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)

 

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 July 17, 2023, there were 89,534,833 shares of Common Stock outstanding.

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

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

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

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

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

	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		—		—		—		9	—			—				9
Pension and OPEB liability adjustment		—		—		—	—		—				(4	)		(4	)
Foreign currency translation adjustment		—		—		—	—		—				(8	)		(8	)
Interest rate swaps		—