

Unrealized loss on marketable securities

 

 

11

 

 

 

 

Stock-based compensation

 

 

9

 

 

 

8

 

Deferred income taxes

 

 

9

 

 

 

29

 

Technology-related investments gain

 

 

(6

)

 

 

 

Loss on intercompany foreign exchange

 

 

3

 

 

 

1

 

Other

 

 

5

 

 

 

1

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(70

)

 

 

(73

)

Inventories

 

 

(29

)

 

 

(26

)

Accounts payable

 

 

17

 

 

 

2

 

Other assets and liabilities

 

 

(47

)

 

 

25

 

Net cash provided by operating activities

 

 

229

 

 

 

271

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Additions of long-lived assets

 

 

(50

)

 

 

(69

)

Business acquisitions

 

 

(23

)

 

 

 

Proceeds from technology-related investments

 

 

6

 

 

 

 

Investment in equity method investee

 

 

(1

)

 

 

 

Net cash used for investing activities

 

 

(68

)

 

 

(69

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Repurchases of common stock

 

 

(115

)

 

 

(226

)

Borrowings on revolving credit facility

 

 

95

 

 

 

 

Payments on revolving credit facility

 

 

(95

)

 

 

 

Dividend payments

 

 

(41

)

 

 

(42

)

Taxes paid related to net share settlement of equity awards

 

 

(4

)

 

 

(3

)

Payments on long-term debt

 

 

(3

)

 

 

(3

)

Proceeds from exercise of stock options

 

 

1

 

 

 

3

 

Payments of acquisition-related contingent liability

 

 

 

 

 

(3

)

Net cash used for financing activities

 

 

(162

)

 

 

(274

)

Effect of exchange rate changes on cash

 

 

(4

)

 

 

 

Net decrease in cash and cash equivalents

 

 

(5

)

 

 

(72

)

Cash and cash equivalents at beginning of period

 

 

127

 

 

 

310

 

Cash and cash equivalents at end of period

 

$

122

 

 

$

238

 

Supplemental disclosures:

 

 

 

 

 

 

Interest paid

 

$

57

 

 

$

38

 

Income taxes paid

 

$

59

 

 

$

45

 

 

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 March 31, 2021

 

$

1

 

 

$

 

 

$

 

 

$

1,820

 

 

$

(971

)

 

$

(86

)

 

$

764

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

5

 

Pension and OPEB liability adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

4

 

Interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

1

 

Issuance of common stock

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(130

)

 

 

 

 

 

(130

)

Dividends on common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21

)

 

 

 

 

 

(21

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

110

 

 

 

 

 

 

110

 

Balance at June 30, 2021

 

$

1

 

 

$

 

 

$

 

 

$

1,826

 

 

$

(1,012

)

 

$

(83

)

 

$

732

 

Balance at March 31, 2022

 

$

1

 

 

$

 

 

$

 

 

$

1,832

 

 

$

(1,098

)

 

$

(56

)

 

$

679

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Pension and OPEB liability adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

(8

)

Interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

6

 

Issuance of common stock

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(34

)

 

 

 

 

 

(34

)

Dividends on common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21

)

 

 

 

 

 

(21

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

122

 

 

 

 

 

 

122

 

Balance at June 30, 2022

 

$

1

 

 

$

 

 

$

 

 

$

1,839

 

 

$

(1,031

)

 

$

(60

)

 

$

749

 

 

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

6


Table of Contents

 

 

 

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, 2020

 

$

1

 

 

$

 

 

$

 

 

$

1,818

 

 

$

(974

)

 

$

(89

)

 

$

756

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

8

 

Pension and OPEB liability adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4

)

 

 

(4

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

 

 

 

12

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(226

)

 

 

 

 

 

(