Item 1. Financial Statements
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
(in millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
799.6
|
|
|
$
|
739.8
|
|
|
$
|
1,555.2
|
|
|
$
|
1,491.3
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
677.4
|
|
|
654.0
|
|
|
1,328.7
|
|
|
1,266.3
|
|
|
|
|
|
|
|
|
|
Gross profit
|
122.2
|
|
|
85.8
|
|
|
226.5
|
|
|
225.0
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
60.5
|
|
|
55.5
|
|
|
120.1
|
|
|
117.3
|
|
|
|
|
|
|
|
|
|
Operating income
|
61.7
|
|
|
30.3
|
|
|
106.4
|
|
|
107.7
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(28.8
|
)
|
|
(23.4
|
)
|
|
(57.9
|
)
|
|
(47.4
|
)
|
|
|
|
|
|
|
|
|
Investment income
|
0.2
|
|
|
0.1
|
|
|
0.3
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
Debt refinancing and redemption costs
|
0.1
|
|
|
—
|
|
|
(11.2
|
)
|
|
—
|
|
Other, net
|
(2.0
|
)
|
|
(0.6
|
)
|
|
(1.5
|
)
|
|
(1.8
|
)
|
|
|
|
|
|
|
|
|
Income before income taxes
|
31.2
|
|
|
6.4
|
|
|
36.1
|
|
|
58.9
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
5.4
|
|
|
1.7
|
|
|
3.0
|
|
|
3.9
|
|
|
|
|
|
|
|
|
|
Net income
|
25.8
|
|
|
4.7
|
|
|
33.1
|
|
|
55.0
|
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
Net income attributable to AAM
|
$
|
25.8
|
|
|
$
|
4.7
|
|
|
$
|
33.1
|
|
|
$
|
55.9
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
$
|
0.34
|
|
|
$
|
0.06
|
|
|
$
|
0.43
|
|
|
$
|
0.74
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
$
|
0.34
|
|
|
$
|
0.06
|
|
|
$
|
0.43
|
|
|
$
|
0.74
|
|
See accompanying notes to condensed consolidated financial statements.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
(in millions)
|
Net income
|
$
|
25.8
|
|
|
$
|
4.7
|
|
|
$
|
33.1
|
|
|
$
|
55.0
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
Defined benefit plans, net of tax of $(0.8) million and $(0.1) million for the three and six months ended June 30, 2013, respectively
|
1.7
|
|
|
(0.5
|
)
|
|
0.6
|
|
|
(14.5
|
)
|
Foreign currency translation adjustments
|
(21.7
|
)
|
|
(22.5
|
)
|
|
(16.8
|
)
|
|
(11.8
|
)
|
Change in derivatives
|
(2.1
|
)
|
|
(0.2
|
)
|
|
(1.6
|
)
|
|
5.4
|
|
Other comprehensive loss
|
(22.1
|
)
|
|
(23.2
|
)
|
|
(17.8
|
)
|
|
(20.9
|
)
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
3.7
|
|
|
(18.5
|
)
|
|
15.3
|
|
|
34.1
|
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
Foreign currency translation adjustments attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to AAM
|
$
|
3.7
|
|
|
$
|
(18.5
|
)
|
|
$
|
15.3
|
|
|
$
|
34.8
|
|
See accompanying notes to condensed consolidated financial statements.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013
|
|
December 31, 2012
|
|
|
(Unaudited)
|
|
|
Assets
|
|
(in millions)
|
Current assets
|
|
|
Cash and cash equivalents
|
|
$
|
78.9
|
|
|
$
|
62.4
|
|
Accounts receivable, net
|
|
559.5
|
|
|
463.4
|
|
Inventories, net
|
|
233.2
|
|
|
224.3
|
|
Prepaid expenses and other current assets
|
|
120.6
|
|
|
122.0
|
|
Total current assets
|
|
992.2
|
|
|
872.1
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
1,036.8
|
|
|
1,009.7
|
|
Deferred income taxes
|
|
366.2
|
|
|
366.1
|
|
Goodwill
|
|
156.2
|
|
|
156.4
|
|
GM postretirement cost sharing asset
|
|
252.5
|
|
|
259.7
|
|
Other assets and deferred charges
|
|
204.8
|
|
|
202.0
|
|
Total assets
|
|
$
|
3,008.7
|
|
|
$
|
2,866.0
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
450.7
|
|
|
$
|
396.1
|
|
Accrued compensation and benefits
|
|
90.1
|
|
|
84.9
|
|
Deferred revenue
|
|
15.8
|
|
|
17.2
|
|
Accrued expenses and other current liabilities
|
|
90.4
|
|
|
102.6
|
|
Total current liabilities
|
|
647.0
|
|
|
600.8
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
1,546.5
|
|
|
1,454.1
|
|
Deferred revenue
|
|
79.5
|
|
|
82.2
|
|
Postretirement benefits and other long-term liabilities
|
|
837.3
|
|
|
849.7
|
|
Total liabilities
|
|
3,110.3
|
|
|
2,986.8
|
|
|
|
|
|
|
|
|
Stockholders' deficit
|
|
|
|
|
|
|
Common stock, par value $0.01 per share
|
|
0.8
|
|
|
0.8
|
|
Paid-in capital
|
|
604.9
|
|
|
600.9
|
|
Accumulated deficit
|
|
(242.7
|
)
|
|
(275.8
|
)
|
Treasury stock at cost, 6.0 million shares as of June 30, 2013 and December 31, 2012
|
|
(182.2
|
)
|
|
(182.1
|
)
|
Accumulated other comprehensive income (loss), net of tax
|
|
|
|
|
Defined benefit plans
|
|
(273.9
|
)
|
|
(274.5
|
)
|
Foreign currency translation adjustments
|
|
(9.2
|
)
|
|
7.6
|
|
Unrecognized gain on derivatives
|
|
0.7
|
|
|
2.3
|
|
Total AAM stockholders' deficit
|
|
(101.6
|
)
|
|
(120.8
|
)
|
Noncontrolling interest in subsidiaries
|
|
—
|
|
|
—
|
|
Total stockholders’ deficit
|
|
(101.6
|
)
|
|
(120.8
|
)
|
Total liabilities and stockholders' deficit
|
|
$
|
3,008.7
|
|
|
$
|
2,866.0
|
|
See accompanying notes to condensed consolidated financial statements.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
|
2013
|
|
2012
|
|
|
(in millions)
|
Operating activities
|
|
|
|
|
Net income
|
|
$
|
33.1
|
|
|
$
|
55.0
|
|
Adjustments to reconcile net income to net cash provided by operating activities
|
|
|
|
|
Depreciation and amortization
|
|
83.7
|
|
|
73.7
|
|
Deferred income taxes
|
|
(1.5
|
)
|
|
(1.1
|
)
|
Stock-based compensation
|
|
3.2
|
|
|
0.6
|
|
Pensions and other postretirement benefits, net of contributions
|
|
5.9
|
|
|
(29.5
|
)
|
Loss (gain) on disposal of property, plant and equipment, net
|
|
(3.5
|
)
|
|
0.8
|
|
Debt refinancing and redemption costs
|
|
2.5
|
|
|
—
|
|
Changes in operating assets and liabilities
|
|
|
|
|
Accounts receivable
|
|
(99.1
|
)
|
|
(142.6
|
)
|
Inventories
|
|
(12.3
|
)
|
|
(34.2
|
)
|
Accounts payable and accrued expenses
|
|
51.1
|
|
|
135.3
|
|
Deferred revenue
|
|
(3.8
|
)
|
|
(16.7
|
)
|
Other assets and liabilities
|
|
(26.1
|
)
|
|
(16.7
|
)
|
Net cash provided by operating activities
|
|
33.2
|
|
|
24.6
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
(121.5
|
)
|
|
(92.9
|
)
|
Proceeds from sale of property, plant and equipment
|
|
4.9
|
|
|
1.2
|
|
Proceeds from sale-leaseback of equipment
|
|
16.0
|
|
|
—
|
|
Net cash used in investing activities
|
|
(100.6
|
)
|
|
(91.7
|
)
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
Net short-term repayments under credit facilities
|
|
(12.0
|
)
|
|
(1.7
|
)
|
Payments of long-term debt and capital lease obligations
|
|
(307.3
|
)
|
|
(18.0
|
)
|
Proceeds from issuance of long-term debt
|
|
410.0
|
|
|
12.4
|
|
Debt issuance costs
|
|
(6.6
|
)
|
|
—
|
|
Purchase of noncontrolling interest
|
|
—
|
|
|
(4.0
|
)
|
Purchase of treasury stock
|
|
(0.1
|
)
|
|
(5.9
|
)
|
Employee stock option exercises
|
|
0.8
|
|
|
0.1
|
|
Net cash provided by (used in) financing activities
|
|
84.8
|
|
|
(17.1
|
)
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
(0.9
|
)
|
|
0.2
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
16.5
|
|
|
(84.0
|
)
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
62.4
|
|
|
169.2
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
78.9
|
|
|
$
|
85.2
|
|
|
|
|
|
|
|
|
Supplemental cash flow information
|
|
|
|
|
|
|
Interest paid
|
|
$
|
55.9
|
|
|
$
|
43.1
|
|
Income taxes paid, net of refunds
|
|
$
|
8.2
|
|
|
$
|
10.0
|
|
See accompanying notes to condensed consolidated financial statements.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
American Axle & Manufacturing Holdings, Inc. (Holdings) and its subsidiaries (collectively, we, our, us or AAM) is a Tier I supplier to the automotive industry. We manufacture, engineer, design and validate driveline and drivetrain systems and related components and chassis modules for light trucks, sport utility vehicles (SUVs), passenger cars, crossover vehicles and commercial vehicles. Driveline and drivetrain systems include components that transfer power from the transmission and deliver it to the drive wheels. Our driveline, drivetrain and related products include axles, chassis modules, driveshafts, power transfer units, transfer cases, chassis and steering components, driveheads, transmission parts and metal-formed products. In addition to locations in the United States (U.S.) (Michigan, Ohio, Indiana and Pennsylvania), we also have offices or facilities in Brazil, China, Germany, India, Japan, Luxembourg, Mexico, Poland, Scotland, South Korea, Sweden and Thailand.
Basis of Presentation
We have prepared the accompanying interim condensed consolidated financial statements in accordance with the instructions to Form 10-Q under the Securities Exchange Act of 1934. These condensed consolidated financial statements are unaudited but include all normal recurring adjustments, which we consider necessary for a fair presentation of the information set forth herein. Results of operations for the periods presented are not necessarily indicative of the results for the full fiscal year.
The balance sheet at
December 31, 2012
presented herein has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (GAAP) for complete consolidated financial statements.
In order to prepare the accompanying interim condensed consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts and disclosures in our interim condensed consolidated financial statements. Actual results could differ from those estimates.
For further information, refer to the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended
December 31, 2012
.
Effect of New Accounting Standards
On January 1, 2013, new accounting guidance regarding impairment testing of indefinite-lived intangible assets became effective. Under the new guidance, an entity testing an indefinite-lived intangible asset for impairment has the option of performing a qualitative impairment assessment before calculating the fair value of the asset. We do not believe that the adoption of this new accounting guidance will have a significant effect on our impairment assessments of indefinite-lived intangible assets in the future.
On February 5, 2013, new accounting guidance was issued which requires entities to disclose additional information about items reclassified out of accumulated other comprehensive income (AOCI). The new guidance requires entities to disclose, either on the face of the financial statements or as a separate footnote to the financial statements, additional information regarding changes in AOCI balances by component, either before tax or net-of-tax, and requires entities to disclose significant items reclassified out of AOCI by component. The new guidance does not change the current accounting guidance which states that a total for comprehensive income must be reported in condensed interim financial statements in either a single continuous statement or two separate but consecutive statements. Other than additional disclosure requirements, the adoption of this new guidance has had no impact on our condensed consolidated financial statements.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. RESTRUCTURING ACTIONS
There were no payments made in the first six months of 2013 related to our remaining asset retirement obligation of
$0.5 million
, as of June 30, 2013.
In the six months ended June 30, 2012, we incurred charges for the redeployment of assets and other related costs associated with the closure of our Detroit Manufacturing Complex (DMC) and Cheektowaga Manufacturing Facility (CKMF). We expensed and paid
$20.7 million
in the first six months of 2012, related to these actions.
3. INVENTORIES
We state our inventories at the lower of cost or market. The cost of our inventories is determined using the FIFO method. When we determine that our gross inventories exceed usage requirements, or if inventories become obsolete or otherwise not saleable, we record a provision for such loss as a component of our inventory accounts.
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013
|
|
December 31, 2012
|
|
|
(in millions)
|
|
|
|
|
|
Raw materials and work-in-progress
|
|
$
|
238.5
|
|
|
$
|
220.3
|
|
Finished goods
|
|
26.2
|
|
|
25.0
|
|
Gross inventories
|
|
264.7
|
|
|
245.3
|
|
Inventory valuation reserves
|
|
(31.5
|
)
|
|
(21.0
|
)
|
Inventories, net
|
|
$
|
233.2
|
|
|
$
|
224.3
|
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013
|
|
December 31, 2012
|
|
|
(in millions)
|
|
|
|
|
|
Revolving credit facility
|
|
$
|
—
|
|
|
$
|
—
|
|
9.25% Notes, net of discount
|
|
337.8
|
|
|
337.5
|
|
7.875% Notes
|
|
—
|
|
|
300.0
|
|
7.75% Notes
|
|
200.0
|
|
|
200.0
|
|
6.625% Notes
|
|
550.0
|
|
|
550.0
|
|
6.25% Notes
|
|
400.0
|
|
|
—
|
|
Foreign credit facilities
|
|
53.2
|
|
|
61.0
|
|
Capital lease obligations
|
|
5.5
|
|
|
5.6
|
|
Long-term debt
|
|
$
|
1,546.5
|
|
|
$
|
1,454.1
|
|
6.25% Notes
In the first quarter of 2013, we issued
$400.0 million
of
6.25%
senior unsecured notes due 2021 (
6.25%
Notes). Concurrent with the offering of the
6.25%
Notes, we made a tender offer to purchase our
7.875%
Notes, of which the aggregate principal amount outstanding at the time of the tender offer was
$300.0 million
. Net proceeds from the
6.25%
Notes were used to fund the purchase pursuant to the tender offer and the subsequent redemption of the entire
$300.0 million
of the
7.875%
Notes and for other general corporate purposes. We paid debt issuance costs of
$6.6 million
in the first six months of 2013 related to the
6.25%
Notes.
7.875% Notes
On March 1, 2013, in connection with the cash tender offer, we purchased
$172.6 million
aggregate principal amount of the
7.875%
Notes, and paid accrued interest. Upon purchase, we expensed
$5.2 million
related to a tender premium,
$0.1 million
of professional fees and unamortized debt issuance costs of
$1.2 million
related to this debt. We had been amortizing the debt issuance costs over the expected life of the borrowing.
On March 15, 2013, we voluntarily redeemed the remaining
7.875%
Notes outstanding. This resulted in a principal payment of
$127.4 million
, a payment of
$3.3 million
related to a redemption premium, as well as payment of accrued interest. Upon redemption, we expensed
$0.9 million
of unamortized debt issuance costs related to this debt. We had been amortizing the debt issuance costs over the expected life of the borrowing.
Revolving Credit Facility
On March 20, 2013, we terminated our class C loan facility of
$72.8 million
, which would have matured on June 30, 2013. Upon termination, we expensed
$0.5 million
of unamortized debt issuance costs related to the class C facility. We had been amortizing the debt issuance costs over the expected life of the borrowing. As of
June 30, 2013
, the Revolving Credit Facility provided up to
$365.0 million
of revolving bank financing commitments through June 30, 2016. At
June 30, 2013
, we had
$341.7 million
available under the Revolving Credit Facility. This availability reflects a reduction of
$23.3 million
for standby letters of credit issued against the facility.
The Revolving Credit Facility provides back-up liquidity for our foreign credit facilities. We intend to use the availability of long-term financing under the Revolving Credit Facility to refinance any current maturities related to such debt agreements that are not otherwise refinanced on a long-term basis in their local markets.
We utilize local currency credit facilities to finance the operations of certain foreign subsidiaries. At
June 30, 2013
,
$53.2 million
was outstanding under these facilities and an additional
$59.2 million
was available.
The weighted-average interest rate of our long-term debt outstanding was
7.5%
at
June 30, 2013
and
7.9%
as of
December 31, 2012
.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. FAIR VALUE
The fair value accounting guidance defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The definition is based on an exit price rather than an entry price, regardless of whether the entity plans to hold or sell the asset. This guidance also establishes a fair value hierarchy to prioritize inputs used in measuring fair value as follows:
|
|
•
|
Level 1: Observable inputs such as quoted prices in active markets;
|
|
|
•
|
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
|
|
|
•
|
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
Financial instruments
The estimated fair value of our financial assets and liabilities that are recognized at fair value on a recurring basis, using available market information and other observable data, as of
June 30, 2013
, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013
|
|
December 31, 2012
|
|
|
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
|
Input
|
|
|
(in millions)
|
|
(in millions)
|
|
|
Balance Sheet Classification
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
10.8
|
|
|
$
|
10.8
|
|
|
$
|
6.5
|
|
|
$
|
6.5
|
|
|
Level 1
|
Prepaid expenses and other current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency forward contracts
|
|
1.1
|
|
|
1.1
|
|
|
2.3
|
|
|
2.3
|
|
|
Level 2
|
Other assets and deferred charges
|
|
|
|
|
|
|
|
|
|
|
Currency forward contracts
|
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
Level 2
|
Other accrued expenses
|
|
|
|
|
|
|
|
|
|
|
Currency forward contracts
|
|
0.5
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
Level 2
|
The carrying values of our cash, accounts receivable, accounts payable and accrued liabilities approximates their fair values due to the short-term maturities of these instruments. The carrying values of our borrowings under the foreign credit facilities approximates their fair value due to the frequent resetting of the interest rates. We estimated the fair value of the amounts outstanding on our debt using available market information and other observable data, to be as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013
|
|
December 31, 2012
|
|
|
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
|
Input
|
|
|
(in millions)
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.25% Notes
|
|
$
|
337.8
|
|
|
$
|
363.8
|
|
|
$
|
337.5
|
|
|
$
|
377.4
|
|
|
Level 2
|
7.875% Notes
|
|
—
|
|
|
—
|
|
|
300.0
|
|
|
310.1
|
|
|
Level 2
|
7.75% Notes
|
|
200.0
|
|
|
218.5
|
|
|
200.0
|
|
|
216.5
|
|
|
Level 2
|
6.625% Notes
|
|
550.0
|
|
|
558.3
|
|
|
550.0
|
|
|
555.5
|
|
|
Level 2
|
6.25% Notes
|
|
400.0
|
|
|
405.0
|
|
|
—
|
|
|
—
|
|
|
Level 2
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. DERIVATIVES
Our business and financial results are affected by fluctuations in world financial markets, including interest rates and currency exchange rates. Our hedging policy has been developed to manage these risks to an acceptable level based on management’s judgment of the appropriate trade-off between risk, opportunity and cost. We do not hold financial instruments for trading or speculative purposes.
Currency forward contracts
From time to time, we use foreign currency forward contracts to reduce the effects of fluctuations in exchange rates, primarily relating to the Mexican Peso, Euro and Pound Sterling. As of
June 30, 2013
, we have currency forward contracts outstanding with a notional amount of
$47.5 million
that hedge our exposure to changes in foreign currency exchange rates for our payroll expenses.
The following table summarizes the reclassification of pre-tax derivative gains into net income from accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of
|
|
Gain (Loss) Reclassified
|
|
Gain Expected to be
|
|
|
Gain (Loss)
|
|
Three Months Ended
|
|
Six Months Ended
|
|
Reclassified
|
|
|
Reclassified into
|
|
June 30,
|
|
June 30,
|
|
During the
|
|
|
Net Income
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Next 12 Months
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency forward contracts
|
|
Cost of Goods Sold
|
|
$
|
0.9
|
|
|
$
|
(1.3
|
)
|
|
$
|
2.1
|
|
|
$
|
(1.5
|
)
|
|
$
|
0.6
|
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. EMPLOYEE BENEFIT PLANS
The components of net periodic benefit cost (credit) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
0.9
|
|
|
$
|
0.8
|
|
|
$
|
1.8
|
|
|
$
|
1.6
|
|
Interest cost
|
|
8.5
|
|
|
8.8
|
|
|
17.0
|
|
|
17.6
|
|
Expected asset return
|
|
(11.5
|
)
|
|
(8.0
|
)
|
|
(23.0
|
)
|
|
(16.0
|
)
|
Amortized loss
|
|
2.4
|
|
|
1.8
|
|
|
4.8
|
|
|
3.6
|
|
Amortized prior service cost
|
|
0.3
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
Net periodic benefit cost
|
|
$
|
0.6
|
|
|
$
|
3.4
|
|
|
$
|
1.2
|
|
|
$
|
6.8
|
|
|
|
|
|
|
Other Postretirement Benefits
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
$
|
0.2
|
|
|
$
|
0.2
|
|
Interest cost
|
|
3.3
|
|
|
3.9
|
|
|
6.6
|
|
|
7.8
|
|
Amortized loss
|
|
0.2
|
|
|
0.2
|
|
|
0.4
|
|
|
0.4
|
|
Amortized prior service credit
|
|
(0.5
|
)
|
|
(0.5
|
)
|
|
(0.9
|
)
|
|
(1.0
|
)
|
Curtailment gain
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21.8
|
)
|
Settlement
|
|
—
|
|
|
(5.2
|
)
|
|
—
|
|
|
(5.2
|
)
|
Net periodic benefit cost (credit)
|
|
$
|
3.1
|
|
|
$
|
(1.5
|
)
|
|
$
|
6.3
|
|
|
$
|
(19.6
|
)
|
In the first quarter of 2012, we recorded a gain of
$21.8 million
to cost of goods sold for the curtailment of certain other postretirement benefits (OPEB). This resulted primarily from the reduction in the expected future OPEB related to the DMC and CKMF hourly associates who terminated employment from AAM as a result of our plant closures. These curtailment gains resulted in an increase in our accumulated other comprehensive loss of
$21.8 million
.
In the second quarter of 2012, we notified hourly associates of the termination of a benefit plan, which provided legal services to certain eligible hourly associates represented by the International UAW. As a result of terminating this plan, we recorded a settlement gain of
$5.2 million
in cost of goods sold in the second quarter of 2012. Recognition of this settlement gain reduced our postretirement benefits and other long-term liabilities by
$4.7 million
and also reduced our accumulated other comprehensive loss by
$0.5 million
.
Due to our significant pension contributions made in 2012, we will not make any cash payments in 2013 to satisfy our regulatory funding requirements. We expect our cash outlay for other postretirement benefit obligations in 2013, net of GM cost sharing, to be approximately
$15 million
.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
We record a liability for estimated warranty obligations at the dates our products are sold. These estimates are established using sales volumes and internal and external warranty data where there is no payment history and historical information about the average cost of warranty claims for customers with prior claims. We adjust the liability as necessary.
The following table provides a reconciliation of changes in the product warranty liability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
22.9
|
|
|
$
|
16.8
|
|
|
$
|
29.1
|
|
|
$
|
13.4
|
|
Accruals
|
|
2.5
|
|
|
10.7
|
|
|
5.7
|
|
|
14.4
|
|
Settlements
|
|
(1.3
|
)
|
|
(0.1
|
)
|
|
(10.5
|
)
|
|
(0.4
|
)
|
Adjustment to prior period accruals, net
|
|
(0.7
|
)
|
|
(2.8
|
)
|
|
(0.9
|
)
|
|
(2.8
|
)
|
Foreign currency translation and other
|
|
(0.2
|
)
|
|
(0.1
|
)
|
|
(0.2
|
)
|
|
(0.1
|
)
|
Ending balance
|
|
$
|
23.2
|
|
|
$
|
24.5
|
|
|
$
|
23.2
|
|
|
$
|
24.5
|
|
9. INCOME TAXES
We are required to adjust our effective tax rate each quarter to estimate our annual effective tax rate. We must also record the tax impact of certain discrete, unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur. In addition, jurisdictions with a projected loss for the year or a year-to-date loss where no tax benefit can be recognized are excluded from the estimated annual effective tax rate. The impact of such an exclusion could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings versus annual projections.
Income tax expense was
$5.4 million
in the
three
months ended
June 30, 2013
as compared to
$1.7 million
in the
three
months ended
June 30, 2012
. Our effective income tax rate was
17.2%
in the
second
quarter of
2013
as compared to
25.9%
in the
second
quarter of
2012
.
Income tax expense was
$3.0 million
in the first
six
months of
2013
as compared to
$3.9 million
in the first
six
months of
2012
. Our effective income tax rate was
8.3%
in the first
six
months of
2013
as compared to
6.6%
in the first
six
months of
2012
.
Our income tax expense and effective tax rate for the three and six months ended June 30, 2013 primarily reflect favorable foreign tax rates, along with our inability to realize a tax benefit for current foreign losses. Additionally, in the first quarter of 2013, we recorded a tax benefit of
$1.5 million
relating to the release of a prior year unrecognized tax benefit due to the expiration of the applicable statute of limitations and a tax benefit of
$3.3 million
relating to an election we made in the first six months of 2013 regarding the treatment of foreign exchange gains and losses in a foreign jurisdiction.
In the three months ended June 30, 2013, we settled a transfer pricing examination of our 2006 income tax return with the Mexican tax authorities. This settlement resulted in a reduction of our liability for unrecognized income tax benefits and a cash payment of
$4.7 million
.
Our income tax expense and effective tax rate for the three and six months ended June 30, 2012 reflect the effect of recognizing a net operating loss benefit against our taxable income in the U.S. and recognizing net tax expense of
$1.3 million
related to the amendment of state income tax returns as a result of the settlement of federal income tax audits for the years 2004 through 2007.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10.
EARNINGS PER SHARE (EPS)
The following table sets forth the computation of our basic and diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
(in millions, except per share data)
|
Numerator
|
|
|
|
|
|
|
|
|
Net income attributable to AAM
|
|
$
|
25.8
|
|
|
$
|
4.7
|
|
|
$
|
33.1
|
|
|
$
|
55.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares outstanding -
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding
|
|
76.8
|
|
|
75.1
|
|
|
76.5
|
|
|
75.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive stock-based compensation
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares outstanding -
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted weighted-average shares after assumed conversions
|
|
76.9
|
|
|
75.1
|
|
|
76.5
|
|
|
75.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
$
|
0.34
|
|
|
$
|
0.06
|
|
|
$
|
0.43
|
|
|
$
|
0.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
$
|
0.34
|
|
|
$
|
0.06
|
|
|
$
|
0.43
|
|
|
$
|
0.74
|
|
Certain exercisable stock options were excluded from the computations of diluted EPS because the exercise price of these options was greater than the average period market prices. The number of stock options outstanding, which were not included in the calculation of diluted EPS, was
2.3 million
at
June 30, 2013
and
3.3 million
at
June 30, 2012
. The range of exercise prices related to the excluded exercisable stock options was
$15.58
-
$40.83
at
June 30, 2013
and
June 30, 2012
.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11.
RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Reclassification adjustments and other activity impacting accumulated other comprehensive income (loss) during the three and six months ended June 30, 2013 are as follows
(in millions)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Plans
|
|
Foreign Currency Translation Adjustments
|
|
Unrecognized Gain on Derivatives
|
|
Total
|
Balance at March 31, 2013
|
$
|
(275.6
|
)
|
|
$
|
12.5
|
|
|
$
|
2.8
|
|
|
(260.3
|
)
|
|
|
|
|
|
|
|
|
Other comprehensive loss before reclassifications
|
(0.8
|
)
|
|
(21.7
|
)
|
|
(1.2
|
)
|
|
(23.7
|
)
|
|
|
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive income (loss) (Loss (gain) recorded in cost of goods sold)
|
2.5
|
|
|
—
|
|
|
(0.9
|
)
|
|
1.6
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income (loss)
|
1.7
|
|
|
(21.7
|
)
|
|
(2.1
|
)
|
|
(22.1
|
)
|
|
|
|
|
|
|
|
|
Balance at June 30, 2013
|
$
|
(273.9
|
)
|
|
$
|
(9.2
|
)
|
|
$
|
0.7
|
|
|
$
|
(282.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Plans
|
|
Foreign Currency Translation Adjustments
|
|
Unrecognized Gain on Derivatives
|
|
Total
|
Balance at December 31, 2012
|
$
|
(274.5
|
)
|
|
$
|
7.6
|
|
|
$
|
2.3
|
|
|
$
|
(264.6
|
)
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications
|
(4.4
|
)
|
|
(16.8
|
)
|
|
0.5
|
|
|
(20.7
|
)
|
|
|
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive income (loss) (Loss (gain) recorded in cost of goods sold)
|
5.0
|
|
|
—
|
|
|
(2.1
|
)
|
|
2.9
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income (loss)
|
0.6
|
|
|
(16.8
|
)
|
|
(1.6
|
)
|
|
(17.8
|
)
|
|
|
|
|
|
|
|
|
Balance at June 30, 2013
|
$
|
(273.9
|
)
|
|
$
|
(9.2
|
)
|
|
$
|
0.7
|
|
|
$
|
(282.4
|
)
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Holdings has no significant assets other than its 100% ownership in AAM, Inc. and no direct subsidiaries other than AAM, Inc. The 9.25% Notes are senior secured obligations of AAM Inc. and the 7.75% Notes, 6.625% Notes and 6.25% Notes are senior unsecured obligations of AAM Inc.; all of which are fully and unconditionally and joint and severally, guaranteed by Holdings and substantially all domestic subsidiaries of AAM, Inc.
These Condensed Consolidating Financial Statements are prepared under the equity method of accounting whereby the investments in subsidiaries are recorded at cost and adjusted for the parent’s share of the subsidiaries’ cumulative results of operations, capital contributions and distributions, and other equity changes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Income
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
AAM Inc.
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Elims
|
|
Consolidated
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
$
|
—
|
|
|
$
|
211.3
|
|
|
$
|
58.8
|
|
|
$
|
529.5
|
|
|
$
|
—
|
|
|
$
|
799.6
|
|
Intercompany
|
|
—
|
|
|
4.6
|
|
|
56.3
|
|
|
2.4
|
|
|
(63.3
|
)
|
|
—
|
|
Total net sales
|
|
—
|
|
|
215.9
|
|
|
115.1
|
|
|
531.9
|
|
|
(63.3
|
)
|
|
799.6
|
|
Cost of goods sold
|
|
—
|
|
|
197.7
|
|
|
98.9
|
|
|
444.1
|
|
|
(63.3
|
)
|
|
677.4
|
|
Gross profit
|
|
—
|
|
|
18.2
|
|
|
16.2
|
|
|
87.8
|
|
|
—
|
|
|
122.2
|
|
Selling, general and administrative expenses
|
|
—
|
|
|
52.3
|
|
|
—
|
|
|
8.2
|
|
|
—
|
|
|
60.5
|
|
Operating income (loss)
|
|
—
|
|
|
(34.1
|
)
|
|
16.2
|
|
|
79.6
|
|
|
—
|
|
|
61.7
|
|
Non-operating income (expense), net
|
|
—
|
|
|
(29.3
|
)
|
|
2.7
|
|
|
(3.9
|
)
|
|
—
|
|
|
(30.5
|
)
|
Income (loss) before income taxes
|
|
—
|
|
|
(63.4
|
)
|
|
18.9
|
|
|
75.7
|
|
|
—
|
|
|
31.2
|
|
Income tax expense (benefit)
|
|
—
|
|
|
(12.3
|
)
|
|
—
|
|
|
17.7
|
|
|
—
|
|
|
5.4
|
|
Earnings (loss) from equity in subsidiaries
|
|
25.8
|
|
|
24.5
|
|
|
(9.7
|
)
|
|
—
|
|
|
(40.6
|
)
|
|
—
|
|
Net income (loss) before royalties and dividends
|
|
25.8
|
|
|
(26.6
|
)
|
|
9.2
|
|
|
58.0
|
|
|
(40.6
|
)
|
|
25.8
|
|
Royalties and dividends
|
|
—
|
|
|
52.4
|
|
|
—
|
|
|
(52.4
|
)
|
|
—
|
|
|
—
|
|
Net income after royalties and dividends
|
|
25.8
|
|
|
25.8
|
|
|
9.2
|
|
|
5.6
|
|
|
(40.6
|
)
|
|
25.8
|
|
Net loss attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income attributable to AAM
|
|
$
|
25.8
|
|
|
$
|
25.8
|
|
|
$
|
9.2
|
|
|
$
|
5.6
|
|
|
$
|
(40.6
|
)
|
|
$
|
25.8
|
|
Other comprehensive loss
|
|
(22.1
|
)
|
|
(22.1
|
)
|
|
(21.3
|
)
|
|
(24.4
|
)
|
|
67.8
|
|
|
(22.1
|
)
|
Comprehensive income (loss) attributable to AAM
|
|
$
|
3.7
|
|
|
$
|
3.7
|
|
|
$
|
(12.1
|
)
|
|
$
|
(18.8
|
)
|
|
$
|
27.2
|
|
|
$
|
3.7
|
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
AAM Inc.
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Elims
|
|
Consolidated
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
$
|
—
|
|
|
$
|
182.1
|
|
|
$
|
54.8
|
|
|
$
|
502.9
|
|
|
$
|
—
|
|
|
$
|
739.8
|
|
Intercompany
|
|
—
|
|
|
3.8
|
|
|
59.4
|
|
|
6.4
|
|
|
(69.6
|
)
|
|
—
|
|
Total net sales
|
|
—
|
|
|
185.9
|
|
|
114.2
|
|
|
509.3
|
|
|
(69.6
|
)
|
|
739.8
|
|
Cost of goods sold
|
|
—
|
|
|
206.4
|
|
|
100.7
|
|
|
416.5
|
|
|
(69.6
|
)
|
|
654.0
|
|
Gross profit (loss)
|
|
—
|
|
|
(20.5
|
)
|
|
13.5
|
|
|
92.8
|
|
|
—
|
|
|
85.8
|
|
Selling, general and administrative expenses
|
|
—
|
|
|
46.5
|
|
|
—
|
|
|
9.0
|
|
|
—
|
|
|
55.5
|
|
Operating income (loss)
|
|
—
|
|
|
(67.0
|
)
|
|
13.5
|
|
|
83.8
|
|
|
—
|
|
|
30.3
|
|
Non-operating income (expense), net
|
|
—
|
|
|
(24.5
|
)
|
|
0.4
|
|
|
0.2
|
|
|
—
|
|
|
(23.9
|
)
|
Income (loss) before income taxes
|
|
—
|
|
|
(91.5
|
)
|
|
13.9
|
|
|
84.0
|
|
|
—
|
|
|
6.4
|
|
Income tax expense
|
|
—
|
|
|
1.2
|
|
|
—
|
|
|
0.5
|
|
|
—
|
|
|
1.7
|
|
Earnings (loss) from equity in subsidiaries
|
|
4.7
|
|
|
52.0
|
|
|
(12.7
|
)
|
|
—
|
|
|
(44.0
|
)
|
|
—
|
|
Net income (loss) before royalties and dividends
|
|
4.7
|
|
|
(40.7
|
)
|
|
1.2
|
|
|
83.5
|
|
|
(44.0
|
)
|
|
4.7
|
|
Royalties and dividends
|
|
—
|
|
|
45.4
|
|
|
—
|
|
|
(45.4
|
)
|
|
—
|
|
|
—
|
|
Net income after royalties and dividends
|
|
4.7
|
|
|
4.7
|
|
|
1.2
|
|
|
38.1
|
|
|
(44.0
|
)
|
|
4.7
|
|
Net loss attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income attributable to AAM
|
|
$
|
4.7
|
|
|
$
|
4.7
|
|
|
$
|
1.2
|
|
|
$
|
38.1
|
|
|
$
|
(44.0
|
)
|
|
$
|
4.7
|
|
Other comprehensive loss
|
|
(23.2
|
)
|
|
(23.2
|
)
|
|
(21.4
|
)
|
|
(21.8
|
)
|
|
66.4
|
|
|
(23.2
|
)
|
Comprehensive income (loss) attributable to AAM
|
|
$
|
(18.5
|
)
|
|
$
|
(18.5
|
)
|
|
$
|
(20.2
|
)
|
|
$
|
16.3
|
|
|
$
|
22.4
|
|
|
$
|
(18.5
|
)
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Income
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
AAM Inc.
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Elims
|
|
Consolidated
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
$
|
—
|
|
|
$
|
411.6
|
|
|
$
|
112.7
|
|
|
$
|
1,030.9
|
|
|
$
|
—
|
|
|
$
|
1,555.2
|
|
Intercompany
|
|
—
|
|
|
8.0
|
|
|
113.9
|
|
|
7.3
|
|
|
(129.2
|
)
|
|
—
|
|
Total net sales
|
|
—
|
|
|
419.6
|
|
|
226.6
|
|
|
1,038.2
|
|
|
(129.2
|
)
|
|
1,555.2
|
|
Cost of goods sold
|
|
—
|
|
|
396.2
|
|
|
196.1
|
|
|
865.6
|
|
|
(129.2
|
)
|
|
1,328.7
|
|
Gross profit
|
|
—
|
|
|
23.4
|
|
|
30.5
|
|
|
172.6
|
|
|
—
|
|
|
226.5
|
|
Selling, general and administrative expenses
|
|
—
|
|
|
101.2
|
|
|
—
|
|
|
18.9
|
|
|
—
|
|
|
120.1
|
|
Operating income (loss)
|
|
—
|
|
|
(77.8
|
)
|
|
30.5
|
|
|
153.7
|
|
|
—
|
|
|
106.4
|
|
Non-operating income (expense), net
|
|
—
|
|
|
(70.8
|
)
|
|
5.4
|
|
|
(4.9
|
)
|
|
—
|
|
|
(70.3
|
)
|
Income (loss) before income taxes
|
|
—
|
|
|
(148.6
|
)
|
|
35.9
|
|
|
148.8
|
|
|
—
|
|
|
36.1
|
|
Income tax expense (benefit)
|
|
—
|
|
|
(13.9
|
)
|
|
—
|
|
|
16.9
|
|
|
—
|
|
|
3.0
|
|
Earnings (loss) from equity in subsidiaries
|
|
33.1
|
|
|
64.9
|
|
|
(12.9
|
)
|
|
—
|
|
|
(85.1
|
)
|
|
—
|
|
Net income (loss) before royalties and dividends
|
|
33.1
|
|
|
(69.8
|
)
|
|
23.0
|
|
|
131.9
|
|
|
(85.1
|
)
|
|
33.1
|
|
Royalties and dividends
|
|
—
|
|
|
102.9
|
|
|
—
|
|
|
(102.9
|
)
|
|
—
|
|
|
—
|
|
Net income after royalties and dividends
|
|
33.1
|
|
|
33.1
|
|
|
23.0
|
|
|
29.0
|
|
|
(85.1
|
)
|
|
33.1
|
|
Net loss attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income attributable to AAM
|
|
$
|
33.1
|
|
|
$
|
33.1
|
|
|
$
|
23.0
|
|
|
$
|
29.0
|
|
|
$
|
(85.1
|
)
|
|
$
|
33.1
|
|
Other comprehensive loss
|
|
(17.8
|
)
|
|
(17.8
|
)
|
|
(13.6
|
)
|
|
(16.1
|
)
|
|
47.5
|
|
|
(17.8
|
)
|
Comprehensive income attributable to AAM
|
|
$
|
15.3
|
|
|
$
|
15.3
|
|
|
$
|
9.4
|
|
|
$
|
12.9
|
|
|
$
|
(37.6
|
)
|
|
$
|
15.3
|
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
AAM Inc.
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Elims
|
|
Consolidated
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
$
|
—
|
|
|
$
|
380.4
|
|
|
$
|
109.3
|
|
|
$
|
1,001.6
|
|
|
$
|
—
|
|
|
$
|
1,491.3
|
|
Intercompany
|
|
—
|
|
|
11.4
|
|
|
120.1
|
|
|
12.2
|
|
|
(143.7
|
)
|
|
—
|
|
Total net sales
|
|
—
|
|
|
391.8
|
|
|
229.4
|
|
|
1,013.8
|
|
|
(143.7
|
)
|
|
1,491.3
|
|
Cost of goods sold
|
|
—
|
|
|
380.4
|
|
|
200.6
|
|
|
829.0
|
|
|
(143.7
|
)
|
|
1,266.3
|
|
Gross profit
|
|
—
|
|
|
11.4
|
|
|
28.8
|
|
|
184.8
|
|
|
—
|
|
|
225.0
|
|
Selling, general and administrative expenses
|
|
—
|
|
|
98.2
|
|
|
—
|
|
|
19.1
|
|
|
—
|
|
|
117.3
|
|
Operating income (loss)
|
|
—
|
|
|
(86.8
|
)
|
|
28.8
|
|
|
165.7
|
|
|
—
|
|
|
107.7
|
|
Non-operating income (expense), net
|
|
—
|
|
|
(48.8
|
)
|
|
1.2
|
|
|
(1.2
|
)
|
|
—
|
|
|
(48.8
|
)
|
Income (loss) before income taxes
|
|
—
|
|
|
(135.6
|
)
|
|
30.0
|
|
|
164.5
|
|
|
—
|
|
|
58.9
|
|
Income tax expense
|
|
—
|
|
|
0.3
|
|
|
—
|
|
|
3.6
|
|
|
—
|
|
|
3.9
|
|
Earnings (loss) from equity in subsidiaries
|
|
55.9
|
|
|
99.3
|
|
|
(26.2
|
)
|
|
—
|
|
|
(129.0
|
)
|
|
—
|
|
Net income (loss) before royalties and dividends
|
|
55.9
|
|
|
(36.6
|
)
|
|
3.8
|
|
|
160.9
|
|
|
(129.0
|
)
|
|
55.0
|
|
Royalties and dividends
|
|
—
|
|
|
92.5
|
|
|
—
|
|
|
(92.5
|
)
|
|
—
|
|
|
—
|
|
Net income after royalties and dividends
|
|
55.9
|
|
|
55.9
|
|
|
3.8
|
|
|
68.4
|
|
|
(129.0
|
)
|
|
55.0
|
|
Net loss attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
|
—
|
|
|
0.9
|
|
Net income attributable to AAM
|
|
$
|
55.9
|
|
|
$
|
55.9
|
|
|
$
|
3.8
|
|
|
$
|
69.3
|
|
|
$
|
(129.0
|
)
|
|
$
|
55.9
|
|
Other comprehensive loss
|
|
(20.9
|
)
|
|
(20.9
|
)
|
|
(11.3
|
)
|
|
(6.8
|
)
|
|
39.0
|
|
|
(20.9
|
)
|
Foreign currency translation adjustments attributable to noncontrolling interests
|
|
0.2
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
(0.4
|
)
|
|
0.2
|
|
Comprehensive income (loss) attributable to AAM
|
|
$
|
34.8
|
|
|
$
|
34.8
|
|
|
$
|
(7.5
|
)
|
|
$
|
62.3
|
|
|
$
|
(89.6
|
)
|
|
$
|
34.8
|
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
AAM Inc.
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Elims
|
|
Consolidated
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
—
|
|
|
$
|
2.7
|
|
|
$
|
—
|
|
|
$
|
76.2
|
|
|
$
|
—
|
|
|
$
|
78.9
|
|
Accounts receivable, net
|
|
—
|
|
|
122.9
|
|
|
33.5
|
|
|
403.1
|
|
|
—
|
|
|
559.5
|
|
Inventories, net
|
|
—
|
|
|
46.6
|
|
|
31.7
|
|
|
154.9
|
|
|
—
|
|
|
233.2
|
|
Other current assets
|
|
—
|
|
|
44.2
|
|
|
3.5
|
|
|
72.9
|
|
|
—
|
|
|
120.6
|
|
Total current assets
|
|
—
|
|
|
216.4
|
|
|
68.7
|
|
|
707.1
|
|
|
—
|
|
|
992.2
|
|
Property, plant and equipment, net
|
|
—
|
|
|
253.4
|
|
|
81.3
|
|
|
702.1
|
|
|
—
|
|
|
1,036.8
|
|
Goodwill
|
|
—
|
|
|
—
|
|
|
147.8
|
|
|
8.4
|
|
|
—
|
|
|
156.2
|
|
Other assets and deferred charges
|
|
—
|
|
|
696.6
|
|
|
43.9
|
|
|
83.0
|
|
|
—
|
|
|
823.5
|
|
Investment in subsidiaries
|
|
222.2
|
|
|
1,142.0
|
|
|
—
|
|
|
—
|
|
|
(1,364.2
|
)
|
|
—
|
|
Total assets
|
|
$
|
222.2
|
|
|
$
|
2,308.4
|
|
|
$
|
341.7
|
|
|
$
|
1,500.6
|
|
|
$
|
(1,364.2
|
)
|
|
$
|
3,008.7
|
|
Liabilities and stockholders’ equity (deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
—
|
|
|
$
|
113.4
|
|
|
$
|
44.4
|
|
|
$
|
292.9
|
|
|
$
|
—
|
|
|
$
|
450.7
|
|
Other current liabilities
|
|
—
|
|
|
115.2
|
|
|
4.4
|
|
|
76.7
|
|
|
—
|
|
|
196.3
|
|
Total current liabilities
|
|
—
|
|
|
228.6
|
|
|
48.8
|
|
|
369.6
|
|
|
—
|
|
|
647.0
|
|
Intercompany payable (receivable)
|
|
323.8
|
|
|
(470.9
|
)
|
|
(201.9
|
)
|
|
349.0
|
|
|
—
|
|
|
—
|
|
Long-term debt
|
|
—
|
|
|
1,487.8
|
|
|
5.5
|
|
|
53.2
|
|
|
—
|
|
|
1,546.5
|
|
Investment in subsidiaries obligation
|
|
—
|
|
|
—
|
|
|
12.8
|
|
|
—
|
|
|
(12.8
|
)
|
|
—
|
|
Other long-term liabilities
|
|
—
|
|
|
840.7
|
|
|
1.3
|
|
|
74.8
|
|
|
—
|
|
|
916.8
|
|
Total liabilities
|
|
323.8
|
|
|
2,086.2
|
|
|
(133.5
|
)
|
|
846.6
|
|
|
(12.8
|
)
|
|
3,110.3
|
|
Total AAM Stockholders’ equity (deficit)
|
|
(101.6
|
)
|
|
222.2
|
|
|
475.2
|
|
|
654.0
|
|
|
(1,351.4
|
)
|
|
(101.6
|
)
|
Noncontrolling interests in subsidiaries
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total stockholders’ equity (deficit)
|
|
(101.6
|
)
|
|
222.2
|
|
|
475.2
|
|
|
654.0
|
|
|
(1,351.4
|
)
|
|
(101.6
|
)
|
Total liabilities and stockholders’ equity (deficit)
|
|
$
|
222.2
|
|
|
$
|
2,308.4
|
|
|
$
|
341.7
|
|
|
$
|
1,500.6
|
|
|
$
|
(1,364.2
|
)
|
|
$
|
3,008.7
|
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
AAM Inc.
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Elims
|
|
Consolidated
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
—
|
|
|
$
|
10.6
|
|
|
$
|
—
|
|
|
$
|
51.8
|
|
|
$
|
—
|
|
|
$
|
62.4
|
|
Accounts receivable, net
|
|
—
|
|
|
94.4
|
|
|
25.3
|
|
|
343.7
|
|
|
—
|
|
|
463.4
|
|
Inventories, net
|
|
—
|
|
|
48.7
|
|
|
31.6
|
|
|
144.0
|
|
|
—
|
|
|
224.3
|
|
Other current assets
|
|
—
|
|
|
48.8
|
|
|
3.5
|
|
|
69.7
|
|
|
—
|
|
|
122.0
|
|
Total current assets
|
|
—
|
|
|
202.5
|
|
|
60.4
|
|
|
609.2
|
|
|
—
|
|
|
872.1
|
|
Property, plant and equipment, net
|
|
—
|
|
|
250.4
|
|
|
84.2
|
|
|
675.1
|
|
|
—
|
|
|
1,009.7
|
|
Goodwill
|
|
—
|
|
|
—
|
|
|
147.8
|
|
|
8.6
|
|
|
—
|
|
|
156.4
|
|
Other assets and deferred charges
|
|
—
|
|
|
706.1
|
|
|
40.0
|
|
|
81.7
|
|
|
—
|
|
|
827.8
|
|
Investment in subsidiaries
|
|
202.9
|
|
|
1,094.6
|
|
|
—
|
|
|
—
|
|
|
(1,297.5
|
)
|
|
—
|
|
Total assets
|
|
$
|
202.9
|
|
|
$
|
2,253.6
|
|
|
$
|
332.4
|
|
|
$
|
1,374.6
|
|
|
$
|
(1,297.5
|
)
|
|
$
|
2,866.0
|
|
Liabilities and stockholders’ equity (deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
—
|
|
|
$
|
91.4
|
|
|
$
|
37.3
|
|
|
$
|
267.4
|
|
|
$
|
—
|
|
|
$
|
396.1
|
|
Other current liabilities
|
|
—
|
|
|
124.5
|
|
|
3.8
|
|
|
76.4
|
|
|
—
|
|
|
204.7
|
|
Total current liabilities
|
|
—
|
|
|
215.9
|
|
|
41.1
|
|
|
343.8
|
|
|
—
|
|
|
600.8
|
|
Intercompany payable (receivable)
|
|
323.7
|
|
|
(420.6
|
)
|
|
(188.7
|
)
|
|
285.6
|
|
|
—
|
|
|
—
|
|
Long-term debt
|
|
—
|
|
|
1,387.5
|
|
|
5.6
|
|
|
61.0
|
|
|
—
|
|
|
1,454.1
|
|
Investment in subsidiaries obligation
|
|
—
|
|
|
—
|
|
|
7.6
|
|
|
—
|
|
|
(7.6
|
)
|
|
—
|
|
Other long-term liabilities
|
|
—
|
|
|
867.9
|
|
|
1.2
|
|
|
62.8
|
|
|
—
|
|
|
931.9
|
|
Total liabilities
|
|
323.7
|
|
|
2,050.7
|
|
|
(133.2
|
)
|
|
753.2
|
|
|
(7.6
|
)
|
|
2,986.8
|
|
Total AAM Stockholders’ equity (deficit)
|
|
(120.8
|
)
|
|
202.9
|
|
|
465.6
|
|
|
621.4
|
|
|
(1,289.9
|
)
|
|
(120.8
|
)
|
Noncontrolling interests in subsidiaries
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total stockholders’ equity (deficit)
|
|
(120.8
|
)
|
|
202.9
|
|
|
465.6
|
|
|
621.4
|
|
|
(1,289.9
|
)
|
|
(120.8
|
)
|
Total liabilities and stockholders’ equity (deficit)
|
|
$
|
202.9
|
|
|
$
|
2,253.6
|
|
|
$
|
332.4
|
|
|
$
|
1,374.6
|
|
|
$
|
(1,297.5
|
)
|
|
$
|
2,866.0
|
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
AAM Inc.
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Elims
|
|
Consolidated
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
—
|
|
|
$
|
(35.0
|
)
|
|
$
|
38.3
|
|
|
$
|
29.9
|
|
|
$
|
—
|
|
|
$
|
33.2
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
—
|
|
|
(35.2
|
)
|
|
(4.2
|
)
|
|
(82.1
|
)
|
|
—
|
|
|
(121.5
|
)
|
Proceeds from sale of equipment
|
|
—
|
|
|
4.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.9
|
|
Proceeds from sale-leaseback of equipment
|
|
—
|
|
|
16.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16.0
|
|
Net cash used in investing activities
|
|
—
|
|
|
(14.3
|
)
|
|
(4.2
|
)
|
|
(82.1
|
)
|
|
—
|
|
|
(100.6
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net debt activity
|
|
—
|
|
|
98.0
|
|
|
(0.2
|
)
|
|
(7.1
|
)
|
|
—
|
|
|
90.7
|
|
Intercompany activity
|
|
0.1
|
|
|
(50.8
|
)
|
|
(33.9
|
)
|
|
84.6
|
|
|
—
|
|
|
—
|
|
Debt issuance costs
|
|
—
|
|
|
(6.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6.6
|
)
|
Employee stock option exercises
|
|
—
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
Purchase of treasury stock
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
Net cash provided by (used in) financing activities
|
|
—
|
|
|
41.4
|
|
|
(34.1
|
)
|
|
77.5
|
|
|
—
|
|
|
84.8
|
|
Effect of exchange rate changes on cash
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.9
|
)
|
|
—
|
|
|
(0.9
|
)
|
Net increase (decrease) in cash and cash equivalents
|
|
—
|
|
|
(7.9
|
)
|
|
—
|
|
|
24.4
|
|
|
—
|
|
|
16.5
|
|
Cash and cash equivalents at beginning of period
|
|
—
|
|
|
10.6
|
|
|
—
|
|
|
51.8
|
|
|
—
|
|
|
62.4
|
|
Cash and cash equivalents at end of period
|
|
$
|
—
|
|
|
$
|
2.7
|
|
|
$
|
—
|
|
|
$
|
76.2
|
|
|
$
|
—
|
|
|
$
|
78.9
|
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
AAM Inc.
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Elims
|
|
Consolidated
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
—
|
|
|
$
|
(51.9
|
)
|
|
$
|
32.4
|
|
|
$
|
44.1
|
|
|
$
|
—
|
|
|
$
|
24.6
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
—
|
|
|
(25.2
|
)
|
|
(4.2
|
)
|
|
(63.5
|
)
|
|
—
|
|
|
(92.9
|
)
|
Proceeds from sale of equipment
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
|
1.2
|
|
Net cash used in investing activities
|
|
—
|
|
|
(24.8
|
)
|
|
(4.2
|
)
|
|
(62.7
|
)
|
|
—
|
|
|
(91.7
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net debt activity
|
|
—
|
|
|
(1.7
|
)
|
|
(0.1
|
)
|
|
(5.5
|
)
|
|
—
|
|
|
(7.3
|
)
|
Intercompany activity
|
|
5.9
|
|
|
17.0
|
|
|
(28.1
|
)
|
|
5.2
|
|
|
—
|
|
|
—
|
|
Purchase of noncontrolling interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4.0
|
)
|
|
—
|
|
|
(4.0
|
)
|
Employee stock option exercises
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
Purchase of treasury stock
|
|
(5.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.9
|
)
|
Net cash provided by (used in) financing activities
|
|
—
|
|
|
15.4
|
|
|
(28.2
|
)
|
|
(4.3
|
)
|
|
—
|
|
|
(17.1
|
)
|
Effect of exchange rate changes on cash
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
Net decrease in cash and cash equivalents
|
|
—
|
|
|
(61.3
|
)
|
|
—
|
|
|
(22.7
|
)
|
|
—
|
|
|
(84.0
|
)
|
Cash and cash equivalents at beginning of period
|
|
—
|
|
|
83.7
|
|
|
—
|
|
|
85.5
|
|
|
—
|
|
|
169.2
|
|
Cash and cash equivalents at end of period
|
|
$
|
—
|
|
|
$
|
22.4
|
|
|
$
|
—
|
|
|
$
|
62.8
|
|
|
$
|
—
|
|
|
$
|
85.2
|
|
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
This management’s discussion and analysis (MD&A) should be read in conjunction with the unaudited condensed consolidated financial statements and notes appearing elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the year ended
December 31, 2012
.
Unless the context otherwise requires, references to "we," "our," "us" or "AAM" shall mean collectively (i) American Axle & Manufacturing Holdings, Inc. (Holdings), a Delaware corporation, and (ii) American Axle & Manufacturing, Inc. (AAM, Inc.), a Delaware corporation, and its direct and indirect subsidiaries. Holdings has no subsidiaries other than AAM, Inc.
COMPANY OVERVIEW
We are a Tier I supplier to the automotive industry. We manufacture, engineer, design and validate driveline and drivetrain systems and related components and chassis modules for light trucks, sport utility vehicles (SUVs), passenger cars, crossover vehicles and commercial vehicles. Driveline and drivetrain systems include components that transfer power from the transmission and deliver it to the drive wheels. Our driveline, drivetrain and related products include axles, chassis modules, driveshafts, power transfer units, transfer cases, chassis and steering components, driveheads, transmission parts and metal-formed products. In addition to locations in the United States (U.S.) (Michigan, Ohio, Indiana and Pennsylvania), we also have offices or facilities in Brazil, China, Germany, India, Japan, Luxembourg, Mexico, Poland, Scotland, South Korea, Sweden and Thailand.
We are the principal supplier of driveline components to General Motors Company (GM) for its rear-wheel drive (RWD) light trucks and SUVs manufactured in North America, supplying substantially all of GM’s rear axle and front four-wheel drive and all-wheel drive (4WD/AWD) axle requirements for these vehicle platforms. Sales to GM were approximately
74%
of our total net sales in the first
six
months of
2013
and both the first
six
months and the full year
2012
.
We are the sole-source supplier to GM for certain axles and other driveline products for the life of each GM vehicle program covered by a Lifetime Program Contract (LPC). Substantially all of our sales to GM are made pursuant to the LPCs. The LPCs have terms equal to the lives of the relevant vehicle programs or their respective derivatives, which typically run 5 to 7 years, and require us to remain competitive with respect to technology, design and quality.
We are also the principal supplier of driveline system products for the Chrysler Group LLC’s (Chrysler) heavy-duty Ram full-size pickup trucks and its derivatives. Sales to Chrysler were approximately
8%
of our total net sales in the first
six
months of
2013
as compared to 9% for the first six months of
2012
and 10% for the full-year
2012
. In addition to GM and Chrysler, we supply driveline systems and other related components to Volkswagen AG, Audi AG, Scania AB, Mack Trucks Inc., PACCAR Inc., Nissan Motor Co. Ltd., Harley-Davidson Inc., Tata Motors, Ford Motor Company, Beijing Benz Automotive Co., Ltd., Deere & Company and other original equipment manufacturers (OEMs) and Tier I supplier companies such as Jatco Ltd. and Hino Motors Ltd. Our net sales to customers other than GM increased to
$411.9 million
in the first
six
months of
2013
as compared to
$391.8 million
in the first
six
months of
2012
.
RESULTS OF OPERATIONS –– THREE MONTHS ENDED
JUNE 30, 2013
AS COMPARED TO THREE MONTHS ENDED
JUNE 30, 2012
Net Sales
Net sales increased to
$799.6 million
in the
second
quarter of
2013
as compared to
$739.8 million
in the
second
quarter of
2012
. This 8% increase in sales reflects an increase in global launch activity, additional content on GM and Chrysler's next generation full-size truck programs and a 13% increase in non-GM sales.
Our content-per-vehicle (as measured by the dollar value of our products supporting our customers' North American light truck and SUV programs) increased to
$1,554
in the
second
quarter of
2013
as compared to
$1,439
in the
second
quarter of
2012
. Our 4WD/AWD penetration rate on these vehicle programs increased to
65.7%
in the
second
quarter of
2013
as compared to
61.1%
in the
second
quarter of
2012
.
Gross Profit
Gross profit increased to
$122.2 million
in the
second
quarter of
2013
as compared to
$85.8 million
in the
second
quarter of
2012
. Gross margin increased to
15.3%
in the
second
quarter of
2013
as compared to
11.6%
in the
second
quarter of
2012
.
The increase in gross profit in the second quarter of 2013, as compared to the second quarter of 2012 is primarily due to an increase in contribution margin on higher sales, which was partially offset by increased launch preparation costs. Gross profit in the second quarter of 2012 reflected the adverse impact of $36.3 million of special charges and other restructuring costs related to the closure of our Detroit Manufacturing Complex (DMC) and Cheektowaga Manufacturing Facility (CKMF). These special charges included $28.1 million of expense related to a claim made by the International UAW for pension and postretirement benefits. Gross profit and gross margin in the second quarter of 2012 also reflected the impact of increased freight and material cost and higher warranty accruals, which was partially offset by a $5.2 million settlement gain related to the termination of our UAW Legal Services Plan.
Selling, General and Administrative Expenses (SG&A)
SG&A (including research and development (R&D)) was
$60.5 million
or
7.6%
of net sales in the
second
quarter of
2013
as compared to
$55.5 million
or
7.5%
of net sales in the
second
quarter of
2012
. R&D was
$27.3 million
in the
second
quarter of
2013
as compared to
$28.8 million
in the
second
quarter of
2012
. The change in SG&A in the
second
quarter of
2013
primarily reflects increased incentive compensation accruals and stock-based compensation expense.
Operating Income
Operating income increased to
$61.7 million
in the
second
quarter of
2013
as compared to
$30.3 million
in the
second
quarter of
2012
. Operating margin increased to
7.7%
in the
second
quarter of
2013
as compared to
4.1%
in the
second
quarter of
2012
. The changes in operating income and operating margin were due to factors discussed in Gross Profit and SG&A above.
Interest Expense and Investment Income
Interest expense was
$28.8 million
in the
second
quarter of
2013
as compared to
$23.4 million
in the
second
quarter of
2012
. The increase in interest expense reflects higher average outstanding borrowings in the second quarter of 2013 as compared to the second quarter of 2012. Investment income was
$0.2 million
in the
second
quarter of
2013
as compared to
$0.1 million
in the
second
quarter of
2012
.
The weighted-average interest rate of our long-term debt outstanding was
7.4%
in the
second
quarter of
2013
and 7.9% in the second quarter of 2012.
Other Expense
Following are the components of other expense for the
second
quarter of
2013
and
2012
:
Other expense, net
Other expense, net, which includes foreign exchange gains and losses and the net effect of our proportionate share of earnings from equity in unconsolidated subsidiaries, was
$2.0 million
in the
second
quarter of
2013
and $0.6 million in the second quarter of
2012
.
Income Tax Expense
Income tax expense was
$5.4 million
in the
second
quarter of
2013
as compared to
$1.7 million
in the
second
quarter of
2012
. Our effective income tax rate was
17.2%
in the
second
quarter of
2013
as compared to
25.9%
in the
second
quarter of
2012
.
Our income tax expense and effective tax rate for the second quarter of 2013 primarily reflect favorable foreign tax rates, along with our inability to realize a tax benefit for current foreign losses. Our income tax expense and effective tax rate for the second quarter of 2012 reflect the effect of recognizing a net operating loss benefit against our taxable income in the U.S. Our income tax expense for the second quarter of 2012 also reflects a net tax expense of $1.3 million related to the amendment of state income tax returns as a result of the settlement of federal income tax audits for the tax years 2004 through 2007.
Net Income Attributable to AAM and Earnings Per Share (EPS)
Net income attributable to AAM increased to
$25.8 million
in the
second
quarter of
2013
as compared to
$4.7 million
in the
second
quarter of
2012
. Diluted EPS increased to
$0.34
in the
second
quarter of
2013
as compared to
$0.06
in the
second
quarter of
2012
. Net income attributable to AAM and EPS for the
second
quarters of
2013
and
2012
were primarily impacted by the factors discussed in Net Sales, Gross Profit and SG&A above.
RESULTS OF OPERATIONS ––
SIX
MONTHS ENDED
JUNE 30, 2013
AS COMPARED TO
SIX
MONTHS ENDED
JUNE 30, 2012
Net Sales
Net sales increased to
$1,555.2 million
in the first
six
months of
2013
as compared to
$1,491.3 million
in the first
six
months of
2012
. As compared to the first
six
months of
2012
, our increase in sales in the first
six
months of
2013
reflect an increase in global launch activity and additional content on GM and Chrysler's next generation full-size truck programs, which was partially offset by a reduction in deferred revenue recognition related to the 2008 AAM - GM Agreement. Sales in the first quarter of 2013 also reflect the adverse impact of the labor strike at General Motors' Rayong factory in Thailand, which we estimate to be approximately $12.5 million.
Our content-per-vehicle (as measured by the dollar value of our products supporting our customers' North American light truck and SUV programs) increased by 5% to
$1,529
in the first
six
months of
2013
as compared to $1,457 in the first
six
months of
2012
. Our 4WD/AWD penetration rate increased to
66.4%
in the first
six
months of
2013
as compared to
62.9%
in the first
six
months of
2012
.
Gross Profit
Gross profit increased to
$226.5 million
in the first
six
months of
2013
as compared to
$225.0 million
in the first
six
months of
2012
. Gross margin was
14.6%
in the first
six
months of
2013
as compared to
15.1%
in the first
six
months of
2012
.
The increase in gross profit in the first
six
months of
2013
as compared to the first
six
months of
2012
primarily reflects an increase in contribution margin on higher sales, which was partially offset by increased launch preparation costs. Gross profit in the first six months of 2012 reflected the adverse impact of special charges of $28.1 million of expense for a contingency related to a claim made by the International UAW for pension and postretirement benefits, $24.2 million of expense primarily related to asset redeployment and other restructuring costs associated with the closure of DMC and CKMF and a $21.8 million OPEB curtailment gain recorded as a result of the DMC and CKMF hourly associates who have terminated employment from AAM as a result of our plant closures. Gross profit and gross margin in the first six months of 2012 also reflected the impact of increased freight and material cost and higher warranty accruals, which was partially offset by a $5.2 million settlement gain related to the termination of our UAW Legal Services Plan.
Selling, General and Administrative Expenses (SG&A)
SG&A (including research and development (R&D)) was
$120.1 million
or
7.7%
of net sales in the first
six
months of
2013
as compared to
$117.3 million
or
7.9%
of net sales in the first
six
months of
2012
. R&D was
$55.8 million
in the first
six
months of
2013
as compared to
$58.9 million
in the first
six
months of
2012
. The increase in SG&A in the first
six
months of
2013
primarily reflects increased incentive compensation accruals and stock-based compensation expense, which was partially offset by lower R&D spending.
Operating Income
Operating income was
$106.4 million
in the first
six
months of
2013
as compared to
$107.7 million
in the first
six
months of
2012
. Operating margin was
6.8%
in the first
six
months of
2013
as compared to
7.2%
in the first
six
months of
2012
. The changes in operating income and operating margin were due to factors discussed in Gross Profit and SG&A above.
Interest Expense and Investment Income
Interest expense was
$57.9 million
in the first
six
months of
2013
as compared to
$47.4 million
in the first
six
months of
2012
. The increase in interest expense reflects higher average outstanding borrowings in the first six months of 2013 as compared to the first six months of 2012. Investment income was
$0.3 million
in the first
six
months of
2013
as compared to
$0.4 million
in the first
six
months of
2012
.
The weighted-average interest rate of our long-term debt outstanding was
7.6%
in the first
six
months of
2013
and 7.9% in the first six months of
2012
.
Other Expense
Following are the components of Other Expense for the first
six
months of
2013
and
2012
:
Debt refinancing and redemption costs
In the first
six
months of 2013, we expensed $11.2 million of unamortized debt issuance costs and prepayment premiums related to the termination of our class C Revolving Credit Facility, the purchase of $172.6 million of our 7.875% Notes pursuant to a tender offer and the subsequent redemption of the remaining $127.4 million of our 7.875% Notes.
Other expense, net
Other expense, net, which includes foreign exchange gains and losses and the net effect of our proportionate share of earnings from equity in unconsolidated subsidiaries, was
$1.5 million
in the first
six
months of
2013
as compared to
$1.8 million
in the first
six
months of
2012
.
Income Tax Expense
Income tax expense was
$3.0 million
in the first
six
months of
2013
as compared to
$3.9 million
in the first
six
months of
2012
. Our effective income tax rate was
8.3%
in the first
six
months of
2013
as compared to
6.6%
in the first
six
months of
2012
.
Our income tax expense and effective tax rate for the first six months of 2013 primarily reflect favorable foreign tax rates, along with our inability to realize a tax benefit for current foreign losses. Additionally, in the first six months of 2013, we recorded a tax benefit of $1.5 million relating to the release of a prior year unrecognized tax benefit due to the expiration of the applicable statute of limitations and a tax benefit of $3.3 million relating to an election we made in the first six months of 2013 regarding the treatment of foreign exchange gains and losses in a foreign jurisdiction.
Our income tax expense and effective tax rate for the first six months of 2012 reflect the effect of recognizing a net operating loss benefit against our taxable income in the U.S. Our income tax expense for the first six months of 2012 also reflects a net tax expense of $1.3 million related to the amendment of state income tax returns as a result of the settlement of federal income tax audits for the tax years 2004 through 2007.
Net Loss Attributable to Noncontrolling Interest
Net loss attributable to noncontrolling interests was
$0.9 million
in the first
six
months of
2012
. The noncontrolling interest in e-AAM was acquired in the first quarter of 2012, so there is no longer an allocation of net loss attributable to noncontrolling interest related to this entity.
Net Income Attributable to AAM and Earnings Per Share (EPS)
Net income attributable to AAM was
$33.1 million
in the first
six
months of
2013
as compared to
$55.9 million
in the first
six
months of
2012
. Diluted earnings per share was
$0.43
in the first
six
months of
2013
as compared to
$0.74
in the first
six
months of
2012
. Net income attributable to AAM and EPS for the first
six
months of
2013
and
2012
were primarily impacted by the factors discussed in Gross Profit, SG&A, Interest Expense and Debt Refinancing and Redemption Costs above.
LIQUIDITY AND CAPITAL RESOURCES
Our primary liquidity needs are to fund capital expenditures, debt service obligations and our working capital requirements. We believe that operating cash flow, available cash and cash equivalent balances and available committed borrowing capacity under our Revolving Credit Facility will be sufficient to meet these needs.
Operating Activities
In the first
six
months of
2013
, net cash provided by operating activities was
$33.2 million
as compared to
$24.6 million
in the first
six
months of
2012
. The following factors impacted cash provided by operating activities in the first six months of 2013 as compared to the first six months of 2012:
Cash paid for special charges
In the first
six
months of 2012, we made cash payments of $33.2 million for special charges primarily related to asset redeployment and other costs associated with the closure of DMC and CKMF.
GM payment terms
As a result of a change in the administration of GM supplier payment terms from pay on shipment to pay on receipt, our operating cash flow was negatively impacted by approximately $28 million in the first half of 2012.
Interest paid
Interest paid in the first six months of 2013 was $55.9 million as compared to $43.1 million in the first six months of 2012. The increase primarily relates to higher average outstanding borrowings in the first six months of 2013 as compared to the first six months of 2012.
Pension and Other Postretirement Benefits (OPEB)
Due to our significant pension contributions made in 2012, we will not make any cash payments in 2013 to satisfy our regulatory funding requirements. We contributed $10.6 million to our pension trusts in the first half of 2012. We expect our cash outlay for other postretirement benefit obligations in 2013, net of GM cost sharing, to be approximately $15 million.
Investing Activities
Capital expenditures were
$121.5 million
in the first
six
months of
2013
as compared to
$92.9 million
in the first
six
months of
2012
. We expect our capital spending, net of proceeds from the sale-leaseback of equipment and the sale of property, plant and equipment in
2013
to approximate 7% of sales, which includes support for our significant global program launches in 2013 and 2014 within our new and incremental business backlog.
In the first six months of 2013, we entered into sale-leaseback transactions for equipment recently purchased. We received proceeds of $16.0 million in the first six months of 2013 related to these transactions.
We also received proceeds of $4.5 million in the first six months of 2013 related to the sale of property, plant and equipment at our Detroit Manufacturing Complex that we had previously written down to its estimated fair value as a result of asset impairments.
Financing Activities
In the first
six
months of
2013
, net cash provided by financing activities was
$84.8 million
as compared to net cash used in financing activities of $17.1 million in the first
six
months of
2012
. Total long-term debt outstanding increased
$92.4 million
in the first
six
months of
2013
to
$1,546.5 million
as compared to
$1,454.1 million
at year-end
2012
, primarily as a result of the issuance of $400.0 million of 6.25% senior unsecured notes in the first six months of 2013, which was partially offset by using the proceeds to purchase and redeem $300.0 million of our 7.875% Notes.
6.25% Notes
In the first six months of 2013, we issued $400.0 million of 6.25% senior unsecured notes due 2021 (6.25% Notes). Concurrent with the offering of the 6.25% Notes, we made a tender offer to purchase our 7.875% Notes, of which the aggregate principal amount outstanding at the time of the tender offer was $300.0 million. Net proceeds from the 6.25% Notes were used to fund the purchase pursuant to the tender offer and the subsequent redemption of the entire $300.0 million of the 7.875% Notes and for other general corporate purposes. We paid debt issuance costs of $6.6 million in the first six months of 2013 related to the 6.25% Notes.
7.875% Notes
On March 1, 2013, in connection with the cash tender offer, we purchased $172.6 million aggregate principal amount of the 7.875% Notes, and paid accrued interest. Upon purchase, we expensed $5.2 million related to a tender premium, $0.1 million of professional fees and unamortized debt issuance costs of $1.2 million related to this debt. We had been amortizing the debt issuance costs over the expected life of the borrowing.
On March 15, 2013, we voluntarily redeemed the remaining 7.875% Notes outstanding. This resulted in a principal payment of $127.4 million, a payment of $3.3 million related to a redemption premium, as well as payment of accrued interest. Upon redemption, we expensed $0.9 million of unamortized debt issuance costs related to this debt. We had been amortizing the debt issuance costs over the expected life of the borrowing.
9.25% Notes
Pursuant to the terms of our 9.25% Notes, we have the right to voluntarily redeem an additional $42.5 million of our 9.25% Notes in October 2013. In addition, at any time prior to January 15, 2014, we may redeem some or all of the notes at a price equal to 100% of the principal amount plus a make-whole premium. On or after January 15, 2014, we may redeem some or all of the notes at pre-established prices. We may elect to exercise our rights to redeem all or part of the remaining 9.25% Notes, subject to our liquidity position and the appropriate market conditions.
Revolving Credit Facility
On March 20, 2013, we terminated our class C loan facility of $72.8 million, which would have matured on June 30, 2013. Upon termination, we expensed $0.5 million of unamortized debt issuance costs related to the class C facility. We had been amortizing the debt issuance costs over the expected life of the borrowing. As of
June 30, 2013
, the Revolving Credit Facility provided up to
$365.0 million
of revolving bank financing commitments through June 30, 2016. At
June 30, 2013
, we had
$341.7 million
available under the Revolving Credit Facility. This availability reflects a reduction of
$23.3 million
for standby letters of credit issued against the facility.
We utilize foreign credit facilities and uncommitted lines of credit to finance working capital needs. At
June 30, 2013
,
$53.2 million
was outstanding under these facilities with additional availability of
$59.2 million
.
In the first six months of 2012, we paid $4.0 million to acquire the remaining shares of e-AAM Driveline Systems AB (e-AAM). e-AAM, previously a joint venture between AAM and Saab Automobile AB, was created to design and commercialize electric and hybrid driveline systems designed to improve fuel efficiency, reduce CO
2
emissions and provide all-wheel-drive capability.
In the first six months of 2012, we repurchased 0.5 million shares of AAM common stock for $5.9 million to satisfy employee tax withholding obligations due upon the vesting of our 2007 and 2009 restricted stock grants.
We received
$0.8 million
in the first six months of 2013 related to the exercise of employee stock options.
CYCLICALITY AND SEASONALITY
Our operations are cyclical because they are directly related to worldwide automotive production, which is itself cyclical and dependent on general economic conditions and other factors. Our business is also moderately seasonal as our major OEM customers historically have an extended shutdown of operations (typically 1-2 weeks) in conjunction with their model year changeover and an approximate one-week shutdown in December. Accordingly, our quarterly results may reflect these trends.
LITIGATION AND ENVIRONMENTAL MATTERS
We are involved in various legal proceedings incidental to our business. Although the outcome of these matters cannot be predicted with certainty, we do not believe that any of these matters, individually or in the aggregate, will have a material adverse effect on our financial condition, results of operations or cash flows.
We are subject to various federal, state, local and foreign environmental and occupational safety and health laws, regulations and ordinances, including those regulating air emissions, water discharge, waste management and environmental cleanup. We will continue to closely monitor our environmental conditions to ensure that we are in compliance with all laws, regulations and ordinances. We have made, and will continue to make, capital and other expenditures (including recurring administrative costs) to comply with environmental requirements. Such expenditures were not significant in the second quarter of
2013
, and we do not expect such expenditures to be significant for the remainder of
2013
.