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, 2021

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 15, 2021, there were 105,755,046 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
Item 4.	Controls and Procedures	39
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	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)

	June 30, 2021			December 31, 2020
ASSETS
Current Assets
Cash and cash equivalents	$	238		$	310
Accounts receivable – net of allowances for doubtful accounts of $2 and $1, respectively		299			228
Inventories		206			181
Other current assets		55			37
Total Current Assets		798			756
Property, plant and equipment, net		665			638
Intangible assets, net		940			963
Goodwill		2,064			2,064
Other non-current assets		55			56
TOTAL ASSETS	$	4,522		$	4,477
LIABILITIES
Current Liabilities
Accounts payable	$	167		$	157
Product warranty liability		29			36
Current portion of long-term debt		6			6
Deferred revenue		39			34
Other current liabilities		188			140
Total Current Liabilities		429			373
Product warranty liability		31			30
Deferred revenue		103			109
Long-term debt		2,505			2,507
Deferred income taxes		473			442
Other non-current liabilities		249			260
TOTAL LIABILITIES		3,790			3,721
Commitments and contingencies (see NOTE P)
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, 1,880,000,000 shares authorized, 107,158,758 shares issued and outstanding and 112,033,477 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		1,826			1,818
Accumulated deficit		(1,012	)		(974	)
Accumulated other comprehensive loss, net of tax		(83	)		(89	)
TOTAL STOCKHOLDERS’ EQUITY		732			756
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	$	4,522		$	4,477

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,
	2021			2020			2021			2020
Net sales	$	603		$	377		$	1,191		$	1,014
Cost of sales		315			212			612			523
Gross profit		288			165			579			491
Selling, general and administrative		80			69			153			144
Engineering — research and development		41			38			79			74
Operating income		167			58			347			273
Interest expense, net		(30	)		(33	)		(59	)		(66	)
Other income, net		3			5			6			4
Income before income taxes		140			30			294			211
Income tax expense		(30	)		(7	)		(64	)		(49	)
Net income	$	110		$	23		$	230		$	162
Basic earnings per share attributable to common stockholders	$	1.01		$	0.20		$	2.09		$	1.42
Diluted earnings per share attributable to common stockholders	$	1.01		$	0.20		$	2.07		$	1.41
Comprehensive income, net of tax	$	113		$	19		$	236		$	129

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,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	230		$	162
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment		51			46
Deferred income taxes		29			43
Amortization of intangible assets		23			29
Stock-based compensation		8			5
Amortization of deferred financing costs		1			2
Other		1			3
Changes in assets and liabilities:
Accounts receivable		(73	)		39
Inventories		(26	)		(3	)
Accounts payable		2			(33	)
Other assets and liabilities		25			(53	)
Net cash provided by operating activities		271			240
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of long-lived assets		(69	)		(49	)
Business acquisitions		—			4
Net cash used for investing activities		(69	)		(45	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchases of common stock		(226	)		(180	)
Dividend payments		(42	)		(39	)
Payments on long-term debt		(3	)		(3	)
Payment of acquisition-related contingent liability		(3	)		(3	)
Taxes paid related to net share settlement of equity awards		(3	)		(2	)
Proceeds from exercise of stock options		3			1
Borrowings on revolving credit facility		—			800
Payments on revolving credit facility		—			(525	)
Net cash (used for) provided by financing activities		(274	)		49
Effect of exchange rate changes on cash		—			(2	)
Net (decrease) increase in cash and cash equivalents		(72	)		242
Cash and cash equivalents at beginning of period		310			192
Cash and cash equivalents at end of period	$	238		$	434
Supplemental disclosures:
Interest paid	$	38		$	65
Income taxes paid	$	45		$	8

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, 2020	$	1	$	—	$	—	$	1,804	$	(1,031	)	$	(81	)	$	693
Stock-based compensation		—		—		—		2		—			—			2
Pension and OPEB liability adjustment		—		—		—		—		—			(2	)		(2	)
Interest rate swaps		—		—		—		—		—			(2	)		(2	)
Dividends on common stock		—		—		—		—		(19	)		—			(19	)
Net income		—		—		—		—		23			—			23
Balance at June 30, 2020	$	1	$	—	$	—	$	1,806	$	(1,027	)	$	(85	)	$	695
Balance at March 31, 2021	$	1	$	—	$	—	$	1,820	$	(971	)	$	(86	)	$	764
Stock-based compensation		—		—		—		5		—			—			5
Pension and OPEB liability adjustment		—		—		—		—		—			(2	)		(2	)
Foreign currency translation adjustment		—		—		—		—		—			4			4
Interest rate swaps		—		—		—		—		—			1			1
Issuance of common stock		—		—		—		1		—			—			1
Repurchase of common stock		—		—		—		—		(130	)		—			(130	)
Dividends on common stock		—		—		—		—		(21	)		—			(21	)
Net income		—		—		—		—		110			—			110
Balance at June 30, 2021	$	1	$	—	$	—	$	1,826	$	(1,012	)	$	(83	)	$	732

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)

	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, 2019	$	1	$	—	$	—	$	1,802		$	(970	)	$	(52	)	$	781
Stock-based compensation		—		—		—		5			—			—			5
Pension and OPEB liability adjustment		—		—		—		—			—			(6	)		(6	)
Foreign currency translation adjustment		—		—		—		—			—			(2	)		(2	)
Interest rate swaps		—		—		—		—			—			(25	)		(25	)
Issuance of common stock		—		—		—		(1	)		—			—			(1	)
Repurchase of common stock		—		—		—		—			(180	)		—			(180	)
Dividends on common stock		—		—		—		—			(39	)		—			(39	)
Net income		—		—		—		—			162			—			162
Balance at June 30, 2020	$	1	$	—	$	—	$	1,806		$	(1,027	)	$	(85	)	$	695
Balance at December 31, 2020	$	1	$	—	$	—	$	1,818		$	(974	)	$	(89	)	$	756
Stock-based compensation		—		—		—		8			—			—			8
Pension and OPEB liability adjustment		—		—		—		—			—			(4	)		(4	)
Foreign currency translation adjustment		—		—		—		—			—			(2	)		(2	)
Interest rate swaps		—		—		—		—			—			12			12
Repurchase of common stock		—		—		—		—			(226	)		—			(226	)
Dividends on common stock		—		—		—		—			(42	)		—			(42	)
Net income		—		—		—		—			230			—			230
Balance at June 30, 2021	$	1	$	—	$	—	$	1,826