What changed in this filing

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Item 1. Financial Statements

2021-10-28 compared with 2021-07-29 · 131 added, 99 removed, 452 unchanged (34% of the section changed)

3 unchanged sentences

(unaudited, dollars in millions, except share and per share data)

September 30,

Current Assets

33 unchanged sentences

(unaudited, dollars in millions, except per share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of sales

13 unchanged sentences

(unaudited, dollars in millions)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

4 unchanged sentences

Stock-based compensation

Technology-related investments gain

Amortization of deferred financing costs

6 unchanged sentences

Additions of long-lived assets

Loans to third parties

Proceeds from technology-related investments

Business acquisitions

9 unchanged sentences

Payments on revolving credit facility

Net cash (used for) provided by financing activities

Net cash used for financing activities

Effect of exchange rate changes on cash

16 unchanged sentences

Stockholders' Equity

Balance at March 31, 2020

Balance at June 30, 2020

Stock-based compensation

Pension and OPEB liability adjustment

Foreign currency translation adjustment

Interest rate swaps

Repurchase of common stock

Dividends on common stock

Balance at September 30, 2020

Balance at June 30, 2021

Balance at March 31, 2021

Stock-based compensation

2 unchanged sentences

Interest rate swaps

Issuance of common stock

Repurchase of common stock

Dividends on common stock

Balance at June 30, 2021

Balance at September 30, 2021

The accompanying notes are an integral part of the condensed consolidated financial statements.

2 unchanged sentences

(unaudited, dollars in millions)

Six months ended

Nine months ended

Non-voting Common Stock

7 unchanged sentences

Pension and OPEB liability adjustment

Foreign currency translation adjustment

Interest rate swaps

2 unchanged sentences

Dividends on common stock

Balance at June 30, 2020

Balance at September 30, 2020

Balance at December 31, 2020

5 unchanged sentences

Dividends on common stock

Balance at June 30, 2021

Balance at September 30, 2021

The accompanying notes are an integral part of the condensed consolidated financial statements.

9 unchanged sentences

In March 2020, the World Health Organization categorized the novel coronavirus ("COVID-19") as a pandemic.

In the first half of 2021, the COVID-19 pandemic continued to cause supply chain, labor and raw material constraints that created volatility in the Company’s business performance and impacted global markets and supply chains.

As a result, the Company has experienced raw material and component part price inflation, increased freight costs and increased overtime expense as a result of labor shortages.

To limit the spread of COVID-19, governments continue to take various actions including the administration of vaccinations, travel bans and restrictions, quarantines, curfews, stay-at-home orders, social distancing guidelines and business shutdowns and closures.

In the third quarter of 2021, the COVID-19 pandemic continued to cause supply chain, labor and raw material constraints that created volatility in the Company’s business performance and impacted global markets and supply chains.

As a result, the Company has experienced, and expects to continue to experience, raw material and component part price inflation, increased freight and logistics costs and increased overtime expense as a result of labor shortages.

In addition, despite increased customer demand the Company’s net sales were negatively impacted as a result of its customers’ inability to secure components from the broader commercial vehicle supply base which resulted in reduced commercial vehicle build schedules.

To limit the spread of COVID-19, governments continue to take various actions including the administration or mandate of vaccinations, travel bans and restrictions, quarantines, curfews, stay-at-home orders, social distancing guidelines and business shutdowns and closures.

The Company is also continuing to take a variety of measures to promote the safety and security of its employees and to maintain operations with as minimal impact as possible to its stakeholders, and as a result, the Company has been able to continue its manufacturing operations and deliver its products to customers.

9 unchanged sentences

The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2020 as filed with the Secur ities and Exchange Commission on February 18 , 20 2 1 .

The interim period financial results for the three - and six- month period s presented are not necessarily indicative of results to be expected for any other interim period or for the entire year.

The interim period financial results for the three - and nine - month period s presented are not necessarily indicative of results to be expected for any other interim period or for the entire year.

Use of Estimates

25 unchanged sentences

The Company estimates the impact of all other incentives based on the related sales and market conditions in the end market vocation.

The Company recorded no material adjustments based on variable consideration during each of the three and six months ended June 30, 2021 and 2020.

The Company recorded no material adjustments based on variable consideration during each of the three and nine months ended September 30, 2021 and 2020.

Net sales are made on credit terms, generally 30 days, based on an assessment of the customer’s creditworthiness.

For certain goods or services, the Company receives consideration prior to satisfying the related performance obligation.

Such consideration is recorded as a contract liability in current and non-current Deferred revenue as of June 30, 2021 and December 31, 2020.

See Note J, “Deferred Revenue” for more information, including the amount of revenue earned during each of the three and six months ended June 30, 2021 and 2020 that had been previously deferred.

The Company had no material contract assets as of June 30, 2021 and December 31, 2020.

Such consideration is recorded as a contract liability in current and non-current Deferred revenue as of September 30, 2021 and December 31, 2020.

See Note J, “Deferred Revenue” for more information, including the amount of revenue earned during each of the three and nine months ended September 30, 2021 and 2020 that had been previously deferred.

The Company had no material contract assets as of September 30, 2021 and December 31, 2020.

The Company has one operating segment and reportable segment.

1 unchanged sentence

The following presents disaggregated revenue by categories that best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors (dollars in millions):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

North America On-Highway

5 unchanged sentences

Inventories consisted of the following components (dollars in millions):

September 30,

Purchased parts and raw materials

6 unchanged sentences

GOODWILL AND OTHER INTANGIBLE ASSETS

As of June 30, 2021 and December 31, 2020, the carrying value of the Company’s Goodwill was $ 2,064 .

As of each of September 30, 2021 and December 31, 2020, the carrying value of the Company’s Goodwill was $ 2,064 .

The following presents a summary of other intangible assets (dollars in millions):

June 30, 2021

September 30, 2021

December 31, 2020

6 unchanged sentences

Customer relationships — defense

As of June 30, 2021 and December 31, 2020, the carrying value of the Company’s Goodwill and Intangible assets, net was $ 3,004 million and $ 3,027 million, respectively.

As of September 30, 2021 and December 31, 2020, the carrying value of the Company’s Goodwill and Intangible assets, net was $ 2,992 million and $ 3,027 million, respectively.

Amortization expense related to other intangible assets for the next five fiscal years is expected to be (dollars in millions):

19 unchanged sentences

At each balance sheet date, the Company performs an analysis of all instruments subject to authoritative accounting guidance and includes, in Level 3, all of those whose fair value is based on significant unobservable inputs.

As of June 30, 2021 and December 31, 2020, the Company did no t have any Level 3 financial assets or liabilities.

As of September 30, 2021 and December 31, 2020, the Company did no t have any Level 3 financial assets or liabilities.

The Company’s assets and liabilities that are measured at fair value include cash equivalents, derivative instruments, assets held in a rabbi trust and a deferred compensation obligation.

9 unchanged sentences

The fair values are included in other current and non-current assets and liabilities in the Condensed Consolidated Balance Sheets.

The following table summarizes the fair value of the Company’s financial assets and (liabilities) as of June 30, 2021 and December 31, 2020 (dollars in millions):

The following table summarizes the fair value of the Company’s financial assets and (liabilities) as of September 30, 2021 and December 31, 2020 (dollars in millions):

Fair Value Measurements Using

4 unchanged sentences

Observable Inputs

September 30,

Cash equivalents

3 unchanged sentences

Long-term debt and maturities are as follows (dollars in millions):

September 30,

Long-term debt:

7 unchanged sentences

Total long-term debt, net

As of June 30, 2021, the Company had $ 2,535 million of indebtedness associated with Allison Transmission, Inc.’s (“ATI”), the Company’s wholly-owned subsidiary, 4.75 % Senior Notes due October 2027 (“4.75% Senior Notes”), ATI’s 5.875 % Senior Notes due June 2029 (“5.875% Senior Notes”), 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”) and 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 $ 635 million due March 2026 (“Term Loan”) and ATI’s revolving credit facility with commitments in the amount of $ 650 million due September 2025 (“Revolving Credit Facility” and, together with the Term Loan, the “Senior Secured Credit Facility”).

The fair value of the Company’s long-term debt obligations as of June 30, 2021 was $ 2,592 million.

The fair value is based on quoted Level 2 market prices of the Company’s debt as of June 30, 2021.

As of September 30, 2021, the Company had $ 2,533 million of indebtedness associated with Allison Transmission, Inc.’s (“ATI”), the Company’s wholly-owned subsidiary, 4.75 % Senior Notes due October 2027 (“4.75% Senior Notes”), ATI’s 5.875 % Senior Notes due June 2029 (“5.875% Senior Notes”), 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”) and 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 $ 633 million due March 2026 (“Term Loan”) and ATI’s revolving credit facility with commitments in the amount of $ 650 million due September 2025 (“Revolving Credit Facility” and, together with the Term Loan, the “Senior Secured Credit Facility”).

The fair value of the Company’s long-term debt obligations as of September 30, 2021 was $ 2,567 million.

The fair value is based on quoted Level 2 market prices of the Company’s debt as of September 30, 2021.

It is not expected that the Company would be able to repurchase a significant amount of its debt at these levels.

5 unchanged sentences

subsidiary guarantors, with certain exceptions set forth in the Credit Agreement, and ATI’s capital stock and all of the capital stock or other equity interests held by the Company, ATI and each of ATI’s existing and future U.S.

subsidiary guarantors (subject to certain limitations for equity interest of foreign subsidiaries and other exceptions set forth in the Credit Agreement).

Interest on the Term

Loan, as of June 30, 2021 , is either (a) 1.75 % over a LIBOR rate on deposits in U.S.

subsidiary guarantors (subject to certain limitations for

equity interest of foreign subsidiaries and other exceptions set forth in the Credit Agreement).

Interest on the Term Loan, as of September 30, 2021 , is either (a) 1.75 % over a LIBOR rate on deposits in U.S.

dollars for one-, two-, three- or six -month periods (or twelve-month or shorter periods if, at the time of the borrowing, available from all relevant lenders) (the "LIBOR Rate"), or (b) 0.75 % over the greater of the prime lending rate as quoted by the administrative agent, the LIBOR R ate for an interest period of one month plus 1.00 % and the federal funds effective rate published by the Federal Reserve Bank of New York plus 0.50 %, subject to a 1.00 % floor (the "Base Rate").

As of June 30, 2021 , the Company elected to pay the lowest all-in rate of LIBOR plus the applicable margin, or 1.85 %, on the Term Loan.

As of September 30, 2021 , the Company elected to pay the lowest all-in rate of LIBOR plus the applicable margin, or 1.83 %, on the Term Loan.

The Credit Agreement requires minimum quarter ly principal payments on the Term Loan, as well as prepayments from certain net cash proceeds of non-ordinary course asset sales and casualty and condemnation events, the incurrence of certain debt and from a percentage of excess cash flow, if applicable.

The minimum required quarte rly principal payment on the Term Loan through its maturity date of March 2026 is $ 2 million.

As of June 30, 2021 , there had been no payments required for certain net cash proceeds of non-ordinary course asset sales and casualty and condemnation events.

As of September 30, 2021 , there had been no payments required for certain net cash proceeds of non-ordinary course asset sales and casualty and condemnation events.

The remaining principal balance is due upon maturity.

The Senior Secured Credit Facility also provides a Revolving Credit Facility, net of an allowance for up to $ 75 million in outstanding letters of credit commitments.

As of June 30, 2021, the Company had $ 645 million available under the Revolving Credit Facility, net of $ 5 million in letters of credit.

As of September 30, 2021, the Company had $ 645 million available under the Revolving Credit Facility, net of $ 5 million in letters of credit.

Borrowings under the Revolving Credit Facility bear interest at a variable base rate plus an applicable margin based on the Company’s first lien net leverage ratio.

2 unchanged sentences

and when the Company’s first lien net leverage ratio is equal to or below 3.50 x, interest on the Revolving Credit Facility is (y) 0.25 % over the Base Rate or (z) 1.25 % over the LIBOR Rate.

As of June 30, 2021, the applicable margin for the Revolving Credit Facility was 1.25 %.

As of September 30, 2021, the applicable margin for the Revolving Credit Facility was 1.25 %.

In addition, there is an annual commitment fee, based on the Company’s first lien net leverage ratio, on the average unused revolving credit borrowings available under the Revolving Credit Facility.

As of June 30, 2021, the commitment fee is 0.25 %.

As of September 30, 2021, the commitment fee is 0.25 %.

Borrowings under the Revolving Credit Facility are payable at the option of the Company throughout the term of the Senior Secured Credit Facility with the balance due in September 2025.

The Senior Secured Credit Facility requires the Company to maintain a specified maximum first lien net leverage ratio of 5.50 x when revolving loan commitments remain outstanding on the Revolving Credit Facility at the end of a fiscal quarter.

As of June 30, 2021, the Company had no amounts outstanding under the Revolving Credit Facility;

As of September 30, 2021, the Company had no amounts outstanding under the Revolving Credit Facility;

however, the Company would have been in compliance with the maximum first lien net leverage ratio, achieving a 0.46 x ratio.

1 unchanged sentence

In addition, the Credit Agreement, among other things, includes customary restrictions (subject to certain exceptions) on the Company’s ability to incur certain indebtedness, grant certain liens, make certain investments, engage in acquisitions, consolidations and mergers, declare or pay certain dividends or repurchase shares of the Company’s common stock.

As of June 30, 2021, the Company was in compliance with all covenants under the Credit Agreement.

As of September 30, 2021, the Company was in compliance with all covenants under the Credit Agreement.

4 .75% Senior Notes

3 unchanged sentences

incur or guarantee additional indebtedness, incur liens, pay dividends on, redeem or repurchase the Company’s capital stock, make certain investments, permit payment or dividend restrictions on certain of the Company’s subsidiaries, sell assets, engage in certain transactions with affiliates, and consolidate or merge or sell all or substantially all of the Company’s assets.

As of June 30, 2021, the Company was in compliance with all covenants under the indenture governing the 4.75 % Senior Notes.

As of September 30, 2021, the Company was in compliance with all covenants under the indenture governing the 4.75 % Senior Notes.

5.875% Senior Notes

3 unchanged sentences

As of June 30, 2021, the Company was in compliance with all covenants under the indenture governing the 5.875 % Senior Notes.

As of September 30, 2021, the Company was in compliance with all covenants under the indenture governing the 5.875 % Senior Notes.

3.75% Senior Notes

7 unchanged sentences

As of June 30, 2021, the Company was in compliance with all covenants under the indenture governing the 3.75% Senior Notes.

As of September 30, 2021, the Company was in compliance with all covenants under the indenture governing the 3.75 % Senior Notes.

The Company is subject to interest rate risk related to the Senior Secured Credit Facility and enters into interest rate swaps that are based on LIBOR to manage a portion of this exposure.

2 unchanged sentences

Balances in AOCL are reclassified to earnings when transactions related to the underlying risk are settled.

As of June 30, 2021, the Company held interest rate swaps effective from September 2019 to September 2025 with notional values totaling $ 250 million and a weighted average LIBOR fixed rate of 3.04 %, interest rate swaps effective from September 2019 to September 2022 with notional values totaling $ 250 million and a weighted average LIBOR fixed rate of 3.01 % and interest rate swaps effective from September 2022 to September 2025 with notional values totaling $ 250 million and a weighted average LIBOR fixed rate of 2.82 %.

As of September 30, 2021, the Company held interest rate swaps effective from September 2019 to September 2025 with notional values totaling $ 250 million and a weighted average LIBOR fixed rate of 3.04 %, interest rate swaps effective from September 2019 to September 2022 with notional values totaling $ 250 million and a weighted average LIBOR fixed rate of 3.01 % and interest rate swaps effective from September 2022 to September 2025 with notional values totaling $ 250 million and a weighted average LIBOR fixed rate of 2.82 %.

See NOTE F, “Fair Value of Financial Instruments” for information regarding the fair value of the Company’s interest rate swaps.

1 unchanged sentence

Balance Sheet Location

September 30,

Derivatives designated as hedging instruments:

3 unchanged sentences

Total derivatives designated as hedging instruments

The balance of derivative losses recorded in AOCL as of June 30, 2021 was $ 45 million.

See NOTE O, “Accumulated Other Comprehensive Loss” for information regarding activity recorded as a component of AOCL during the three and six months ended June 30, 2021 and 2020.

As of June 30, 2021, the Company had $ 14 million of derivative losses recorded in AOCL expected to be reclassified to earnings within the next twelve months.

The balance of derivative losses recorded in AOCL as of September 30, 2021 was $ 41 million.

See NOTE O, “Accumulated Other Comprehensive Loss” for information regarding activity recorded as a component of AOCL during the three and nine months ended September 30, 2021 and 2020.

As of September 30, 2021, the Company had $ 14 million of derivative losses recorded in AOCL expected to be reclassified to earnings within the next twelve months.

PRODUCT WARRANTY LIABILITIES

As of June 30, 2021, current and non-current product warranty liabilities were $ 29 million and $ 31 million, respectively.

As of June 30, 2020, current and non-current product warranty liabilities were $ 29 million and $ 19 million, respectively.

As of September 30, 2021, current and non-current product warranty liabilities were $ 35 million and $ 23 million, respectively.

As of September 30, 2020, current and non-current product warranty liabilities were $ 34 million and $ 31 million, respectively.

Product warranty liability activities consist of the following (dollars in millions):

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Beginning balance

3 unchanged sentences

DEFERRED REVENUE

As of June 30, 2021, current and non-current deferred revenue was $ 39 million and $ 103 million, respectively.

As of June 30, 2020, current and non-current deferred revenue was $ 34 million and $ 111 million, respectively.

As of September 30, 2021, current and non-current deferred revenue was $ 37 million and $ 101 million, respectively.

As of September 30, 2020, current and non-current deferred revenue was $ 33 million and $ 107 million, respectively.

Deferred revenue activity consists of the following (dollars in millions):

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Beginning balance

1 unchanged sentence

Ending balance

Deferred revenue recorded in current and non-current liabilities related to ETC as of June 30, 2021 was $ 30 million and $ 87 million, respectively.

Deferred revenue recorded in current and non-current liabilities related to ETC as of June 30, 2020 was $ 27 million and $ 93 million, respectively.

Deferred revenue recorded in current and non-current liabilities related to ETC as of September 30, 2021 was $ 29 million and $ 86 million, respectively.

Deferred revenue recorded in current and non-current liabilities related to ETC as of September 30, 2020 was $ 28 million and $ 89 million, respectively.

Contracts are assessed by the Company to determine if the contract conveys the right to control an identified asset in exchange for consideration during a period of time.

The Company classifies all identified leases as either operating or finance leases.

As of June 30, 2021, the Company was not a party to any finance leases.

As of September 30, 2021, the Company was not a party to any finance leases.

Contracts that contain leases are assessed to determine if the consideration in the contract is related to a lease component, non-lease component or other components not related to the lease.

8 unchanged sentences

Any lease liability is classified between current and non-current liabilities based on the terms of the underlying leases.

The weighted average discount rate on operating leases as of June 30, 2021 and December 31, 2020 was 4.36 % and 4.37 %, respectively.

As of June 30, 2021, the Company recorded current and non-current operating lease liabilities of $ 4 million and $ 15 million, respectively.

The weighted average discount rate on operating leases as of September 30, 2021 and December 31, 2020 was 4.36 % and 4.37 %, respectively.

As of September 30, 2021, the Company recorded current and non-current operating lease liabilities of $ 4 million and $ 14 million, respectively.

As of December 31, 2020, the Company recorded current and non-current operating lease liabilities of $ 4 million and $ 17 million, respectively.

The following table reconciles total operating lease liabilities as of June 30, 2021 to future undiscounted cash flows for operating leases:

The following table reconciles future undiscounted cash flows for operating leases as of September 30, 2021 to total operating lease liabilities:

September 30,

Total lease payments

2 unchanged sentences

The below table depicts the ROU assets held by the Company based on the underlying asset:

Total right-of-use assets

The weighted average remaining lease term as of June 30, 2021 and June 30, 2020 was 7.1 years and 7.5 years, respectively.

Operating lease expense was $ 2 million in each of the three months ended June 30, 2021 and 2020 and $ 3 million in each of the six months ended June 30, 2021 and 2020, and was recorded within Selling, general and administrative expense and Engineering - research and development on the Company's Condensed Consolidated Statements of Comprehensive Income.

There was no short-term operating lease expense for each of the three and six months ended June 30, 2021 and 2020.

The calculation of the Company's ROU assets and lease liabilities did not include cash consideration as of June 30, 2021 and December 31, 2020.

During each of the six months ended June 30, 2021 and 2020, the Company recorded $ 1 million of new ROU assets obtained in exchange for lease obligations.

September 30,

Total ROU assets

The weighted average remaining lease term as of September 30, 2021 and September 30, 2020 was 7.2 years and 7.6 years, respectively.

Operating lease expense was $ 1 million in each of the three months ended September 30, 2021 and 2020 and $ 4 million in each of the nine months ended September 30, 2021 and 2020, and was recorded within Selling, general and administrative expense and Engineering - research and development on the Company's Condensed Consolidated Statements of Comprehensive Income.

There was no material short-term operating lease expense for each of the three and nine months ended September 30, 2021 and 2020.

The calculation of the Company's ROU assets and lease liabilities did not include cash consideration as of September 30, 2021 and December 31, 2020.

During the nine months ended September 30, 2021 and 2020, the Company recorded $ 1 million and $ 2 million, respectively, of new ROU assets obtained in exchange for lease obligations.

OTHER CURRENT LIABILITIES

Other current liabilities consist of the following (dollars in millions):

September 30,

Payroll and related costs

Accrued interest payable

Sales allowances

Accrued interest payable

Vendor buyback obligation

Derivative liabilities

Taxes payable

Derivative liabilities

Lease liability

6 unchanged sentences

For the Three Months

Ended June 30,

Ended September 30,

For the Three Months

Ended June 30,

Ended September 30,

Net periodic benefit cost (credit):

2 unchanged sentences

Prior service credit

Recognized actuarial loss

Net periodic benefit cost (credit)

1 unchanged sentence

Post-retirement Benefits

For the Six Months

Ended June 30,

For the Six Months

Ended June 30,

For the Nine Months

Ended September 30,

For the Nine Months

Ended September 30,

Net periodic benefit cost (credit):

2 unchanged sentences

Prior service credit

Recognized actuarial loss

Net periodic benefit cost (credit)

The components of net periodic benefit cost (credit) other than the service cost component are included in Other income, net in the Condensed Consolidated Statements of Comprehensive Income.

For the three and six months ended June 30, 2021, the Company recorded total income tax expense of $ 30 million and $ 64 million, respectively.

The effective tax rate for the three and six months ended June 30, 2021 was 21 % and 22 %, respectively.

For the three and six months ended June 30, 2020, the Company recorded total income tax expense of $ 7 million and $ 49 million, respectively.

The effective tax rate for both the three and six months ended June 30, 2020 was 23 %.

For the three and nine months ended September 30, 2021, the Company recorded total income tax expense of $ 30 million and $ 94 million, respectively.

The effective tax rate for the three and nine months ended September 30, 2021 was 24 % and 22 %, respectively.

For the three and nine months ended September 30, 2020, the Company recorded total income tax expense of $ 21 million and $ 70 million, respectively.

The effective tax rate for the three and nine months ended September 30, 2020 was 21 % and 23 %, respectively.

The need to establish a valuation allowance against the deferred tax assets is assessed periodically based on a more-likely-than-not realization threshold, in accordance with authoritative accounting guidance.

4 unchanged sentences

The Company has determined, based on the evaluation of both objective and subjective evidence available, that this valuation allowance is necessary and that it is more likely than not that the deferred tax assets are not fully realizable.

In accordance with the FASB’s authoritative guidance on accounting for income taxes, the Company has recorded a liability for unrecognized tax benefits related to a 2010 Research and Development Credit as of June 30, 2021 and December 31, 2020.

The accounting guidance prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

3 unchanged sentences

Three months ended

AOCL as of March 31, 2020

Other comprehensive loss before reclassifications

Amounts reclassified from AOCL

Income tax benefit

Net current period other comprehensive loss

AOCL as of June 30, 2020

AOCL as of March 31, 2021

Other comprehensive (loss) income before reclassifications

2 unchanged sentences

Net current period other comprehensive (loss) income

AOCL as of September 30, 2020

AOCL as of June 30, 2021

Six months ended

Other comprehensive loss before reclassifications

Amounts reclassified from AOCL

Income tax benefit (expense)

Net current period other comprehensive (loss) income

AOCL as of September 30, 2021

Nine months ended

AOCL as of December 31, 2019

3 unchanged sentences

Net current period other comprehensive loss

AOCL as of June 30, 2020

AOCL as of September 30, 2020

AOCL as of December 31, 2020

3 unchanged sentences

Net current period other comprehensive (loss) income

AOCL as of June 30, 2021

AOCL as of September 30, 2021

Amounts reclassified from AOCL

1 unchanged sentence

Three months ended

June 30, 2021

September 30, 2021

Three months ended

June 30, 2020

September 30, 2020

Affected line item in the Condensed

5 unchanged sentences

Other income, net

Recognized actuarial loss

Other income, net

Total reclassifications, before tax

Income before income taxes

Income tax expense

Income tax benefit

Income tax expense

2 unchanged sentences

AOCL Components

Six months ended

June 30, 2021

Six months ended

June 30, 2020

Nine months ended

September 30, 2021

Nine months ended

September 30, 2020

Affected line item in the Condensed

5 unchanged sentences

Other income, net

Recognized actuarial loss

Other income, net

Total reclassifications, before tax

Income before income taxes

Income tax expense

Income tax benefit (expense)

Income tax expense

5 unchanged sentences

The Company has an agreement with the Environmental Protection Agency to perform remedial activities at the Company’s Indianapolis, Indiana manufacturing facilities related to historical soil and groundwater contamination.

As of June 30, 2021, the Company had a liability recorded in the amount of $ 3 million.

As of September 30, 2021, the Company had a liability recorded in the amount of $ 3 million.

Claims, Disputes, and Litigation

8 unchanged sentences

The assumed proceeds under the treasury stock method include the purchase price that the grantee will pay in the future and compensation cost for future service that the Company has not yet recognized.

For each of the three and six months ended June 30, 2021 and 2020, there were 1 million outstanding stock options excluded from the diluted EPS calculation because they were anti-dilutive.

For each of the three and nine months ended September 30, 2021 and 2020, there were 1 million outstanding stock options excluded from the diluted EPS calculation because they were anti-dilutive.

The following table reconciles the numerators and denominators used to calculate basic EPS and diluted EPS (in millions, except per share data):

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Weighted average shares of common stock outstanding

3 unchanged sentences

Diluted earnings per share attributable to common stockholders

During the three and six months ended June 30, 2021, the Company repurchased $ 130 million and $ 226 million, respectively, of its common stock under the current stock repurchase program authorized by the Board of Directors (“Repurchase Program”), leaving $ 601 million of authorized repurchases remaining under the Repurchase Program as of June 30, 2021.

During the three and nine months ended September 30, 2021, the Company repurchased $ 100 million and $ 326 million, respectively, of its common stock under the current stock repurchase program authorized by the Board of Directors (“Repurchase Program”), leaving $ 501 million of authorized repurchases remaining under the Repurchase Program as of September 30, 2021.

The Repurchase Program has no termination date, and the timing and amount of stock purchases are subject to market conditions and corporate needs.

The Repurchase Program may be modified, suspended or discontinued at any time at the Company’s discretion.

SUBSEQUENT EVENT

During the third quarter, the Company entered into a strategic collaboration framework agreement (“Agreement”) for the development of electrified powertrain solutions for global commercial vehicles with Jing-Jin Electric Technologies Co.

(“JJE”), a Chinese electrified propulsion company in components, assemblies and systems for global automotive and commercial vehicle customers.

Pursuant to the Agreement, the Company and JJE are working to define the product portfolio scope, manufacturing locations and supporting resources to be provided by each party.

In addition, the Company provided a loan in the amount of $ 11 million to JJE’s United States-based subsidiary to support JJE North America’s commercial vehicle electric drive product development, testing and manufacturing acceleration efforts.

On October 20, 2021, the Company announced that it would invest approximately $ 42 million in JJE’s initial public offering at the The Science and Technology Innovation Board on the Shanghai Stock Exchange, representing 3.25 % of JJE’s outstanding common stock.

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-Q

Item 1. Financial Statements