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, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 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 16, 2024, there were 86,622,825 shares of Common Stock outstanding.

TABLE OF CONTENTS

		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	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	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	39
Item 5.	Other Information	40
Item 6.	Exhibits	41
	Signatures	42

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, 2024			December 31, 2023
ASSETS
Current Assets
Cash and cash equivalents	$	788		$	555
Accounts receivable – net of allowance for doubtful accounts of $2 and $4, respectively		393			356
Inventories		326			276
Other current assets		85			63
Total Current Assets		1,592			1,250
Marketable securities		13			20
Property, plant and equipment, net		780			774
Intangible assets, net		825			833
Goodwill		2,076			2,076
Other non-current assets		82			72
TOTAL ASSETS	$	5,368		$	5,025
LIABILITIES
Current Liabilities
Accounts payable	$	272		$	210
Product warranty liability		29			32
Current portion of long-term debt		5			6
Deferred revenue		45			41
Other current liabilities		212			212
Total Current Liabilities		563			501
Product warranty liability		32			27
Deferred revenue		93			89
Long-term debt		2,396			2,497
Deferred income taxes		505			519
Other non-current liabilities		158			159
TOTAL LIABILITIES		3,747			3,792
Commitments and contingencies (see Note P)
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, 1,880,000,000 shares authorized, 86,743,980 shares issued and outstanding and 87,648,046 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		1,930			1,891
Accumulated deficit		(272	)		(628	)
Accumulated other comprehensive loss, net of tax		(38	)		(31	)
TOTAL STOCKHOLDERS’ EQUITY		1,621			1,233
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	$	5,368		$	5,025

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,
	2024			2023			2024			2023
Net sales	$	824		$	736		$	2,429		$	2,260
Cost of sales		428			379			1,273			1,161
Gross profit		396			357			1,156			1,099
Selling, general and administrative		85			86			253			265
Engineering — research and development		51			49			146			140
Operating income		260			222			757			694
Interest expense, net		(21	)		(27	)		(68	)		(83	)
Other income (expense), net		10			(2	)		(2	)		10
Income before income taxes		249			193			687			621
Income tax expense		(49	)		(35	)		(131	)		(118	)
Net income	$	200		$	158		$	556		$	503
Basic earnings per share attributable to common stockholders	$	2.30		$	1.76		$	6.39		$	5.53
Diluted earnings per share attributable to common stockholders	$	2.27		$	1.76		$	6.32		$	5.53
Comprehensive income, net of tax	$	199		$	151		$	549		$	493

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,
	2024			2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	556		$	503
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment		82			81
Stock-based compensation		20			17
Deferred income taxes		(12	)		(22	)
Amortization of intangible assets		8			33
Unrealized loss (gain) on marketable securities		8			(1	)
Pension plan settlement loss		4			—
Technology-related investments loss (gain)		1			(3	)
Other		4			4
Changes in assets and liabilities:
Accounts receivable		(36	)		(12	)
Inventories		(50	)		(60	)
Accounts payable		36			34
Other assets and liabilities		(31	)		(28	)
Net cash provided by operating activities		590			546
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of long-lived assets		(68	)		(73	)
Investment in equity method investee		(4	)		—
Proceeds from sale of assets		4			—
Investment in equities without a readily determinable fair value		(2	)		—
Proceeds from technology-related investments		—			2
Net cash used for investing activities		(70	)		(71	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchases of common stock		(133	)		(157	)
Payments on long-term debt		(103	)		(5	)
Dividend payments		(66	)		(63	)
Proceeds from exercise of stock options		28			27
Taxes paid related to net share settlement of equity awards		(9	)		(7	)
Debt financing fees		(4	)		—
Net cash used for financing activities		(287	)		(205	)
Effect of exchange rate changes on cash		—			(1	)
Net increase in cash and cash equivalents		233			269
Cash and cash equivalents at beginning of period		555			232
Cash and cash equivalents at end of period	$	788		$	501
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income taxes paid	$	(150	)	$	(164	)
Interest paid	$	(91	)	$	(95	)
Interest received from interest rate swaps	$	10		$	8
Non-cash investing activities:
Capital expenditures in liabilities	$	30		$	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, 2023	$	1	$	—	$	—	$	1,868	$	(788	)	$	(25	)	$	1,056
Stock-based compensation		—		—		—		6		—			—			6
Pension and OPEB liability adjustment		—		—		—		—		—			(2	)		(2	)
Foreign currency translation adjustment		—		—		—		—		—			(5	)		(5	)
Issuance of common stock		—		—		—		11		—			—			11
Repurchase of common stock		—		—		—		—		(20	)		—			(20	)
Dividends on common stock		—		—		—		—		(20	)		—			(20	)
Net income		—		—		—		—		158			—			158
Balance at September 30, 2023	$	1	$	—	$	—	$	1,885	$	(670	)	$	(32	)	$	1,184
Balance at June 30, 2024	$	1	$	—	$	—	$	1,919	$	(399	)	$	(37	)	$	1,484
Stock-based compensation		—		—		—		6		—			—			6
Pension and OPEB liability adjustment		—		—		—		—		—			(3	)		(3	)
Foreign currency translation adjustment		—		—		—		—		—			8			8
Interest rate swaps		—		—		—		—		—			(6	)		(6	)
Issuance of common stock		—		—		—		5		—			—			5
Repurchase of common stock		—		—		—		—		(51	)		—			(51	)
Dividends on common stock		—		—		—		—		(22	)		—			(22	)
Net income		—		—		—		—		200			—			200
Balance at September 30, 2024	$	1	$	—	$	—	$	1,930	$	(272	)	$	(38	)	$	1,621

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

6

	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, 2022	$	1	$	—	$	—	$	1,848	$	(953	)	$	(22	)	$	874
Stock-based compensation		—		—		—		17		—			—			17
Pension and OPEB liability adjustment		—		—		—		—		—			(7	)		(7	)
Foreign currency translation adjustment		—		—		—		—		—			(5	)		(5	)
Interest rate swaps		—		—		—		—		—			2			2
Issuance of common stock		—		—		—		20		—			—			20
Repurchase of common stock		—		—		—		—		(157	)		—			(157	)
Dividends on common stock		—		—		—		—		(63	)		—			(63	)
Net income		—		—		—		—		503			—			503
Balance at September 30, 2023	$	1	$	—	$	—	$	1,885	$	(670	)	$	(32	)	$	1,184
Balance at December 31, 2023	$	1	$	—	$	—	$	1,891	$	(628	)	$	(31	)	$	1,233
Stock-based compensation		—		—		—		20		—			—			20
Pension and OPEB liability adjustment		—		—		—		—		—			(2	)		(2	)
Foreign currency translation adjustment		—		—		—		—		—			1			1
Interest rate swaps		—		—		—		—		—			(6	)		(6	)
Issuance of common stock		—		—		—		19		—			—			19
Repurchase of common stock		—		—		—		—		(134	)		—			(134	)
Dividends on common stock		—		—		—		—		(66	)		—			(66	)
Net income		—		—		—		—		556			—			556
Balance at September 30, 2024	$	1	$	—	$	—	$	1,930	$	(272	)	$	(38	)	$	1,621

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

7

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”.

The Company has a global presence by serving customers in North America, Asia, Europe, South America, and Africa, with approximately 75% of its revenues being generated in North America in 2023. The Company serves customers through an independent network of approximately 1,600 independent distributor and dealer locations worldwide.

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.

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, 2023 as filed with the Securities and Exchange Commission on February 14, 2024. The interim period financial results for the three- and nine-month periods presented are not necessarily indicative of results to be expected for any other interim period or for the entire year.

8

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, determination of discount rate and other assumptions for pension and other post-retirement benefit ("OPEB") expense, 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. Actual results could differ materially from these estimates and from the assumptions used in the preparation of the Company's financial statements. Changes in estimates are recorded in results of operations in the period that the events or circumstances giving rise to such changes occur.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board ("FASB") issued authoritative accounting guidance expanding public entities’ reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses that are regularly reviewed by the Chief Operating Decision Maker and included within each reported measure of segment profit or loss. The guidance will become effective for the Company starting with its fiscal year ending December 31, 2024 and the subsequent interim periods. The guidance will be applied retrospectively, and the Company does not plan to early adopt. Management is currently evaluating the impact of this guidance on the Company's consolidated financial statements.

In December 2023, the FASB issued authoritative accounting guidance to improve income tax disclosures by requiring disaggregated information about a reporting entity's effective tax rate reconciliation and information on income taxes paid. The guidance will become effective for the Company beginning with its fiscal year ending December 31, 2025. The guidance will be applied prospectively with the option to apply it retrospectively. Management is currently evaluating the impact of this guidance on the Company's consolidated financial statements.

All other recently issued accounting pronouncements were assessed as either not applicable to the Company or were not expected to have a material impact on the Company's condensed consolidated financial statements.

9

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. 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 no material adjustments based on variable consideration during any of the three or nine months ended September 30, 2024 or 2023.

Net sales are made on credit terms, generally 30 days, based on an assessment of the customer’s creditworthiness. For certain goods or services, the Company receives consideration prior to satisfying the related performance obligation. Such consideration is recorded as a contract liability in current and non-current deferred revenue as of September 30, 2024 and December 31, 2023. See "Note J. Deferred Revenue” for more information, including the amount of revenue earned during each of the three and nine months ended September 30, 2024 and 2023 that had been previously deferred. The Company had no material contract assets as of either September 30, 2024 or December 31, 2023.

The Company has one operating segment and reportable segment. The Company is in one line of business, which is the design, manufacture and distribution of vehicle propulsion solutions. The following presents disaggregated revenue by categories that best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors (dollars in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
North America On-Highway	$	457	$	376	$	1,333	$	1,149
North America Off-Highway		1		9		6		58
Defense		53		43		144		103
Outside North America On-Highway		126		118		369		349
Outside North America Off-Highway		19		19		83		66
Service Parts, Support Equipment and Other		168		171		494		535
Total Net Sales	$	824	$	736	$	2,429	$	2,260

10

NOTE D. INVENTORIES

Inventories consisted of the following components (dollars in millions):

	September 30, 2024		December 31, 2023
Purchased parts and raw materials	$	153	$	152
Work in progress		20		17
Finished goods		94		53
Service parts		59		54
Total inventories	$	326	$	276

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 September 30, 2024 and December 31, 2023, the carrying value of the Company’s Goodwill was $2,076 million.

The following presents a summary of other intangible assets (dollars in millions):

	September 30, 2024							December 31, 2023
	Intangible assets, gross		Accumulated amortization			Intangible assets, net		Intangible assets, gross		Accumulated amortization			Intangible assets, net
Other intangible assets:
Trade name	$	791	$	—		$	791	$	791	$	—		$	791
In-process research and development		1		—			1		25		—			25
Customer relationships — commercial		839		(837	)		2		839		(833	)		6
Proprietary technology		508		(481	)		27		484		(479	)		5
Customer relationships — defense		62		(58	)		4		62		(56	)		6
Non-compete agreement		1		(1	)		—		1		(1	)