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, 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)

 

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 13, 2022, there were 92,490,446 shares of Common Stock outstanding.

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 – 37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38 – 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	42
Item 6.	Exhibits	43
	Signatures	44

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)

	September 30, 2022			December 31, 2021
ASSETS
Current Assets
Cash and cash equivalents	$	180		$	127
Accounts receivable – net of allowances for doubtful accounts of $5 and $3, respectively		374			301
Inventories		223			204
Other current assets		61			39
Total Current Assets		838			671
Property, plant and equipment, net		711			706
Intangible assets, net		889			917
Goodwill		2,074			2,064
Marketable securities		22			46
Other non-current assets		59			53
TOTAL ASSETS	$	4,593		$	4,457
LIABILITIES
Current Liabilities
Accounts payable	$	227		$	179
Product warranty liability		26			33
Current portion of long-term debt		6			6
Deferred revenue		39			37
Other current liabilities		189			204
Total Current Liabilities		487			459
Product warranty liability		20			20
Deferred revenue		95			99
Long-term debt		2,502			2,504
Deferred income taxes		525			514
Other non-current liabilities		202			227
TOTAL LIABILITIES		3,831			3,823
Commitments and contingencies (see Note P)
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, 1,880,000,000 shares authorized, 93,480,956 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		1,843			1,832
Accumulated deficit		(1,021	)		(1,126	)
Accumulated other comprehensive loss, net of tax		(61	)		(73	)
TOTAL STOCKHOLDERS’ EQUITY		762			634
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	$	4,593		$	4,457

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)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net sales	$	710		$	567		$	2,051		$	1,758
Cost of sales		382			306			1,092			918
Gross profit		328			261			959			840
Selling, general and administrative		78			73			231			226
Engineering — research and development		47			42			136			121
Operating income		203			146			592			493
Interest expense, net		(29	)		(28	)		(88	)		(87	)
Other (expense) income, net		(15	)		6			(28	)		12
Income before income taxes		159			124			476			418
Income tax expense		(20	)		(30	)		(86	)		(94	)
Net income	$	139		$	94		$	390		$	324
Basic earnings per share attributable to common stockholders	$	1.46		$	0.89		$	4.02		$	2.97
Diluted earnings per share attributable to common stockholders	$	1.45		$	0.89		$	4.02		$	2.97
Comprehensive income, net of tax	$	138		$	92		$	402		$	328

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)

	Nine Months Ended September 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	390		$	324
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment		82			77
Amortization of intangible assets		35			35
Unrealized loss on marketable securities		20			—
Stock-based compensation		14			11
Technology-related investments gain		(6	)		(3	)
Loss on intercompany foreign exchange		5			—
Deferred income taxes		1			61
Other		5			2
Changes in assets and liabilities:
Accounts receivable		(89	)		(32	)
Inventories		(28	)		(38	)
Accounts payable		36			7
Other assets and liabilities		(32	)		23
Net cash provided by operating activities		433			467
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of long-lived assets		(75	)		(112	)
Business acquisitions		(23	)		—
Proceeds from technology-related investments		6			4
Loans to third parties		—			(11	)
Investment in equity method investee		(1	)		—
Net cash used for investing activities		(93	)		(119	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchases of common stock		(216	)		(326	)
Borrowings on revolving credit facility		95			—
Payments on revolving credit facility		(95	)		—
Dividend payments		(61	)		(62	)
Payments on long-term debt		(5	)		(5	)
Taxes paid related to net share settlement of equity awards		(4	)		(3	)
Proceeds from exercise of stock options		1			3
Payments of acquisition-related contingent liability		—			(3	)
Net cash used for financing activities		(285	)		(396	)
Effect of exchange rate changes on cash		(2	)		(1	)
Net increase (decrease) in cash and cash equivalents		53			(49	)
Cash and cash equivalents at beginning of period		127			310
Cash and cash equivalents at end of period	$	180		$	261
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for:
Income taxes	$	85		$	48
Interest	$	84		$	72
Non-cash investing activities:
Capital expenditures in liabilities	$	23		$	19

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)

	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, 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
Balance at June 30, 2022	$	1	$	—	$	—	$	1,839		$	(1,031	)	$	(60	)	$	749
Stock-based compensation		—		—		—		5			—			—			5
Pension and OPEB liability adjustment		—		—		—		—			—			(2	)		(2	)
Foreign currency translation adjustment		—		—		—		—			—			(12	)		(12	)
Interest rate swaps		—		—		—		—			—			13			13
Issuance of common stock		—		—		—		(1	)		—			—			(1	)
Repurchase of common stock		—		—		—		—			(109	)		—			(109	)
Dividends on common stock		—		—		—		—			(20	)		—			(20	)
Net income		—		—		—		—			139			—			139
Balance at September 30, 2022	$	1	$	—	$	—	$	1,843		$	(1,021	)	$	(61	)	$	762

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

6

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, 2020	$	1	$	—	$	—	$	1,818	$	(974	)	$	(89	)	$	756
Stock-based compensation		—		—		—		11