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What changed in Allison Transmission Holdings Inc's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Allison Transmission Holdings Inc's 2023 and 2024 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 2024 report.

+155 added−151 removedSource: 10-K (2025-02-13) vs 10-K (2024-02-14)

Top changes in Allison Transmission Holdings Inc's 2024 10-K

155 paragraphs added · 151 removed · 145 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

50 edited+6 added−4 removed49 unchanged
Biggest changeWe target our end users primarily through marketing activities by our sales staff, who directly call on end users and attend local trade shows, targeting specific vocations globally and through our plant tour programs, where end users may test our products on our Indianapolis test track and our enhanced customer experience demonstration track at our Hungary facility. 12 Table of Contents While our marketing management uses the term “customer” interchangeably for OEMs and end users, the primary objective of our marketing strategy is to create demand for propulsion solutions through: • OEM promotion of our products and incorporation of our propulsion solutions in their commercial vehicle product offerings; • Allison representative and/or Allison distributor contact with identified, major end users; and • Our network of independent dealers who contact other end users.
Biggest changeWhile our marketing management uses the term “customer” interchangeably for OEMs and end users, the primary objective of our marketing strategy is to create demand for propulsion solutions through: • OEM and body builder promotion of our products and incorporation of our propulsion solutions in their commercial vehicle product offerings; • Allison representative and/or Allison distributor contact with identified, major end users; and • Our network of independent dealers who contact other end users.
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.
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.
Further, we are developing new products and technology to improve the fuel efficiency and fuel economy of our 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 to avoid consuming fuel without compromising performance, and to expand our portfolio of electric hybrid and fully electric propulsion solutions.
We also provide electric hybrid and 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 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.
Class 8 straight trucks are those with a unified body (e.g., refuse, construction, and dump trucks), while tractors have a vehicle chassis that is separable from the trailer they pull. Class 8 tractor is further divided into two subcategories: regional haul and line-haul.
Class 8 straight trucks are those with a unified body (e.g., refuse, construction, and dump trucks), while tractors have a vehicle chassis that is separable from the trailer they pull. Class 8 tractors are further divided into two subcategories: regional haul and line-haul.
We often compete in this market against (i) independent manufacturers of 7 Table of Contents manual transmissions, AMTs, electric hybrid and fully electric propulsion solutions, (ii) fully automatic transmissions 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, 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.
In 2023, 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.
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.
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. 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.
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.
The following is a summary of our on-highway net sales by vehicle class in North America. Our core 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. 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.
Off-highway mining and construction applications include trucks used to haul various commodities and other products around construction sites and mines, including underground mines. These trucks include rigid dump trucks, wide-body dump trucks and underground trucks with load capacities between 40 to 110 tons.
Off-highway mining and construction applications include trucks used to haul various commodities and other products around construction sites and mines, including underground mines. These trucks include rigid dump trucks, wide-body dump trucks and underground trucks with load capacities between 40 to 130 tons.
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.
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.
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 ZF and Dana. Specialty vehicles using our heavy-duty off-highway transmissions include airport rescue and firefighting vehicles.
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.
The following is a summary of our on-highway net sales by region outside of North America. 8 Table of Contents 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.
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.
On-Highway Products Product Applications 1000 Series • Distribution • Motorhome • Refuse • School and Shuttle Bus • Services • Specialty • Wheeled Defense 2000 Series • Distribution • Motorhome • Refuse • School and Shuttle Bus • Services • Specialty • Wheeled Defense 3000 Series • 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 11 Table of Contents Off-Highway Products Product Applications 5000 Series • Rigid and Articulated Dump Truck • Underground Mine Truck • Well Service Rigs 6000 Series • Rigid and Articulated Dump Truck • 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 X1100 • Tracked Vehicles Product Development and Engineering We maintain product development and engineering capability 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 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.
The sale of Allison-branded parts and fluids, remanufactured transmissions 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 parts.
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.
Some of our operations require environmental permits and controls to prevent and reduce air and water pollution. These permits are subject to modification, renewal and revocation by 14 Table of Contents issuing authorities. In addition, certain of our products and our customer’s products are subject to certification requirements by a variety of regulatory bodies.
Some of our operations require environmental permits and controls to prevent and reduce air and water pollution. These permits are subject to modification, renewal and revocation by issuing authorities. In addition, certain of our products and our customer’s products are subject to certification requirements by a variety of regulatory bodies.
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 75% of our revenues being generated in North America in 2023. 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 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 own and have licensing arrangements for a number of U.S. and foreign patents related to our products and business. We do not consider our business to be dependent 13 Table of Contents on any single patent, nor will the expiration of any single patent materially affect our business.
We own and have licensing arrangements for a number of U.S. and foreign patents related to our products and business. We do not consider our business to be dependent on any single patent, nor will the expiration of any single patent materially affect our business.
Allison products are used in a wide variety of applications, including on-highway trucks (distribution, refuse, construction, fire and emergency), buses (primarily school and transit), motorhomes, off-highway vehicles and equipment (primarily energy, mining and construction applications) and defense vehicles (tactical wheeled and tracked).
Allison products are used in a wide variety of applications, including on-highway vehicles (distribution, refuse, construction, fire and emergency), buses (primarily school, transit and coach), motorhomes, off-highway vehicles and equipment (energy, mining, construction and agriculture) and defense vehicles (tactical wheeled and tracked).
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 2023, we purchased approximately $1,047 million of direct materials and components from outside suppliers.
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.
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.
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.
Competition in Western Europe is most notably characterized by a high level of vertical powertrain integration, with OEMs often utilizing their own manual transmissions and AMTs in their vehicles, and electric hybrid and fully electric propulsion solutions.
Competition in Western Europe is most notably characterized by a high level of vertical powertrain integration, with OEMs often utilizing vertically integrated manual transmissions and AMTs in their vehicles, and electric hybrid and fully electric propulsion solutions.
Off-highway markets in Asia are shared by energy, mining and construction 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 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.
For more than 105 years, we have built our business on these values: Quality, Customer Focus, Integrity, Innovation, and Teamwork. We use a variety of human capital measures in managing our business, including: workforce demographics; inclusion and diversity; and employee health and safety. Workforce Demographics .
For more than 105 years, we have built our business on these values: Quality, Customer Focus, Integrity, Innovation, and Teamwork. We use a variety of human capital measures in managing our business, including: workforce demographics; equality of opportunity; and employee health and safety. Workforce Demographics .
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 and distribution markets. Currently, manual transmissions are the predominant transmissions used in commercial vehicles in the Asia-Pacific region. Europe, Middle East, Africa.
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.
Our spending on aluminum and steel raw materials directly and indirectly through our purchase of these components constituted approximately 20% of our direct material and component costs in 2023. 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 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.
Within Europe, we serve Western European developed markets, as well as Eastern European emerging markets, principally in the refuse, emergency, transit bus, coach bus, distribution and utility markets.
Within Europe, we serve Western European developed markets, as well as Eastern European emerging markets, principally in the refuse, emergency, transit bus, coach bus, distribution, utility and wheeled defense vehicle markets.
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”) and Twin Disc, Inc. (“Twin Disc”). 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 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.
Our major competitor in this end market is Twin Disc. 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 commercial vehicle market outside of North America.
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.
For 2023, we achieved an overall recordable rate of 1.64 at our global locations, meaning that for every 100 employees, 1.64 employees incurred an injury that resulted in recordable medical treatment, and the number of lost work days was 0.63 at our global locations, meaning that for every 100 employees, 0.63 individuals experienced an incident that resulted in days away from work.
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.
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 110 countries around the world.
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.
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, 2023, we had a highly skilled workforce of approximately 3,700 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, 2024, we had a highly skilled workforce of approximately 4,000 employees, with approximately 89% of those employees in the U.S.
We also continue to regularly report our sustainability efforts and metrics under the Global Reporting Initiative framework and report our progress in our annual Environmental, Social and Governance Report.
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.
Our off-highway markets in EMEA are mining and construction. Our major off-highway competitors are Caterpillar and Komatsu, both of which are vertically integrated manufacturers of off-highway mining vehicles, including the specific fully automatic transmission used in their mining trucks. A typical construction application is a rigid or articulated dump truck, with competition from Caterpillar, Dana, Volvo and ZF.
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.
Approximately 48% 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 new four-year collective bargaining agreement with UAW Local 933 that expires in November 2027. Inclusion and Diversity .
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 .
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. 9 Table of Contents Asia-Pacific.
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.
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.
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.
NORTH AMERICA OUTSIDE NORTH AMERICA END MARKET ON- HIGHWAY OFF- HIGHWAY ON- HIGHWAY OFF- HIGHWAY DEFENSE SERVICE PARTS, SUPPORT EQUIPMENT & OTHER 2023 NET SALES (IN MILLIONS) $ 1,529 $ 63 $ 477 $ 104 $ 166 $ 696 % OF TOTAL 50% 2% 16% 4% 5% 23% • Construction • Day Cab Tractors • Distribution • Emergency • Motorhome • Refuse • School, transit, shuttle and coach buses • Utility • Construction • Energy • Mining • Specialty vehicle • Construction • Distribution • Emergency • Mining • Refuse • School, transit, shuttle and coach buses • Specialty • Utility • Construction • Energy • Mining • Specialty vehicle • Global tracked combat platforms • North America medium- and heavy-tactical wheeled platforms • Aluminum die cast components • Extended transmission coverage • Remanufactured transmissions • Royalties • Saleable engineering • Service parts • Support equipment • Transmission fluids Refer to "Note 19.
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.
While both emerging technologies are gaining use in automotive markets and electric hybrids and fully electric propulsion solutions have gained use in the bus market, fully electric propulsion solutions remain in a developmental phase in the medium- and heavy-duty commercial vehicle market. 5 Table of Contents Our Served Markets We sell our propulsion solutions globally for use in medium- and heavy-duty on-highway commercial vehicles, off-highway vehicles and equipment and defense vehicles.
While both emerging technologies are gaining use in automotive markets and electric hybrids and fully electric propulsion solutions have gained use in the bus market, fully electric propulsion solutions remain in a developmental phase in the medium- and heavy-duty commercial vehicle market.
ITEM 1. Business Overview Allison Transmission Holdings, Inc. and its subsidiaries (“Allison,” “we,” “us” or “our”) design and manufacture vehicle propulsion solutions, including commercial-duty on-highway, off-highway and defense fully automatic transmissions and electric hybrid and fully electric systems. The business was founded in 1915 and has been headquartered in Indianapolis, Indiana since inception.
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.
Our efforts to promote an equitable and inclusive workplace include: providing unconscious bias training; continuing to increase our focus on non-traditional recruiting sources such as veterans, people with disabilities, diverse professional organizations, high schools, Historically Black Colleges and Universities and predominantly Hispanic organizations; organizing virtual mentoring programs to connect employees from different locations, departments and backgrounds; and creating LGBTQ+, multicultural, emerging professionals and military veterans employee resource groups.
Our efforts to promote a respectful workplace include: providing training; utilizing non-traditional recruiting sources, such as organizations focused on veterans and people with disabilities, diverse professional organizations, and schools with diverse student bodies; organizing virtual mentoring programs to connect employees from different locations, departments and backgrounds; and creating multicultural, emerging professionals, and military veterans employee resource groups that are open to all.
Emerging technologies in commercial-duty propulsion solutions include electric hybrid and fully electric propulsion solutions in certain end markets and are in part driven by efforts to reduce fuel consumption, noise and greenhouse gas emissions.
Emerging technologies in commercial-duty propulsion solutions include electric hybrid and fully electric propulsion solutions in certain end markets and are in part driven by efforts to reduce fuel consumption, noise and greenhouse gas emissions. Fully electric powertrains differ from electric hybrid powertrains because they only have a battery for energy storage and exclusively power the wheels using electric motors.
Manufacturing Our manufacturing strategy provides for distributed capability in manufacturing and assembly of our products for the global commercial vehicle market. Our primary manufacturing facilities, located in Indianapolis, Indiana, consist of approximately 2.3 million square feet of usable manufacturing space in five plants.
Our primary manufacturing facilities, located in Indianapolis, Indiana, consist of approximately 2.3 million square feet of usable manufacturing space in five plants.
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 proposed climate disclosure rules that remain under consideration by the SEC.
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.
Additionally, we face competition from ZF in certain defense wheeled vehicles using automatic transmissions and from several AMT suppliers. 10 Table of Contents Service Parts, Support Equipment and Other Our service parts, support equipment and other end market is comprised of: Allison-branded service parts and transmission fluids, aluminum die cast components, extended transmission coverage, remanufactured transmissions, royalties, saleable engineering and support equipment.
Service Parts, Support Equipment and Other Our service parts, support equipment and other end market is comprised of: Allison-branded service parts and transmission fluids, aluminum die cast components, extended transmission coverage, remanufactured propulsion solutions, royalties, saleable engineering and support equipment.
The competition for service parts and ReTran remanufactured transmissions comes from a variety of smaller-scale companies sourcing non-genuine “will-fit” parts from unauthorized manufacturers. These “will-fit” parts often do not meet our product specifications, and therefore may be of lesser quality than genuine Allison parts.
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 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.
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.
In addition to the sale of propulsion solutions, we also sell branded replacement parts, support equipment, aluminum die cast components and other products necessary to service the installed base of vehicles utilizing our solutions. The following table provides a summary of our business by end market for the fiscal year ended December 31, 2023.
Our Served Markets We sell our propulsion solutions globally for use in medium- and heavy-duty on-highway commercial vehicles, off-highway vehicles and equipment and defense vehicles. In addition to the sale of propulsion solutions, we also sell branded replacement parts, support equipment, aluminum die cast components and other products necessary to service the installed base of vehicles utilizing our solutions.
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. The following is a summary of our product lines.
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.
Allison recognizes the power of different thought, accepts and respects each individual and strives to create an inclusive workplace where everyone can reach their full potential, driving innovation and business results. Allison’s Inclusion and Diversity (I&D) Executive Council is chaired by our Chief Executive Officer and includes eight executive members.
Allison recognizes the power of different thought, accepts and respects each individual and strives to create a workplace where everyone can reach their full potential, driving innovation and business results. Allison hires, promotes, trains, and compensates its employees based on merit, experience, or other work-related criteria. Allison values the wide range of backgrounds of our employees.
Removed
Fully electric powertrains differ from electric hybrid powertrains because they only propel the vehicle with an electric motor; while electric hybrids generally utilize both a conventional internal combustion power source and powertrain as well as the means to propel the vehicle electrically.
Added
In contrast, electric hybrids may use multiple energy storage sources including diesel and hydrogen and may drive the wheels exclusively with electric motors or in parallel with an internal combustion engine.
Removed
The following table presents a summary of our market share by vehicle class in the North America On-Highway end market. CLASS 4-5 TRUCKS MOTOR HOME SCHOOL BUS CLASS 6-7 TRUCKS CLASS 8 STRAIGHT TRUCKS CLASS 8 DAY CAB 2023 SHARE 15% 33% 79% 79% 82% 5% Off-Highway.
Added
The following table provides a summary of our business by end market for the fiscal year ended December 31, 2024.
Removed
The council exists to provide leadership advice, analyze progress of our I&D strategy and ensure alignment with our business strategy. We are committed to advancing and representing all of our workforce by creating a diverse, equitable, and inclusive organization.
Added
The following is a summary of our product lines.
Removed
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).
Added
We target our end users primarily through marketing activities by our sales staff, who directly call on end users and attend local trade shows, targeting specific vocations globally and through our plant tour programs, where end users may test our products on our Indianapolis test track and our enhanced customer experience demonstration track at our Hungary facility.
Added
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
Allison views our diversity as a strength and strives to create work environments that accept differences while promoting productivity and teamwork. Everyone at Allison is responsible for creating and maintaining a productive work environment where the dignity of all employees is respected.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn 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.
Biggest changeIn 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.
While we have succession plans in place for members 18 Table of Contents 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.
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.
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 2023, 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 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.
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 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 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.
In addition, we may continue to experience increased labor costs, including the anticipated significant labor cost increases under our new collective bargaining agreement with the UAW, which may 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 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.
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.
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.
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 2024 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 2025 of approximately $2 million.
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, 2023, 2022 and 2021, our top five OEM customers accounted for approximately 52%, 51% and 52% 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, 2024, 2023 and 2022, our top five OEM customers accounted for approximately 55%, 52% and 51% of our net sales, respectively.
Volatility in and disruption to the global economic environment, including the impact of an economic recession, and changes in the regulatory and business environments in which we operate may have a material adverse effect on our business, results of operations and financial condition.
Volatility in and disruption to the global economic environment, including the impact of an economic recession, trade protectionism and tariffs, and changes in the regulatory and business environments in which we operate may have a material adverse effect on our business, results of operations and financial condition.
At December 31, 2023, $618 million of our total indebtedness was associated with 28 Table of Contents ATI’s term loan facility due March 2026 (“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, 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”).
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.
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.
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 22 Table of Contents equipment, which would impact our margins.
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.
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, 2023 defined benefit pension plans obligation of approximately $17 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, 2024 defined benefit pension plans obligation of approximately $13 million.
Our top three customers, Daimler AG, Traton SE and PACCAR Inc., accounted for approximately 18%, 11% and 11%, respectively, of our net sales during 2023. 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 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.
In that event, we would need to find alternate 19 Table of Contents 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 on favorable terms, if at all.
As of December 31, 2023, we had no outstanding borrowings against the Revolving Credit Facility.
As of December 31, 2024, we had no outstanding borrowings against the Revolving Credit Facility.
Subject to covenant compliance and certain 29 Table of Contents conditions, our indebtedness permits additional borrowing, including total borrowing up to $645 million under the Revolving Credit Facility, net of $5 million in letters of credit.
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.
Strategic Risks Our success depends on research and development efforts, and we may not be successful in developing or introducing new products and technologies, including electric propulsion solutions, and responding to customer needs.
Strategic Risks Our success depends on research and development efforts, and we may not be successful in developing or introducing new products and technologies and responding to customer needs.
Our business is subject to certain risks associated with doing business internationally, particularly in emerging markets. Outside-North America net sales represented approximately 25% of our net sales for 2023.
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.
As of December 31, 2023, approximately 48% 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.
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.
Geopolitical risks, including the wars in Ukraine and the Middle East, may have an adverse effect on our results of operations and financial conditions, including on the availability of raw materials for our products or component parts, our supply chain, our customers and our long-term sales opportunities.
Geopolitical risks may have an adverse effect on our results of operations and financial condition, including on the availability of raw materials for our products or component parts, our supply chain, our customers and our long-term sales opportunities.
As of December 31, 2023, we had total indebtedness of $2,518 million, and we would have been able to borrow an additional $645 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 $650 million due September 2025 (“Revolving Credit Facility”).
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”).
We have experienced, and expect to continue to experience, delays in the availability and receipt of raw materials and component parts as a result of global economic uncertainty and the wars in Ukraine and the Middle East, some of which have materially impacted, and may continue to materially impact, our ability to meet customer demand.
We have experienced, and expect to continue to experience, delays in the availability and receipt of component parts as a result of shortages of available labor in North America and global economic uncertainty, some of which have materially impacted, and may continue to materially impact, our ability to meet customer demand.
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. Labor unrest could have an adverse effect on our business, results of operations and financial condition.
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.
Similarly, a one percentage point decrease in the assumed discount rate would result in an increase in the December 31, 2023 OPEB obligation of approximately $7 million. As of December 31, 2023, the unfunded status of our defined benefit pension plans was $5 million and the unfunded status of our OPEB plan was $64 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. 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.
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 proposed climate disclosure rules that remain under consideration by the SEC.
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.
Our failure to comply with these laws and regulations could result in legal liability, significant regulator penalties and fines, or impair our reputation in the marketplace. 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.
Our failure to comply with these laws and regulations could result in legal liability, significant regulator penalties and fines, or impair our reputation in the marketplace.
In addition, the discontinuation of particular vehicle 20 Table of Contents models for which we are a significant supplier could reduce our net sales and have a material adverse effect on our results of operations. We are subject to cybersecurity risks to operational systems, security systems, or infrastructure owned by Allison or third-party vendors or suppliers.
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.
Added
We are subject to cybersecurity risks to operational systems, security systems, or infrastructure owned by Allison or third-party vendors or suppliers.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed2 unchanged
Biggest changeITEM 2. P ROPERTIES Our world headquarters, which we own, is located at One Allison Way, Indianapolis, Indiana 46222. As of December 31, 2023, we have 18 manufacturing and certain other facilities in eight countries. The following table sets forth certain information regarding our significant facilities.
Biggest changeITEM 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 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−0 removed5 unchanged
Biggest changeAs of December 31, 2018 As of December 31, 2019 As of December 31, 2020 As of December 31, 2021 As of December 31, 2022 As of December 31, 2023 Allison Transmission Holdings, Inc. $ 100.00 $ 111.49 $ 101.36 $ 87.09 $ 101.76 $ 144.77 S&P 500 Index 100.00 131.49 155.68 200.37 164.08 207.21 Peer Group 100.00 133.32 160.82 193.58 159.43 196.09 ITEM 6. [ R ESER VED] 35 Table of Contents
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
The graph assumes $100 was invested on December 31, 2018 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, 2019 in our common stock and each of the indices and that all dividends, if any, are reinvested.
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 February 1, 2024, there were approximately 130,952 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 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.
The following table sets forth information related to our repurchase of our common stock on a monthly basis in the three months ended December 31, 2023: 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, 2023 383,042 $ 54.21 383,042 $ 857,356,552 November 1 – November 30, 2023 1,051,931 52.92 1,051,931 801,693,372 December 1 – December 31, 2023 514,441 56.37 514,441 772,694,727 Total 1,949,414 54.08 1,949,414 (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, 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.

Item 7. Management's Discussion & Analysis

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

57 edited+3 added−2 removed58 unchanged
Biggest changeThe increase was principally driven by a $170 million, or 13%, 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 $108 million, or 18%, increase in net sales in the Service Parts, Support Equipment and Other end market principally driven by higher demand for global service parts, support equipment and aluminum die cast components and price increases on certain products, a $20 million, or 14%, increase in net sales in the Defense end market principally driven by increased demand for Wheeled and Tracked vehicle applications and a $14 million, or 3%, increase in net sales in the Outside North America On-Highway end market principally driven by price increases on certain products and the continued execution of our growth initiatives, partially offset by a $46 million, or 22%, decrease in Global Off-Highway net sales principally driven by lower demand in the energy sector, partially offset by higher demand in the mining and construction sectors outside of North America.
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.
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 2023 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.
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.
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 $650 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. 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.
We also assess our ability to recover certain costs from our suppliers and record a receivable from the supplier when we believe a recovery is probable. Warranty costs may differ from those estimated if actual claim rates are higher or lower than our historical rates. Further information is provided in "Note 10.
We also assess our ability to recover certain costs from our suppliers and record a receivable from the supplier when we believe a recovery is realizable. Warranty costs may differ from those estimated if actual claim rates are higher or lower than our historical rates. Further information is provided in "Note 10.
If the actual number of affected transmissions differs from this estimate, or if a different mix of incentives is actually paid, the impact on net sales would be recorded in the period that the change was identified. Assuming our current mix of sales incentives, a 10% change in sales incentives would correspondingly change our earnings by approximately $9 million.
If the actual number of affected transmissions differs from this estimate, or if a different mix of incentives is actually paid, the impact on net sales would be recorded in the period that the change was identified. Assuming our current mix of sales incentives, a 10% change in sales incentives would correspondingly change our earnings by approximately $8 million.
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, 2023.
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.
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 2023, 2022 and 2021, 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 2024, 2023 and 2022, 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 2023 and 2022 items and year-over-year comparisons between 2023 and 2022.
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.
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 2023 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 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.
After reviewing the various qualitative factors mentioned above, our annual 2023 indefinite-lived intangible assets impairment tests, as of October 31, 2023, indicated that the fair value of our indefinite-lived intangible assets more likely than not exceeded their respective carrying values, indicating no impairment.
After reviewing the various qualitative factors mentioned above, our annual 2024 indefinite-lived intangible assets impairment tests, as of October 31, 2024, indicated that the fair value of our indefinite-lived intangible assets more likely than not exceeded their respective carrying values, indicating no impairment.
The increase in income tax expense was principally driven by increased 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 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.
A detailed discussion of 2021 items and year-over-year comparisons between 2022 and 2021 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, 2022, as filed with the SEC on February 16, 2023.
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.
As of December 31, 2023, we had $618 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, 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”).
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 $555 million and $232 million as of December 31, 2023 and 2022, 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 $781 million and $555 million as of December 31, 2024 and 2023, respectively.
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 expect to have a significant increase in labor costs under the terms of this new agreement.
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.
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, 2023, our first lien net leverage ratio was 0.06x.
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).
We have a global presence by serving customers in North America, Asia, Europe, South America, and Africa, with approximately 75% of our revenues being generated in North America in 2023. 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 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.
As of December 31, 2023, 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 Investors Service, Inc. (“Moody’s”) and Fitch Ratings, Inc. (“Fitch”).
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”).
Short-term and long-term debt service liquidity requirements consist of $2 million of minimum required quarterly principal payments on ATI’s Term Loan through its maturity date of March 2026 and periodic interest payments on ATI’s Term Loan and the Senior Notes. There are no required quarterly principal payments on the Senior Notes.
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.
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 $7 million of principal payments on the Term Loan during each of the years ended December 31, 2023 and 2022.
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 Board of Directors has authorized us to repurchase up to $4,000 million of our common stock pursuant to the Repurchase Program. During 2023, we repurchased approximately $263 million of our common stock under the Repurchase Program. All of the repurchase transactions during 2023 were settled in cash during the same period.
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.
As of December 31, 2023, the total of cash held by foreign subsidiaries was $88 million, the majority of which was at our subsidiaries located in China, the Netherlands, India and Japan.
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, 2023, we had approximately $773 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, 2023, 2022 and 2021 (dollars in millions): Years ended December 31, Statement of Cash Flows Data 2023 2022 2021 Cash flows provided by operating activities $ 784 $ 657 $ 635 Cash flows used for investing activities (129 ) (183 ) (212 ) Cash flows used for financing activities (332 ) (367 ) (604 ) Generally, cash provided by operating activities has been adequate to fund our operations.
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.
As of December 31, 2023, our credit ratings from both Moody's and Fitch are shown in the table below: December 31, 2023 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 that our capital expenditures and cash income taxes in 2024 will be comparable to 2023.
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.
Global Off-Highway net sales were down 22% for the year ended December 31, 2023 compared to the year ended December 31, 2022, principally driven by lower demand in the energy sector, partially offset by higher demand in the mining and construction sectors outside of North America.
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.
For the year ended December 31, 2023, direct material costs were approximately 67%, overhead costs were approximately 26% and direct labor costs were approximately 7% 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, 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.
Income tax expense Income tax expense for the year ended December 31, 2023 was $154 million resulting in an effective tax rate of 19%, compared to $114 million of income tax expense and an effective tax rate of 18% for the year ended December 31, 2022.
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.
The effect of a one percentage point decrease in the assumed discount rate would result in an increase in the December 31, 2023 defined benefit pension plans obligation of approximately $17 million. Similarly, a one percentage point decrease in the assumed discount rate would result in an increase in the December 31, 2023 OPEB obligation of approximately $7 million.
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.
Of the available cash and cash equivalents, $134 million was deposited in operating accounts and $421 million was invested in U.S. government backed securities as of December 31, 2023, compared to $121 million deposited in operating accounts and $111 million invested in U.S. government backed securities as of December 31, 2022.
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.
Defense end market net sales were up 14% for the year ended December 31, 2023 compared to the year ended December 31, 2022, principally driven by increased demand for Wheeled and Tracked vehicle applications.
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.
Other income (expense), net Other income (expense), net for the year ended December 31, 2023 was $15 million compared to ($21) million for the year ended December 31, 2022.
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.
Cash used for investing activities Investing activities for the year ended December 31, 2023 used $129 million of cash compared to $183 million for the year ended December 31, 2022.
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 financing activities Financing activities for the year ended December 31, 2023 used $332 million of cash compared to $367 million for the year ended December 31, 2022.
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.
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) 2023 2022 2021 Net income (GAAP) $ 673 $ 531 $ 442 plus: Income tax expense 154 114 130 Interest expense, net 107 118 116 Depreciation of property, plant and equipment 109 109 104 Amortization of intangible assets 45 46 46 Stock-based compensation expense (a) 22 18 14 Technology-related investments gain (b) (3 ) (6 ) (3 ) Unrealized loss (gain) on marketable securities (c) 1 22 (4 ) Unrealized loss on foreign exchange (d) — 6 — Acquisition-related earnouts (e) — 2 1 Pension curtailment (f) — 1 — UAW Local 933 retirement incentive (g) — — (2 ) Adjusted EBITDA (Non-GAAP) $ 1,108 $ 961 $ 844 Net sales (GAAP) $ 3,035 $ 2,769 $ 2,402 Net income as a percent of net sales (GAAP) 22.2 % 19.2 % 18.4 % Adjusted EBITDA as a percent of net sales (Non-GAAP) 36.5 % 34.7 % 35.1 % Net cash provided by operating activities (GAAP) $ 784 $ 657 $ 635 Deductions to reconcile to Adjusted free cash flow: Additions of long-lived assets (125 ) (167 ) (175 ) Adjusted free cash flow (Non-GAAP) $ 659 $ 490 $ 460 (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. 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).
As of December 31, 2023, we had $645 million available under the Revolving Credit Facility, net of $5 million in letters of credit. As of December 31, 2023, we had no amounts outstanding under the Revolving Credit Facility.
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.
Cost of sales Cost of sales for the year ended December 31, 2023 was $1,565 million compared to $1,472 million for the year ended December 31, 2022, an increase of 6%.
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%.
The increase was principally driven by higher direct material and manufacturing expense commensurate with increased net sales and higher direct material costs. 40 Table of Contents Gross profit Gross profit for the year ended December 31, 2023 was $1,470 million compared to $1,297 million for the year ended December 31, 2022, an increase of 13%.
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%.
We have significant liquidity, including $555 million of cash and cash equivalents and $645 million available under the Revolving Credit Facility, net of $5 million in letters of credit, as of December 31, 2023.
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.
Service Parts, Support Equipment and Other end market net sales were up 18% for the year ended December 31, 2023 compared to the year ended December 31, 2022, principally driven by higher demand for global service parts, support equipment and aluminum die cast components and price increases on certain products.
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.
Gross profit as a percent of net sales for the year ended December 31, 2023 increased 160 basis points compared to the same period in 2022 principally driven by price increases on certain products and increased net sales, partially offset by increased cost of sales.
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.
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.
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").
(b) Represents gains (recorded in Other income (expense), net) related to investments in co-development agreements to expand our position in propulsion solution technologies. (c) Represents losses (gains) (recorded in Other income (expense), net) related to an investment in the common stock of Jing-Jin Electric Technologies Co. Ltd.
(c) Represents losses (recorded in Other (expense) income, net) related to an investment in the common stock of Jing-Jin Electric Technologies Co. Ltd.
Comparison of years ended December 31, 2023 and 2022 Years ended December 31, (dollars in millions) 2023 % of net sales 2022 % of net sales Net sales $ 3,035 100 % $ 2,769 100 % Cost of sales 1,565 52 1,472 53 Gross profit 1,470 48 1,297 47 Operating expenses: Selling, general and administrative 357 12 328 12 Engineering — research and development 194 6 185 7 Total operating expenses 551 18 513 19 Operating income 919 30 784 28 Other expense, net: Interest expense, net (107 ) (3 ) (118 ) (4 ) Other income (expense), net 15 — (21 ) (1 ) Total other expense, net (92 ) (3 ) (139 ) (5 ) Income before income taxes 827 27 645 23 Income tax expense (154 ) (5 ) (114 ) (4 ) Net income $ 673 22 % $ 531 19 % Net sales Net sales for the year ended December 31, 2023 were $3,035 million compared to $2,769 million for the year ended December 31, 2022, an increase of 10%.
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%.
The decrease was principally driven by a $26 million increase in proceeds from the exercise of stock options and a $15 million decrease in stock repurchases under the Repurchase Program. 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 $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.
Outside North America On-Highway end market net sales were up 3% for the year ended December 31, 2023 compared to the year ended December 31, 2022, principally driven by price increases on certain products and the continued execution of our growth initiatives.
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.
In 2024, we expect higher net sales driven by price increases on certain products and the continued execution of growth initiatives. 36 Table of Contents Full Year 2023 and 2022 Net Sales by End Market (in millions) End Market 2023 Net Sales 2022 Net Sales % Variance North America On-Highway $ 1,529 $ 1,359 13 % North America Off-Highway 63 86 (27 )% Defense 166 146 14 % Outside North America On-Highway 477 463 3 % Outside North America Off-Highway 104 127 (18 )% Service Parts, Support Equipment and Other 696 588 18 % Total Net Sales $ 3,035 $ 2,769 10 % North America On-Highway end market net sales were up 13% for the year ended December 31, 2023 compared to the year ended December 31, 2022, principally driven by strength in demand for Class 8 vocational and medium-duty trucks and price increases on certain products.
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.
The increase was principally driven by $155 million of price increases on certain products and $70 million related to increased net sales, partially offset by $36 million of higher manufacturing expense and $15 million of higher direct material costs.
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.
Overview We design and manufacture vehicle propulsion solutions, including commercial-duty on-highway, off-highway and defense fully automatic transmissions and electric hybrid and fully electric systems. The business was founded in 1915 and has been headquartered in Indianapolis, Indiana since inception. Allison is traded on the New York Stock Exchange under the symbol, “ALSN”.
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”.
The increase was principally driven by $12 million of higher commercial activities spending, $8 million of higher incentive compensation expense and $9 million of higher product warranty expense. Engineering — research and development Engineering expenses for the year ended December 31, 2023 were $194 million compared to $185 million for the year ended December 31, 2022, an increase of 5%.
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.
The increase was principally driven by increased product initiatives spending. Interest expense, net Interest expense, net for the year ended December 31, 2023 was $107 million compared to $118 million for the year ended December 31, 2022, a decrease of 9%.
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%.
The decrease was principally driven by higher interest income on cash equivalents, partially offset by $4 million of higher interest expense on ATI's Term Loan due to higher variable interest rates, net of the favorable impact from interest rate hedges.
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.
Cash provided by operating activities Operating activities for the year ended December 31, 2023 generated $784 million of cash compared to $657 million for the year ended December 31, 2022. The increase was principally driven by higher gross profit and lower operating working capital requirements, partially offset by higher cash income taxes.
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.
The decrease was principally driven by a $42 million decrease in capital expenditures and $23 million in cash paid for business acquisitions during 2022 that did not reoccur in 2023, partially offset by $5 million of equity investments in 2023 and a $4 million decrease in proceeds from technology-related investments.
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.
(d) Represents losses (recorded in Other income (expense), net) on intercompany financing transactions for our India facility. (e) Represents expenses (recorded in Selling, general and administrative and Engineering — research and development) for earnouts related to our acquisition of Vantage Power Limited.
(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.
(g) Represents adjustments (recorded in Cost of sales) related to a 2018 to 2021 retirement incentive program for certain employees represented by the UAW pursuant to the UAW Local 933 collective bargaining agreement that was effective through November 2023. 39 Table of Contents Results of Operations The following table sets forth certain financial information for the years ended December 31, 2023 and 2022.
(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.
Selling, general and administrative Selling, general and administrative expenses for the year ended December 31, 2023 were $357 million compared to $328 million for the year ended December 31, 2022, an increase of 9%.
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.
The change was principally driven by $21 million of favorable change in marketable securities, $11 million of favorable foreign exchange and $6 million of favorable change associated with assets held in a rabbi trust, partially offset by $3 million of unfavorable change in technology-related investment gains.
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.
Removed
Our net sales are driven by commercial vehicle production, which tends to be highly correlated to macroeconomic conditions and continues to be impacted by global supply chain constraints.
Added
(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.
Removed
(f) Represents a curtailment loss (recorded in Selling, general and administrative) for our European subsidiary's defined benefit pension plan.
Added
(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.
Added
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.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+0 added−0 removed7 unchanged
Biggest changeOur Senior Secured Credit Facility provides for variable rate borrowings of up to $1,263 million, including $645 million under our Revolving Credit Facility, net of $5 million of letters of credit.
Biggest changeOur 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.
A one-eighth percent increase or decrease in assumed interest rates for the Senior Secured Credit Facility, if fully drawn as of December 31, 2023, would have an impact of approximately $1 million on interest expense per year. As of December 31, 2023, 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, 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.
As of December 31, 2023, 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.
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.
Assuming current levels of commodity purchases, a 10% variation in the price of aluminum and steel would correspondingly change our earnings by approximately $9 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 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.
Commodity Price Risk We are subject to changes in our cost of sales caused by movements in underlying commodity prices. As of December 31, 2023, approximately 67% of our cost of sales consisted of purchased components. A substantial portion of the purchased parts are made of aluminum and steel.
Commodity 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.

Other ALSN 10-K year-over-year comparisons