UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File No.
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification Number) |
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(Address of Principal Executive Offices) |
(Zip Code) |
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(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
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.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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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 April 13, 2023, there were
INDEX
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Item 1. |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 6. |
38 |
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39 |
2
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)
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March 31, |
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December 31, |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable – net of allowance for doubtful accounts of $ |
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Inventories |
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Other current assets |
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Total Current Assets |
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Property, plant and equipment, net |
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Intangible assets, net |
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Goodwill |
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Marketable securities |
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Other non-current assets |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES |
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Current Liabilities |
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Accounts payable |
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$ |
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$ |
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Product warranty liability |
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Current portion of long-term debt |
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Deferred revenue |
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Other current liabilities |
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Total Current Liabilities |
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Product warranty liability |
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Deferred revenue |
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Long-term debt |
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Deferred income taxes |
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Other non-current liabilities |
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TOTAL LIABILITIES |
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(see Note P) |
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STOCKHOLDERS’ EQUITY |
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Common stock, $ |
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Non-voting common stock, $ |
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Preferred stock, $ |
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Paid in capital |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive loss, net of tax |
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( |
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( |
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TOTAL STOCKHOLDERS’ EQUITY |
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TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY |
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$ |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
3
Allison Transmission Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Income
(unaudited, dollars in millions, except per share data)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Net sales |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Selling, general and administrative |
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Engineering — research and development |
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Operating income |
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Interest expense, net |
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( |
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Other income (expense), net |
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( |
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Income before income taxes |
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Income tax expense |
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( |
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( |
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Net income |
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$ |
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$ |
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Basic earnings per share attributable to common stockholders |
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$ |
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$ |
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Diluted earnings per share attributable to common stockholders |
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$ |
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$ |
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Comprehensive income, net of tax |
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$ |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
4
Allison Transmission Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited, dollars in millions)
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Three Months Ended March 31, |
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2023 |
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2022 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation of property, plant and equipment |
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Amortization of intangible assets |
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Deferred income taxes |
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Stock-based compensation |
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Unrealized (gain) loss on marketable securities |
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( |
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Technology-related investments gain |
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( |
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( |
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Other |
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Changes in assets and liabilities: |
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Accounts receivable |
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( |
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( |
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Inventories |
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( |
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Accounts payable |
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Other assets and liabilities |
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( |
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Net cash provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Additions of long-lived assets |
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( |
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Proceeds from technology-related investments |
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Business acquisitions |
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( |
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Investment in equity method investee |
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( |
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Net cash used for investing activities |
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( |
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( |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Repurchases of common stock |
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( |
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( |
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Dividend payments |
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Proceeds from exercise of stock options |
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Taxes paid related to net share settlement of equity awards |
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( |
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( |
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Payments on long-term debt |
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( |
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( |
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Borrowings on revolving credit facility |
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Payments on revolving credit facility |
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( |
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Net cash used for financing activities |
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( |
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( |
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Effect of exchange rate changes on cash |
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Net increase in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
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Cash paid during period for: |
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Interest |
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$ |
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Income taxes |
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$ |
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Non-cash investing activities: |
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Capital expenditures in liabilities |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
5
Allison Transmission Holdings, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited, dollars in millions)
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Three months ended |
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Common Stock |
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Non-voting Common Stock |
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Preferred Stock |
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Paid-in Capital |
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Accumulated (Deficit) Income |
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Accumulated Other Comprehensive (Loss) Income, net of tax |
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Stockholders' Equity |
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Balance at December 31, 2021 |
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$ |
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$ |
— |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Pension and OPEB liability adjustment |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Interest rate swaps |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Repurchase of common stock |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Dividends on common stock |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Balance at March 31, 2022 |
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$ |
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$ |
— |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Balance at December 31, 2022 |
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$ |
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$ |
— |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Pension and OPEB liability adjustment |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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— |
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Interest rate swaps |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Issuance of common stock |
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— |
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— |
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— |
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— |
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— |
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Repurchase of common stock |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Dividends on common stock |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Balance at March 31, 2023 |
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$ |
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$ |
— |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
6
Allison Transmission Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(UNAUDITED)
NOTE A. OVERVIEW
Overview
Allison Transmission Holdings, Inc. and its subsidiaries (“Allison” or the “Company”) design and manufacture vehicle propulsion solutions, including commercial-duty on-highway, off-highway and defense fully automatic transmissions and electric hybrid and fully electric systems. The business was founded in 1915 and has been headquartered in Indianapolis, Indiana since inception. Allison is traded on the New York Stock Exchange under the symbol, “ALSN”.
Although approximately
NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The condensed consolidated financial statements have been prepared in accordance with accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the condensed consolidated financial statements do not include all information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. The information herein reflects all normal recurring material adjustments, which are, in the opinion of management, necessary for the fair statement of the results for the periods presented. The condensed consolidated financial statements herein consist of all wholly-owned domestic and foreign subsidiaries with all significant intercompany transactions eliminated.
7
These condensed consolidated financial statements present the financial position, results of comprehensive income, cash flows and statements of stockholders’ equity of the Company. Certain immaterial reclassifications have been made in the condensed consolidated financial statements of prior periods to conform to the current period presentation. These reclassifications had no material impact on previously reported net income, total stockholders’ equity or cash flows. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on February 16, 2023. The interim period financial results for the three-month periods presented are not necessarily indicative of results to be expected for any other interim period or for the entire year.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses. Estimates include, but are not limited to, sales incentives, government price adjustments, fair market values and future cash flows associated with goodwill, indefinite-lived intangibles, definite-lived intangibles, long-lived asset impairment tests, useful lives for depreciation and amortization, warranty liabilities, core deposit liabilities, environmental liabilities, determination of discount rate and other assumptions for pension and other post-retirement benefit ("OPEB") expense, determination of discount rate and period for leases, income taxes and deferred tax valuation allowances, derivative valuation, assumptions for business combinations and contingencies. The Company’s accounting policies involve the application of judgments and assumptions made by management that include inherent risks and uncertainties. Due to the uncertainty surrounding global economic conditions, including as a result of government actions to control inflation, the war in Ukraine and the ongoing effects of the COVID-19 pandemic, and the resulting impacts on the Company's supply chain, demand for its products, foreign exchange rates, interest rates and the cost and availability of raw materials, labor, energy and transport, actual results could differ materially from these estimates and assumptions used in preparation of the financial statements including, but not limited to, future cash flows associated with goodwill, indefinite-lived intangibles, definite-lived intangibles, long-lived asset impairment tests, determination of discount rate and other assumptions for pension and OPEB expense and income taxes. Changes in estimates are recorded in results of operations in the period that the events or circumstances giving rise to such changes occur.
8
NOTE C. REVENUE
Revenue is recognized as each distinct performance obligation within a contract is satisfied. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. The Company enters into long-term agreements (“LTAs”) and distributor agreements with certain customers. The LTAs and distributor agreements do not include committed volumes until underlying purchase orders are issued; therefore, the Company determined that purchase orders are the contract with a customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when the performance obligation is satisfied, as there is no right of return.
Some of the Company's contracts include multiple performance obligations, most commonly the sale of both a transmission and extended transmission coverage ("ETC"). The Company allocates the contract’s transaction price to each performance obligation based on the standalone selling price of each distinct good or service in the contract.
The Company may also use volume-based discounts and rebates as marketing incentives in the sales of both vehicle propulsion solutions and service parts, which are accounted for as variable consideration. The Company records the impact of the incentives as a reduction to revenue when it is determined that the adjustment is not likely to reverse, historically on a quarterly basis. The Company estimates the impact of all other incentives based on the related sales and market conditions in the end market vocation. The Company recorded
Net sales are made on credit terms, generally
The Company has
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Three Months Ended March 31, |
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2023 |
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2022 |
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North America On-Highway |
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$ |
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$ |
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North America Off-Highway |
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Defense |
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Outside North America On-Highway |
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Outside North America Off-Highway |
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Service Parts, Support Equipment and Other |
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Total Net Sales |
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$ |
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$ |
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9
NOTE D. INVENTORIES
Inventories consisted of the following components (dollars in millions):
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March 31, |
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December 31, |
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Purchased parts and raw materials |
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$ |
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$ |
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Work in progress |
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Service parts |
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Finished goods |
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Total inventories |
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$ |
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$ |
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Inventory components shipped to third parties, primarily cores, parts to re-manufacturers, and parts to contract manufacturers, which the Company has an obligation to buy back, are included in purchased parts and raw materials, with an offsetting liability in Other current liabilities. See "Note L. Other Current Liabilities” for more information.
NOTE E. GOODWILL AND OTHER INTANGIBLE ASSETS
As of both March 31, 2023 and December 31, 2022, the carrying value of the Company’s Goodwill was $
The following presents a summary of other intangible assets (dollars in millions):
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March 31, 2023 |
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December 31, 2022 |
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Intangible |
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Accumulated |
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Intangible |
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Intangible |
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Accumulated |
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Intangible |
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Other intangible assets: |
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|
|
||||||
Trade name |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
In-process research and development |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Customer relationships — commercial |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Proprietary technology |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Customer relationships — defense |
|
|
|
|
|
( |
) |
|
|
|
||||||||||||||