What changed in this filing

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Item 1A. Risk Factors

2023-02-16 compared with 2022-02-17 · 74 added, 86 removed, 318 unchanged (33% of the section changed)

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In addition, we compete with manufacturers developing alternative technologies, including fully electric propulsion solutions, that may or may not require a transmission.

In addition, regulations enacted and subsidies offered by governmental entities continue to drive the development and adoption of various alternative technologies, including electric propulsion solutions.

A focus on climate change and environmental sustainability, including through regulations enacted and subsidies offered by governmental entities, continues to drive the development and adoption of various alternative technologies, including electric propulsion solutions, in the commercial vehicle industry.

If the pace of adoption of electric vehicles proceeds faster than we are anticipating, we may not be in a position to meet customer demand or our competitors may be better positioned to meet customer demand, which may result in a decline in our market share or negatively impact our ability to execute our growth initiatives.

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In addition, some of our customers or future customers are OEMs that manufacture or could in the future manufacture transmissions, propulsion solutions or alternate technologies, including electric propulsion solutions, for their own products.

Despite their manufacturing capabilities, our existing OEM customers have chosen to purchase certain transmissions and propulsion solutions from us due to customer demand, resulting from the quality of our products and in order to reduce fixed costs, eliminate production risks and maintain company focus.

Despite their manufacturing capabilities, our existing OEM customers have chosen to purchase certain transmissions and propulsion solutions from us due to end user demand.

However, we cannot be certain these customers will continue to purchase our products in the future.

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A significant reduction in the level of external sourcing by our OEM customers could significantly impact our net sales and cash flows and, accordingly, have a material adverse effect on our business, results of operations and financial condition.

Our financial condition and results of operations have been and may continue to be materially adversely affected by the coronavirus pandemic.

The global spread of the novel strain of coronavirus (COVID-19) that has been declared a pandemic by the World Health Organization and the preventative measures taken to contain or mitigate the outbreak have caused, and are continuing to cause, significant volatility and uncertainty and economic disruptions.

Governments around the world continue to implement measures to contain or mitigate the spread of the virus, including vaccine and testing mandates, quarantines, “shelter in place”

and “stay at home”

orders, travel restrictions, business curtailments and other measures, due to the ongoing pandemic.

While we continue to operate our plants consistent with applicable government guidelines, we may experience production shutdowns or slowdowns at our manufacturing facilities as a result of government orders, our inability to obtain component parts from suppliers,

labor shortages or decreased customer production schedules.

In addition, many of our suppliers and customers have experienced, and may continue to experience, production slowdowns and/or shutdowns, as a result of government orders and supply chain, raw material, labor and logistics constraints, which have impacted, and may continue to impact, our business, sales and results of operations.

The effects of the COVID-19 pandemic on the global economy had a material impact on demand for our products and our results of operations during 2021.

While we continued to experience a recovery in demand for our products during 2021, ongoing supply chain, labor, raw material, freight and logistics constraints have negatively impacted, and may continue to negatively impact, the sales of our products, expenses and our results of operations.

In addition, future pandemic-related impacts on the global economy, including inflation, may continue to adversely impact our business and results of operations.

The extent to which the COVID-19 pandemic may continue to adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including the severity and duration of the outbreak, emerging variants of the virus that may be more contagious than current variants and the effectiveness of actions taken globally to contain or mitigate its effects, including the availability, pace of distribution, acceptance of and effectiveness of vaccines.

In addition, vaccine or testing mandates adopted by the U.S.

or other governments in order to combat the pandemic may result in additional labor shortages and/or increased costs for us or our suppliers and customers that may have a material impact on our business.

Any future financial impact cannot be estimated reasonably at this time, but may materially adversely affect our business, supply chain, sales, results of operations, financial condition and cash flows.

Even after the COVID-19 pandemic has subsided, we may experience materially adverse impacts to our business due to any resulting economic recession or depression that may continue to impact customer demand and the financial instability or operating viability of our suppliers and customers.

Additionally, concerns over the economic impact of COVID-19 have caused extreme volatility in financial and other capital markets which may adversely impact our ability to access capital markets.

Increases in cost, disruption of supply or shortage of raw materials or components used in our products could harm our business and profitability.

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In the event they are successful in doing so, our margins would decline.

Temporary industry-wide shortages of raw materials have occurred in 2021, which has led to increased raw material price volatility and cost increases which could continue into 2022.

Industry-wide shortages of raw materials have continued to

occur in 2022, which led to increased raw material price volatility and cost increases, which we expect to continue in 2023.

We may not be able to pass on these costs to our customers, and this could have a material adverse effect on our business, results of operations and financial condition.

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Furthermore, there are only a limited number of suppliers for certain of the materials used in our business, such as corrosion-resistant steel.

one is available, must be validated or materials and components must be purchased from a supplier without a completed PPAP, which could increase our risk of purchasing non-conforming components.

As a result, our business is subject to the risk of additional price fluctuations and periodic delays in the delivery of our materials or components if supplies from a validated supplier are interrupted and a new supplier, if one is available, must be validated or materials and components must be purchased from a supplier without a completed PPAP, which could increase our risk of purchasing non-conforming components.

Any such price fluctuations or delays, if significant, could harm our profitability or operations.

In addition, the loss of a supplier could result in significant material cost increases or reduce our production capacity.

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 the COVID-19 pandemic, some of which may materially impact our ability to meet customer demand.

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, the war in Ukraine and the COVID-19 pandemic, some of which have materially impacted, and may continue to materially impact, our ability to meet customer demand.

We also cannot guarantee we will be able to maintain favorable arrangements and relationships with these suppliers.

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Our current collective bargaining agreement with UAW Local 933 is effective through November 2023.

Any new collective bargaining agreement we negotiate with the UAW to replace the existing collective bargaining agreement upon its expiration may result in increased costs to us, in particular labor costs, which could have an adverse effect on our results of operations.

In addition to our unionized work force, many of our direct and indirect customers and vendors have unionized work forces.

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Prolonged inflation could result in higher costs and decreased margins and earnings.

Recent inflationary pressures have resulted in increased raw material, labor, energy, freight and logistics expenses and other costs, which, if they continue for a prolonged period, may adversely affect our results of operations.

Recent inflationary pressures have resulted in increased raw material, labor, energy, freight and logistics expenses and other costs, which impacted our margins in 2022 and may continue to adversely affect our results of operations.

If our costs are subject to continuing significant inflationary pressures, we may not be able to fully offset such higher costs through price increases.

Our inability to do so could harm our results of operation.

Volatility in and disruption to the global economic environment 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.

The commercial vehicle industry as a whole has been more adversely affected by volatile economic conditions than many other industries, as the purchase or replacement of commercial vehicles, which are durable items, can be deferred for many reasons, including reduced spending by end users.

Future changes in the regulatory and business environments in which we operate, including increased trade protectionism and tariffs, may adversely affect our ability to sell our products or source materials needed to manufacture our products.

Geopolitical risks, including the war in Ukraine, 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.

Political, economic and other conditions in foreign countries and regions, including geopolitical risks such as escalating tensions between China and western countries and the current conflict between Russia and Ukraine, may have an adverse effect on our results of operations and financial condition.

As a result of Russia’s invasion of Ukraine and actions by the U.S.

and other governments to implement sanctions against Russia, as well as certain businesses, individuals and banks in Russia, we have suspended indefinitely all sales and exports of our products to customers in Russia and Belarus and Russian- and Belarusian-affiliated, owned or controlled entities.

These actions did not have a material impact on our net sales in 2022 and are not expected to have a material impact on our net sales in 2023.

However, the duration of the war in Ukraine, its impact on the regional and global economy, and the breadth, severity and duration of sanctions imposed by the U.S.

and other governments is uncertain.

An extended war could impact our ability or those of our suppliers or customers to obtain certain raw materials or component parts and could limit the availability and cost of energy throughout Europe, which could increase our costs, impact our ability to deliver our products or reduce customer demand.

In addition, certain of our competitors may continue to sell products in Russia during this time, which may have a negative impact on our long-term sales opportunities in Russia.

Since the beginning of the war in Ukraine, we have also experienced, and may continue to experience, an increase in cybersecurity attacks, which, if successful, may harm our business.

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.

Increasing inflation, geopolitical risks and supply chain, labor and energy constraints have caused and may continue to cause volatility in and disruption to the global economic environment.

Historically, the commercial vehicle industry as a whole has been more adversely affected by volatile economic conditions, such as a recession, than many other industries, as the purchase or replacement of commercial vehicles, which are durable items, can be deferred for many reasons, including reduced spending by end users.

Future changes in the regulatory and business environments in which we operate, including increased geopolitical risks, trade protectionism and tariffs, may adversely affect our ability to sell our products or source materials needed to manufacture our products.

Furthermore, financial instability or bankruptcy at any of our suppliers or customers could disrupt our ability to manufacture our products and impair our ability to collect receivables, any or all of which may have a material adverse effect on our business, results of operations and financial condition.

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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.

Our financial condition and results of operations have been and may continue to be materially adversely affected by pandemics, including the coronavirus pandemic.

The effects of the COVID-19 pandemic on the global economy continued to have an impact on commercial vehicle production schedules, which impacted the sales of our products and our results of operations during 2022.

While we continued to experience a recovery in demand for our products during 2022, ongoing supply chain, labor, raw material, energy, freight and logistics constraints have negatively impacted, and may continue to negatively impact, the sales of our products, costs and our results of operations.

In addition, future pandemic-related impacts on the global economy, including inflation, may continue to adversely impact our business and results of operations.

The extent to which the COVID-19 pandemic may continue to adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including the severity and duration of the outbreak, emerging variants of the virus that may be more contagious than current variants and the actions taken by governments to contain or mitigate its effects, including the availability, pace of distribution, acceptance of and effectiveness of vaccines.

Certain of our end users operate in highly cyclical industries, which can result in uncertainty and significantly impact the demand for our products, which could have a material adverse effect on our business, results of operations and financial condition.

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For the years ended December 31, 2022, 2021 and 2020, our top five OEM customers accounted for approximately 51%, 52% and 53% of our net sales, respectively.

Our top three customers, Daimler AG, PACCAR Inc.

and Traton SE (includes Navistar International Corporation as of December 31, 2021) accounted for approximately 20%, 10% and 10%, respectively, of our net sales during 2021.

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, Traton SE and PACCAR Inc., accounted for approximately 20%, 10% and 9%, respectively, of our net sales during 2022.

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 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.

We are subject to cybersecurity risks to operational systems, security systems, or infrastructure owned by Allison or third-party vendors or suppliers.

We are at risk for interruptions, outages, and breaches of:

(i) operational systems, including business, financial, accounting, product development, data processing, or manufacturing processes, owned by us or our third-party vendors or suppliers;

(ii) facility security systems, owned by us or our third-party vendors or suppliers;

and/or (iii) vehicle propulsion control modules or other in-product technology, owned by us or our third-party vendors or suppliers.

Such cyber incidents could materially disrupt operational systems;

result in loss of intellectual property, trade secrets or other proprietary or competitively sensitive information;

compromise personally identifiable information of employees, customers, suppliers, or others;

jeopardize the security of our facilities;

and/or affect the performance of vehicle propulsion control modules or other in-product technology.

A cyber incident could be caused by malicious third parties using sophisticated, targeted methods to circumvent firewalls, encryption, and other security defenses, including hacking, fraud, trickery, or other forms of deception.

The techniques used by third parties change frequently and may be difficult to detect for long periods of time.

A significant cyber incident could impact production capability, harm our reputation and/or subject us to regulatory actions or litigation, including those as result of global privacy and security regulations, any of which could materially affect our business, results of operations and financial condition.

While we utilize a number of measures to prevent, detect and mitigate these threats, including employee education, monitoring of networks and systems, and maintenance of backup and protective systems, there is no guarantee such efforts will be successful in preventing a cyber incident.

Our sales to the Defense end market are to government entities and contractors for the U.S.

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In addition, if a significant number of independent dealers were to terminate their contracts, it could adversely impact our business, results of operations and financial condition.

We are subject to cybersecurity risks to operational systems, security systems, or infrastructure owned by Allison or third-party vendors or suppliers.

We are at risk for interruptions, outages, and breaches of:

(i) operational systems, including business, financial, accounting, product development, data processing, or manufacturing processes, owned by us or our third-party vendors or suppliers;

(ii) facility security systems, owned by us or our third-party vendors or suppliers;

and/or (iii) vehicle propulsion control modules or other in-product technology, owned by us or our third-party vendors or suppliers.

Such cyber incidents could materially disrupt operational systems;

result in loss of intellectual property, trade secrets or other proprietary or competitively sensitive information;

compromise personally identifiable information of employees, customers, suppliers, or others;

jeopardize the security of our facilities;

and/or affect the performance of vehicle propulsion control modules or other in-product technology.

The techniques used by third

parties change frequently and may be difficult to detect for long periods of time.

A significant cyber incident could impact production capability, harm our reputation and/or subject us to regulatory actions or litigation, any of which could materially affect our business, results of operations and financial condition.

In the event of a catastrophic loss of our key manufacturing facility, our business would be adversely affected.

While we manufacture our products in several facilities and maintain insurance covering our facilities, including business interruption insurance, a catastrophic loss of the use of all or a portion of one of our manufacturing facilities due to accident, labor issues, weather conditions, acts of war, political unrest, terrorist activity, natural disaster or extreme weather events, which may increase in frequency and intensity as a result of climate change, public health crisis, such as pandemics and epidemics or otherwise, whether short- or long-term, would have a material adverse effect on our business, results of operations and financial condition.

While we manufacture our products in several facilities and maintain insurance covering our facilities, including business interruption insurance, a catastrophic loss of the use of all or a portion of one of our manufacturing facilities due to accident, labor issues, weather conditions, acts of war, political unrest, terrorist activity, natural disaster or extreme weather events, which may increase in frequency and intensity as a result of climate change, public health crises, such as pandemics and epidemics or otherwise, whether short- or long-term, would have a material adverse effect on our business, results of operations and financial condition.

Our most significant concentration of manufacturing is around our corporate headquarters in Indianapolis, Indiana, where we produce approximately 90% of our transmissions.

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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 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.

Our success depends on our ability to develop or introduce new products and technologies and improve the efficiency and performance of our current products, and we invest significant resources in research and development in order to do so.

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The development of new products and technologies is difficult, time-consuming and costly and the timetable for commercial release is uncertain.

Not all of our new product launches have been successful, and we may not be successful in the future in introducing other new products and responding to customer needs.

Not all of our new product launches have been successful, and we may not be successful in the future in introducing other new products and

responding to customer needs.

In addition, it often takes significant time, in some cases multiple fleet buy cycles, before customers gain experience with new products and technologies and those new products and technologies become widely-accepted by the market, if at all.

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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.

activities may be constrained due to intellectual property rights of others, licenses for technologies that would enable us to keep pace with our competitors may not be available on commercially reasonable terms if at all and we may not be able to recoup a return on our development investments.

If our competitors are able to respond to changing market demands and adopt new technologies more quickly than we do, demand for our products could decline, our competitive position could be harmed, our future research and development activities may be constrained due to intellectual property rights of others, licenses for technologies that would enable us to keep pace with our competitors may not be available on commercially reasonable terms if at all and we may not be able to recoup a return on our development investments.

Moreover, changing customer demands as well as evolving regulatory, safety and environmental standards could require us to adapt our products and technologies to address such changes.

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Furthermore, there may be production delays due to unanticipated technological setbacks, which may, in turn, delay the release of new products to our end users.

If increased regulatory or environmental standards cause the rate of adoption of new technologies, including electric vehicles for the medium- and heavy-duty commercial market, to occur at a pace that is faster than we are anticipating, we may not have products available to meet that accelerated timeframe.

If the rate of adoption of new technologies, including electric vehicles for the medium- and heavy-duty commercial market, occurs at a pace that is faster than we are anticipating, we may not have products available to meet that accelerated timeframe.

If we experience significant delays or increased costs in the production, launch or acceptance of our products and technologies, our net sales and results of operations may be materially adversely affected.

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As part of that strategy, we have established manufacturing facilities in India and Hungary.

We have also dedicated significant human resources to serve markets where we anticipate increased adoption of automaticity, including China, India, Brazil and Russia.

We have also dedicated significant human resources to serve markets where we anticipate increased adoption of automaticity.

However, manual transmissions remain the market leader outside North America, and there can be no assurance that adoption of automatic transmissions will increase.

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Most of our operations are in the U.S., but we also have manufacturing and customization facilities in India and Hungary with a services agreement with Stellantis NV and customization capability in Brazil, the Netherlands, China and Japan.

Further, we intend to continue to pursue growth opportunities for our business in a variety of business environments outside the U.S., which could exacerbate the risks set forth below.

Further, we intend to continue to pursue growth opportunities for our business in a variety of business environments

outside the U.S., which could exacerbate the risks set forth below.

Our international operations are subject to, without limitation, the following risks:

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political risks, including increased trade protectionism and risks of loss due to civil disturbances, acts of terrorism, acts of war, guerilla activities and insurrection;

unstable economic, financial and market conditions and increased expenses as a result of inflation or higher interest rates;

unstable economic, financial and market conditions and increased expenses as a result of inflation, higher energy costs or higher interest rates;

difficulties in enforcement of third-party contractual obligations and intellectual property rights and collecting receivables through foreign legal systems;

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If one of our products is determined to be defective, we may face substantial warranty costs and may be responsible for significant costs associated with a product recall or a redesign.

We have had defect and warranty issues associated with certain of our products in the past, and we cannot give assurance similar product defects will not occur in the future.

We have had defect and warranty issues associated with certain of our products in the past, and similar product defects may occur in the future.

See "Note 10.

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We also rely on our reputation with end users of our products to specify our products when purchasing new vehicles from our OEM customers.

In the event we are not able to maintain or enhance our brand in these new markets or our reputation is damaged in our existing markets as a result of product defects or recalls, we may face difficulty in maintaining our pricing positions with respect to some of our products or experience reduced demand for our products, which could negatively impact our business, results of operations and financial condition.

In the event we are not able to maintain or enhance our

brand in these new markets or our reputation is damaged in our existing markets as a result of product defects or recalls, we may face difficulty in maintaining our pricing positions with respect to some of our products or experience reduced demand for our products, which could negatively impact our business, results of operations and financial condition.

Additionally, we license the “Allison Transmission”

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General Motors Company (“GM”) has granted us an irrevocable, perpetual, royalty-free, worldwide license under a large number of U.S.

and foreign patents and patent applications, as well as certain unpatented technology and know-how, to design, develop, manufacture, use and sell fully automatic transmissions and electric hybrid propulsion solution for use in certain vocational vehicles, defense vehicles and off-road products.

With respect to the bulk of the intellectual property licensed to us, our license is exclusive with respect to the design, development, manufacture, use and sale of fully automatic transmissions and electric hybrid propulsion solution in vocational vehicles above certain weight rating thresholds, certain defense vehicles and certain off-road products.

and foreign patents and patent applications, as well as certain unpatented technology and know-how, to design, develop, manufacture, use and sell fully automatic transmissions and electric hybrid propulsion solutions for use in certain vocational vehicles, defense vehicles and off-road products.

For the bulk of the intellectual property licensed to us, our license is exclusive with respect to the design, development, manufacture, use and sale of fully automatic transmissions and electric hybrid propulsion solutions in vocational vehicles above certain weight rating thresholds, certain defense vehicles and certain off-road products.

It is non-exclusive with respect to certain other products that are within the scope of the licensed patents or to which the licensed technology can be applied.

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Moreover, regulatory bodies are increasingly adopting regulations that target limiting greenhouse gases and combatting climate change, which may impact our ability to sell our current products or require us to develop new products or technologies.

If these environmental, health and safety laws and regulations that impact our operations or products become more stringent or expand to include a larger portion of our products

or our customer’s products in the future, we could incur additional costs in order to ensure that our business and products comply with such regulations.

If these environmental, health and safety laws and regulations that impact our operations or products become more stringent or expand to include a larger portion of our products or our customer’s products in the future, we could incur additional costs in order to ensure that our business and products comply with such regulations.

In addition, we may not be successful in developing products or technologies that comply with, or the vehicle or customer OEMs to which we sell our products may choose not to comply with, such laws and regulations, which could impact our ability to sell our products in certain locations, negatively impact our business and result in a loss of market share.

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We or our predecessors have been named potentially responsible parties at contaminated sites from time to time.

We manage the remediation of historical soil and groundwater contamination at our Indianapolis, Indiana facilities under an Agreed Order of Consent with the EPA.

See Part II, Item 8., "NOTE 18.

Commitments and Contingencies”

of this Annual Report on Form 10-K.

There can be no assurances that future environmental remediation obligations will not have a material adverse effect on our results of operations and financial condition.

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government, or become subject to fines or other sanctions if we are found to have violated such laws or regulations.

As a result of the need to comply with these laws and regulations, we are subject to increased risks of governmental investigations, civil fraud actions, criminal prosecutions, whistleblower lawsuits and other enforcement actions.

As a result of the need to comply with these laws and regulations, we are subject to increased risks of governmental investigations, civil fraud actions, criminal

prosecutions, whistleblower lawsuits and other enforcement actions.

The laws and regulations to which we are subject include, but are not limited to, Export Administration Regulations, the Federal Acquisition Regulation, International Traffic in Arms Regulations and regulations from the Bureau of Alcohol, Tobacco, Firearms and Explosives and the FCPA.

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government as a result of our default, we could be liable for additional costs the U.S.

government incurs in acquiring undelivered goods or services from another source and any other

damages it suffers.

government incurs in acquiring undelivered goods or services from another source and any other damages it suffers.

Additionally, we cannot assign prime U.S.

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Provisions of our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, as a result, depress the trading price of our common stock.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous.

Our amended and restated certificate of incorporation and amended and restated bylaws and certain provisions of the Delaware General Corporation Law contain provisions that could discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous.

These provisions:

authorize the issuance of blank check preferred stock that our Board of Directors could issue to increase the number of outstanding shares and to discourage a takeover attempt;

limit the ability of stockholders to remove directors only “for cause”;

prohibit our stockholders from calling a special meeting of stockholders;

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As of December 31, 2022, we had total indebtedness of $2,525 million, and we would have been able to borrow an additional $644 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 $650 million due September 2025 (“Revolving Credit Facility”).

As of December 31, 2021, we had no outstanding borrowings against the Revolving Credit Facility.

As of December 31, 2022, we had no outstanding borrowings against

the Revolving Credit Facility.

At December 31, 2022, $625 million of our total indebtedness was associated with 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”).

For a complete description of the terms of the Senior Secured Credit

Facility and the Senior Notes, please see "NOTE 8.

in Part II, Item 8., of this Annual Report on Form 10-K for additional information of this Annual Report on Form 10-K.

For a complete description of the terms of the Senior Secured Credit Facility and the Senior Notes, please see "Note 8.

in Part II, Item 8., of this Annual Report on Form 10-K .

Our indebtedness could have important consequences.

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This, to a significant extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

We cannot ensure that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under the Senior Secured Credit Facility in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.

We cannot ensure that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under the Revolving Credit Facility in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.

In such circumstances, we may need to refinance all or a portion of our indebtedness on or before maturity.

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We cannot ensure that any such actions, if necessary, could be effected on commercially reasonable terms or at all.

If we fail to pay principal, premium, if any, and interest on our indebtedness or to otherwise comply with the covenants in the instruments governing our indebtedness, we may be forced into bankruptcy or liquidation by our lenders.

If we are unable to generate sufficient cash flow or are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness.

In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the Senior Secured Credit Facility could elect to terminate their commitments thereunder,

cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation.

If our operating performance declines, we may in the future need to obtain waivers from the required lenders under the Senior Secured Credit Facility to avoid being in default.

If we or any of our subsidiaries breach the covenants under the Senior Secured Credit Facility and seek a waiver, we may not be able to obtain a waiver from the required lenders.

If this occurs, we would be in default under the Senior Secured Credit Facility, the lenders could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation.

Despite current indebtedness levels, we and our subsidiaries may still be able to incur additional indebtedness, which could further exacerbate the risks associated with our substantial financial leverage.

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Pursuant to GAAP, we are required to assess our goodwill and indefinite-lived intangible assets to determine if they are impaired on an annual basis, or more often if events or changes in circumstances indicate that impairment may have occurred.

Intangible assets with finite lives are amortized over the useful life and are reviewed for impairment on triggering events such as events or changes in circumstances indicating that an impairment may

have occurred.

If the testing performed indicates that impairment has occurred, we are required to record a non-cash impairment charge for the difference between the carrying value of the goodwill and the implied fair value of the goodwill or the carrying value of the intangible assets and the fair value of the intangible assets in the period the determination is made.

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Our world headquarters, which we own, is located at One Allison Way, Indianapolis, Indiana 46222.

As of December 31, 2021, we have approximately 20 manufacturing and certain other facilities in eight countries.

As of December 31, 2022, we have 19 manufacturing and certain other facilities in eight countries.

The following table sets forth certain information regarding our significant facilities.

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Engineering, Research and Development

Vehicle Electrification + Environmental Test (VE+ET) Center

Research and Development

Auburn Hills, Michigan, USA

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Manufacturing

Szentgotthard

Manufacturing & Customization

Manufacturing

We believe all our facilities are suitable for their intended purpose, are being efficiently utilized and provide adequate capacity to meet demand for the next several years.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors