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What changed in Allison Transmission Holdings Inc's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Allison Transmission Holdings Inc's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+313 added−242 removedSource: 10-K (2026-02-24) vs 10-K (2025-02-13)

Top changes in Allison Transmission Holdings Inc's 2025 10-K

313 paragraphs added · 242 removed · 220 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

56 edited+18 added−5 removed44 unchanged
Biggest changeSales and Marketing Organization Our sales and marketing effort is organized along geographic and customer lines and is comprised of marketing, sales and service professionals, supported by customer integration engineers worldwide. In North America, selling efforts in the on-highway end market are organized by distributor area responsibility, OEM sales and, for our large end users, national accounts.
Biggest changeIn North America, selling efforts in the on-highway end market are organized by distributor area responsibility, OEM sales and, for our large end users, national accounts. Outside North America, we manage our sales, marketing, service and customer integration engineering professionals through regional areas of responsibility. These regional management teams distribute OEM service and customer integration engineering resources globally.
Today, we sell substantially all of the propulsion solutions for medium- and heavy-tactical wheeled vehicles used by the U.S. military, including the Joint Light Tactical Vehicle, Light Armored Vehicle, Stryker Armored Vehicle, the Family of Medium Tactical Vehicles, Heavy Expanded Mobility Tactical Trucks, Palletized Loading Systems, Heavy Dump Trucks and Heavy Equipment Transporters.
Today, we sell substantially all of the propulsion solutions for medium- and heavy-tactical wheeled vehicles used by the U.S. military, including the Joint Light Tactical Vehicle, Stryker Armored Vehicle, the Family of Medium Tactical Vehicles, Heavy Expanded Mobility Tactical Trucks, Palletized Loading Systems, Heavy Dump Trucks and Heavy Equipment Transporters.
Globally, we face competition primarily from Renk AG/Renk America, SAPA S.p.A, ST Kinetics and QinetiQ Group plc for the supply of tracked vehicle propulsion solutions. Additionally, we face competition from ZF in certain defense wheeled vehicles using automatic transmissions and from several AMT suppliers.
Globally, we face competition primarily from QinetiQ Group plc, Renk AG/Renk America, SAPA S.p.A and ST Kinetics for the supply of tracked vehicle propulsion solutions. Additionally, we face competition from ZF in certain defense wheeled vehicles using automatic transmissions and from several AMT suppliers.
The process is interactive, as Allison representatives, Allison distributors, OEMs and dealers educate customers and respond to the specific applications, requirements and needs of numerous specialty markets. Similarly, we work with customers, dealers and OEMs to educate, improve and simplify how they specify vehicles and vehicle systems in order to optimize vehicle performance and fuel consumption.
The process is interactive, as Allison representatives, Allison distributors, OEMs and dealers educate customers and respond to the specific applications, requirements and needs of numerous specialty markets. Similarly, we work with customers, dealers and OEMs to educate, improve and simplify how they specify vehicles and certain systems in order to optimize vehicle performance and fuel consumption.
Despite their propulsion solutions manufacturing capabilities, we believe that our existing OEM customers have chosen to purchase certain propulsion solutions from us due to the quality, reliability and strong brand of our propulsion solutions and in order to limit fixed costs, minimize production risks and maintain company focus on commercial vehicle design, production and marketing. 15 Table of Contents Corporate Information Allison Transmission Holdings, Inc. was incorporated in Delaware on June 22, 2007.
Despite their propulsion solutions manufacturing capabilities, we believe that our existing OEM customers have chosen to purchase certain propulsion solutions from us due to the quality, reliability and strong brand of our propulsion solutions and in order to limit fixed costs, minimize production risks and maintain company focus on commercial vehicle design, production and marketing. 16 Table of Contents Corporate Information Allison Transmission Holdings, Inc. was incorporated in Delaware on June 22, 2007.
Our major competitors in this end market include vertically integrated companies that manufacture fully automatic transmissions for their vehicles. These vertically integrated competitors include Caterpillar, Komatsu Ltd. (“Komatsu”), and Volvo Group (“Volvo”). We also compete with independent manufacturers such as ZF. Specialty vehicles using our heavy-duty off-highway transmissions include airport rescue and firefighting vehicles.
Our major competitors in this end market for 2025 included vertically integrated companies that manufacture fully automatic transmissions for their vehicles. These vertically integrated competitors included Caterpillar, Komatsu Ltd. (“Komatsu”), and Volvo Group (“Volvo”). We also compete with independent manufacturers such as ZF. Specialty vehicles using our heavy-duty off-highway transmissions include airport rescue and firefighting vehicles.
The following is a summary of our on-highway net sales by vehicle class and type in North America. Our North American on-highway market includes Class 4-5, Class 6-7 and Class 8 straight trucks and regional haul tractors, conventional transit, shuttle and coach buses, school buses and motorhomes. Class 8 trucks are subdivided into two markets: straight and tractor.
The following is a summary of our on-highway net sales by vehicle class and type in North America for 2025. Our North American on-highway market includes Class 4-5, Class 6-7 and Class 8 straight trucks and regional haul tractors, conventional transit, shuttle and coach buses, school buses and motorhomes. Class 8 trucks are subdivided into two markets: straight and tractor.
We do not anticipate our liabilities relating to contaminated sites will be material to our financial results. Competition We compete on the basis of product performance, quality, price, distribution capability, service and fuel efficiency, in addition to other factors. We face competition from numerous manufacturers of various types of propulsion solutions for commercial vehicles.
We do not anticipate our liabilities relating to contaminated sites will be material to our financial results. Competition We compete on the basis of product performance, quality, value, distribution capability, service and fuel efficiency, in addition to other factors. We face competition from numerous manufacturers of various types of propulsion solutions for commercial vehicles.
The information contained on, or accessible through, our website is not incorporated into this Annual Report on Form 10-K. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at https://www.sec.gov. 16 Table of Contents
The information contained on, or accessible through, our website is not incorporated into this Annual Report on Form 10-K. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at https://www.sec.gov. 17 Table of Contents
Off-Highway. We have provided products used in vehicles and equipment that primarily serve energy, mining and construction applications in North America for over 70 years. Off-highway energy applications include hydraulic fracturing equipment, well-stimulation equipment, pumping equipment, and well-servicing rigs, which often use a fully automatic transmission in stationary pumping applications.
We have provided products used in vehicles and equipment that primarily serve energy, mining and construction applications in North America for over 75 years. Off-highway energy applications include hydraulic fracturing equipment, well-stimulation equipment, pumping equipment, and well-servicing rigs, which often use a fully automatic transmission in stationary pumping applications.
Our primary competitors are Caterpillar, Danyang Winstar Auto Parts Co., Ltd., Twin Disc and manufacturers of electrified solutions in energy applications; Caterpillar, Xi’an FC Intelligence Transmission Co. Ltd. and Komatsu in mining applications; and Caterpillar, Volvo and ZF in construction applications. Europe, Middle East, Africa. Our off-highway markets in EMEA are mining and construction.
Our primary competitors were Caterpillar, Danyang Winstar Auto Parts Co., Ltd., Twin Disc and manufacturers of electrified solutions in energy applications; Caterpillar, Xi’an FC Intelligence Transmission Co. Ltd. and Komatsu in mining applications; and Caterpillar, Volvo and ZF in construction applications in 2025. Europe, Middle East, Africa. Our off-highway markets in EMEA are mining and construction.
The Middle East 8 Table of Contents and Africa regions are generally characterized by very limited local vehicle production, with imports from China, Europe, India, South America, Turkey and the U.S. accounting for the majority of vehicles. South America. The South American region is characterized by a high level of OEM vertical integration, with captive manual transmission and AMT manufacturing.
The Middle East and Africa regions are generally characterized by very limited local vehicle production, with imports from China, Europe, India, South America, Turkey and the U.S. accounting for the majority of vehicles. South America. The South American region is characterized by a high level of OEM vertical integration, with captive manual transmission and AMT manufacturing.
Moreover, the clutches must be replaced regularly, resulting in increased maintenance expense and vehicle downtime. Manual transmissions also 4 Table of Contents require a skilled driver to operate the disconnect clutch when launching the vehicle and shifting gears. AMTs are manual transmissions that feature automated operation of the disconnect clutch.
Moreover, the clutches must be replaced regularly, resulting in increased maintenance expense and vehicle downtime. Manual transmissions also require a skilled driver to operate the disconnect clutch when launching the vehicle and shifting gears. AMTs are manual transmissions that feature automated operation of the disconnect clutch.
These “will-fit” parts often do not meet our product specifications, and therefore may be of lesser quality than genuine Allison parts. 10 Table of Contents Our Product Offerings Allison transmissions and electric propulsion solutions are sold under the Allison Transmission brand name and remanufactured transmissions are sold under the ReTran brand name.
These “will-fit” parts often do not meet our product specifications, and therefore may be of lesser quality than genuine Allison parts. Our Product Offerings Allison transmissions and electric propulsion solutions are sold under the Allison Transmission brand name and remanufactured transmissions are sold under the ReTran brand name.
Propulsion solutions for tactical wheeled vehicles are typically sold to OEMs. 9 Table of Contents We supply tracked vehicle propulsion solutions to the U.S. Army, including the Abrams M1A2 Main Battle Tank, Joint Assault Bridge, Assault Breacher Vehicles, M10 Booker and the M113A3 Armored Personnel Carrier family of vehicles. We also sell parts kits to the U.S.
Propulsion solutions for tactical wheeled vehicles are typically sold to OEMs. We supply tracked vehicle propulsion solutions to the U.S. Army, including the Abrams M1A2 Main Battle Tank, Joint Assault Bridge, Assault Breacher Vehicles, M10 Booker and the M113A3 Armored Personnel Carrier family of vehicles. We also sell parts kits to the U.S. Army for Abrams Tank sustainment.
We supply our heavy-duty off-highway transmissions to producers of well-stimulation and well-servicing equipment. Competition in this end market includes Caterpillar Inc. (“Caterpillar”), Twin Disc, Inc. (“Twin Disc”) and certain alternative hydraulic fracturing technologies. We also provide heavy-duty transmissions used in mining trucks, specialty vehicles and construction vehicles.
We supply our heavy-duty off-highway transmissions to producers of well-stimulation and well-servicing equipment. Competition in this end market for 2025 included Caterpillar Inc. (“Caterpillar”), Twin Disc, Inc. (“Twin Disc”) and certain alternative hydraulic fracturing technologies. We also provide heavy-duty transmissions used in mining trucks, specialty vehicles and construction vehicles.
These developments and further actions that may be taken in the U.S. and in other countries, states or provinces could affect our operations both positively and negatively (e.g., by affecting the demand for or suitability of some of our products). 14 Table of Contents In addition to the foregoing, various legislation, regulations and international accords pertaining to climate change have been implemented or are being considered for implementation, particularly as they relate to the reporting of greenhouse gas emissions and sustainability efforts being undertaken, such as the European Union’s Corporate Sustainability Reporting Directive ("CSRD"), California’s Climate Corporate Data Accountability Act and Climate-Related Financial Risk Act, and the SEC's final climate disclosure rules, which are currently stayed.
These developments and further actions that may be taken in the U.S. and in other countries, states or provinces could affect our operations both positively and negatively (e.g., by affecting the demand for or suitability of some of our products). 15 Table of Contents In addition to the foregoing, various legislation, regulations and international accords pertaining to climate change have been implemented or are being considered for implementation, particularly as they relate to the reporting of greenhouse gas emissions and sustainability efforts being undertaken, such as the European Union’s Corporate Sustainability Reporting Directive ("CSRD") and California’s Climate Corporate Data Accountability Act and Climate-Related Financial Risk Act.
Our people are a critical component in our continued success, the delivery of our values and the execution of our growth initiatives. As of December 31, 2024, we had a highly skilled workforce of approximately 4,000 employees, with approximately 89% of those employees in the U.S.
Our people are a critical component in our continued success, the delivery of our values and the execution of our growth initiatives. As of December 31, 2025, we had a highly skilled workforce of approximately 4,000 employees, with approximately 87% of those employees in the U.S.
Our spending on aluminum and steel raw materials directly and indirectly through our purchase of these components constituted approximately 19% of our direct material and component costs in 2024. The balance of our direct and indirect materials and components costs are primarily composed of value-added services and conversion costs.
Our spending on aluminum and steel raw materials directly and indirectly through our purchase of these components constituted approximately 16% of our direct material and component costs in 2025. The balance of our direct and indirect materials and components costs are primarily composed of value-added services and conversion costs.
Our primary off-highway competitors are Caterpillar, Volvo and Komatsu, all of which are vertically integrated manufacturers of off-highway mining vehicles, including the specific fully automatic transmission used in their mining trucks. A typical mining application is a rigid, underground or articulated dump truck, with competition from Caterpillar, Dana, Volvo and ZF.
Our primary off-highway competitors for 2025 were Caterpillar, Volvo and Komatsu, all of which are vertically integrated manufacturers of off-highway mining vehicles, including the specific fully automatic transmission used in their mining 9 Table of Contents trucks. A typical mining application is a rigid, underground or articulated dump truck, with competition from Caterpillar, Volvo and ZF in 2025.
Concentration of Risk” in Part II, Item 8., of this Annual Report on Form 10-K for additional information on our significant original equipment manufacturer (“OEM”) customers. 5 Table of Contents North America On-Highway. We are the largest manufacturer of fully automatic transmissions for the on-highway medium- and heavy-duty commercial vehicle market in North America.
Concentration of Risk” of Notes to Consolidated Financial Statements included in Part II, Item 8., of this Annual Report on Form 10-K for additional information on our significant original equipment manufacturer (“OEM”) customers. 6 Table of Contents North America On-Highway We are the largest manufacturer of fully automatic transmissions for the on-highway medium- and heavy-duty commercial vehicle market in North America.
Approximately 50% of our 13 Table of Contents U.S. employees are represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) and are subject to a collective bargaining agreement. In January 2024, we entered into a new four-year collective bargaining agreement with UAW Local 933 that expires in November 2027. Equality of Opportunity .
Approximately 49% of our U.S. employees are represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) and are subject to a collective bargaining agreement. In January 2024, we entered into a four-year collective bargaining agreement with UAW Local 933 that expires in November 2027.
For 2024, we achieved an overall recordable rate of 1.47 at our global locations, meaning that for every 100 employees, 1.47 employees incurred an injury that resulted in recordable medical treatment, and the number of lost work days was 0.49 at our global locations, meaning that for every 100 employees, 0.49 individuals experienced an incident that resulted in days away from work.
For 2025, we achieved an overall recordable rate of 0.99 at our global locations, meaning that for every 100 employees, 0.99 employees incurred an injury that resulted in recordable medical treatment, and the number of lost work days was 0.30 at our global locations, meaning that for every 100 employees, 0.30 individuals experienced an incident that resulted in days away from work.
The aftermarket provides us with a relatively stable source of revenues as the installed base of vehicles and equipment utilizing our solutions continues to grow. The need for replacement parts is driven by normal vehicle and equipment maintenance requirements. Uninterrupted operation is generally critical for end users’ profitability.
The aftermarket provides us with a relatively stable source of revenues as the installed base of vehicles and equipment utilizing our solutions continues to grow. The need for replacement parts is driven by normal vehicle and equipment maintenance requirements.
Army for Abrams Tank sustainment. See Part I, Item 1A., “Risk Factors” of this Annual Report on Form 10-K for a discussion of risks associated with our contracts with the DOD. We have defense products in approximately 120 countries around the world.
See Part I, Item 1A., “Risk Factors” of this Annual Report on Form 10-K for a discussion of risks associated with our contracts with the DOD. We have defense products in approximately 120 countries around the world as of December 31, 2025.
Our high volume on-highway products are produced in multiple global locations (United States, Chennai, India and Szentgotthard, Hungary), while off-highway, electric hybrid propulsion and defense tracked products are produced in Indianapolis and fully electric propulsion solutions are produced in Auburn Hills, Michigan. In addition, our aluminum die cast components are produced in Lewisburg, Tennessee.
Our high volume on-highway products are produced in multiple global locations (United States, Chennai, India and Szentgotthard, Hungary), while off-highway products are produced in Indianapolis and Chennai, India. Our electric hybrid propulsion and defense tracked products are also produced in Indianapolis, and fully electric propulsion solutions are produced in Auburn Hills, Michigan.
In addition, OEMs in the Asia-Pacific market are increasingly exporting their products to other regions. Within Asia-Pacific, our sales efforts are principally focused on the transit bus, vocational truck, severe service, distribution and wide-body dump truck markets. Currently, manual transmissions are the predominant transmission type used in commercial vehicles in the Asia-Pacific region. Europe, Middle East, Africa.
Within Asia-Pacific, our sales efforts are principally focused on the transit bus, vocational truck, severe service, distribution and wide-body dump truck markets. Currently, manual transmissions are the predominant transmission type used in commercial vehicles in the Asia-Pacific region. Europe, Middle East, Africa.
We continue to monitor the development and implementation of such legislation and regulations and are evaluating the impact these laws and regulations may have on the Company, including the extent of our potential disclosures or other reporting requirements.
We continue to monitor the development and implementation of such legislation and regulations and are evaluating the impact these laws and regulations may have on the Company, including the extent of our potential disclosures or other reporting requirements. We also continue to regularly report our sustainability efforts in our annual Corporate Social Responsibility Report.
On-Highway Products Product Applications 1000 Series • Agriculture • Distribution • Motorhome • Refuse • School and Shuttle Bus • Services • Specialty • Wheeled Defense 2000 Series • Agriculture • Distribution • Motorhome • Refuse • School and Shuttle Bus • Services • Specialty • Wheeled Defense 3000 Series • Agriculture • Coach and Transit Bus • Construction • Day Cab Tractors • Distribution • Fire and Emergency • Motorhome • Refuse • Services • Specialty • Wheeled Defense 4000 Series • Articulated and Wide Body Mining Dump Trucks • Coach and Transit Bus • Construction • Day Cab Tractors • Distribution • Fire and Emergency • Motorhome • Refuse • Specialty • Wheeled Defense eGen Flex Electric Hybrid Propulsion Solutions • Transit and Shuttle Bus eGen Power Fully Electric Propulsion Solutions • Coach and Transit Bus • Day Cab Tractors • Distribution • Fire and Emergency • Line-Haul Tractors • Refuse • School and Shuttle Bus Off-Highway Products Product Applications 6000 Series • Rigid, Articulated, and Wide-Body Mining Dump Trucks • Underground Mine Truck • Well Service Rigs 8000 Series • Hydraulic Fracturing Equipment • Rigid Dump Trucks 9000 Series • Hydraulic Fracturing Equipment • Rigid Dump Trucks FracTran • Hydraulic Fracturing Equipment Defense Products Product Applications X200 • Tracked Vehicles 3040MX • Tracked Vehicles 4040MX • Tracked Vehicles X1100 • Tracked Vehicles eGen Force • Tracked Vehicles 11 Table of Contents Product Development and Engineering We maintain product development and engineering capabilities dedicated to the design, development, refinement and support of our fully automatic transmissions and electric hybrid and fully electric propulsion systems.
On-Highway Products Product Applications 1000 Series • Agriculture • Distribution • Motorhome • Refuse • School and Shuttle Bus • Services • Specialty • Wheeled Defense 2000 Series • Agriculture • Distribution • Motorhome • Refuse • School and Shuttle Bus • Services • Specialty • Wheeled Defense 3000 Series • Agriculture • Coach and Transit Bus • Construction • Day Cab Tractors • Distribution • Fire and Emergency • Motorhome • Refuse • Services • Specialty • Wheeled Defense 4000 Series • Articulated and Wide Body Mining Dump Trucks • Coach and Transit Bus • Construction • Day Cab Tractors • Distribution • Fire and Emergency • Motorhome • Refuse • Specialty • Wheeled Defense eGen Flex Electric Hybrid Propulsion Solutions • Transit Bus eGen Power Fully Electric Propulsion Solutions • Coach and Transit Bus • Day Cab Tractors • Distribution • Fire and Emergency • Line-Haul Tractors • Refuse • School and Shuttle Bus 11 Table of Contents Off-Highway Products Product Applications 6000 Series • Rigid, Articulated, and Wide-Body Mining Dump Trucks • Underground Mine Truck • Well Service Rigs 8000 Series • Hydraulic Fracturing Equipment • Rigid Dump Trucks 9000 Series • Hydraulic Fracturing Equipment • Rigid Dump Trucks FracTran • Hydraulic Fracturing Equipment Defense Products Product Applications X200 • Tracked Vehicles 3040MX • Tracked Vehicles 4040MX • Tracked Vehicles X1100 • Tracked Vehicles eGen Force • Tracked Vehicles Subsequent to the acquisition of the Acquired Off-Highway Business, our product portfolio has expanded to include drivetrain and motion solutions for a wide range of mobile and stationary off-highway equipment.
We have limited exposure to the Class 8 line-haul tractor market because lower priced manual transmissions and AMTs generally meet the needs of these vehicles which are primarily used in long distance hauling. We also provide electric hybrid and fully electric propulsion solutions within the North American on-highway market.
We have limited exposure to the Class 8 line-haul tractor market because lower priced manual transmissions and AMTs generally meet the needs of these vehicles, which are primarily used in long distance hauling.
Allison is traded on the New York Stock Exchange under the symbol “ALSN”. We have a global presence by serving customers in North America, Asia, Europe, South America, and Africa, with approximately 77% of our revenues being generated in North America in 2024. We serve customers through an independent network of approximately 1,600 independent distributor and dealer locations worldwide.
Allison is traded on the New York Stock Exchange under the symbol “ALSN”. We have a global presence by serving customers in North America, Asia, Europe, South America, and Africa, with approximately 76% of our revenues being generated in North America in 2025.
The following is a summary of our product lines.
The following is a summary of our product lines as of December 31, 2025.
We often compete in this market against (i) independent manufacturers of manual transmissions, AMTs, electric hybrid and fully electric propulsion solutions, (ii) fully automatic transmissions 6 Table of Contents manufactured by Ford Motor Company (“Ford”), ZF Friedrichshafen AG (“ZF”) and Voith GmbH (“Voith”) and (iii) vertically integrated OEMs in certain weight classes that use their own internally manufactured transmissions in certain vehicles.
We often compete in this market against (i) independent manufacturers of manual transmissions, AMTs and electric hybrid and fully electric propulsion solutions, (ii) fully automatic transmissions manufactured by Ford Motor Company (“Ford”), ZF Friedrichshafen AG (“ZF”) and Driventic GmbH (“Driventic”) and (iii) vertically integrated OEMs in certain weight classes that use their own internally manufactured transmissions in certain vehicles. 7 Table of Contents Outside North America On-Highway Outside North America we serve several different markets, including: Asia-Pacific, Europe, Middle East, Africa (collectively, “EMEA”), and South America.
Defense We have had a long-standing relationship with the U.S. Department of Defense (the “DOD”) since the 1940s, when we began developing our first-generation tank transmission.
Department of Defense (the “DOD”) since the 1940s, when we began developing our first-generation tank transmission.
Our Business We are the world’s largest manufacturer of fully automatic transmissions for medium- and heavy-duty commercial vehicles and medium- and heavy-tactical U.S. defense vehicles and a leader in electrified propulsion systems.
Our Business We are the world’s largest manufacturer of fully automatic transmissions for medium- and heavy-duty commercial vehicles and medium- and heavy-tactical U.S. defense vehicles, and subsequent to the acquisition of the Acquired Off-Highway Business, a leading provider of drivetrain and propulsion solutions for off-highway applications.
NORTH AMERICA OUTSIDE NORTH AMERICA END MARKET ON- HIGHWAY OFF- HIGHWAY ON- HIGHWAY OFF- HIGHWAY DEFENSE SERVICE PARTS, SUPPORT EQUIPMENT & OTHER 2024 NET SALES (IN MILLIONS) $ 1,752 $ 8 $ 493 $ 97 $ 212 $ 663 % OF TOTAL 54% —% 15% 3% 7% 21% • Construction • Day Cab Tractors • Distribution • Emergency • Motorhome • Refuse • School, transit, shuttle and coach buses • Utility • Construction • Energy • Mining • Specialty vehicle • Agriculture • Construction • Distribution • Emergency • Mining • Refuse • School, transit, shuttle and coach buses • Specialty • Wheeled defense platforms • Utility • Construction • Energy • Mining • Specialty vehicle • Global tracked combat platforms • North America wheeled platforms • Aluminum die cast components • Extended transmission coverage • Remanufactured propulsion solutions • Royalties • Saleable engineering • Service parts • Support equipment • Transmission fluids Refer to "Note 19.
The following table provides a summary of our business by end market for the fiscal year ended December 31, 2025. 5 Table of Contents ON-HIGHWAY OFF-HIGHWAY END MARKET NORTH AMERICA OUTSIDE NORTH AMERICA GLOBAL DEFENSE SERVICE PARTS, SUPPORT EQUIPMENT & OTHER 2025 NET SALES (DOLLARS IN MILLIONS) $ 1,540 $ 507 $ 53 $ 267 $ 643 % OF TOTAL 51% 17% 2% 9% 21% • Construction • Day Cab Tractors • Distribution • Emergency • Motorhome • Refuse • School, transit, shuttle and coach buses • Utility • Agriculture • Construction • Distribution • Emergency • Mining • Refuse • School, transit, shuttle and coach buses • Specialty • Wheeled defense platforms • Utility • Construction • Energy • Mining • Specialty vehicle • Global tracked combat platforms • North America wheeled platforms • Aluminum die cast components • Extended transmission coverage • Remanufactured propulsion solutions • Royalties • Saleable engineering • Service parts • Support equipment • Transmission fluids Refer to "Note 19.
The sale of Allison-branded service parts and transmission fluids, remanufactured propulsion solutions and support equipment is fundamental to our brand promise. We have assembled a worldwide network of approximately 1,600 independent distributor and dealer locations to sell, service and support our solutions. As part of our brand strategy, our distributors and dealers are required to sell genuine Allison-branded service parts.
Uninterrupted operation is generally critical for end users’ profitability. 10 Table of Contents The sale of Allison-branded service parts and transmission fluids, remanufactured propulsion solutions and support equipment is fundamental to our brand promise. We have assembled a worldwide network of approximately 1,500 independent distributor and dealer locations as of December 31, 2025 to sell, service and support our solutions.
ITEM 1. Business Overview Allison Transmission Holdings, Inc. and its subsidiaries (“Allison,” “we,” “us” or “our”) is a leading designer and manufacturer of propulsion solutions for commercial and defense vehicles and the largest global manufacturer of medium- and heavy-duty fully automatic transmissions. The business was founded in 1915 and has been headquartered in Indianapolis, Indiana since inception.
ITEM 1. Business Overview Allison Transmission Holdings, Inc. and its subsidiaries (“Allison,” “we,” “us” or “our”) is a global leader in high-performance mobility and work solutions built for the needs of the modern industrial world. The business was founded in 1915 and has been headquartered in Indianapolis, Indiana since inception.
Currently, manual transmissions are the predominant transmissions used in commercial vehicles in South America. We serve the South American region primarily in the bus, refuse, vocational truck and agricultural markets. Off-Highway. The following is a summary of our off-highway net sales by region outside of North America. Asia-Pacific. Off-highway markets in Asia are shared by energy, mining and construction applications.
Currently, manual transmissions are the predominant 8 Table of Contents transmissions used in commercial vehicles in South America. We serve the South American region primarily in the bus, refuse, vocational truck and agricultural markets. Global Off-Highway North America.
We sell substantially all of our propulsion solutions in the North American on-highway market to OEMs. These OEMs, in turn, install our propulsion solutions in vehicles in which our product is either the exclusive propulsion solution available or is specifically requested by end users.
These OEMs, in turn, install our propulsion solutions in vehicles in which our product is either the exclusive propulsion solution available or is specifically requested by end users. In 2025, OEM customers representing over 90% of our North American on-highway unit volume participated in long-term agreements (“LTAs”) with us.
We also provide fully electric propulsion solutions for the outside North America on-highway market. While the use of fully automatic transmissions in the medium- and heavy-duty commercial vehicle market has been widely accepted in North America, markets outside North America continue to be dominated by manual transmissions.
We are a leading manufacturer of fully automatic transmissions for the medium-duty and heavy-duty commercial vehicle market outside of North America. We also provide fully electric propulsion solutions for the outside North America on-highway market.
In 2024, OEM customers representing over 90% of our North American on-highway unit volume participated in long-term agreements (“LTAs”) with us. Generally, these LTAs offer the OEM customer defined levels of mutual commitment with respect to growing Allison’s presence in the OEMs’ products and promotional efforts, pricing and sharing of commodity cost risk.
Generally, these LTAs offer the OEM customer defined levels of mutual commitment with respect to growing Allison’s presence in the OEMs’ products and promotional efforts, pricing and sharing of commodity cost risk. The length of our LTAs is typically between three and five years.
The following is a summary of our on-highway net sales by region outside of North America. Asia-Pacific. Our key Asia-Pacific markets include Australia, China, India, Japan and South Korea; however, we actively participate in several other important Asia-Pacific countries including Indonesia, Malaysia, Singapore, Taiwan and Thailand.
Our key Asia-Pacific markets include Australia, China, India, Japan and South Korea; however, we actively participate in several other important Asia-Pacific countries including Indonesia, Malaysia, Singapore, Taiwan and Thailand. In addition, OEMs in the Asia-Pacific market are increasingly exporting their products to other regions.
The competition for service parts and remanufactured propulsion solutions comes from a variety of smaller-scale companies sourcing non-genuine “will-fit” parts from unauthorized manufacturers.
We also provide support equipment to our OEMs to assist in installing new Allison solutions into vehicles, and, therefore, sales of support equipment are dependent upon sales of new solutions. The competition for service parts and remanufactured propulsion solutions comes from a variety of smaller-scale companies sourcing non-genuine “will-fit” parts from unauthorized manufacturers.
Our primary manufacturing facilities, located in Indianapolis, Indiana, consist of approximately 2.3 million square feet of usable manufacturing space in five plants.
Manufacturing Our manufacturing strategy provides for distributed capability in manufacturing and assembly of our products for the global commercial vehicle market. As of December 31, 2025, our primary manufacturing facilities, located in Indianapolis, Indiana, consist of approximately 2.3 million square feet of usable manufacturing space in five plants.
Our field organization also works closely with distributors who, in turn, work with dealers to provide end users with education, parts, service and warranty support.
Our field organization also works closely with distributors who, in turn, work with dealers to provide end users with education, parts, service and warranty support. The defense group focuses on industry OEMs and collaborative dialogue with OEMs and government leaders to understand program requirements and determine our long-term product development strategy.
Manual transmissions are the most prevalent in medium- and heavy-duty commercial vehicles, generally, outside North America. Manual transmissions utilize a disconnect clutch causing power to be interrupted during each gear shift resulting in energy loss-related inefficiencies and less work being accomplished for a given amount of fuel consumed.
Manual transmissions utilize a disconnect clutch causing power to be interrupted during each gear shift resulting in energy loss-related inefficiencies and less work being accomplished for a given amount of fuel consumed. In long-distance trucking, this power interruption is not a significant factor, as the manual transmission provides its highest degree of fuel economy during steady-state cruising.
Where adopted, fully automatic transmission-equipped medium- and heavy-duty commercial vehicles are concentrated in certain vocational end markets. We often compete in this market against (i) independent manufacturers of manual transmissions, AMTs, electric hybrid and fully electric propulsion solutions, (ii) fully automatic transmissions manufactured by ZF, Voith, and Shaanxi Fast Gear Co., Ltd. and (iii) vertically integrated OEMs.
We often compete in this market against (i) independent manufacturers of manual transmissions, AMTs and electric hybrid and fully electric propulsion solutions, (ii) fully automatic transmissions manufactured by ZF, Driventic, and Shaanxi Fast Gear Co., Ltd. and (iii) vertically integrated OEMs. The following is a summary of our on-highway net sales by region outside of North America for 2025. Asia-Pacific.
Our products are highly engineered, requiring advanced manufacturing processes, and employ complex software algorithms for our propulsion system controls to maximize end user performance. We have more than 200 different models that are compatible with more than 500 combinations of engine brands, models and ratings (including diesel, gasoline, natural gas and other alternative fuels).
Our products are highly engineered, requiring advanced manufacturing processes, and employ complex software algorithms for our propulsion system controls to maximize end user performance.
Further, we are developing new products and technology to improve the fuel efficiency and fuel economy of our fuel agnostic conventional products, including by allowing engines to operate more efficiently and at lower speeds to avoid consuming fuel without compromising performance, and to expand our portfolio of electric hybrid and fully electric propulsion solutions.
Further, we are developing new products and technology to improve the fuel efficiency and fuel economy of our fuel-agnostic conventional products, including by allowing engines to operate more efficiently and at lower speeds without compromising performance, and by developing our product portfolio to pair with new engine ratings enabling lower nitrous oxide emissions. 12 Table of Contents Sales and Marketing Organization Our sales and marketing effort is organized along geographic and customer lines and is comprised of marketing, sales and service professionals, supported by customer integration engineers worldwide.
Within the aftermarket, we offer remanufactured propulsion solutions as a cost-effective alternative for repairs and replacements. We also provide support equipment to our OEMs to assist in installing new Allison solutions into vehicles, and, therefore, sales of support equipment are dependent upon sales of new solutions.
As part of our brand strategy, our distributors and dealers are required to sell genuine Allison-branded service parts. Within the aftermarket, we offer remanufactured propulsion solutions as a cost-effective alternative for repairs and replacements.
Additionally, we have created thousands of unique Allison-developed calibrations available to be used with our control modules. Our Industry Commercial vehicles typically employ one of three transmission types: manual, automated manual or fully automatic. Manual transmissions and automated manual transmissions ("AMT") are the most prevalent transmission types used in Class 8 tractors in North America.
Manual transmissions and automated manual transmissions ("AMT") are the most prevalent transmission types used in Class 8 tractors in North America. Manual transmissions are the most prevalent in medium- and heavy-duty commercial vehicles, generally, outside North America.
We also have established customization and parts distribution in the United States, the Netherlands, Brazil, China, Hungary, India and Japan. Suppliers and Raw Materials A significant amount of the part numbers that make up our propulsion solutions are purchased from outside suppliers, and during 2024, we purchased approximately $1,101 million of direct materials and components from outside suppliers.
As part of the acquisition of the Acquired Off-Highway Business, we acquired approximately 46 manufacturing and assembly plants, in addition to certain other facilities, which facilities will produce our Allison Off-Highway Drive & Motion Systems products. 13 Table of Contents Suppliers and Raw Materials A significant amount of the part numbers that make up our propulsion solutions are purchased from outside suppliers, and during 2025, we purchased approximately $1,022 million of direct materials and components from outside suppliers.
Outside North America, we manage our sales, marketing, service and customer integration engineering professionals through regional areas of responsibility. These regional management teams distribute OEM service and customer integration engineering resources globally. We have developed a marketing strategy to reach OEM customers as well as end users.
We have developed a marketing strategy to reach OEM customers as well as end users.
In long-distance trucking, this power interruption is not a significant factor, as the manual transmission provides its highest degree of fuel economy during steady-state cruising. However, steady-state cruising is only one part of the duty cycle.
However, steady-state cruising is only one part of the duty cycle.
The interest in conserving fuel and reducing greenhouse gas emissions is driving demand for more fuel-efficient commercial vehicles. Our electric hybrid and fully electric propulsion customers include bus and truck applications. We compete primarily with BAE Systems plc and manufacturers of fully electric propulsion solutions such as Dana Incorporated ("Dana") and Cummins Inc. as well as certain vertically integrated OEMs.
We also provide electric hybrid propulsion solutions within the North American on-highway transit market, where interest in conserving fuel and reducing greenhouse gas emissions remains a customer desire. We compete primarily with BAE Systems plc in the transit market segment. We sell substantially all of our propulsion solutions in the North American on-highway market to OEMs.
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The following table provides a summary of our business by end market for the fiscal year ended December 31, 2024.
Added
We serve customers through an independent network of approximately 1,500 independent distributor and dealer locations worldwide as of December 31, 2025. On January 1, 2026, we completed the acquisition of the Acquired Off-Highway Business, expanding our portfolio of drivetrain and propulsion solutions and broadening our participation in off-highway end markets.
Removed
The length of our LTAs is typically between three and five years.
Added
As a result of this acquisition, we now operate a broader range of technologies and products and serve a more diverse global customer base across on-highway, off-highway, and defense applications.
Removed
Our major competitor in this end market is Twin Disc. 7 Table of Contents Outside North America Outside North America we serve several different markets, including: Asia-Pacific, Europe, Middle East, Africa (collectively, “EMEA”), and South America. On-Highway. We are the largest manufacturer of fully automatic transmissions for the medium-duty and heavy-duty commercial vehicle market outside of North America.
Added
Unless otherwise expressly provided herein, the information disclosed in this Part I, Item 1 is provided as of and/or for the year ended December 31, 2025 and, accordingly, does not give effect to the acquisition of the Acquired Off-Highway Business.
Removed
The defense group focuses on industry OEMs and collaborative dialogue with OEMs and government leaders to understand program requirements and determine our long-term product development strategy. 12 Table of Contents Manufacturing Our manufacturing strategy provides for distributed capability in manufacturing and assembly of our products for the global commercial vehicle market.
Added
As a result of our acquisition of the Acquired Off-Highway Business, we now offer an expanded portfolio of drivetrain, motion and propulsion solutions, providing complementary product breadth and an enhanced ability to support customers across multiple end markets.
Removed
We also continue to regularly report our sustainability efforts and metrics under the Global Reporting Initiative framework and report our progress in our annual Corporate Social Responsibility Report.
Added
The Acquired Off-Highway Business has historically served end markets with demand characteristics that differ from our traditional on-highway markets, contributing to a more diversified portfolio.
Added
Following our acquisition of the Acquired Off-Highway Business, we continue to operate under the Allison name, but our operations are now comprised of two business units: Allison Transmission and Allison Off-Highway 4 Table of Contents Drive & Motion Systems.
Added
Business unit leadership is located globally, reflecting the international nature of our operations and the importance of local market insights, sourcing, production and customer support. Our Industry Commercial vehicles typically employ one of three transmission types: manual, automated manual or fully automatic.
Added
While the use of fully automatic transmissions in the medium- and heavy-duty commercial vehicle market has been widely accepted in North America, markets outside North America continue to be predominantly served by manual transmissions. Where adopted, fully automatic transmission-equipped medium- and heavy-duty commercial vehicles are concentrated in certain vocational end markets.
Added
Our major competitor in this end market for 2025 was Twin Disc. Outside North America. The following is a summary of our off-highway net sales by region outside of North America for 2025. Asia-Pacific. Off-highway markets in Asia are shared by energy, mining and construction applications.
Added
As a result of the acquisition of the Acquired Off-Highway Business, we now provide drivetrain and motion solutions for a wide range of mobile and stationary off-highway equipment both in North America and outside North America.
Added
These solutions include optimized drivetrain systems, propulsion components and motion technologies designed for industries such as construction, agriculture, mining, material handling and other industrial applications.
Added
The portfolio encompasses systems that manage power conveyance to machines and power work functions, including axles, gearboxes, transmissions and related components, as well as motion systems tailored to customer performance and efficiency requirements across both conventional and electrified powertrains. Consequently, we now face competition in these expanded end markets. Defense We have had a long-standing relationship with the U.S.
Added
These solutions include optimized drivetrain systems, propulsion components and motion technologies designed for industries such as construction, agriculture, mining, material handling and other industrial applications.
Added
This expanded portfolio encompasses systems that manage power conveyance to machines and power work functions, including axles, gearboxes, transmissions and related components, as well as motion systems tailored to customer performance and efficiency requirements across both conventional and electrified powertrains.
Added
Product Development and Engineering We maintain product development and engineering capabilities dedicated to the design, development, refinement and support of our fully automatic transmissions and electric hybrid and fully electric propulsion systems.
Added
In addition, our aluminum die cast components are produced in Lewisburg, Tennessee. We also have established customization and parts distribution centers in the United States, the Netherlands, Brazil, China, Hungary, India and Japan.
Added
As part of the acquisition of the Acquired Off-Highway Business, effective as of January 1, 2026, we acquired approximately 8,000 additional employees, excluding contractors, with approximately 8% of those employees in the U.S.
Added
Approximately 68% of the U.S. employees that were acquired with the Acquired Off-Highway Business are represented by the UAW or the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (the "USW") and are subject to collective bargaining agreements. 14 Table of Contents Equality of Opportunity .

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

75 edited+34 added−3 removed118 unchanged
Biggest changeIf any third party uses the trade name “Allison Transmission” in ways that adversely affect such trade name or trademark, our reputation could suffer damage, which in turn could have a material adverse effect on our business, results of operations and financial condition. 25 Table of Contents Many of the key patents and unpatented technology we use in our business are licensed to us, not owned by us, and our ability to use and enforce such patents and technology is restricted by the terms of the license.
Biggest changeAdditionally, we license the “Allison Transmission” name and certain related trademarks to third parties. If any third party uses the trade name “Allison Transmission” in ways that adversely affect such trade name or trademark, our reputation could suffer damage, which in turn could have a material adverse effect on our business, results of operations and financial condition.
In addition, the discontinuation of particular vehicle models for which we are a significant supplier could reduce our net sales and have a material adverse effect on our results of operations. Labor unrest could have an adverse effect on our business, results of operations and financial condition.
In addition, the discontinuation of particular vehicle models for which we are a significant supplier could reduce our net sales and have a material adverse effect on our business, results of operations and financial condition. Labor unrest could have an adverse effect on our business, results of operations and financial condition.
Potential and completed acquisitions and partnerships involve many risks that could have an adverse effect on our business, financial condition or results of operations, including: • our ability to identify suitable acquisition or partnership candidates, prevail against competing potential acquirers or partners and negotiate and consummate acquisitions or partnerships on terms attractive to us; • difficulties in integrating personnel and sales forces, operations, manufacturing, logistics, research and development, information technology, communications, purchasing, accounting, marketing, administration and other systems and processes and otherwise assimilating the operations of the acquired company; • the diversion of resources, including diverting management’s attention from our current operations; • risks of entering new geographic or product markets in which we have limited or no direct prior experience; • the potential loss of key customers, employees or suppliers of the acquired company or adverse effects on our existing business relationships with our suppliers and customers; • the potential incurrence of indebtedness to fund the acquisition or partnerships; • the acquired business or partnership not achieving anticipated revenues, earnings, cash flow or market share; • excess capacity; • failure to achieve the expected synergies or cost savings; • the need for additional investments post-investment or post-acquisition that could be greater than anticipated; • the impact of U.S. and foreign competition laws and regulations on our ability to make certain acquisitions, to enter into certain partnerships or to make certain strategic investments; 24 Table of Contents • inaccurate assessment of undisclosed, contingent or other liabilities or problems and unanticipated costs associated with the acquisition or partnership; • incorrect estimates made in accounting for acquisitions, incurrence of non-recurring charges and write-off of significant amounts of goodwill that could adversely affect our financial results; and • dilution of earnings.
Potential and completed acquisitions, including the acquisition of the Acquired Off-Highway Business, and partnerships involve many risks that could have an adverse effect on our business, financial condition or results of operations, including: • our ability to identify suitable acquisition or partnership candidates, prevail against competing potential acquirers or partners and negotiate and consummate acquisitions or partnerships on terms attractive to us; 27 Table of Contents • difficulties in integrating personnel and sales forces, operations, manufacturing, logistics, research and development, information technology, communications, purchasing, accounting, marketing, administration and other systems and processes and otherwise assimilating the operations of the acquired company; • the diversion of resources, including diverting management’s attention from our current operations; • risks of entering new geographic or product markets in which we have limited or no direct prior experience; • the potential loss of key customers, employees or suppliers of the acquired company or adverse effects on our existing business relationships with our suppliers and customers; • the potential incurrence of indebtedness to fund the acquisition or partnerships; • the acquired business or partnership not achieving anticipated revenues, earnings, cash flow or market share; • excess capacity; • failure to achieve the expected synergies or cost savings; • the need for additional investments post-investment or post-acquisition that could be greater than anticipated; • the impact of U.S. and foreign competition laws and regulations on our ability to make certain acquisitions, to enter into certain partnerships or to make certain strategic investments; • inaccurate assessment of undisclosed, contingent or other liabilities or problems and unanticipated costs associated with the acquisition or partnership; • incorrect estimates made in accounting for acquisitions, incurrence of non-recurring charges and write-off of significant amounts of goodwill that could adversely affect our financial results; and • dilution of earnings.
In addition, we continue to experience increased labor costs, including significant labor cost increases under our new collective bargaining agreement with the UAW, which will continue to impact our results of operations. Our business would be adversely affected if we fail to retain key executives, or to adequately plan for the succession of members of our executive management team.
In addition, we continue to experience increased labor costs, including significant labor cost increases under our collective bargaining agreement with the UAW, which will continue to impact our results of operations. Our business would be adversely affected if we fail to retain key executives, or to adequately plan for the succession of members of our executive management team.
While we manufacture our products in several facilities and maintain insurance covering our facilities, including business interruption insurance, a catastrophic loss of the use of all or a portion of one of our manufacturing facilities due to accident, labor issues, weather conditions, acts of war, political unrest, terrorist activity, natural disaster or extreme weather events, which may increase in frequency and intensity as a result of climate change, public health crises, such as pandemics and epidemics or otherwise, whether short- or long-term, would have a material adverse effect on our business, results of operations and financial condition.
While we manufacture our products in many facilities and maintain insurance covering our facilities, including business interruption insurance, a catastrophic loss of the use of all or a portion of one of our manufacturing facilities due to accident, labor issues, weather conditions, acts of war, political unrest, terrorist activity, natural disaster or extreme weather events, which may increase in frequency and intensity as a result of climate change, public health crises, such as pandemics and epidemics, or otherwise, whether short- or long-term, would have a material adverse effect on our business, results of operations and financial condition.
We currently do, and may continue in the future to, rely on unpatented proprietary technology. In such regard, we cannot be assured that any of our applications for protection of our intellectual property rights will be approved or that others will not infringe or challenge our intellectual property rights.
We currently rely, and may continue in the future to rely, on unpatented proprietary technology. In such regard, we cannot be assured that any of our applications for protection of our intellectual property rights will be approved or that others will not infringe or challenge our intellectual property rights.
Our amended and restated certificate of incorporation and amended and restated bylaws and certain provisions of the Delaware General Corporation Law contain provisions that could discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous.
Our amended and restated certificate of incorporation and amended and restated bylaws and certain provisions of the General Corporation Law of the State of Delaware contain provisions that could discourage, delay or prevent a change in control of our Company or changes in our management that the stockholders of our Company may deem advantageous.
For example, it could: • make it more difficult for us to satisfy our obligations under our indebtedness; • require us to further dedicate a substantial portion of our cash flow from operations to payments of principal and interest on our indebtedness, thereby reducing the availability of our cash flow to fund acquisitions, working capital, capital expenditures, research and development efforts and other general corporate purposes; • increase our vulnerability to and limit our flexibility in planning for, or reacting to, downturns or changes in our business and the industry in which we operate; • restrict us from making strategic acquisitions or cause us to make non-strategic divestitures; • expose us to the risk of increased interest rates as borrowings under the Senior Secured Credit Facility are subject to variable rates of interest; • place us at a competitive disadvantage compared to our competitors that have less debt; and • limit our ability to borrow additional funds.
For example, it could: • make it more difficult for us to satisfy our obligations under our indebtedness; • require us to further dedicate a substantial portion of our cash flow from operations to payments of principal and interest on our indebtedness, thereby reducing the availability of our cash flow to fund acquisitions, working capital, capital expenditures, research and development efforts and other general corporate purposes; • increase our vulnerability to and limit our flexibility in planning for, or reacting to, downturns or changes in our business and the industry in which we operate; • restrict us from making strategic acquisitions or cause us to make non-strategic divestitures; • expose us to the risk of increased interest rates as borrowings under the Senior Secured Credit Facility are subject to variable rates of interest; • place us at a competitive disadvantage compared to our competitors that have less debt; and 33 Table of Contents • limit our ability to borrow additional funds.
An increase in the cost or a sustained interruption in the supply or shortage of some of these raw materials or components that may be caused by a deterioration of our relationships with suppliers, adverse geopolitical events such as the crisis in the Red Sea, events such as natural disasters and extreme weather events which may increase in frequency and intensity as a result of climate change, power outages, labor strikes and public health crisis such as pandemics and epidemics or the like could negatively impact our business, results of operations and financial condition.
An increase in the cost or a sustained interruption in the supply or shortage of some of these raw materials or components that may be caused by a deterioration of our relationships with suppliers, adverse geopolitical events such as the crisis in the Red Sea, events such as natural disasters and extreme weather events, which may increase in frequency and intensity as a result of climate change, power outages, labor strikes and public health crises, such as pandemics and epidemics, could negatively impact our business, results of operations and financial condition.
In addition, the increased adoption of electric propulsion solutions could result in lower demand for our fully automatic transmissions and, over time, the demand for related service parts and support equipment, which would impact our margins.
In addition, an increased adoption of electric propulsion solutions could result in lower demand for our fully automatic transmissions and, over time, the demand for related service parts and support equipment, which would impact our margins.
Any inability of customers to pay us for our products and services, or any demands by suppliers for different payment terms, may materially and adversely affect our results of operations and financial condition.
Any inability of customers to pay us for our products and services, or any demands by suppliers for different payment terms, may materially and adversely affect our business, results of operations and financial condition.
A cyber incident could be caused by malicious insiders or by third parties using sophisticated, targeted 20 Table of Contents methods to circumvent firewalls, encryption, and other security defenses, including hacking, fraud, trickery, or other forms of deception, such as social engineering and phishing, or due to human or technological error, such as misconfigurations, “bugs,” or vulnerabilities in software or hardware used by us or others.
A cyber incident could be caused by malicious insiders or by third parties using sophisticated, targeted methods to circumvent firewalls, encryption, and other security defenses, including hacking, fraud, trickery, or other 23 Table of Contents forms of deception, such as social engineering and phishing, or due to human or technological error, such as misconfigurations, “bugs,” or vulnerabilities in software or hardware used by us or others.
These provisions: • authorize the issuance of blank check preferred stock that our Board of Directors could issue to increase the number of outstanding shares and to discourage a takeover attempt; • prohibit our stockholders from calling a special meeting of stockholders; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • provide that the Board of Directors is expressly authorized to adopt, or to alter or repeal, our bylaws; • establish advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and • require the approval of holders of at least two-thirds of the outstanding shares of common stock to amend the bylaws and certain provisions of the certificate of incorporation.
These provisions: • authorize the issuance of blank check preferred stock that our Board of Directors could issue to increase the number of outstanding shares and to discourage a takeover attempt; • prohibit our stockholders from calling a special meeting of stockholders; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • provide that the Board of Directors is expressly authorized to adopt, or to alter or repeal, our bylaws; • establish advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and 32 Table of Contents • require the approval of holders of at least two-thirds of the outstanding shares of common stock to amend the bylaws and certain provisions of the certificate of incorporation.
Although we believe the loss or expiration of any single patent would not have a material effect on our business, results of operations or financial position, there can be no assurance that any one, or more, of the patents or any other intellectual property owned by or licensed to us will not be challenged, invalidated or circumvented by third parties.
Although we believe the loss or expiration of any single patent would not have a material effect on our business, results of operations or financial condition, there can be no assurance that any one, or more, of the patents or any other intellectual property owned by or licensed to us will not be challenged, invalidated or circumvented by third parties.
There can be no assurances that future environmental remediation obligations will not have a material adverse effect on our results of operations and financial condition. In addition, we occasionally evaluate alternatives with respect to our facilities, including possible dispositions or closings.
There can be no assurance that future environmental remediation obligations will not have a material adverse effect on our results of operations and financial condition. In addition, we occasionally evaluate alternatives with respect to our facilities, including possible dispositions or closings.
The magnitude of such impact cannot be determined with certainty at this time. However, the effect of a one percentage point decrease in the assumed discount rate would result in an increase in the December 31, 2024 defined benefit pension plans obligation of approximately $13 million.
The magnitude of such impact cannot be determined with certainty at this time. However, the effect of a one percentage point decrease in the assumed discount rate would result in an increase in the December 31, 2025 defined benefit pension plans obligation of approximately $13 million.
We are subject to cybersecurity risks to operational systems, security systems, or infrastructure owned by Allison or third-party vendors or suppliers.
We are subject to cybersecurity risks to operational systems, security systems, and infrastructure owned by Allison or third-party vendors or suppliers.
While we have succession plans in place for members of our executive management team, and continue to review and update those plans, and certain key executive 18 Table of Contents officers are party to or participants in severance and change in control arrangements, these arrangements do not guarantee that the services of our executive officers will continue to be available to us or that we will be able to find suitable management personnel to replace departing executives on a timely basis.
While we have succession plans in place for members of our executive management team, and continue to review and update those plans, and certain key executive officers are party to or participants in severance and change in control arrangements, these arrangements do not guarantee that the services of our executive officers will continue to be available to us or that we will be able to find suitable management personnel to replace departing executives on a timely basis.
Because the values of these defined benefit pension plans’ assets have fluctuated and will fluctuate in response to changing market conditions, the amount of gains or losses that will be recognized in subsequent periods, the impact on the funded status of the defined benefit pension plans and the future minimum required contributions, if any, could have a material adverse effect on our business, results of operations and financial condition.
Because the values of these defined benefit pension plans’ assets have fluctuated and will fluctuate in response to changing market conditions, the amount of gains or losses that will be recognized in subsequent periods, the impact on the funded status of the defined benefit pension plans and the future minimum required contributions, if any, could have 34 Table of Contents a material adverse effect on our business, results of operations and financial condition.
In the event we are not able to maintain or enhance our brand in these new markets or our reputation is damaged in our existing markets as a result of product defects or recalls, we may face difficulty in maintaining our pricing positions with respect to some of our products or experience reduced demand for our products, which could negatively impact our business, results of operations and financial condition.
In the event we are not able to maintain or enhance our 29 Table of Contents brand in these new markets or our reputation is damaged in our existing markets as a result of product defects or recalls, we may face difficulty in maintaining our pricing positions with respect to some of our products or experience reduced demand for our products, which could negatively impact our business, results of operations and financial condition.
Goodwill and Other Intangible Assets” of Notes to Consolidated Financial Statements included in Part II, Item 8., of this Annual Report on Form 10-K for additional details. 30 Table of Contents The carrying value of long-lived assets is evaluated whenever events or circumstances indicate that the carrying value of a long-lived asset may not be recoverable.
Goodwill and Other Intangible Assets” of Notes to Consolidated Financial Statements included in Part II, Item 8., of this Annual Report on Form 10-K for additional details. The carrying value of long-lived assets is evaluated whenever events or circumstances indicate that the carrying value of a long-lived asset may not be recoverable.
If our costs are subject to continuing significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability to do so could harm our results of operations.
If our costs are subject to continuing significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability to do so could harm our business and results of operations.
If we do not adequately anticipate the changing needs of our 22 Table of Contents customers by keeping pace with improvements and changes in vehicle propulsion technology and developing and introducing new and effective products and technologies on a timely basis, or if the products and technologies we develop do not become market-leading, our competitive position and prospects could be harmed.
If we do not adequately anticipate the changing needs of our customers by keeping pace with improvements and changes in vehicle propulsion technology and developing and introducing new and effective products and technologies on a timely basis, or if the products and technologies we develop do not become market-leading, our competitive position and prospects could be harmed.
In addition, as a provider of defense products and services to the U.S. government and foreign governments, we are subject to a heightened risk of cyberattacks, including by foreign governments, violent extremist organizations, and transnational criminal organizations.
As a provider of defense products and services to the U.S. government and foreign governments, we are subject to a heightened risk of cyberattacks, including by foreign governments, violent extremist organizations, and transnational criminal organizations.
Likewise, a one percentage point decrease in the effective interest rate for determining defined benefit pension plans contributions would result in an increase in the minimum required contributions for 2025 of approximately $2 million.
Likewise, a one percentage point decrease in the effective interest rate for determining defined benefit pension plans contributions would result in an increase in the minimum required contributions for 2026 of approximately $2 million.
If these environmental, health and safety laws and regulations 26 Table of Contents that impact our operations or products become more stringent or expand to include a larger portion of our products or our customers’ products in the future, we could incur additional costs in order to ensure that our business and products comply with such regulations.
If these environmental, health and safety laws and regulations that impact our operations or products become more stringent or expand to include a larger portion of our products or our customers’ products in the future, we could incur additional costs in order to ensure that our business and products comply with such regulations.
Moreover, the protection provided for our intellectual property by the laws and courts of foreign nations may not be as advantageous to us as the protection available under U.S. law. Environmental, health and safety laws and regulations may impose significant compliance costs and liabilities on us.
Moreover, the protection provided for our intellectual property by the laws and courts of foreign nations may not be as advantageous to us as the protection available under U.S. law. 30 Table of Contents Environmental, health and safety laws and regulations may impose significant compliance costs and liabilities on us.
We have in the past and may in the future derive a significant portion of our net sales from a relatively limited number of OEM customers. For the years ended December 31, 2024, 2023 and 2022, our top five OEM customers accounted for approximately 55%, 52% and 51% of our net sales, respectively.
We have in the past and may in the future derive a significant portion of our net sales from a relatively limited number of OEM customers. For the years ended December 31, 2025, 2024 and 2023, our top five OEM customers accounted for approximately 52%, 55% and 52% of our net sales, respectively.
Extended or expanded conflicts could impact our ability or those of our suppliers or customers to obtain certain raw materials or component parts and could limit the availability and cost of energy throughout Europe, which could increase our costs, impact our ability to deliver our products or reduce customer demand.
Extended or expanded conflicts could impact our ability or those of our suppliers or customers to obtain certain raw materials or component parts and could limit the availability and cost of energy throughout Europe, which could increase our costs, impact our ability to deliver 24 Table of Contents our products or reduce customer demand.
Even in the event that increased costs can be passed through to customers, our gross margin percentages would decline as the recovery of these costs from customers generally lags six to twelve months. In 2024, approximately 75% of our total spending on components was sourced from approximately 40 suppliers, many of which are the single source for such components.
Even in the event that increased costs can be passed through to customers, our gross margin percentages would decline as the recovery of these costs from customers generally lags six to 12 months. In 2025, approximately 75% of our total spending on components was sourced from approximately 40 suppliers, many of which are the single source for such components.
Increases or decreases in these variables globally may significantly impact the demand for our products, which could have a material adverse effect on our business, results of operations and financial 19 Table of Contents condition.
Increases or decreases in these variables globally may significantly impact the demand for our products, which could have a material adverse effect on our business, results of operations and financial condition.
Further, we intend to continue to pursue growth opportunities for our business in a variety of business environments outside the U.S., which could exacerbate the risks set forth below.
Further, we intend to continue to pursue growth opportunities for our business in a variety of business environments outside the U.S., 26 Table of Contents which could exacerbate the risks set forth below.
In addition, it often takes significant time, in some cases multiple fleet buy cycles, before customers gain experience with new products and technologies and those new products and technologies become widely-accepted by the market, if at all.
In addition, it often takes significant time, in some cases multiple fleet buy cycles, 25 Table of Contents before customers gain experience with new products and technologies and those new products and technologies become widely-accepted by the market, if at all.
We may also face lawsuits brought by third parties that either allege property damage or personal injury as a result of, or seek reimbursement for costs associated with, such contamination. Our business and financial results may be adversely affected by U.S. government contracting risks.
We may also face lawsuits brought by third parties that either allege property damage or personal injury as a result of, or seek reimbursement for costs associated with, such contamination. 31 Table of Contents Our business and financial results may be adversely affected by government contracting risks.
In that event, we would need to find alternate sources for these goods and services, and there is no assurance we would be able to find such alternate sources on favorable terms, if at all.
In that event, we would need to find alternate sources for these goods and services, and there is no assurance we would be able to find such alternate sources 20 Table of Contents on favorable terms, if at all.
Our sales are concentrated among our top five OEM customers and the loss or consolidation of any one of these customers or the discontinuation of particular vehicle models for which we are a significant supplier could reduce our net sales and have a material adverse effect on our results of operations and financial condition.
The loss or consolidation of any one of these customers or the discontinuation of particular vehicle models for which we are a significant supplier could reduce our net sales and have a material adverse effect on our results of operations and financial condition.
As of December 31, 2024, we had no outstanding borrowings against the Revolving Credit Facility.
As of December 31, 2025, we had no outstanding borrowings against the Revolving Credit Facility.
Our business is subject to certain risks associated with doing business internationally, particularly in emerging markets. Outside-North America net sales represented approximately 23% of our net sales for 2024.
Our business is subject to certain risks associated with doing business internationally, particularly in emerging markets. Outside-North America net sales represented approximately 24% of our net sales for 2025.
As of December 31, 2024, we had total indebtedness of $2,414 million, and we would have been able to borrow an additional $744 million, net of $6 million of outstanding letters of credit, under Allison Transmission Inc.’s (“ATI”), our wholly-owned subsidiary, revolving credit facility with commitments in the amount of $750 million due March 2029 (“Revolving Credit Facility”).
As of December 31, 2025, we had total indebtedness of $2,909 million, and we would have been able to borrow an additional $745 million, net of $5 million of outstanding letters of credit, under Allison Transmission Inc.’s (“ATI”), our wholly-owned subsidiary, revolving credit facility with commitments in the amount of $750 million due March 2029 (“Revolving Credit Facility”).
As of December 31, 2024, approximately 50% of our U.S. employees, representing approximately 44% of our total employees, were represented by the UAW and are subject to a collective bargaining agreement. Our current collective bargaining agreement with UAW Local 933 is effective through November 2027.
As of December 31, 2025, approximately 49% of our U.S. employees, representing approximately 43% of our total employees, were represented by the UAW and are subject to a collective bargaining agreement. Our current collective bargaining agreement with UAW Local 933 is effective through November 2027.
Any new collective bargaining agreement we negotiate with the UAW to replace the existing collective bargaining agreement upon its expiration may result in increased costs to us, in particular labor costs, which could have an adverse effect on our results of operations.
Any new collective bargaining agreements we negotiate with the UAW or the USW to replace the existing collective bargaining agreements upon their expiration may result in increased costs to us, in particular labor costs, which could have an adverse effect on our results of operations.
While we may experience the supply chain constraints mentioned above across all our products lines, the impacts to our customers are likely to be more pronounced in our lower volume product lines, including those supplied to the Defense and Off-Highway end markets.
While we may experience the supply chain constraints mentioned above across all our product lines, the impacts to our customers are likely to be more pronounced in our 21 Table of Contents lower volume product lines, including those supplied to the Allison Transmission Defense and Allison Transmission Off-Highway end markets.
We are subject to various laws and regulations applicable to parties doing business with the U.S. government, including laws and regulations governing performance of U.S. government contracts, the use and treatment of U.S. government furnished property and the nature of materials used in our products.
We are subject to various laws and regulations applicable to parties doing business with governmental entities, including laws and regulations governing performance of government contracts, capital allocations, the use and treatment of government furnished property and the nature of materials used in our products.
Department of the Treasury, and other trade protection regulations and measures; 23 Table of Contents • political risks, including increased trade protectionism and risks of loss due to civil disturbances, acts of terrorism, acts of war, guerilla activities and insurrection; • unstable economic, financial and market conditions and increased expenses as a result of inflation, higher energy costs or higher interest rates; • difficulties in enforcement of third-party contractual obligations and intellectual property rights and collecting receivables through foreign legal systems; • difficulty in staffing and managing international operations and the application of foreign labor regulations; • differing local product preferences and product requirements; • fluctuations in currency exchange rates to the extent that our assets or liabilities are denominated in a currency other than the functional currency of the country where we operate; • potentially adverse tax consequences from changes in tax laws, requirements relating to withholding taxes on remittances and other payments by subsidiaries and restrictions on our ability to repatriate dividends from our subsidiaries; and • exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
Department of the Treasury, and other trade protection regulations and measures; • political risks, including increased trade protectionism and risks of loss due to civil disturbances, acts of terrorism, acts of war, guerrilla activities and insurrection; • unstable economic, financial and market conditions and increased expenses as a result of inflation, higher energy costs or higher interest rates; • difficulties in enforcement of third-party contractual obligations and intellectual property rights and collecting receivables through foreign legal systems; • difficulties in staffing and managing international operations and the application of foreign labor regulations; • differing local product preferences and product requirements; • potentially adverse tax consequences from changes in tax laws, requirements relating to withholding taxes on remittances and other payments by subsidiaries and restrictions on our ability to repatriate dividends from our subsidiaries; and • exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
The techniques used by threat actors change frequently and may be difficult to detect for long periods of time. Cyberattacks are expected to accelerate on a global basis in frequency and magnitude as threat actors are increasingly using tools – including artificial intelligence – to evade detection and even remove forensic evidence.
The techniques used by threat actors change frequently and are often difficult to detect. Cyberattacks are expected to accelerate on a global basis in frequency and magnitude as threat actors are increasingly using tools - including artificial intelligence - to evade detection and even remove forensic evidence.
At December 31, 2024, $514 million of our total indebtedness was associated with ATI’s 28 Table of Contents term loan facility due March 2031 (“Term Loan” , and together with the Revolving Credit Facility, the “Senior Secured Credit Facility”), $400 million of our total indebtedness was associated with ATI’s 4.75% Senior Notes due October 2027 (“4.75% Senior Notes”), $500 million of our total indebtedness was associated with ATI’s 5.875% Senior Notes due June 2029 (“5.875% Senior Notes”) and $1,000 million of our total indebtedness was associated with ATI’s 3.75% Senior Notes due January 2031 (“3.75% Senior Notes”, and together with the 4.75% Senior Notes and 5.875% Senior Notes, the “Senior Notes”).
At December 31, 2025, $509 million of indebtedness was associated with ATI’s term loan facility due March 2031 (“Term Loan” , and together with the Revolving Credit Facility, the “Senior Secured Credit Facility”), $400 million of indebtedness was associated with ATI’s 4.75% Senior Notes due October 2027 (“4.75% Senior Notes”), $500 million of indebtedness was associated with ATI’s 5.875% Senior Notes due June 2029 (“5.875% Senior Notes 2029”), $1,000 million of indebtedness was associated with ATI’s 3.75% Senior Notes due January 2031 (“3.75% Senior Notes”) and $500 million of indebtedness was associated with ATI’s 5.875% Senior Notes due December 2033 (“5.875% Senior Notes 2033”, and together with the 4.75% Senior Notes, 5.875% Senior Notes 2029 and 3.75% Senior Notes, the “Senior Notes”).
Our top three customers, Daimler AG, PACCAR Inc. and Traton SE, accounted for approximately 20%, 13% and 11%, respectively, of our net sales during 2024. The loss of, or consolidation of, any one of these customers, or a significant decrease in business from, one or more of these customers could harm our business.
Our top three customers, Daimler AG, PACCAR Inc. and Traton SE, accounted for approximately 18%, 11% and 10%, respectively, of our net sales during 2025. The loss of, or consolidation of, any one of these customers or a significant decrease in business from one or more of these customers, could harm our business, results of operations and financial condition.
We may be unilaterally suspended or barred from conducting business with the U.S. government, or become subject to fines or other sanctions if we are found to have violated such laws or regulations.
We may be unilaterally suspended or barred from conducting business with a governmental entity, or become subject to fines or other sanctions if we are found to have violated such laws or regulations.
Risks Related to Our Business and Operations We participate in markets that are competitive, and our competitors’ actions could have a material adverse effect on our business, results of operations and financial condition. Our business operates in competitive markets.
For a more complete discussion of the material risks facing our business, see below. Risks Related to Our Business and Operations We participate in markets that are competitive, and our competitors’ actions could have a material adverse effect on our business, results of operations and financial condition. Our business operates in competitive markets.
Our most significant concentration of manufacturing is around our corporate headquarters in Indianapolis, Indiana, where we produce approximately 90% of our transmissions.
Our most significant concentration of manufacturing is around our corporate headquarters in Indianapolis, Indiana, where we produced approximately 85% of our transmissions in 2025.
If we are unable to accurately predict demand, we may be unable to meet our customers’ needs, resulting in the loss of potential sales, or we may manufacture excess products, resulting in increased inventories and overcapacity in our production facilities, increasing our unit production cost and decreasing our operating margins.
If we are unable to accurately predict demand, we may be unable to meet our customers’ needs, resulting in the loss of potential sales, or we may manufacture excess products, resulting in increased inventories and overcapacity in our production facilities, increasing our unit production cost and decreasing our operating margins. 22 Table of Contents In 2025, our sales were concentrated among our top five OEM customers.
Similarly, a one percentage point decrease in the assumed discount rate would result in an increase in the December 31, 2024 OPEB obligation of approximately $6 million. As of December 31, 2024, the net overfunded status of our defined benefit pension plans was $2 million, while the unfunded status of our OPEB plan was $59 million.
Similarly, a one percentage point decrease in the assumed discount rate would result in an increase in the December 31, 2025 OPEB obligation of approximately $6 million. As of December 31, 2025, the unfunded status of our defined benefit pension plans was $4 million and the unfunded status of our OPEB plan was $66 million.
We have experienced labor shortages and wage inflation amid low levels of unemployment and workforce availability. As a result, we may not be able to attract and retain qualified personnel, which may impact our ability to manufacture, design and develop our propulsion solutions, satisfy customer demand in a timeframe that meets their desired production schedules and compete effectively.
As a result, we may not be able to attract and retain qualified personnel, which may impact our ability to manufacture, design and develop our propulsion solutions, satisfy customer demand in a timeframe that meets their desired production schedules and compete effectively.
In addition, while we have suspended indefinitely all sales and exports of our products to customers in Russia and Belarus and Russian and Belarusian affiliate owned or controlled entities, certain of our competitors have continued to sell products in Russia during this time, which may have a negative impact on our long-term sales opportunities in Russia. 21 Table of Contents Our brand and reputation are dependent on the continued participation and level of service of our numerous independent distributors and dealers.
In addition, while we have suspended indefinitely all sales and exports of our products to customers in Russia and Belarus and Russian and Belarusian affiliate owned or controlled entities, certain of our competitors have continued to sell products in Russia during this time, which may have a negative impact on our long-term sales opportunities in Russia.
A focus on climate change and environmental sustainability, including through regulations enacted and subsidies offered by governmental entities, continues to drive the development and adoption of various alternative technologies, including electric propulsion solutions, in the commercial vehicle industry.
In addition, we compete with manufacturers developing alternative technologies, including fully electric propulsion solutions, that may or may not require a transmission. A focus on climate change and environmental sustainability, including through regulations enacted and subsidies offered by governmental entities, continues to drive the development and adoption of various alternative technologies, including electric propulsion solutions, in the commercial vehicle industry.
Certain of our end users operate in highly cyclical industries, which can result in uncertainty and significantly impact the demand for our products, which could have a material adverse effect on our business, results of operations and financial condition. Some of the markets in which we operate, including energy, mining, construction, distribution and motorhomes, exhibit a high degree of cyclicality.
Certain of our end users operate in highly cyclical industries, which can result in uncertainty and significantly impact the demand for our products, which could have a material adverse effect on our business, results of operations and financial condition.
The laws and regulations to which we are 27 Table of Contents subject include, but are not limited to, Export Administration Regulations, the Federal Acquisition Regulation, International Traffic in Arms Regulations and regulations from the Bureau of Alcohol, Tobacco, Firearms and Explosives and the FCPA.
The laws and regulations to which we are subject include, but are not limited to, Export Administration Regulations, the Federal Acquisition Regulation, International Traffic in Arms Regulations, regulations from the Bureau of Alcohol, Tobacco, Firearms and Explosives and the FCPA in the U.S., as well as the regulations and laws applicable to government contracting in countries outside the U.S.
For a complete description of the terms of the Senior Secured Credit Facility and the Senior Notes, please see "Note 8. Debt” in Part II, Item 8., of this Annual Report on Form 10-K. Our indebtedness could have important consequences.
For a complete description of the terms of the Senior Secured Credit Facility and the Senior Notes, see "Note 8. Debt” of Notes to Consolidated Financial Statements included in Part II, Item 8., of this Annual Report on Form 10-K.
Any such disruption in our supply chain could adversely affect our ability to manufacture and deliver our products on a timely basis, and thereby affect our results of operations.
Any such disruption in our supply chain could adversely affect our ability to manufacture and deliver our products on a timely basis, and thereby affect our results of operations. Increases in cost, disruption of supply or shortage of raw materials or components used in our products could harm our business and profitability.
We compete against other existing or new global manufacturers of transmissions and propulsion solutions for commercial vehicles on the basis of product performance, quality, price, distribution capability, service and fuel efficiency in addition to other factors. In addition, we compete with manufacturers developing alternative technologies, including fully electric propulsion solutions, that may or may not require a transmission.
We compete against other existing or new global manufacturers of transmissions and propulsion solutions for commercial vehicles on the basis of product 19 Table of Contents performance, quality, price, distribution capability, service and fuel efficiency in addition to other factors.
All of the suppliers from which we purchase materials and components used in our business are fully validated suppliers, meaning the suppliers’ manufacturing processes and inputs have been validated under a production part approval process (“PPAP”). Furthermore, there are only a limited number of suppliers for certain of the materials used in our business, such as corrosion-resistant steel.
As of December 31, 2025, all of the suppliers from which we purchase materials and components used in our business were fully validated suppliers, meaning the suppliers’ manufacturing processes and inputs have been validated under a production part approval process (“PPAP”).
In the event they are successful in doing so, our margins would decline. We may not be able to pass on these costs to our customers, 17 Table of Contents and this could have a material adverse effect on our business, results of operations and financial condition.
We may not be able to pass on these costs to our customers, and this could have a material adverse effect on our business, results of operations and financial condition.
Subject to covenant compliance and certain 29 Table of Contents conditions, our indebtedness permits additional borrowing, including total borrowing up to $744 million under the Revolving Credit Facility, net of $6 million in letters of credit.
Subject to covenant compliance and certain conditions, our indebtedness as of December 31, 2025 permitted additional borrowing, including total borrowing up to $745 million under the Revolving Credit Facility, net of $5 million in letters of credit.
Decisions to purchase our products are largely a result of the performance of these and other industries we serve. If demand for output in these industries decreases, the demand for our products will likely decrease.
Some of the markets in which we operate, including agriculture, energy, mining, construction, material handling, distribution and motorhomes, exhibit a high degree of cyclicality. Decisions to purchase our products are largely a result of the performance of these and other industries we serve. If demand for output in these industries decreases, the demand for our products will likely decrease.
However, manual transmissions remain the market leader outside North America, and there can be no assurance that adoption of automatic transmissions will increase.
We have also dedicated significant human resources to serve markets where we anticipate increased adoption of automaticity. However, manual transmissions remain the market leader outside North America, and there can be no assurance that adoption of automatic transmissions will increase.
Volatility in the prices of raw materials such as steel, aluminum and nickel could increase the cost of manufacturing our products. Additionally, our suppliers are also subject to fluctuations in the prices of raw materials and may attempt to pass all or a portion of such increases on to us.
Additionally, our suppliers are also subject to fluctuations in the prices of raw materials and may attempt to pass all or a portion of such increases on to us. In the event they are successful in doing so, our margins would decline.
Concern over climate change continues to result in new legal and regulatory requirements designed to mitigate the effects of climate change on the environment, such as actions taken by the U.S.
Concern over climate change continues to result in new legal and regulatory requirements designed to mitigate the effects of climate change on the environment, such as actions taken by the U.S. Environmental Protection Agency and several states to address greenhouse gas emissions, the European Union’s CSRD and California’s Climate Corporate Data Accountability Act and Climate-Related Financial Risk Act.
Most of our operations are in the U.S., but we also have manufacturing and customization facilities in India and Hungary with a services agreement with Stellantis NV and customization capability in Brazil, the Netherlands, China and Japan.
Most of our operations were in the U.S. in 2025, but we also have manufacturing and customization facilities in India and Hungary with a services agreement with Stellantis N.V. and customization capability in Brazil, the Netherlands, China and Japan, and, effective January 1, 2026, manufacturing and assembly facilities located in approximately 14 additional countries as a result of the acquisition of the Acquired Off-Highway Business.
We work with a network of approximately 1,600 independent distributors and dealers that provide post-sale service, service parts and support equipment.
Our brand and reputation are dependent on the continued participation and level of service of our numerous independent distributors and dealers. We work with a network of approximately 1,500 independent distributors and dealers (as of December 31, 2025) that provide post-sale service, service parts and support equipment.
Labor cost inflation and employee attraction and retention could have an adverse effect on our business, results of operations and financial condition. Our success depends on our ability to identify, recruit and retain highly skilled, qualified personnel, and there is currently increased competition for talent.
Our success depends on our ability to identify, recruit and retain highly skilled, qualified personnel, and there is currently increased competition for talent. We have experienced labor shortages and wage inflation amid low levels of unemployment and workforce availability.
If we experience significant delays or increased costs in the production, launch or acceptance of our products and technologies, our net sales and results of operations may be materially adversely affected. Our long-term growth prospects and results of operations may be impaired if the rate of adoption of fully automatic transmissions in commercial vehicles outside North America does not increase.
If we experience significant delays or increased costs in the production, launch or acceptance of our products and technologies, our business, results of operations and financial condition may be materially adversely affected.
Our long-term growth strategy depends in part on an increased rate of automaticity outside North America. As part of that strategy, we have established manufacturing facilities in India and Hungary. We have also dedicated significant human resources to serve markets where we anticipate increased adoption of automaticity.
Our long-term growth prospects and results of operations may be impaired if the rate of adoption of fully automatic transmissions in commercial vehicles outside North America does not increase. Our long-term growth strategy depends in part on an increased rate of automaticity outside North America. As part of that strategy, we have established manufacturing facilities in India and Hungary.
We may not be able to identify or consummate acquisitions or partnerships or achieve expected benefits from or effectively integrate acquisitions or partnerships, which could harm our growth. From time to time, we evaluate selective acquisitions, partnerships and strategic investments.
Our exposure to such exchange rate fluctuations and foreign currency risks has increased with the acquisition of the Acquired Off-Highway Business. We may not be able to identify or consummate acquisitions or partnerships or achieve expected benefits from or effectively integrate acquisitions or partnerships, which could harm our growth.
We use raw materials directly in manufacturing and in components that we purchase from our suppliers. We generally purchase components with significant raw material content on the open market. The prices for and availability of these raw materials fluctuate depending on market conditions.
Our products contain various raw materials, including corrosion-resistant steel, non-ferrous metals such as aluminum and nickel, and precious metals such as platinum and palladium. We use raw materials directly in manufacturing and in components that we purchase from our suppliers. We generally purchase components with significant raw material content on the open market.
Protecting our intellectual property rights is critical to our ability to compete and succeed as a company.
Many of the key patents and unpatented technology we use in our business are licensed to us, not owned by us, and our ability to use and enforce such patents and technology is restricted by the terms of the license. Protecting our intellectual property rights is critical to our ability to compete and succeed as a company.
Removed
Increases in cost, disruption of supply or shortage of raw materials or components used in our products could harm our business and profitability. Our products contain various raw materials, including corrosion-resistant steel, non-ferrous metals such as aluminum and nickel, and precious metals such as platinum and palladium.
Added
Risk Factors Summary The following is a summary of the principal risks that could adversely affect our business, results of operations and financial condition.
Removed
Additionally, we license the “Allison Transmission” name and certain related trademarks to third parties.
Added
Risks Related to Our Business and Operations • We participate in markets that are competitive, and our competitors’ actions could have a material adverse effect on our business, results of operations and financial condition. • Volatility in and disruption to the global economic environment may have a material adverse effect on our business, results of operations and financial condition. • Increases in cost, disruption of supply or shortage of raw materials or components used in our products could harm our business and profitability. • Prolonged inflation could result in higher costs and decreased margins and earnings. • Labor cost inflation and employee attraction and retention could have an adverse effect on our business, results of operations and financial condition. • Certain of our end users operate in highly cyclical industries, which can result in uncertainty and significantly impact the demand for our products, which could have a material adverse effect on our business, results of operations and financial condition. • In 2025, our sales were concentrated among our top five OEM customers.
Removed
Environmental Protection Agency and several states to address greenhouse gas emissions, the European Union’s CSRD, California’s Climate Corporate Data Accountability Act and Climate-Related Financial Risk Act, and the SEC's final climate disclosure rules, which are currently stayed.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

8 edited+2 added−1 removed4 unchanged
Biggest changeThis does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the NIST CSF as a framework to help us identify, assess, and manage cybersecurity risks relevant to our business.
Biggest changeThis does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the NIST CSF as a framework to help us identify, assess, and manage cybersecurity risks relevant to our business. 35 Table of Contents Our cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.
Collectively, the members of the operational cybersecurity team have various certifications, including, but not limited to, CISSP, GSOM, GCIA, GCIH, CISA, CCSK, SSCP, GPEN, CEH, and CISM. 32 Table of Contents
Collectively, the members of the operational cybersecurity team have various certifications, including, but not limited to, CISSP, GSOM, GCIA, GCIH, CISA, CCSK, SSCP, GPEN, CEH, and CISM. 37 Table of Contents
Our management team, led by our CISO, is informed about and monitors the prevention, detection, mitigation, and remediation of key cybersecurity risks and incidents through various means, which may include briefings with internal cybersecurity team members and external consultants, threat intelligence and other information obtained from public or private sources, and alerts and reports produced by security tools deployed in our information technology environment.
Our management team, led by our CISO, stays informed about and monitors the prevention, detection, mitigation, and remediation of key cybersecurity risks and incidents through various means, which may include briefings with internal cybersecurity team members and external consultants, threat intelligence and other information obtained from public or private sources, and alerts and reports produced by security tools deployed in 36 Table of Contents our information technology environment.
The full Board also receives briefings from management on our cybersecurity risk management program. Board members receive presentations on cybersecurity topics from our Chief Information Security Officer ("CISO"), internal security staff or external experts as part of the Board’s continuing education on topics that impact public companies.
Board members receive presentations on cybersecurity topics from our Chief Information Security Officer ("CISO"), internal security staff or external experts as part of the Board’s continuing education on topics that impact public companies.
Our Audit Committee oversees management’s implementation of our cybersecurity risk management program. Our Audit Committee receives quarterly reports from management on our cybersecurity risks. In addition, management updates the Audit Committee, as necessary, regarding significant cybersecurity incidents. The Committee reports to the full Board regarding its activities, including those related to cybersecurity.
In addition, management updates the Audit Committee, as necessary, regarding significant cybersecurity incidents. The Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity. The full Board also receives briefings from management on our cybersecurity risk management program.
See “Risk Factors – We are subject to cybersecurity risks to operational systems, security systems, or infrastructure owned by Allison or third-party vendors or suppliers" in Part I, Item 1A. of this Annual Report on Form 10-K. 31 Table of Contents Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to its Audit Committee oversight of cybersecurity and other information technology risks.
See “Risk Factors – We are subject to cybersecurity risks to operational systems, security systems, or infrastructure owned by Allison or third-party vendors or suppliers" in Part I, Item 1A. of this Annual Report on Form 10-K.
Our management team, including our Chief Executive Officer, Chief Financial Officer, General Counsel, Chief Information Officer ("CIO") and CISO , has overall responsibility for assessing and managing our material risks from cybersecurity threats. Our management team has primary responsibility for implementing our cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants.
Our CISO has primary responsibility for assessing and managing our material risks from cybersecurity threats and supervises both our internal cybersecurity operations team and our retained external cybersecurity consultants.
Our CISO has over 25 years and our CIO has over 10 years of experience in designing and implementing corporate information technology security systems and strategies. In addition, our CISO leads the operational cybersecurity team, which has an average of over 10 years of experience.
Our CISO has over 30 years of experience in leading strategy and operations across information technology, cybersecurity and cloud infrastructure areas for entities in the public, private, government and military sectors. In addition, o ur CISO leads the operational cybersecurity team, which has an average of over 10 years of experience.
Removed
Our cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.
Added
Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to its Audit Committee oversight of cybersecurity and other information technology risks. Our Audit Committee oversees management’s implementation of our cybersecurity risk management program. Our Audit Committee receives quarterly reports from management on our cybersecurity risks.
Added
Our management team, which includes our CISO as well as our Chief Executive Officer, Chief Financial Officer, General Counsel and Chief Information Officer , has overall responsibility for implementing our cybersecurity risk management program.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changePlant Location Approximate Size (ft2) Owned / Leased Description Plant #3 Indianapolis 927,000 Own Engineering, Operational Support Plant #4 Indianapolis 425,900 Own Manufacturing Plant #6 Indianapolis 431,500 Own Manufacturing Plant #12 Indianapolis 534,900 Own Manufacturing Plant #14 Indianapolis 481,100 Own Manufacturing Plant #15 Indianapolis 391,700 Own Manufacturing Plant #17 Indianapolis 389,000 Own Parts Distribution Center Innovation Center Indianapolis 96,000 Own Engineering, Research and Development Vehicle Electrification + Environmental Test (VE+ET) Center Indianapolis 66,000 Own Research and Development Auburn Hills Auburn Hills, Michigan, USA 110,400 Lease Engineering, Operational Support, Manufacturing Walker Die Casting Lewisburg, Tennessee, USA 774,100 Own Manufacturing Chennai India 331,700 Own Manufacturing Szentgotthard Hungary 149,000 Own Manufacturing & Customization We believe all our facilities are suitable for their intended purpose, are being efficiently utilized and provide adequate capacity to meet demand for the next several years.
Biggest changePlant Location Approximate Size (ft2) Owned / Leased Description Plant #3 Indianapolis 927,000 Own Engineering, Operational Support Plant #4 Indianapolis 425,900 Own Manufacturing Plant #6 Indianapolis 431,500 Own Manufacturing Plant #12 Indianapolis 534,900 Own Manufacturing Plant #14 Indianapolis 481,100 Own Manufacturing Plant #15 Indianapolis 391,700 Own Manufacturing Plant #17 Indianapolis 389,000 Own Parts Distribution Center Innovation Center Indianapolis 96,000 Own Engineering, Research and Development Vehicle Electrification + Environmental Test (VE+ET) Center Indianapolis 66,000 Own Research and Development Auburn Hills Auburn Hills, Michigan, USA 110,400 Lease Engineering, Operational Support, Manufacturing Walker Die Casting Lewisburg, Tennessee, USA 774,100 Own Manufacturing Chennai India 551,551 Own Manufacturing Szentgotthard Hungary 149,000 Own Manufacturing & Customization In addition, in connection with the acquisition of the Acquired Off-Highway Business, effective as of January 1, 2026, we acquired approximately 46 additional manufacturing and assembly plants and approximately 30 other facilities located in 24 countries.
ITEM 2. P ROPERTIES Our world headquarters, which we own, is located at One Allison Way, Indianapolis, Indiana 46222. As of December 31, 2024, we have 17 manufacturing and certain other facilities in eight countries. The following table sets forth certain information regarding our significant facilities.
ITEM 2. P ROPERTIES Our world headquarters, which we own, is located at One Allison Way, Indianapolis, Indiana 46222. As of December 31, 2025, we have 17 manufacturing and certain other facilities in eight countries. The following table sets forth certain information regarding our significant facilities as of December 31, 2025.
Removed
The table above does not include sales offices located in various countries.
Added
We believe all our facilities are suitable for their intended purpose, are being efficiently utilized and provide adequate capacity to meet demand for the next several years. The table above does not include sales offices located in various countries.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeNevertheless, we believe the outcome of any of these currently existing proceedings, even if determined adversely, would not have a material adverse effect on our financial condition or results of operations. See also "Note 18. Commitments and Contingencies” in Part II, Item 8., of this Annual Report on Form 10-K. ITEM 4.
Biggest changeNevertheless, we believe the outcome of any of these currently existing proceedings, even if determined adversely, would not have a material adverse effect on our financial condition or results of operations. See "Note 18. Commitments and Contingencies” of Notes to Consolidated Financial Statements included in Part II, Item 8., of this Annual Report on Form 10-K. ITEM 4.
MINE SAF ETY DISCLOSURES Not applicable. 33 Table of Contents PART II.
MINE SAF ETY DISCLOSURES Not applicable. 38 Table of Contents PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of December 31, 2019 As of December 31, 2020 As of December 31, 2021 As of December 31, 2022 As of December 31, 2023 As of December 31, 2024 Allison Transmission Holdings, Inc. $ 100.00 $ 90.91 $ 78.11 $ 91.27 $ 129.84 $ 244.08 S&P 500 Index 100.00 118.40 152.39 124.79 157.59 197.02 Peer Group 100.00 120.62 145.20 119.58 147.08 139.30 ITEM 6. [ R ESER VED] 35 Table of Contents
Biggest changeAs of December 31, 2020 As of December 31, 2021 As of December 31, 2022 As of December 31, 2023 As of December 31, 2024 As of December 31, 2025 Allison Transmission Holdings, Inc. $ 100.00 $ 85.92 $ 100.39 $ 142.82 $ 268.48 $ 246.04 S&P 500 Index 100.00 128.71 105.40 133.10 166.40 196.16 Peer Group 100.00 120.37 99.13 121.93 115.48 121.86 ITEM 6. [ R ESER VED] 40 Table of Contents
Issuances Under Equity Compensation Plans For information regarding the securities authorized for issuance under our equity compensation plans, see Part III, Item 12. of this Annual Report on Form 10-K. 34 Table of Contents Comparative Stock Performance Graph The information included under the heading “Comparative Stock Performance Graph” in this Item 5. of Part II of this Annual Report on Form 10-K shall not be deemed to be “soliciting material” or subject to Regulation 14A or 14C, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act.
Issuances Under Equity Compensation Plans For information regarding the securities authorized for issuance under our equity compensation plans, see Part III, Item 12. of this Annual Report on Form 10-K. 39 Table of Contents Comparative Stock Performance Graph The information included under the heading “Comparative Stock Performance Graph” in this Item 5. of Part II of this Annual Report on Form 10-K shall not be deemed to be “soliciting material” or subject to Regulation 14A or 14C, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act.
The graph assumes $100 was invested on December 31, 2019 in our common stock and each of the indices and that all dividends, if any, are reinvested.
The graph assumes $100 was invested on December 31, 2020 in our common stock and each of the indices and that all dividends, if any, are reinvested.
Issuer Purchases of Equity Securities Our current stock repurchase program (the "Repurchase Program") was authorized by the Board of Directors in 2016, with increases approved by the Board of Directors on each of November 8, 2017, July 30, 2018, May 9, 2019 and February 24, 2022, which in the aggregate authorized total repurchases of up to $4,000 million in shares of our common stock.
Issuer Purchases of Equity Securities Our current stock repurchase program (the "Repurchase Program") was authorized by the Board of Directors in 2016, with increases approved by the Board of Directors on each of November 8, 2017, July 30, 2018, May 9, 2019, February 24, 2022 and February 20, 2025, which in the aggregate total authorized repurchases of $5,000 million in shares of our common stock.
Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the NYSE under the symbol “ALSN.” Holders As of January 30, 2025, there were approximately 201,925 stockholders of record of our common stock, which includes the actual number of holders registered on our books and holders of shares in “street name” or persons, partnerships, associations, corporations or other entities identified in security position listings maintained by depositories.
Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the New York Stock Exchange under the symbol “ALSN.” Holders As of February 5, 2026, there were approximately 306,855 stockholders of record of our common stock, which includes the actual number of holders registered on our books and holders of shares in “street name” or persons, partnerships, associations, corporations or other entities identified in security position listings maintained by depositories.
The following table sets forth information related to our repurchase of our common stock on a monthly basis during the three months ended December 31, 2024: Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) October 1 – October 31, 2024 230,958 $ 99.57 230,958 $ 615,635,222 November 1 – November 30, 2024 374,067 117.62 374,067 571,639,106 December 1 – December 31, 2024 465,551 112.76 465,551 519,143,756 Total 1,070,576 111.61 1,070,576 (1) These values reflect repurchases made under the Repurchase Program.
The following table sets forth information related to our repurchase of our common stock on a monthly basis during the three months ended December 31, 2025: Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) October 1 – October 31, 2025 207,881 $ 82.97 207,881 $ 1,218,918,146 November 1 – November 30, 2025 162,873 82.92 162,873 1,205,413,180 December 1 – December 31, 2025 143,818 96.08 143,818 1,191,595,143 Total 514,572 86.62 514,572 (1) These values reflect repurchases made under the Repurchase Program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

63 edited+38 added−11 removed44 unchanged
Biggest changeThe increase was principally driven by a $223 million, or 15%, increase in net sales in the North America On-Highway end market principally driven by strength in demand for Class 8 vocational and medium-duty trucks and price increases on certain products, a $46 million, or 28%, increase in net sales in the Defense end market principally driven by increased demand for Tracked vehicle applications and a $16 million, or 3%, increase in net sales in the Outside North America On-Highway end market principally driven by higher demand in Asia and price increases on certain products, partially offset by lower demand in Europe, partially offset by a $62 million, or 37%, decrease in Global Off-Highway net sales principally driven by lower demand from the energy sector in North America and the mining and construction sectors outside of North America, partially offset by strength in demand from the energy sector outside of North America and a $33 million, or 5%, decrease in net sales in the Service Parts, Support Equipment and Other end market principally driven by lower demand for North America service parts and aluminum die cast components, partially offset by price increases on certain products.
Biggest changeThe decrease was principally driven by: • North America On-Highway end market net sales decreased $212 million, or 12%, principally driven by lower demand for medium-duty and class 8 vocational trucks, partially offset by price increases on certain products and market share gains for hybrid propulsion systems for transit buses. • Global Off-Highway end market net sales decreased $52 million, or 50%, principally driven by lower demand from the energy, mining and construction sectors outside of North America. • Service Parts, Support Equipment and Other end market net sales decreased $20 million, or 3%, principally driven by lower demand for aluminum die cast components and support equipment, partially offset by higher demand for service parts and price increases on certain products.
A quantitative analysis contains uncertainties because it is performed utilizing a discounted cash flow model which includes key assumptions, such as financial forecasts; net sales growth derived from market information, industry reports, marketing programs and future new product introductions; operating margin improvements derived 45 Table of Contents from cost reduction programs and fixed cost leverage driven by higher sales volumes; and a risk-adjusted discount rate.
A quantitative analysis contains uncertainties because it is performed utilizing a discounted cash flow model which includes key assumptions, such as financial forecasts; net sales growth derived from market information, industry reports, marketing programs and future new product introductions; operating margin improvements derived 52 Table of Contents from cost reduction programs and fixed cost leverage driven by higher sales volumes; and a risk-adjusted discount rate.
A change in the discount rate can have a significant impact on determining our benefit obligations. Our current discount rate is determined by matching the plans’ projected cash flows to a yield curve based on long-term, fixed income debt instruments available as of the measurement date of December 31, 2024.
A change in the discount rate can have a significant impact on determining our benefit obligations. Our current discount rate is determined by matching the plans’ projected cash flows to a yield curve based on long-term, fixed income debt instruments available as of the measurement date of December 31, 2025.
Product Warranty Liabilities” of Notes to Consolidated Financial Statements included in Part II, Item 8., of this Annual Report on Form 10-K, which contains a summary of the activity in our warranty liability account for 2024, 2023 and 2022, including adjustments to pre-existing warranties.
Product Warranty Liabilities” of Notes to Consolidated Financial Statements included in Part II, Item 8., of this Annual Report on Form 10-K, which contains a summary of the activity in our warranty liability account for 2025, 2024 and 2023, including adjustments to pre-existing warranties.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K. This section of this Annual Report on Form 10-K generally discusses 2024 and 2023 items and year-over-year comparisons between 2024 and 2023.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the notes thereto included elsewhere in this Annual Report on Form 10-K. This section of this Annual Report on Form 10-K generally discusses 2025 and 2024 items and year-over-year comparisons between 2025 and 2024.
Outside North America On-Highway end market net sales were up 3% for the year ended December 31, 2024 compared to the year ended December 31, 2023, principally driven by higher demand in Asia and price increases on certain products, partially offset by lower demand in Europe.
Outside North America On-Highway end market net sales were up 3% for the year ended December 31, 2025 compared to the year ended December 31, 2024, principally driven by higher demand in Europe and South America and price increases on certain products, partially offset by lower demand in Asia.
A detailed discussion of 2022 items and year-over-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7. of our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 14, 2024.
A detailed discussion of 2023 items and year-over-year comparisons between 2024 and 2023 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7. of our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 13, 2025.
(b) Represents non-recurring incentives (recorded in Cost of sales, Selling, general and administrative, and Engineering - research and development) to eligible employees as a result of UAW Local 933 represented employees ratifying a four-year collective bargaining agreement effective through November 2027.
(e) Represents non-recurring incentives (recorded in Cost of sales, Selling, general and administrative, and Engineering - research and development) to eligible employees as a result of the UAW Local 933 represented employees ratifying a four-year collective bargaining agreement effective through November 2027.
Additionally, within the terms of the Senior Secured Credit Facility, a first lien net leverage ratio at or below 4.00x results in the elimination of excess cash flow payments on the Senior Secured Credit Facility for the applicable year. As of December 31, 2024, our first lien net leverage ratio was (0.23x).
Additionally, within the terms of the Senior Secured Credit Facility, a first lien net leverage ratio at or below 4.00x results in the elimination of excess cash flow payments on the Senior Secured Credit Facility for the applicable year. As of December 31, 2025, our first lien net leverage ratio was (0.87x).
Our ability to generate cash in the future and our future uses of cash are subject to general economic, financial, competitive, legislative, regulatory and other factors that may be beyond our control. We had total available cash and cash equivalents of $781 million and $555 million as of December 31, 2024 and 2023, respectively.
Our ability to generate cash in the future and our future uses of cash are subject to general economic, financial, competitive, legislative, regulatory and other factors that may be beyond our control. We had total available cash and cash equivalents of $1,495 million and $781 million as of December 31, 2025 and 2024, respectively.
Further information is provided in "Note 15. Employee Benefit Plans” of Notes to Consolidated Financial Statements included in Part II, Item 8., of this Annual Report on Form 10-K, which contains our review on various actuarial assumptions. Income Taxes Income taxes are accounted for under the asset and liability method.
Employee Benefit Plans” of Notes to Consolidated Financial Statements included in Part II, Item 8., of this Annual Report on Form 10-K, which contains our review on various actuarial assumptions. Income Taxes Income taxes are accounted for under the asset and liability method.
As of December 31, 2024, we had $514 million of indebtedness associated with ATI’s Term Loan, $400 million of indebtedness associated with ATI’s 4.75% Senior Notes due October 2027 (“4.75% Senior Notes”), $500 million of indebtedness associated with ATI’s 5.875% Senior Notes due June 2029 (“5.875% Senior Notes”) and $1,000 million of indebtedness associated with ATI’s 3.75% Senior Notes due January 2031 (“3.75% Senior Notes” and, together with the 4.75% Senior Notes and 5.875% Senior Notes, the “Senior Notes”).
As of December 31, 2025, we had $509 million of indebtedness associated with ATI’s Term Loan, $400 million of indebtedness associated with ATI’s 4.75% Senior Notes due October 2027 (“4.75% Senior Notes”), $500 million of indebtedness associated with ATI’s 5.875% Senior Notes due June 2029 (“5.875% Senior Notes 2029”), $1,000 million of indebtedness associated with ATI’s 3.75% Senior Notes due January 2031 (“3.75% Senior Notes”) and $500 million of indebtedness associated with ATI’s 5.875% Senior Notes due December 2033 ("5.875% Senior Notes 2033", and together with the 4.75% Senior Notes, 5.875% Senior Notes 2029 and 3.75% Senior Notes, the “Senior Notes”).
As of December 31, 2024, our credit ratings from both Moody's and Fitch are shown in the table below: December 31, 2024 Credit Ratings Moody's Fitch Corporate Credit Ba1 BB+ Term Loan Baa2 BBB- 4.75% Senior Notes Ba2 BB+ 5.875% Senior Notes Ba2 BB+ 3.75% Senior Notes Ba2 BB+ We anticipate increased capital expenditures and cash income taxes in 2025 compared to 2024.
As of December 31, 2025, our credit ratings from both Moody's and Fitch are shown in the table below: December 31, 2025 Credit Ratings Moody's Fitch Corporate Credit Ba1 BB+ Term Loan due 2031 Baa2 BBB- 4.75% Senior Notes due 2027 Ba2 BB+ 5.875% Senior Notes due 2029 Ba2 BB+ 3.75% Senior Notes due 2031 Ba2 BB+ 5.875% Senior Notes due 2033 Ba2 BB+ We anticipate increased capital expenditures and cash income taxes in 2026 compared to 2025.
Further information is provided in "Note 6. Goodwill and Other Intangible Assets” of Notes to Consolidated Financial Statements included in Part II, Item 8., of this Annual Report on Form 10-K. Impairment of Long-Lived Assets The carrying value of long-lived assets is evaluated whenever events or circumstances indicate that the carrying value of a long-lived asset may not be recoverable.
Goodwill and Other Intangible Assets” of Notes to Consolidated Financial Statements included in Part II, Item 8., of this Annual Report on Form 10-K. 53 Table of Contents Impairment of Long-Lived Assets The carrying value of long-lived assets is evaluated whenever events or circumstances indicate that the carrying value of a long-lived asset may not be recoverable.
Service Parts, Support Equipment and Other end market net sales were down 5% for the year ended December 31, 2024 compared to the year ended December 31, 2023, principally driven by lower demand for North America service parts and aluminum die cast components, partially offset by price increases on certain products.
Service Parts, Support Equipment and Other end market net sales were down 3% for the year ended December 31, 2025 compared to the year ended December 31, 2024, principally driven by lower demand for aluminum die cast components and support equipment, partially offset by higher demand for service parts and price increases on certain products.
The effect of a one percentage point decrease in the assumed discount rate would result in an increase in the December 31, 2024 defined benefit pension plans obligation of approximately $13 million. Similarly, a one percentage point decrease in the assumed discount rate would result in an increase in the December 31, 2024 OPEB obligation of approximately $6 million.
The effect of a one percentage point decrease in the assumed discount rate would result in an increase in the December 31, 2025 defined benefit pension plans obligation of approximately $13 million.
(d) Represents a non-cash settlement charge (recorded in Other (expense) income, net) for a pro rata portion of previously unrecognized pension plan actuarial net losses associated with the pension risk transfer of a portion of our salaried defined benefit pension plan obligations to a third-party insurance company.
(f) Represents a non-cash settlement charge (recorded in Other income (expense), net) for a pro rata portion of previously unrecognized pension plan actuarial net losses associated with the pension risk transfer of a portion of our salaried defined benefit pension plan obligations to a third-party insurance company. (g) Represents other adjustments as defined by the Credit Agreement.
Long-term debt service liquidity requirements also consist of the payment in full of any remaining principal balance of ATI’s Term Loan and the Senior Notes upon their respective maturity dates. We made $104 million and $7 million of principal payments on the Term Loan during the years ended December 31, 2024 and 2023, respectively.
Our long-term debt service liquidity requirements also consist of the payment in full of any remaining principal balance of ATI’s Term Loan, ATI's Incremental Term Loan and the Senior Notes upon their respective maturity dates. 48 Table of Contents We made $5 million and $104 million of principal payments on the Term Loan during the years ended December 31, 2025 and 2024, respectively.
(c) Represents losses (recorded in Other (expense) income, net) related to an investment in the common stock of Jing-Jin Electric Technologies Co. Ltd.
(d) Represents unrealized (gains) losses (recorded in Other income (expense), net) principally related to an investment in the common stock of Jing-Jin Electric Technologies Co. Ltd.
Short-term and long-term debt service liquidity requirements consist of $1 million of minimum required quarterly principal payments on ATI’s Term Loan through its maturity date of March 2031 and periodic interest payments on ATI’s Term Loan and the Senior Notes. There are no required quarterly principal payments on the Senior Notes.
Our short-term and long-term debt service liquidity requirements consist of $1 million of minimum required quarterly principal payments on ATI’s Term Loan through its maturity date of March 2031, $3 million of minimum required quarterly principal payments on ATI’s Incremental Term Loan through its maturity date of January 2033 and periodic interest payments on ATI’s Term Loan, ATI's Incremental Term Loan and the Senior Notes.
If we have commitments outstanding on the Revolving Credit Facility at the end of a fiscal quarter, the Senior Secured Credit Facility requires us to maintain a specified maximum first lien net leverage ratio of 5.50x.
As of December 31, 2025, we had no amounts outstanding under the Revolving Credit Facility. If we have commitments outstanding on the Revolving Credit Facility at the end of a fiscal quarter, the Senior Secured Credit Facility requires us to maintain a specified maximum first lien net leverage ratio of 5.50x.
We have a global presence by serving customers in North America, Asia, Europe, South America, and Africa, with approximately 77% of our revenues being generated in North America in 2024. We serve customers through an independent network of approximately 1,600 independent distributor and dealer locations worldwide.
We have a global presence by serving customers in North America, Asia, Europe, South America, and Africa, with approximately 76% of our revenues being generated in North America in 2025. We serve customers through an independent network of approximately 1,500 independent distributor and dealer locations worldwide as of December 31, 2025.
Global Off-Highway net sales were down 37% for the year ended December 31, 2024 compared to the year ended December 31, 2023, principally driven by lower demand from the energy sector in North America and the mining and construction sectors outside of North America, partially offset by strength in demand from the energy sector outside of North America.
Global Off-Highway net sales were down 50% for the year ended December 31, 2025 compared to the year ended December 31, 2024, principally driven by lower demand from the energy, mining and construction sectors outside of North America.
Of the available cash and cash equivalents, $117 million was deposited in operating accounts and $664 million was invested in U.S. government backed securities as of December 31, 2024, compared to $134 million deposited in operating accounts and $421 million invested in U.S. government backed securities as of December 31, 2023.
Of the available cash and cash equivalents, $1,361 million was deposited in operating accounts and $134 million was invested primarily in U.S. government backed securities and time deposits as of December 31, 2025, compared to $117 million deposited in operating accounts and $664 million invested primarily in U.S. government backed securities as of December 31, 2024.
As of December 31, 2024, the total of cash held by foreign subsidiaries was $61 million, the majority of which was at our subsidiaries located in China, Japan, the Netherlands and India.
As of December 31, 2025, the total of cash held by foreign subsidiaries was $84 million, the majority of which was at our subsidiaries located in China, the Netherlands, Japan, Brazil and Hungary.
The weight given to these considerations depends upon the degree to which they can be objectively verified. Further information on income taxes is provided in "Note 16. Income Taxes” of Notes to Consolidated Financial Statements included in Part II, Item 8., of this Annual Report on Form 10-K. Business Combinations We use the acquisition method to account for business combinations.
Further information on income taxes is provided in "Note 16. Income Taxes” of Notes to Consolidated Financial Statements included in Part II, Item 8., of this Annual Report on Form 10-K. Business Combinations We use the acquisition method to account for business combinations.
For the year ended December 31, 2024, direct material costs were approximately 65%, overhead costs were approximately 27% and direct labor costs were approximately 8% of total cost of sales. We are subject to changes in our cost of sales caused by movements in underlying commodity prices. We seek to hedge against this risk by using LTAs.
For the year ended December 31, 2025, direct material costs were approximately 66%, overhead costs were approximately 26% and direct labor costs were approximately 8% of total cost of sales. We are subject to changes in our cost of sales caused by movements in underlying commodity prices.
Summary of Significant Accounting Policies” in Part II, Item 8., of this Annual Report on Form 10-K. 48 Table of Contents
Summary of Significant Accounting Policies” of Notes to Consolidated Financial Statements included in Part II, Item 8., of this Annual Report on Form 10-K. 55 Table of Contents
Cash used for financing activities Financing activities for the year ended December 31, 2024 used $427 million of cash compared to $332 million for the year ended December 31, 2023.
Cash provided by (used for) financing activities Financing activities for the year ended December 31, 2025 provided $57 million of cash compared to using $427 million for the year ended December 31, 2024.
Adjusted free cash flow is calculated as Net cash provided by operating activities after additions of long-lived assets. 38 Table of Contents The following is a reconciliation of Net income and Net income as a percent of net sales to Adjusted EBITDA and Adjusted EBITDA as a percent of net sales and a reconciliation of Net cash provided by operating activities to Adjusted free cash flow: For the years ended December 31, (unaudited, in millions) 2024 2023 2022 Net income (GAAP) $ 731 $ 673 $ 531 plus: Income tax expense 166 154 114 Depreciation of property, plant and equipment 111 109 109 Interest expense, net 89 107 118 Amortization of intangible assets 10 45 46 Stock-based compensation expense (a) 26 22 18 UAW Local 933 contract signing incentives (b) 14 — — Unrealized loss on marketable securities (c) 9 1 22 Pension plan settlement loss (d) 4 — — Technology-related investments loss (gain) (e) 2 (3 ) (6 ) Unrealized loss on foreign exchange (f) 1 — 6 Other (g) 2 — 3 Adjusted EBITDA (Non-GAAP) $ 1,165 $ 1,108 $ 961 Net sales (GAAP) $ 3,225 $ 3,035 $ 2,769 Net income as a percent of Net sales (GAAP) 22.7 % 22.2 % 19.2 % Adjusted EBITDA as a percent of Net sales (Non-GAAP) 36.1 % 36.5 % 34.7 % Net cash provided by operating activities (GAAP) $ 801 $ 784 $ 657 Deductions to reconcile to Adjusted free cash flow: Additions of long-lived assets (143 ) (125 ) (167 ) Adjusted free cash flow (Non-GAAP) $ 658 $ 659 $ 490 (a) Represents stock-based compensation expense (recorded in Cost of sales, Selling, general and administrative, and Engineering — research and development).
Adjusted free cash flow is calculated as Net cash provided by operating activities after additions of long-lived assets. 44 Table of Contents The following is a reconciliation of Net income and Net income as a percent of net sales to Adjusted EBITDA and Adjusted EBITDA as a percent of net sales and a reconciliation of Net cash provided by operating activities to Adjusted free cash flow: For the years ended December 31, (unaudited, dollars in millions) 2025 2024 2023 Net income (GAAP) $ 623 $ 731 $ 673 plus: Income tax expense 181 166 154 Depreciation of property, plant and equipment 117 111 109 Interest expense, net 92 89 107 Amortization of intangible assets 7 10 45 Acquisition-related expenses (a) 64 — — Loss associated with impairment of long-lived assets (b) 29 1 — Stock-based compensation expense (c) 27 26 22 Unrealized (gain) loss on marketable securities (d) (12 ) 9 1 UAW Local 933 contract signing incentives (e) — 14 — Pension plan settlement loss (f) — 4 — Other (g) 2 4 (3 ) Adjusted EBITDA (Non-GAAP) $ 1,130 $ 1,165 $ 1,108 Net sales (GAAP) $ 3,010 $ 3,225 $ 3,035 Net income as a percent of Net sales (GAAP) 20.7 % 22.7 % 22.2 % Adjusted EBITDA as a percent of Net sales (Non-GAAP) 37.5 % 36.1 % 36.5 % Net cash provided by operating activities (GAAP) (h) $ 836 $ 801 $ 784 Deductions to reconcile to Adjusted free cash flow: Additions of long-lived assets (175 ) (143 ) (125 ) Adjusted free cash flow (Non-GAAP) (h) $ 661 $ 658 $ 659 (a) Represents acquisition-related expenses (recorded in Selling, general and administrative), primarily consulting and legal fees, related to the Acquisition.
At this time, we believe cash provided by operating activities, cash and cash equivalents and borrowing capacity under the Revolving Credit Facility will be sufficient to meet our known and anticipated cash requirements for the next twelve months and thereafter.
At this time, we believe cash provided by operating activities, cash and cash equivalents and borrowing capacity under the Revolving Credit Facility will be sufficient to meet our known and anticipated cash requirements for the next twelve months and thereafter. 50 Table of Contents Cash provided by operating activities Operating activities for the year ended December 31, 2025 generated $836 million of cash compared to $801 million for the year ended December 31, 2024.
The increase was principally driven by $97 million of increased payments on our long-term debt, $4 million of debt financing fees associated with the amendment of the Credit Agreement governing our Senior Secured Credit Facility and $4 million of increased dividend payments, partially offset by $9 million of lower stock repurchases under the Repurchase Program and a $4 million increase in proceeds from the exercise of stock options. 44 Table of Contents Critical Accounting Estimates The preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of some assets and liabilities and, in some instances, the reported amounts of net sales and expenses during the applicable reporting period.
The increase was principally driven by $500 million of proceeds from the issuance of the 5.875% Senior Notes 2033 and $99 million of decreased payments on our long-term debt, partially offset by $74 million of higher stock repurchases under the Repurchase Program, $24 million of lower proceeds from the exercise of stock options, $8 million of increased debt financing fees primarily associated with the issuance of the 5.875% Senior Notes 2033 and the Bridge Facility and $5 million of higher taxes paid related to the net share settlement of equity awards. 51 Table of Contents Critical Accounting Estimates The preparation of the Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of some assets and liabilities and, in some instances, the reported amounts of net sales and expenses during the applicable reporting period.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. When releasing income tax effects from accumulated other comprehensive loss, we utilize the portfolio securities approach.
As of December 31, 2024, we had approximately $519 million available under the Repurchase Program. 43 Table of Contents The following table shows our sources and uses of funds for the years ended December 31, 2024, 2023 and 2022 (dollars in millions): Years ended December 31, Statement of Cash Flows Data 2024 2023 2022 Cash flows provided by operating activities $ 801 $ 784 $ 657 Cash flows used for investing activities (147 ) (129 ) (183 ) Cash flows used for financing activities (427 ) (332 ) (367 ) Generally, cash provided by operating activities has been adequate to fund our operations.
The following table shows our sources and uses of funds for the years ended December 31, 2025, 2024 and 2023 (dollars in millions): Years ended December 31, Statements of Cash Flows Data 2025 2024 2023 Cash flows provided by operating activities $ 836 $ 801 $ 784 Cash flows used for investing activities (184 ) (147 ) (129 ) Cash flows provided by (used for) financing activities 57 (427 ) (332 ) Generally, cash provided by operating activities has been adequate to fund our operations.
Goodwill is tested for impairment at the reporting unit level, which is the same as our one operating and reportable segment. We do not aggregate any components into our reporting unit. Goodwill impairment testing for 2024 was performed using the Step 0 analysis by assessing certain qualitative trends and factors.
Goodwill is tested for impairment at the reporting unit level, which, for 2025, was the same as our one operating and reportable segment. We do not aggregate any components into our reporting unit.
We have significant liquidity, including $781 million of cash and cash equivalents and $744 million available under the Revolving Credit Facility, net of $6 million in letters of credit, as of December 31, 2024.
We had significant liquidity, including $1,495 million of cash and cash equivalents and $745 million available under the Revolving Credit Facility, net of $5 million in letters of credit, as of December 31, 2025.
Any changes to the assumptions and estimates resulting from changes in actual results or market conditions from those anticipated may affect the carrying value of long-lived assets and could result in an impairment charge. 46 Table of Contents Warranty Provisions for estimated expenses related to product warranties are made at the time products are sold.
Any changes to the assumptions and estimates resulting from changes in actual results or market conditions from those anticipated may affect the carrying value of long-lived assets and could result in an impairment charge.
The increase in income tax expense was principally driven by higher taxable income. 41 Table of Contents Liquidity and Capital Resources We generate cash primarily from operations to fund our operating, investing and financing activities.
The increase in income tax expense and effective tax rate was principally driven by elections made under the One Big Beautiful Bill Act. Liquidity and Capital Resources We generate cash primarily from our operations to fund our operating, investing and financing activities.
Defense end market net sales were up 28% for the year ended December 31, 2024 compared to the year ended December 31, 2023, principally driven by increased demand for Tracked vehicle applications.
Defense end market net sales were up 26% for the year ended December 31, 2025 compared to the year ended December 31, 2024, principally driven by increased demand for Tracked vehicle applications, price increases on certain products and the continued execution of our growth initiatives.
Gross profit as a percent of net sales for the year ended December 31, 2024 decreased 100 basis points compared to the same period in 2023, principally driven by increased cost of sales, including $13 million of non-recurring UAW contract signing incentives, partially offset by increased net sales and price increases on certain products.
Gross profit as a percent of net sales for the year ended December 31, 2025 increased 120 basis points compared to the same period in 2024, principally driven by price increases on certain products, lower incentive compensation expense and UAW Local 933 contract signing incentives recognized in 2024 that did not reoccur in 2025.
Appropriate consideration is given to all positive and negative evidence related to that realization. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carryforward periods, and experience with tax attributes expiring unused and tax planning alternatives.
This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carryforward periods, and experience with tax attributes expiring unused and tax planning alternatives. The weight given to these considerations depends upon the degree to which they can be objectively verified.
Overview We are a leading designer and manufacturer of propulsion solutions for commercial and defense vehicles and the largest global manufacturer of medium- and heavy-duty fully automatic transmissions. 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”.
Overview We are a global leader in high-performance mobility and work solutions built for the needs of the modern industrial world. 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”.
Intangible assets with finite lives are amortized over their estimated useful lives and reviewed for impairment when circumstances change that would create a triggering event. Customer relationships are amortized over the life in which expected benefits are to be consumed. The other remaining finite life intangibles are amortized on a straight-line basis over their useful lives.
Customer relationships are amortized over the life in which expected benefits are to be consumed. The other remaining finite life intangibles are amortized on a straight-line basis over their useful lives. We evaluate the remaining useful life of the other intangible assets on a periodic basis to determine whether events or circumstances warrant a revision to the remaining useful life.
When releasing income tax effects from accumulated other comprehensive loss, we utilize the portfolio securities approach. 47 Table of Contents The need to establish a valuation allowance against the deferred tax assets is assessed at least quarterly based on a more-likely-than-not realization threshold, in accordance with the FASB authoritative accounting guidance on income taxes.
The need to establish a valuation allowance against the deferred tax assets is assessed at least quarterly based on a more-likely-than-not realization threshold, in accordance with the FASB authoritative accounting guidance on income taxes. Appropriate consideration is given to all positive and negative evidence related to that realization.
Selling, general and administrative Selling, general and administrative expenses for the year ended December 31, 2024 were $337 million compared to $357 million for the year ended December 31, 2023, a decrease of 6%. The decrease was principally driven by lower intangible amortization expense, partially offset by increased commercial activities spending and higher product warranty expense.
Selling, general and administrative Selling, general and administrative expenses for the year ended December 31, 2025 were $380 million compared to $336 million for the year ended December 31, 2024, an increase of 13%. The increase was principally driven by $64 million of expenses related to the Acquisition and higher product warranty expense, partially offset by lower incentive compensation expense.
Comparison of years ended December 31, 2024 and 2023 Years ended December 31, (dollars in millions) 2024 % of net sales 2023 % of net sales Net sales $ 3,225 100 % $ 3,035 100 % Cost of sales 1,696 53 1,565 52 Gross profit 1,529 47 1,470 48 Operating expenses: Selling, general and administrative 337 10 357 12 Engineering — research and development 200 6 194 6 Total operating expenses 537 16 551 18 Operating income 992 31 919 30 Other expense, net: Interest expense, net (89 ) (3 ) (107 ) (3 ) Other (expense) income, net (6 ) — 15 — Total other expense, net (95 ) (3 ) (92 ) (3 ) Income before income taxes 897 28 827 27 Income tax expense (166 ) (5 ) (154 ) (5 ) Net income $ 731 23 % $ 673 22 % Net sales Net sales for the year ended December 31, 2024 were $3,225 million compared to $3,035 million for the year ended December 31, 2023, an increase of 6%.
Comparison of years ended December 31, 2025 and 2024 Years ended December 31, (dollars in millions) 2025 % of net sales 2024 % of net sales Net sales $ 3,010 100 % $ 3,225 100 % Cost of sales 1,547 51 1,696 53 Gross profit 1,463 49 1,529 47 Operating expenses: Selling, general and administrative 380 13 336 10 Engineering — research and development 174 6 200 6 Loss associated with impairment of long-lived assets 29 1 1 — Total operating expenses 583 20 537 16 Operating income 880 29 992 31 Other expense, net: Interest expense, net (92 ) (3 ) (89 ) (3 ) Other income (expense), net 16 1 (6 ) — Total other expense, net (76 ) (2 ) (95 ) (3 ) Income before income taxes 804 27 897 28 Income tax expense (181 ) (6 ) (166 ) (5 ) Net income $ 623 21 % $ 731 23 % Net sales Net sales for the year ended December 31, 2025 were $3,010 million compared to $3,225 million for the year ended December 31, 2024, a decrease of 7%.
See Part II, Item 7A., “Quantitative and Qualitative Disclosures about Market Risk—Commodity Price Risk” included in this Annual Report on Form 10-K. 37 Table of Contents Selling, general and administrative The principal components of our selling, general and administrative expenses are salaries and benefits for our office personnel, advertising and promotional expenses, product warranty expense, expenses relating to certain information technology systems and amortization of our intangible assets.
Selling, general and administrative The principal components of our selling, general and administrative expenses are salaries and benefits for our office personnel, advertising and promotional expenses, product warranty expense, expenses relating to certain information technology systems and amortization of our intangible assets.
Cash used for investing activities Investing activities for the year ended December 31, 2024 used $147 million of cash compared to $129 million for the year ended December 31, 2023.
Cash used for investing activities Investing activities for the year ended December 31, 2025 used $184 million of cash compared to $147 million for the year ended December 31, 2024. The increase was principally driven by a $32 million increase in capital expenditures.
Adjusted EBITDA is calculated as earnings before interest expense, net, income tax expense, amortization of intangible assets, depreciation of property, plant and equipment and other adjustments as defined by the Second Amended and Restated Credit Agreement dated as of March 29, 2019 as amended (the “Credit Agreement”), governing ATI's Term Loan facility in the amount of $514 million due March 2031 (“Term Loan”) and ATI’s revolving credit facility with commitments in the amount of $750 million due March 2029 ("Revolving Credit Facility" and, together with the Term Loan, the "Senior Secured Credit Facility").
Adjusted EBITDA is calculated as earnings before interest expense, net, income tax expense, amortization of intangible assets, depreciation of property, plant and equipment and other adjustments as defined by the Credit Agreement, governing ATI's Senior Secured Credit Facility. Adjusted EBITDA as a percent of net sales is calculated as Adjusted EBITDA divided by net sales.
In 2025, we expect higher net sales driven by price increases on certain products, increased demand for Tracked vehicle applications in our Defense end market and robust North American vocational demand. 36 Table of Contents Full Year 2024 and 2023 Net Sales by End Market (in millions) End Market 2024 Net Sales 2023 Net Sales % Variance North America On-Highway $ 1,752 $ 1,529 15 % North America Off-Highway 8 63 (87 )% Defense 212 166 28 % Outside North America On-Highway 493 477 3 % Outside North America Off-Highway 97 104 (7 )% Service Parts, Support Equipment and Other 663 696 (5 )% Total Net Sales $ 3,225 $ 3,035 6 % North America On-Highway end market net sales were up 15% for the year ended December 31, 2024 compared to the year ended December 31, 2023, principally driven by strength in demand for Class 8 vocational and medium-duty trucks and price increases on certain products.
Trends Impacting Our Business In 2026, we expect to have higher net sales driven by our North America On-Highway and Defense end markets and net sales for Allison Off-Highway Drive & Motion Systems driven by our Construction & Material Handling end market. 42 Table of Contents Full Year 2025 and 2024 Net Sales by End Market (dollars in millions) End Market 2025 Net Sales 2024 Net Sales % Variance North America On-Highway $ 1,540 $ 1,752 (12 )% Outside North America On-Highway 507 493 3 % Global Off-Highway 53 105 (50 )% Defense 267 212 26 % Service Parts, Support Equipment and Other 643 663 (3 )% Total Net Sales $ 3,010 $ 3,225 (7 )% North America On-Highway end market net sales were down 12% for the year ended December 31, 2025 compared to the year ended December 31, 2024, principally driven by lower demand for medium-duty and class 8 vocational trucks, partially offset by price increases on certain products and market share gains for hybrid propulsion systems for transit buses.
The increase was principally driven by higher gross profit, lower cash interest payments and lower cash income taxes, partially offset by higher operating working capital funding requirements, higher cash incentive compensation payments and non-recurring UAW contract signing incentive payments.
The increase was principally driven by lower cash income taxes, lower operating working capital funding requirements, UAW Local 933 contract signing incentives recognized in 2024 that did not reoccur in 2025 and decreased defined benefit pension plans funding payments, partially offset by lower gross profit, payments for expenses related to the Acquisition, lower cash interest received on interest rate swaps and higher cash incentive compensation payments.
Interest expense, net Interest expense, net for the year ended December 31, 2024 was $89 million compared to $107 million for the year ended December 31, 2023, a decrease of 17%.
Gross profit Gross profit for the year ended December 31, 2025 was $1,463 million compared to $1,529 million for the year ended December 31, 2024, a decrease of 4%.
Our ability to make payments on and refinance our indebtedness and to fund planned capital expenditures and growth initiatives will depend on our ability to generate cash in the future. 42 Table of Contents The Senior Secured Credit Facility provides for a $750 million Revolving Credit Facility, net of an allowance for up to $75 million in outstanding letter of credit commitments.
Our ability to make payments on and refinance our indebtedness and to fund planned capital expenditures and growth initiatives will depend on our ability to generate cash in the future.
Such assumptions and estimates can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors, such as changes in our business strategy and internal forecasts. Although management believes the historical assumptions and estimates are reasonable and appropriate, different assumptions and estimates could materially impact our reported financial results.
Assumptions and estimates about future values and remaining useful lives of our intangible and other long-lived assets are complex and subjective. Such assumptions and estimates can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors, such as changes in our business strategy and internal forecasts.
Engineering — research and development Engineering expenses for the year ended December 31, 2024 were $200 million compared to $194 million for the year ended December 31, 2023, an increase of 3%. The increase was principally driven by increased product initiatives spending.
Engineering — research and development Engineering expenses for the year ended December 31, 2025 were $174 million compared to $200 million for the year ended December 31, 2024, a decrease of 13%. The decrease was principally driven by reduced product initiatives spending to align costs and programs across our business with end markets demand conditions and lower incentive compensation expense.
(g) Represents other adjustments as defined by the Credit Agreement. 39 Table of Contents Results of Operations The following table sets forth certain financial information for the years ended December 31, 2024 and 2023.
There were no payments for expenses related to the Acquisition for the year ended December 31, 2024. 45 Table of Contents Results of Operations The following table sets forth certain financial information for the years ended December 31, 2025 and 2024.
Other (expense) income, net Other (expense) income, net for the year ended December 31, 2024 was ($6) million compared to $15 million for the year ended December 31, 2023.
The increase was principally driven by $5 million of increased interest expense from amortization of deferred financing costs related to the Bridge Facility. Other income (expense), net Other income (expense), net for the year ended December 31, 2025 was $16 million compared to ($6) million for the year ended December 31, 2024.
Our Board of Directors has authorized us to repurchase up to $4,000 million of our common stock pursuant to the Repurchase Program. During 2024, we repurchased approximately $254 million of our common stock under the Repurchase Program. All of the repurchase transactions during 2024 were settled in cash during the same period.
On February 20, 2025, our Board of Directors authorized us to repurchase an additional $1,000 million of our common stock pursuant to our stock repurchase program (the "Repurchase Program"), bringing the total amount authorized pursuant to the Repurchase Program to $5,000 million. During 2025, we repurchased approximately $328 million of our common stock under the Repurchase Program.
The increase was principally driven by $80 million of price increases on certain products and $62 million related to increased net sales, partially offset by $75 million of higher manufacturing expense, including $13 million of non-recurring UAW contract signing incentives, and $8 million of higher direct material costs.
The decrease was principally driven by $223 million from decreased net sales and $45 million of unfavorable direct material costs, partially offset by $140 million of price increases on certain products, $29 million of lower manufacturing expense, $20 million of lower incentive compensation expense and $13 million of UAW Local 933 contract signing incentives recognized in 2024 that did not reoccur in 2025.
As of December 31, 2024, we had $744 million available under the Revolving Credit Facility, net of $6 million in letters of credit. As of December 31, 2024, we had no amounts outstanding under the Revolving Credit Facility.
As of December 31, 2025, the Senior Secured Credit Facility provided for a $750 million Revolving Credit Facility, net of an allowance for up to $75 million in outstanding letter of credit commitments, and we had $745 million available under the Revolving Credit Facility, net of $5 million in letters of credit.
The change was principally driven by an $8 million change in unrealized mark-to-market adjustments for marketable securities, a $5 million change in technology-related investments gains and losses, a $4 million non-cash defined benefit pension plan settlement charge and $4 million of unfavorable foreign exchange.
The change was principally driven by a $21 million change in unrealized mark-to-market adjustments for marketable securities and a $4 million non-cash defined benefit pension plan settlement charge recognized in 2024 that did not reoccur in 2025, partially offset by $5 million of reduced post-retirement benefit plan credits. 47 Table of Contents Income tax expense Income tax expense for the year ended December 31, 2025 was $181 million resulting in an effective tax rate of 23%, compared to $166 million of income tax expense and an effective tax rate of 19% for the year ended December 31, 2024.
As of December 31, 2024, we were in compliance with all covenants under the Senior Secured Credit Facility and indentures governing the Senior Notes. Our credit ratings and outlook are reviewed periodically by Moody’s Ratings (“Moody’s”) and Fitch Ratings, Inc. (“Fitch”).
As of December 31, 2025, we were in compliance with all covenants under the Senior Secured Credit Facility and indentures governing the Senior Notes. In connection with the Acquisition, we entered into the Commitment Letter, which provided for up to $2,000 million of borrowing capacity under the Bridge Facility.
Cash provided by operating activities Operating activities for the year ended December 31, 2024 generated $801 million of cash compared to $784 million for the year ended December 31, 2023.
(h) Net cash provided by operating activities (GAAP) and Adjusted free cash flow (Non-GAAP) include $47 million of payments for expenses related to the Acquisition for the year ended December 31, 2025.
Removed
Trends Impacting Our Business In January 2024, the UAW Local 933 ratified a new four-year collective bargaining agreement with us that expires in November 2027. We have experienced, and expect to continue to experience, a significant increase in labor costs under the terms of this new agreement.
Added
Recent Developments On June 11, 2025, we entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Dana to acquire the Acquired Off-Highway Business (the "Acquisition").
Removed
Adjusted EBITDA as a percent of net sales is calculated as Adjusted EBITDA divided by net sales.
Added
Also on June 11, 2025, in connection with the entry into the Purchase Agreement, we entered into a commitment letter (the “Commitment Letter”) with a group of lenders (the "Lenders"), pursuant to which the Lenders committed to provide a 364-day senior unsecured bridge term loan facility (the “Bridge Facility”), in an aggregate principal amount of up to $2,000 million.
Removed
(e) Represents losses (gains) (recorded in Other (expense) income, net) related to investments in co-development agreements to expand our position in propulsion solution technologies. (f) Represents losses (recorded in Other (expense) income, net) on intercompany financing transactions for our India facility.
Added
As of December 31, 2025, the Bridge Facility aggregate commitment principal amount had been reduced to $500 million as a result of the issuance of $500 million aggregate principal amount of our 5.875% Senior Notes due December 2033 (“5.875% Senior Notes 2033”) and our election to voluntarily reduce the aggregate commitments under the facility.
Removed
Cost of sales Cost of sales for the year ended December 31, 2024 was $1,696 million compared to $1,565 million for the year ended December 31, 2023, an increase of 8%.
Added
On January 1, 2026, the Acquisition was completed for a purchase price of approximately $2,732 million, subject to certain adjustments, using a combination of cash on hand, the $500 million of proceeds from the issuance of the 5.875% Senior Notes 2033, $1,200 million of proceeds from the Incremental Term Loan, and $300 million borrowed under the Revolving Credit Facility.
Removed
The increase was principally driven by higher direct material and manufacturing expense commensurate with increased net sales and higher manufacturing expense, including $13 million of non-recurring UAW contract signing incentives. 40 Table of Contents Gross profit Gross profit for the year ended December 31, 2024 was $1,529 million compared to $1,470 million for the year ended December 31, 2023, an increase of 4%.
Added
No amount was drawn from the Bridge Facility, and it was terminated upon the completion of the Acquisition. As a result of the Acquisition, we now offer an expanded portfolio of drivetrain, motion and propulsion solutions, providing complementary product breadth and an enhanced ability to support customers across multiple end markets.
Removed
The decrease was principally driven by higher interest income on cash and cash equivalents and lower interest expense on ATI's Term Loan due primarily to the repayment of $101 million of principal in the first quarter of 2024.
Added
The Acquired Off-Highway Business has historically served end markets with demand characteristics that differ from our traditional on-highway markets, contributing to a more diversified portfolio. 41 Table of Contents Following the Acquisition, we continue to operate under the Allison name, but our operations are now comprised of two business units: Allison Transmission and Allison Off-Highway Drive & Motion Systems.
Removed
Income tax expense Income tax expense for the year ended December 31, 2024 was $166 million resulting in an effective tax rate of 19%, compared to $154 million of income tax expense and an effective tax rate of 19% for the year ended December 31, 2023.
Added
Business unit leadership is located globally, reflecting the international nature of our operations and the importance of local market insights, sourcing, production and customer support. Allison Transmission offers more than 200 different models compatible with more than 500 combinations of engine brands, models and ratings, including diesel, gasoline, natural gas and other alternative fuels.
Removed
The increase was principally driven by an $18 million increase in capital expenditures and a $5 million increase in equity method investments, partially offset by $4 million of proceeds from the sale of assets.
Added
In addition, Allison Transmission has developed thousands of proprietary calibrations available for use with our electronic control modules, enabling tailored performance across a broad range of customer applications. Allison Off-Highway Drive & Motion Systems provides drivetrain and motion solutions for a wide range of mobile and stationary off-highway equipment.
Removed
These trends and factors were compared to, and based on, the assumptions used in prior years. After reviewing the various qualitative factors mentioned above, our 2024 annual goodwill impairment test indicated that the fair value for the reporting unit more likely than not exceeded its carrying value, indicating no impairment. Other intangible assets have both indefinite and finite useful lives.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeCommodity Price Risk We are subject to changes in our cost of sales caused by movements in underlying commodity prices. As of December 31, 2024, approximately 65% of our cost of sales consisted of purchased components. A substantial portion of the purchased parts are made of aluminum and steel.
Biggest changeThe acquisition of the Acquired Off-Highway Business has increased our exposure to foreign currencies. Commodity Price Risk We are subject to changes in our cost of sales caused by movements in underlying commodity prices. As of December 31, 2025, approximately 66% of our cost of sales consisted of purchased components.
Derivatives” of Notes to Consolidated Financial Statements included in Part II, Item 8., of this Annual Report on Form 10-K. Exchange Rate Risk While our net sales and costs are denominated primarily in U.S.
Debt” of Notes to Consolidated Financial Statements included in Part II, Item 8., of this Annual Report on Form 10-K. Exchange Rate Risk While our net sales and costs are denominated primarily in U.S.
For purposes of the sensitivity analysis above, the impact of these cost sharing arrangements has not been included. 49 Table of Contents
For purposes of the sensitivity analysis above, the impact of these cost sharing arrangements has not been included. 56 Table of Contents
Assuming current levels of foreign currency transactions, a 10% aggregate increase or decrease in the Chinese Yuan Renminbi, Euro, Indian Rupee, and Japanese Yen would correspondingly change our earnings, net of tax, by an estimated $5 million per year. We believe our other direct exposure to foreign currencies is immaterial.
Assuming the levels of foreign currency transactions as of December 31, 2025, a 10% aggregate increase or decrease in the Chinese Yuan Renminbi, Euro, Indian Rupee, and Japanese Yen would correspondingly change our earnings, net of tax, by an estimated $5 million per year. We believe our other direct exposure to foreign currencies was immaterial as of December 31, 2025.
The cost of aluminum parts includes an adjustment factor on future purchases for fluctuations in aluminum prices based on accepted industry indices. In addition, a substantial amount of steel-based contracts also includes an index-based component.
A substantial portion of the purchased parts are made of aluminum and steel. The cost of aluminum parts includes an adjustment factor on future purchases for fluctuations in aluminum prices based on accepted industry indices. In addition, a substantial amount of steel-based contracts also includes an index-based component.
Assuming current levels of commodity purchases, a 10% variation in the price of aluminum and steel would correspondingly change our earnings by approximately $8 million and $13 million per year, respectively. Many of our LTAs have incorporated a cost-sharing arrangement related to potential future commodity price fluctuations.
Assuming the levels of commodity purchases as of December 31, 2025, a 10% variation in the price of aluminum and steel would correspondingly change our earnings by approximately $7 million and $11 million per year, respectively. Many of our LTAs have incorporated a cost-sharing arrangement related to potential future commodity price fluctuations.
A one-eighth percent increase or decrease in assumed interest rates for the Senior Secured Credit Facility, if fully drawn as of December 31, 2024, would have an impact of approximately $1 million on interest expense per year. As of December 31, 2024, we had no outstanding borrowings against the Revolving Credit Facility. Refer to "Note 8. Debt” and "Note 9.
A one-eighth percent increase or decrease in assumed interest rates for the Senior Secured Credit Facility, if fully drawn as of December 31, 2025, would have an impact of approximately $2 million on interest expense per year. As of December 31, 2025, we had no amounts outstanding under the Revolving Credit Facility. Refer to "Note 8.
Our Senior Secured Credit Facility provides for variable rate borrowings of up to $1,258 million, including our $514 million Term Loan and $744 million under our Revolving Credit Facility, net of $6 million of letters of credit.
As of December 31, 2025, our Senior Secured Credit Facility provided for variable rate borrowings of up to $1,254 million, including our $509 million Term Loan and $745 million under our Revolving Credit Facility, net of $5 million of letters of credit.
Removed
As of December 31, 2024, we held interest rate swap contracts that, in the aggregate, effectively hedge $500 million of the variable rate debt associated with the Term Loan at the forward-looking term rate based on the Secured Overnight Financing Rate weighted average fixed rate of 2.81% through September 2025.

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