ALLISON TRANSMISSION | THE POWER OF ALLISON 2020 ANNUAL REPORT 2020 ANNUAL REPORT | THE POWER OF ALLISON OF POWER THE | 2020 REPORT ANNUAL 2020 NET SALES % BY END MARKET 55% NA ON-HIGHWAY Allison Transmission is an industry-leading designer and manufacturer of vehicle propulsion solutions for 20% SERVICE PARTS, SUPPORT EQUIPMENT commercial and defense vehicles, the largest global & OTHER manufacturer of medium- and heavy-duty fully auto- matic transmissions, and a leader in electrified Providing14% OUTSIDE the most propulsion systems. Allison offers a broad range of NA ON-HIGHWAY propulsion solutions that improves the way the world works, and our products are used in a wide variety reliable6% DEFENSE and valued of applications, including on-highway trucks (distribu- tion, refuse, construction, fire and emergency, etc.), buses (school, transit and coach), motorhomes, propulsion4% OUTSIDE solutions off-highway vehicles and equipment (energy, mining NA ON-HIGHWAY and construction applications) and defense vehicles (tactical wheeled and tracked). Founded in 1915, the in the world company is headquartered in Indianapolis, Indiana, NA OFF-HIGHWAY 1% USA. With a market presence in more than 100 countries, Allison has regional headquarters in the Netherlands, China and Brazil, with manufacturing facilities in the U.S., Hungary and India. Allison also has more than 1,400 independent distributor and dealer locations worldwide. For more information, visit allisontransmission.com. Allison is extremely proud to have supported our essential workers and communities during an The Allison Vehicle Environmental Test unprecedented year. Thanks to the unrelenting com- Center (as seen above) is an industry-leading mitment, dedication and resilience of our employees, facility that allows OEMs, body builders, customers and suppliers, we maintained the uninter- suppliers and end-users to satisfy their rupted delivery of our products and the generation medium- and heavy-duty vehicle testing of earnings and positive cash flow throughout 2020. needs in a single, environment-controlled As we continue to navigate this critical period, our location year-round. top priority remains the safety and well-being of Allison’s extended family, including more than 3,000 employees around the globe, and our commitment to the Allison brand promise of quality, reliability and durability, making Allison one of the most recognized brands in the industry. NA ON-HIGHWAY Adjusted Free Adjusted EBITDA Net Income 1 52% Cash Flow (NON-GAAP) (dollars in millions) 1 (NON-GAAP) (dollars in millions) SERVICE PARTS, (dollars in millions) 22% SUPPORT EQUIPMENT & OTHER $737 $1,128 $639 $675 $1,083 $604 OUTSIDE 2020 13% NA ON-HIGHWAY NET SALES % $732 BY END $458 MARKET DEFENSE 9% $299 OUTSIDE 3% NA OFF-HIGHWAY 1% NA OFF-HIGHWAY 2018 2019 2020 2018 2019 2020 2018 2019 2020 (1)Adjusted EBITDA and adjusted Free Cash Flow are non-GAAP financial measures we use to measure our operating profitability and to evaluate and control our cash operating costs. Please refer to pages 36-38 for reconciliation to Net Income and Net Cash Provided by Operating Activities. Allison Transmission 2020 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 001-35456 ALLISON TRANSMISSION HOLDINGS, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 26-0414014 (State of Incorporation) (I.R.S. Employer Identification Number) One Allison Way Indianapolis, IN 46222 (Address of Principal Executive Offices and Zip Code) (317) 242-5000 (Registrant’s Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.01 par value ALSN New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer ☒ ☐ Non-accelerated filer Smaller reporting company ☐ ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The aggregate market value of the voting and non-voting stock held by non-affiliates was approximately $4,136 million as of June 30, 2020. As of February 4, 2021, there were 111,944,955 shares of Common Stock outstanding. Documents Incorporated by Reference Portions of the Registrant’s definitive Proxy Statement for its 2021 annual meeting of stockholders will be incorporated by reference in Part III of this Annual Report on Form 10-K. INDEX Page PART I. Item 1. Business 3 Item 1A. Risk Factors 16 Item 1B. Unresolved Staff Comments 30 Item 2. Properties 31 Item 3. Legal Proceedings 31 Item 4. Mine Safety Disclosures 31 PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of 32 Equity Securities Item 6. Selected Financial Data 33 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 49 Item 8. Financial Statements and Supplementary Data 51 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 97 Item 9A. Controls and Procedures 97 Item 9B. Other Information 98 PART III. Item 10. Directors, Executive Officers and Corporate Governance 99 Item 11. Executive Compensation 99 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder 99 Matters Item 13. Certain Relationships and Related Transactions, and Director Independence 99 Item 14. Principal Accounting Fees and Services 99 PART IV. Item 15. Exhibits and Financial Statement Schedules 100 Item 16. Form 10-K Summary 103 Signatures 104 1 Cautionary Note Regarding Forward-Looking Statements This Annual Report on Form 10-K contains forward-looking statements. The words “believe,” “expect,” “anticipate,” “intend,” “estimate” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Although forward-looking statements reflect management’s good faith beliefs, reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements speak only as of the date the statements are made. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to: the duration and spread of the COVID-19 pandemic, including new variants of the virus and the pace and availability of vaccines, mitigating efforts deployed by government agencies and the public at large, and the overall impact from such outbreak on economic conditions, financial market volatility and our business, including but not limited to the operations of our manufacturing and other facilities, our supply chain, our distribution processes and demand for our products and the corresponding