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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, 2023

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/7b402339e7b3092d6cb0738620b6f33f-img105326217_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 17, 2023, there were 89,534,833 shares of Common Stock outstanding.

 


Table of Contents

 

INDEX

 

 

 

Page

 

PART I. FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

3

 

 

 

 

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

 

 

 

 

Notes to Condensed Consolidated Financial Statements

8

 

 

 

Item 2.

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

23

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36

 

 

 

Item 4.

Controls and Procedures

37

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

38

 

 

 

Item 1A.

Risk Factors

38

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

 

 

 

Item 5.

Other Information

39

 

 

 

Item 6.

Exhibits

40

 

 

 

 

Signatures

41

 

 

 

 

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,
2023

 

 

December 31,
2022

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

351

 

 

$

232

 

Accounts receivable – net of allowance for doubtful accounts of $6 and $5, respectively

 

 

381

 

 

 

363

 

Inventories

 

 

278

 

 

 

224

 

Other current assets

 

 

59

 

 

 

47

 

Total Current Assets

 

 

1,069

 

 

 

866

 

Property, plant and equipment, net

 

 

761

 

 

 

763

 

Intangible assets, net

 

 

855

 

 

 

878

 

Goodwill

 

 

2,076

 

 

 

2,075

 

Marketable securities

 

 

24

 

 

 

22

 

Other non-current assets

 

 

71

 

 

 

67

 

TOTAL ASSETS

 

$

4,856

 

 

$

4,671

 

LIABILITIES

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable

 

$

238

 

 

$

195

 

Product warranty liability

 

 

25

 

 

 

33

 

Current portion of long-term debt

 

 

6

 

 

 

6

 

Deferred revenue

 

 

46

 

 

 

38

 

Other current liabilities

 

 

182

 

 

 

208

 

Total Current Liabilities

 

 

497

 

 

 

480

 

Product warranty liability

 

 

35

 

 

 

24

 

Deferred revenue

 

 

93

 

 

 

93

 

Long-term debt

 

 

2,499

 

 

 

2,501

 

Deferred income taxes

 

 

517

 

 

 

536

 

Other non-current liabilities

 

 

159

 

 

 

163

 

TOTAL LIABILITIES

 

 

3,800

 

 

 

3,797

 

Commitments and contingencies (see Note P)

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Common stock, $0.01 par value, 1,880,000,000 shares authorized, 89,519,087 shares issued and outstanding and 91,788,885 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

 

 

1,868

 

 

 

1,848

 

Accumulated deficit

 

 

(788

)

 

 

(953

)

Accumulated other comprehensive loss, net of tax

 

 

(25

)

 

 

(22

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

1,056

 

 

 

874

 

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY

 

$

4,856

 

 

$

4,671

 

 

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,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net sales

 

$

783

 

 

$

664

 

 

$

1,524

 

 

$

1,341

 

Cost of sales

 

 

402

 

 

 

353

 

 

 

782

 

 

 

710

 

Gross profit

 

 

381

 

 

 

311

 

 

 

742

 

 

 

631

 

Selling, general and administrative

 

 

92

 

 

 

78

 

 

 

179

 

 

 

153

 

Engineering — research and development

 

 

47

 

 

 

46

 

 

 

91

 

 

 

89

 

Operating income

 

 

242

 

 

 

187

 

 

 

472

 

 

 

389

 

Interest expense, net

 

 

(28

)

 

 

(30

)

 

 

(56

)

 

 

(59

)

Other income (expense), net

 

 

2

 

 

 

(3

)

 

 

12

 

 

 

(13

)

Income before income taxes

 

 

216

 

 

 

154

 

 

 

428

 

 

 

317

 

Income tax expense

 

 

(41

)

 

 

(32

)

 

 

(83

)

 

 

(66

)

Net income

 

$

175

 

 

$

122

 

 

$

345

 

 

$

251

 

Basic earnings per share attributable to common stockholders

 

$

1.94

 

 

$

1.26

 

 

$

3.79

 

 

$

2.59

 

Diluted earnings per share attributable to common stockholders

 

$

1.92

 

 

$

1.26

 

 

$

3.75

 

 

$

2.56

 

Comprehensive income, net of tax

 

$

175

 

 

$

118

 

 

$

342

 

 

$

264

 

 

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,

 

 

 

2023

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

345

 

 

$

251

 

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

 

 

 

 

 

 

Depreciation of property, plant and equipment

 

 

53

 

 

 

53

 

Amortization of intangible assets

 

 

22

 

 

 

23

 

Deferred income taxes

 

 

(17

)

 

 

9

 

Stock-based compensation

 

 

11

 

 

 

9

 

Unrealized (gain) loss on marketable securities

 

 

(3

)

 

 

11

 

Technology-related investments gain

 

 

(3

)

 

 

(6

)

Loss on intercompany foreign exchange

 

 

 

 

 

3

 

Other

 

 

3

 

 

 

5

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(19

)

 

 

(70

)

Inventories

 

 

(55

)

 

 

(29

)

Accounts payable

 

 

34

 

 

 

17

 

Other assets and liabilities

 

 

(37

)

 

 

(50

)

Net cash provided by operating activities

 

 

334

 

 

 

226

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Additions of long-lived assets

 

 

(43

)

 

 

(50

)

Proceeds from technology-related investments

 

 

2

 

 

 

6

 

Business acquisitions

 

 

 

 

 

(23

)

Investment in equity method investee

 

 

 

 

 

(1

)

Net cash used for investing activities

 

 

(41

)

 

 

(68

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Repurchases of common stock

 

 

(137

)

 

 

(115

)

Dividend payments

 

 

(43

)

 

 

(41

)

Proceeds from exercise of stock options

 

 

14

 

 

 

1

 

Taxes paid related to net share settlement of equity awards

 

 

(5

)

 

 

(4

)

Payments on long-term debt

 

 

(3

)

 

 

(3

)

Payments on revolving credit facility

 

 

 

 

 

(95

)

Borrowings on revolving credit facility

 

 

 

 

 

95

 

Net cash used for financing activities

 

 

(174

)

 

 

(162

)

Effect of exchange rate changes on cash

 

 

 

 

 

(1

)

Net increase (decrease) in cash and cash equivalents

 

 

119

 

 

 

(5

)

Cash and cash equivalents at beginning of period

 

 

232

 

 

 

127

 

Cash and cash equivalents at end of period

 

$

351

 

 

$

122

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash paid during period for:

 

 

 

 

 

 

Income taxes

 

$

121

 

 

 

59

 

Interest

 

$

64

 

 

 

57

 

Non-cash investing activities:

 

 

 

 

 

 

Capital expenditures in liabilities

 

$

18

 

 

 

12

 

 

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, 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

 

Balance at March 31, 2023

 

$

1

 

 

$

 

 

$

 

 

$

1,857

 

 

$

(845

)

 

$

(25

)

 

$

988

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Pension and OPEB liability adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

(3

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

5

 

Issuance of common stock

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

5

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(97

)

 

 

 

 

 

(97

)

Dividends on common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21

)

 

 

 

 

 

(21

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

175

 

 

 

 

 

 

175

 

Balance at June 30, 2023

 

$

1

 

 

$

 

 

$

 

 

$

1,868

 

 

$

(788

)

 

$

(25

)

 

$

1,056

 

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, 2021

 

$

1

 

 

$ —

 

 

$ —

 

 

$

1,832

 

 

$

(1,126

)

 

$

(73

)

 

$

634

 

Stock-based compensation