NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2017
(Unaudited)
|
|
1.
|
ORGANIZATION AND BASIS OF PRESENTATION
|
Organization
On April 6, 2017, Alpha SPV I, Inc., a wholly-owned subsidiary of American Axle & Manufacturing Holdings, Inc. (Holdings), merged with and into Metaldyne Performance Group, Inc. (MPG), with MPG as the surviving corporation in the merger. Upon completion of the merger, MPG became a wholly-owned subsidiary of Holdings. As a result, we are now a global Tier I supplier to the automotive, commercial and industrial markets. We design, engineer, validate and manufacture driveline, metal forming, powertrain and casting products, employing over
25,000
associates, operating at more than
90
facilities in
17
countries, to support our customers on global and regional platforms with a continued focus on delivering operational excellence, technology leadership and quality.
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, 2016
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, 2016
.
Change in Accounting Principle
Effective April 1, 2017, we changed our method of accounting for indirect inventory from capitalizing and recording as expense when the inventory was consumed to now expensing indirect inventory at the time of purchase. We believe that expensing indirect inventory at the time of purchase is preferable as the change (1) aligns purchase patterns of indirect inventory with our current operational strategies, (2) reduces the administrative burden associated with recordkeeping for indirect inventory, and (3) results in a uniform accounting policy across our global operations as MPG's accounting method had been to expense indirect inventory upon purchase.
Based on the guidance in Accounting Standards Codification (ASC) 250
Accounting Changes and Error Corrections
we applied this change in accounting principle retrospectively. As a result of the change, we have decreased previously reported inventories, net by
$37.2 million
, decreased previously reported retained earnings by
$24.2 million
and increased previously reported deferred tax assets by
$13.0 million
as of January 1, 2016 and December 31, 2016. The cumulative impact of the change in accounting principle from January 1, 2016 to March 31, 2017, which covers the periods in which we would be required to retrospectively revise our Statements of Income and Balance Sheets, is an increase to income of
$2.4 million
, net of tax. We have determined that the quarterly impact of this adjustment would not be material in any required prior period nor is the impact of recording the cumulative impact of
$2.4 million
, net of tax material to the current period. As such, we recorded the
$2.4 million
, net of tax adjustment related to prior periods in the second quarter of 2017. The impact of this
$2.4 million
, net of tax adjustment to income resulted in an increase in basic and diluted earnings per share of
$0.02
per share for the nine months ended September 30, 2017. The impact on current period income for the quarter ended September 30, 2017 was immaterial in comparison to accounting for indirect inventory under our historical accounting policy. See Note 5 - Inventories for further discussion.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Effect of New Accounting Standards
Accounting Standards Update 2017-12
On August 28, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-12 -
Targeted Improvements to Accounting for Hedging Activities (Topic 815)
. ASU 2017-12 is intended to better align the risk management activities of a company with the company's financial reporting for hedging relationships. This guidance expands and refines several aspects of hedge accounting. The most applicable changes to AAM as a result of the new guidance are as follows: 1) the concept of risk component hedging is introduced in ASU 2017-12, which could allow us to hedge contractually specified components in a contract; 2) the guidance now allows entities to utilize a 31-day period in assessing whether the critical terms of a forecasted transaction match the maturity of the hedging derivative, which could allow for expanded use of hedging instruments for certain sales and purchases; and 3) we may now qualitatively assess hedge effectiveness on a quarterly basis when the facts and circumstances related to the hedging relationship have not changed significantly. This guidance becomes effective at the beginning of our 2019 fiscal year, however early adoption is permitted, and we expect to adopt this guidance effective January 1, 2018. The adoption of this guidance is not expected to have any impact on the measurement or presentation of our existing hedging relationships.
Accounting Standards Update 2017-07
On March 10, 2017, the FASB issued ASU 2017-07 -
Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
. The amendments in this update require that an employer disaggregate the service cost component from the other components of defined benefit pension cost and postretirement benefit cost (net benefit cost). The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization. This guidance becomes effective at the beginning of our 2018 fiscal year and requires a retrospective transition method for the income statement classification of the net benefit cost components and a prospective transition method for the capitalization of the service cost component in assets. We are currently assessing the impact that this standard will have on our consolidated financial statements.
Accounting Standards Update 2017-04
On January 26, 2017, the FASB issued ASU 2017-04 -
Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment
. The amendments in this update modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination, or what is referred to under existing guidance as "Step 2." Instead, under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. This guidance becomes effective at the beginning of our 2020 fiscal year, however early adoption is permitted. The guidance requires a prospective transition method. We are currently assessing the impact that this standard will have on our consolidated financial statements.
Accounting Standards Update 2016-16
On October 24, 2016, the FASB issued ASU 2016-16 -
Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory
. Existing income tax guidance prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This existing guidance is deemed an exception to the principle of comprehensive recognition of current and deferred income taxes under GAAP. Due to the limited authoritative guidance about this exception, diversity in practice exists. ASU 2016-16 eliminates this exception for intra-entity transfers of assets other than inventory and requires that entities recognize the income tax consequences when the transfers occur. This guidance becomes effective at the beginning of our 2018 fiscal year and requires a modified retrospective transition method. We are currently assessing the impact that this standard will have on our consolidated financial statements.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Accounting Standards Update 2016-02
On February 25, 2016, the FASB issued ASU 2016-02 -
Leases (Topic 842)
, which supersedes the existing lease accounting guidance and establishes new criteria for recognizing lease assets and liabilities. The most significant impact of the update, to AAM, is that a lessee will be required to recognize a "right-of-use" asset and lease liability for operating lease agreements that were not previously included on the balance sheet under the existing lease guidance. A lessee will be permitted to make a policy election, excluding recognition of the right-of-use asset and associated liability for lease terms of 12 months or less. Expense recognition in the statement of income along with cash flow statement classification for both financing (capital) and operating leases under the new standard will not be significantly changed from existing lease guidance. This guidance becomes effective for AAM at the beginning of our 2019 fiscal year and requires transition under a modified retrospective method. We are currently assessing the impact that this standard will have on our consolidated financial statements.
Accounting Standards Update 2014-09
In 2014, the FASB issued ASU 2014-09 -
Revenue from Contracts with Customers (Topic 606)
, and has subsequently issued ASUs 2015-14 -
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date
, 2016-08 -
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross Versus Net)
, 2016-10 -
Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
, 2016-12 -
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients
, and 2016-20 -
Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements to Topic 606
(collectively, the Revenue Recognition ASUs).
The Revenue Recognition ASUs outline a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersede most current revenue recognition guidance, including industry-specific guidance. The guidance is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. This guidance is effective for AAM beginning on January 1, 2018 and entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. We expect to adopt this guidance using the modified retrospective approach.
We are concluding the assessment phase of implementing this guidance. We have evaluated each of the five steps in the new revenue recognition model, which are as follows: 1) Identify the contract with the customer; 2) Identify the performance obligations in the contract; 3) Determine the transaction price; 4) Allocate the transaction price to the performance obligations; and 5) Recognize revenue when (or as) performance obligations are satisfied. Our preliminary conclusion is that the impact of implementing the Revenue Recognition ASUs will be immaterial to our financial statements and that our method for recognizing revenue subsequent to the implementation of the Revenue Recognition ASUs will not vary significantly from our revenue recognition practices under current GAAP.
There are certain considerations related to internal control over financial reporting that are associated with implementing the new guidance under Topic 606 and we are currently implementing the necessary changes to our control framework for revenue recognition. Disclosure requirements under the new guidance in Topic 606 have been significantly expanded in comparison to the disclosure requirements under the current guidance. We are currently concluding our assessment of the new disclosure requirements and we are in the process of drafting our disclosures for both interim and annual periods under Topic 606.
Share Repurchase Program
In 2016, AAM's Board of Directors authorized a share repurchase program of up to
$100 million
of AAM's common shares through December 31, 2018 as part of AAM's overall capital allocation strategy. The repurchase of shares may be made in the open market or in privately negotiated transactions and will be funded through available cash balances and cash flow from operations. The timing and amount of any share repurchases will be determined based on market and economic conditions, share price, alternative uses of capital and other factors. Approximately
$1.5 million
of shares have been repurchased under the authorized share repurchase program, leaving approximately
$98.5 million
available for repurchase. There were no repurchases under the program in the first
nine
months of 2017.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
2.
|
RESTRUCTURING AND ACQUISITION-RELATED COSTS
|
In the fourth quarter of 2016, AAM initiated actions under a global restructuring program focused on creating a more streamlined organization in addition to reducing our cost structure and preparing for acquisition integration activities. A summary of this activity for the first nine months of 2017 is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance Charges
|
|
Implementation Costs
|
|
Total
|
|
(in millions)
|
Accrual as of December 31, 2016
|
$
|
0.6
|
|
|
$
|
9.2
|
|
|
$
|
9.8
|
|
Charges
|
1.7
|
|
|
13.5
|
|
|
15.2
|
|
Cash utilization
|
(2.3
|
)
|
|
(17.8
|
)
|
|
(20.1
|
)
|
Non-cash utilization
|
—
|
|
|
—
|
|
|
—
|
|
Accrual adjustments
|
—
|
|
|
—
|
|
|
—
|
|
Accrual as of September 30, 2017
|
$
|
—
|
|
|
$
|
4.9
|
|
|
$
|
4.9
|
|
As part of our restructuring actions, we incurred severance charges of approximately
$1.7 million
, as well as implementation costs, including professional expenses, of approximately
$13.5 million
during the nine months ended September 30, 2017. Since the inception of our global restructuring program, we have incurred severance charges totaling
$2.3 million
and implementation costs totaling
$23.7 million
. We expect to incur up to
$5 million
of additional charges under our global restructuring program in 2017.
On March 1, 2017, we completed the acquisition of USM Mexico Manufacturing LLC (USM Mexico) and on April 6, 2017, we completed the acquisition of MPG. During the nine months ended September 30, 2017, we incurred the following charges related to these acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-Related Costs
|
|
Severance Charges
|
|
Integration Expenses
|
|
Total
|
|
(in millions)
|
Charges
|
$
|
40.7
|
|
|
$
|
5.6
|
|
|
$
|
29.0
|
|
|
$
|
75.3
|
|
|
|
|
|
|
|
|
|
Total restructuring and acquisition-related charges
|
$
|
90.5
|
|
Acquisition-related costs primarily consist of advisory, legal, accounting, valuation and certain other professional or consulting fees incurred. Also included in acquisition-related costs is a one-time charge of approximately
$20 million
for MPG stock-based compensation that was accelerated and settled as a result of the acquisition. Integration expenses reflect costs incurred for information technology systems, ongoing operational activities, and consulting fees incurred in conjunction with the acquisitions. Total charges associated with our global restructuring program and acquisition-related charges of
$22.8 million
and
$90.5 million
are shown on a separate line item titled "Restructuring and Acquisition-Related Costs" in our Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2017, respectively.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Acquisition of MPG
On April 6, 2017, AAM completed its acquisition of 100% of the equity interests of MPG for a total purchase price of approximately
$1.5 billion
plus the assumption of approximately
$1.7 billion
in net debt (comprised of approximately
$1.9 billion
in debt less approximately
$0.2 billion
of MPG cash and cash equivalents). Under the terms of the agreement and plan of merger (Merger Agreement), each share of MPG common stock (other than MPG excluded shares as defined in the Merger Agreement) was converted into the right to receive (a)
$13.50
in cash, without interest, and (b)
0.5
of a share of AAM common stock (Merger Consideration). Further, MPG stock options outstanding immediately prior to the effective time of the merger were accelerated and holders of the stock options received the Merger Consideration less the per share exercise price of the MPG stock options. All MPG restricted shares and restricted stock unit awards outstanding under an MPG equity plan were also accelerated and each holder thereof received the Merger Consideration for each restricted share or restricted stock unit award of MPG common stock.
MPG provides highly-engineered components for use in powertrain and safety-critical platforms for the global light, commercial and industrial markets. MPG produces these components using complex metal-forming manufacturing technologies and processes for a global customer base of OEMs and Tier I suppliers, which help their customers meet fuel economy, performance and safety standards. Our acquisition of MPG contributes significantly to diversifying our global customer base and end markets, while also allowing us to expand our presence as a global Tier I supplier to the commercial and industrial markets, in addition to our existing presence as a global Tier I supplier to the automotive industry.
The aggregate cash consideration for the acquisition of MPG was financed using (i) net proceeds from the issuance in March 2017 by AAM of
$1.2 billion
of new senior notes consisting of
$700.0 million
aggregate principal amount of
6.25%
senior notes due 2025, and
$500.0 million
aggregate principal amount of
6.50%
senior notes due 2027, and on April 6, 2017: (ii) borrowings by AAM of
$100.0 million
under a term loan that matures in 2022, (iii) borrowings by AAM of
$1.55 billion
under a term loan that matures in 2024, and (iv) cash on hand.
The acquisition of MPG was accounted for under the acquisition method under Accounting Standards Codification 805
Business Combinations
(ASC 805) with the purchase price allocated to the identifiable assets and liabilities of the acquired company based on the respective fair values of the assets and liabilities.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following represents the preliminary fair values of the assets acquired and liabilities assumed resulting from the acquisition, as well as the calculation of goodwill:
|
|
|
|
|
(in millions)
|
April 6, 2017
|
Cash consideration
|
$
|
953.5
|
|
Share consideration
|
576.7
|
|
Total consideration transferred
|
$
|
1,530.2
|
|
Fair value of MPG noncontrolling interests
|
3.6
|
|
Total fair value of MPG
|
$
|
1,533.8
|
|
|
|
Cash and cash equivalents
|
$
|
202.1
|
|
Accounts receivable
|
403.2
|
|
Inventories
|
199.0
|
|
Prepaid expenses and other long-term assets
|
121.0
|
|
Property, plant and equipment
|
985.7
|
|
Intangible assets
|
1,223.1
|
|
Total assets acquired
|
$
|
3,134.1
|
|
Accounts payable
|
287.8
|
|
Accrued expenses and other
|
137.2
|
|
Deferred income tax liabilities
|
596.4
|
|
Debt
|
1,918.7
|
|
Postretirement benefits and other long-term liabilities
|
54.5
|
|
Net assets acquired
|
$
|
139.5
|
|
Goodwill
|
$
|
1,394.3
|
|
The preliminary allocation of the purchase price to the assets acquired and liabilities assumed, including the residual amount recognized as goodwill, is based upon estimated information and is subject to change within the measurement period. Under the guidance in ASC 805, the measurement period is a period not to exceed one year from the acquisition date during which we may adjust estimated or provisional amounts recorded during purchase accounting if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date. Measurement period adjustments are recorded in the period identified with an offsetting entry to goodwill. Any adjustments to amounts recorded in purchase accounting that do not qualify as measurement period adjustments will be included in earnings in the period identified.
In the third quarter of 2017, we made measurement period adjustments to reflect changes to facts and circumstances that existed as of the acquisition date, which resulted in a net increase in Goodwill of
$18.0 million
. These adjustments related primarily to Intangible assets and the corresponding offset to Deferred income tax liabilities as a result of changes to our third-party valuation and customary post-closing reviews. The resulting impact to amortization expense in our Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2017 of adjusting our intangible assets was immaterial.
The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair value of property, plant and equipment and intangible assets, as well as deferred income tax assets and liabilities, and contingent liabilities. The fair values of the assets acquired and liabilities assumed are based on our preliminary estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. While we believe that these preliminary estimates provide a reasonable basis for estimating the fair value of the assets acquired and liabilities assumed, we will continue to evaluate available information prior to finalization of the amounts.
Goodwill resulting from the acquisition is primarily attributable to anticipated synergies and economies of scale from which we expect to benefit as a combined entity. None of the goodwill is expected to be deductible for tax purposes.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
We recognized
$1,223.1 million
of amortizable intangible assets for customer platforms, customer relationships, developed technology and licensing agreements as a result of the acquisition of MPG. These intangible assets will be amortized over a period ranging from five to 17 years. The intangible assets were valued using primarily the relief from royalty method or the multi-period excess earnings method, both of which utilize significant unobservable inputs. These inputs are defined in the fair value hierarchy as Level 3 inputs, which require management to make estimates and assumptions regarding certain financial measures using forecasted or projected information.
AAM had an existing accounts payable balance of
$12.4 million
with MPG as of the date of acquisition. As a result of the acquisition, this pre-existing accounts payable balance was settled and AAM accounted for this settlement separately from the acquisition. This resulted in a
$12.4 million
reduction in the purchase price and this portion of the cash paid to acquire MPG has been reflected as an operating cash outflow in our Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2017.
Included in net sales and net income attributable to AAM for the period from the acquisition date on April 6, 2017 through September 30, 2017 was approximately
$1,351 million
and
$42 million
, respectively, attributable to MPG.
Unaudited Pro Forma Financial Information
Unaudited pro forma net sales for AAM, on a combined basis with MPG for the nine months ended September 30, 2017 and September 30, 2016, were
$5.3 billion
and
$5.1 billion
, respectively, excluding MPG sales to AAM during those periods. Unaudited pro forma net income amounts for the nine months ended September 30, 2017 and September 30, 2016 were approximately
$290 million
and
$170 million
, respectively. Unaudited pro forma earnings per share amounts for the nine months ended September 30, 2017 and September 30, 2016 were
$2.57
per share and
$1.64
per share, respectively.
The unaudited pro forma net income amounts for the nine months ended September 30, 2017 and September 30, 2016 have been adjusted by approximately
$20 million
for a one-time charge for MPG stock-based compensation that was accelerated and settled on the date of acquisition, approximately
$25 million
related to the step-up of inventory to fair value as a result of the acquisition, and approximately
$55 million
in acquisition-related costs. This adjustment resulted in a reclassification of approximately
$65 million
, net of tax, from unaudited pro forma net income for the first nine months of 2017 into pro forma net income for the first nine months of 2016, as we are required to disclose the unaudited pro forma amounts as if the acquisition of MPG had been completed on January 1, 2016.
The disclosure of unaudited pro forma net sales and earnings is for informational purposes only and does not purport to indicate the results that would actually have been obtained had the merger been completed on the assumed date for the periods presented, or which may be realized in the future.
Acquisition of USM Mexico
On March 1, 2017, AAM completed the acquisition of 100% of USM Mexico, a former subsidiary of U.S. Manufacturing Corporation (USM). The purchase price was funded entirely with available cash and the acquisition was accounted for under the acquisition method.
USM Mexico includes USM's operations in Guanajuato, Mexico, which has historically been one of the largest suppliers to AAM's Guanajuato Manufacturing Complex. This acquisition allows AAM to vertically integrate the supply chain and helps ensure continuity of supply for certain parts to our largest manufacturing facility.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following represents the estimated fair value of the assets acquired and liabilities assumed resulting from the acquisition, as well as the calculation of goodwill:
|
|
|
|
|
(in millions)
|
March 1, 2017
|
Contractual purchase price
|
$
|
162.5
|
|
Adjustments to contractual purchase price for capital equipment
|
4.9
|
|
Adjustment to contractual purchase price for settlement of existing accounts payable balance
|
(22.8
|
)
|
Cash acquired
|
(0.5
|
)
|
Adjusted purchase price, net of cash acquired
|
$
|
144.1
|
|
Accounts receivable
|
1.1
|
|
Inventories
|
4.8
|
|
Prepaid expenses and other
|
2.4
|
|
Property, plant and equipment
|
38.4
|
|
Intangible assets
|
31.7
|
|
Total assets acquired
|
$
|
78.4
|
|
Accounts payable
|
10.8
|
|
Accrued expenses and other
|
2.7
|
|
Deferred income tax liabilities
|
1.2
|
|
Net assets acquired
|
$
|
63.7
|
|
Goodwill
|
$
|
80.4
|
|
The purchase agreement specifies a period of time subsequent to the acquisition date for calculating the final working capital amount of USM Mexico as of the acquisition date. As a result, the purchase price, working capital and goodwill amounts as included in the table above are considered provisional and are subject to adjustment. We expect these provisional amounts to be finalized in the fourth quarter of 2017. None of the goodwill is expected to be deductible for tax purposes.
AAM had an existing accounts payable balance of
$22.8 million
with USM Mexico as of the date of acquisition. As a result of the acquisition, this pre-existing accounts payable balance was settled and AAM accounted for this settlement separately from the acquisition. This resulted in a
$22.8 million
reduction in the purchase price and this portion of the cash paid to acquire USM Mexico has been reflected as an operating cash outflow in our Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2017.
The operating results of USM Mexico from the acquisition date through September 30, 2017 were insignificant to AAM's Condensed Consolidated Statement of Income for the three months and nine months ended September 30, 2017. Further, we have not included pro forma revenue and earnings for the nine months ended September 30, 2017 and September 30, 2016 as the inclusion of USM Mexico would be insignificant to AAM's consolidated results for these periods.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The following table provides a reconciliation of changes in goodwill for the nine months ended September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Driveline
|
|
Metal Forming
|
|
Powertrain
|
|
Casting
|
|
Consolidated
|
|
(in millions)
|
Balance as of December 31, 2016
|
$
|
130.1
|
|
|
$
|
23.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
154.0
|
|
Acquisition of MPG
|
—
|
|
|
516.0
|
|
|
472.3
|
|
|
406.0
|
|
|
1,394.3
|
|
Acquisition of USM Mexico
|
80.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
80.4
|
|
Foreign currency translation
|
0.4
|
|
|
16.6
|
|
|
8.9
|
|
|
—
|
|
|
25.9
|
|
Balance as of September 30, 2017
|
$
|
210.9
|
|
|
$
|
556.5
|
|
|
$
|
481.2
|
|
|
$
|
406.0
|
|
|
$
|
1,654.6
|
|
Intangible Assets
As a result of the acquisitions of MPG and USM Mexico, AAM identified and recognized certain intangible assets that are subject to amortization. The weighted-average amortization period for all intangible assets recognized as a result of these acquisitions is
13.6 years
. The following table provides a breakout of the major intangible assets acquired by class:
|
|
|
|
|
|
|
|
Estimated
|
|
September 30,
|
|
Useful Lives
|
|
2017
|
|
(years)
|
|
(in millions)
|
MPG
|
|
|
|
Customer platforms
|
14
|
|
$
|
950.0
|
|
Customer relationships
|
16-17
|
|
151.8
|
|
Technology and other
|
5-13
|
|
121.3
|
|
Total MPG
|
|
|
$
|
1,223.1
|
|
|
|
|
|
USM Mexico
|
|
|
|
Technology
|
13
|
|
$
|
29.5
|
|
Customer platforms
|
13
|
|
2.2
|
|
Total USM Mexico
|
|
|
$
|
31.7
|
|
|
|
|
|
Total
|
|
|
$
|
1,254.8
|
|
In the third quarter of 2017, we made measurement period adjustments related to the acquisition of MPG to reflect changes to facts and circumstances that existed as of the acquisition date. These adjustments resulted in a decrease to customer platforms of
$20.0 million
and a decrease in customer relationships of
$1.5 million
as a result of changes to our third-party valuation and customary post-closing reviews. The impact to amortization expense in our Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2017 as a result of adjusting our intangible assets was immaterial.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table provides a reconciliation of the gross carrying amount and associated accumulated amortization for AAM's total intangible assets, which are all subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
2017
|
|
2016
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
(in millions)
|
Capitalized computer software
|
$
|
35.2
|
|
|
$
|
(12.8
|
)
|
|
$
|
22.4
|
|
|
$
|
31.7
|
|
|
$
|
(8.5
|
)
|
|
$
|
23.2
|
|
e-AAM in-process research and development
|
5.9
|
|
|
—
|
|
|
5.9
|
|
|
5.3
|
|
|
—
|
|
|
5.3
|
|
Customer platforms
|
952.2
|
|
|
(35.3
|
)
|
|
916.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Customer relationships
|
151.8
|
|
|
(4.9
|
)
|
|
146.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Technology and other
|
150.8
|
|
|
(6.3
|
)
|
|
144.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
1,295.9
|
|
|
$
|
(59.3
|
)
|
|
$
|
1,236.6
|
|
|
$
|
37.0
|
|
|
$
|
(8.5
|
)
|
|
$
|
28.5
|
|
Amortization expense for these intangible assets was
$24.4 million
and
$50.8 million
for the three and nine months ended September 30, 2017, respectively, and
$1.3 million
and
$3.6 million
for the three and nine months ended September 30, 2016, respectively. Estimated amortization expense for each of the next five years is as follows: approximately
$75 million
in 2017 and approximately
$100 million
in each of the years 2018 through 2021.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
We state our inventories at the lower of cost or net realizable value. The cost of our inventories is determined using the first-in first-out 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:
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
|
|
(in millions)
|
|
|
|
|
|
Raw materials and work-in-progress
|
|
$
|
331.4
|
|
|
$
|
163.3
|
|
Finished goods
|
|
90.0
|
|
|
33.8
|
|
Gross inventories
|
|
421.4
|
|
|
197.1
|
|
Inventory valuation reserves
|
|
(24.8
|
)
|
|
(14.8
|
)
|
Inventories, net
|
|
$
|
396.6
|
|
|
$
|
182.3
|
|
Effective April 1, 2017, we changed our method of accounting for indirect inventory from capitalizing and recording as expense when the inventory was consumed to now expensing indirect inventory at the time of purchase. Based on the guidance in ASC 250
Accounting Changes and Error Corrections,
we have adjusted retained earnings to reflect the retrospective application of this change in accounting principle. Refer to Note 1 - Organization and Basis of Presentation for further detail. Based on this change in accounting principle, Raw materials and work-in-progress and Inventory valuation reserves, as of December 31, 2016, reflect a decrease of
$49.4 million
and a decrease of
$12.2 million
, respectively.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
|
|
(in millions)
|
|
|
|
|
|
Revolving Credit Facility
|
|
$
|
—
|
|
|
$
|
—
|
|
Term Loan A Facility
|
|
93.8
|
|
|
—
|
|
Term Loan B Facility
|
|
1,530.6
|
|
|
—
|
|
7.75% Notes due 2019
|
|
200.0
|
|
|
200.0
|
|
6.625% Notes due 2022
|
|
550.0
|
|
|
550.0
|
|
6.50% Notes due 2027
|
|
500.0
|
|
|
—
|
|
6.25% Notes due 2025
|
|
700.0
|
|
|
—
|
|
6.25% Notes due 2021
|
|
400.0
|
|
|
400.0
|
|
5.125% Notes due 2019
|
|
200.0
|
|
|
200.0
|
|
Foreign credit facilities
|
|
52.3
|
|
|
60.4
|
|
Capital lease obligations
|
|
28.6
|
|
|
5.5
|
|
Total debt
|
|
4,255.3
|
|
|
1,415.9
|
|
Less: Current portion of long-term debt
|
|
6.8
|
|
|
3.3
|
|
Long-term debt
|
|
4,248.5
|
|
|
1,412.6
|
|
Less: Debt issuance costs
|
|
79.2
|
|
|
11.7
|
|
Long-term debt, net
|
|
$
|
4,169.3
|
|
|
$
|
1,400.9
|
|
New Senior Secured Credit Facilities
In connection with our acquisition of MPG (the Acquisition) on April 6, 2017, Holdings and American Axle & Manufacturing, Inc. (AAM, Inc.) entered into a credit agreement (the Credit Agreement), among AAM, Inc., as borrower, Holdings, each financial institution party thereto as a lender (the Lenders) and administrative agent, pursuant to which Holdings and certain of its restricted subsidiaries (including certain subsidiaries of MPG acquired as part of the Acquisition) are required to guarantee the borrowings of AAM, Inc. thereunder and Holdings, AAM, Inc. and certain of their restricted subsidiaries are required to pledge their assets (including, without limitation, after-acquired assets), subject to certain exceptions and limitations. In connection with the Credit Agreement, Holdings, AAM, Inc. and certain of their restricted subsidiaries entered into a Collateral Agreement and Guarantee Agreement with the financial institutions party thereto as collateral agent and administrative agent.
Pursuant to the Credit Agreement, the Lenders agreed to provide a
$100.0 million
term loan A facility (the Term Loan A Facility), a
$1.55 billion
term loan B facility (the Term Loan B Facility) and a
$900 million
multi-currency revolving credit facility (the Revolving Credit Facility, and together with the Term Loan A Facility and the Term Loan B Facility, the New Senior Secured Credit Facilities). The proceeds of the Term Loan A Facility and the Term Loan B Facility were used to finance a portion of the consideration for the Acquisition, pay transaction costs, redeem in full MPG Holdco I Inc.’s
7.375%
Senior Notes due 2022, and repay the existing indebtedness of AAM, Inc. under its Amended and Restated Credit Agreement, dated as of January 9, 2004, amended and restated as of September 13, 2013 and as further amended, among AAM, Inc., as borrower, Holdings, and each financial institution party thereto as a lender and administrative agent, as well as repay existing indebtedness of MPG under its Credit Agreement, dated as of October 20, 2014 and as amended as of May 8, 2015, among MPG Holdco I Inc., as guarantor, MPG, the subsidiary guarantors party thereto, and each financial institution party thereto as a lender and administrative agent. The proceeds of the Revolving Credit Facility will be used for general corporate purposes. We paid debt issuance costs of
$53.9 million
in the first nine months of 2017 related to the New Senior Secured Credit Facilities.
The Term Loan A Facility and the Revolving Credit Facility will mature on April 6, 2022, and the Term Loan B Facility will mature on April 6, 2024. Borrowings under the New Senior Secured Credit Facilities bear interest at rates based on the applicable Eurodollar rate or alternate base rate, as AAM may elect, in each case plus an applicable margin determined based on AAM’s total net leverage ratio. The alternate base rate is the greatest of (a) the prime rate of a major United States financial institution, (b) the Federal Reserve Bank of New York rate plus 0.50% and (c) the adjusted Eurodollar rate plus 1.00%. The applicable margin for Eurodollar-based loans under the New Senior Secured Credit Facilities will be between 1.25% and 2.25%
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
with respect to any loan under the Term Loan A Facility, 2.25% with respect to any loan under the Term Loan B Facility, and between 2.00% and 3.00% with respect to any loan under the Revolving Credit Facility. The applicable margin for loans subject to alternate base rate will be between 0.25% and 1.25% with respect to any loan under the Term Loan A Facility, 1.25% with respect to any loan under the Term Loan B Facility, and between 1.00% and 2.00% with respect to any loan under the Revolving Credit Facility.
The Credit Agreement requires certain mandatory prepayments of outstanding loans under the Term Loan A Facility and the Term Loan B Facility, subject to certain exceptions, based on a percentage of the annual excess cash flow of Holdings and its restricted subsidiaries (with step-downs to 0% based upon the total net leverage ratio, and with no prepayment required if annual excess cash flow is under a specified minimum threshold), the net cash proceeds of certain asset sales and casualty and condemnation events, subject to reinvestment rights and certain other exceptions, and the net cash proceeds of any issuance of debt not otherwise permitted under the Credit Agreement.
The Credit Agreement permits AAM, Inc. to incur incremental term loan borrowings and/or increase commitments under the Revolving Credit Facility, subject to certain limitations and the satisfaction of certain conditions, in an aggregate amount not to exceed (i) $600 million, plus (ii) certain voluntary prepayments, plus (iii) additional amounts subject to pro forma compliance with a first lien net leverage ratio for Holdings and its restricted subsidiaries.
The Credit Agreement contains customary affirmative and negative covenants, including, among others, financial covenants based on total net leverage and cash interest expense coverage ratios and limitations on the ability of Holdings, AAM, Inc. or their restricted subsidiaries to make certain investments, declare or pay dividends or distributions on capital stock, redeem or repurchase capital stock and certain debt obligations, incur liens, incur indebtedness, or merge, make certain acquisitions or certain sales of assets. The Credit Agreement includes customary events of default, the occurrence of which would permit the lenders to, among other things, declare the principal, accrued interest and other obligations to be immediately due and payable. Upon such default, the lenders may also seek customary remedies with respect to the collateral under the Collateral Agreement.
As of September 30, 2017, we have prepaid
$5.0 million
of the outstanding principal on our Term Loan A Facility and
$15.5 million
of the outstanding principal on our Term Loan B Facility. These payments satisfy our obligation for principal payments under the Term Loan A Facility and Term Loan B Facility for the next four quarters. As a result, there are no amounts related to the Term Loan A Facility or Term Loan B Facility in the Current portion of long-term debt line item in our Condensed Consolidated Balance Sheet as of September 30, 2017.
At
September 30, 2017
, we had
$869.1 million
available under the Revolving Credit Facility. This availability reflects a reduction of
$30.9 million
for standby letters of credit issued against the facility.
The New Senior Secured Credit Facilities provide back-up liquidity for our foreign credit facilities. We intend to use the availability of long-term financing under the New Senior Secured Credit Facilities to refinance any current maturities related to such debt agreements that are not otherwise refinanced on a long-term basis in their local markets, except where otherwise reclassified to current portion of long-term debt on our Condensed Consolidated Balance Sheet.
6.50% Notes due 2027 and 6.25% Notes due 2025
On March 23, 2017, we issued
$700.0 million
in aggregate principal amount of
6.25%
senior notes due 2025 and
$500.0 million
in aggregate principal amount of
6.50%
senior notes due 2027 (the Notes). Proceeds from the Notes were used primarily to fund the cash consideration related to AAM's acquisition of MPG, related fees and expenses, refinancing certain existing indebtedness of MPG and borrowings under our previous revolving credit facility, which has been replaced by our new Revolving Credit Facility, together with borrowings under the New Senior Secured Credit Facilities. We paid debt issuance costs of
$36.9 million
in the first nine months of 2017 related to the Notes.
Repayment of MPG Indebtedness
Upon the acquisition of MPG, we assumed approximately
$1.9 billion
of existing MPG indebtedness, which we repaid in its entirety on the date of acquisition. This indebtedness was comprised of approximately
$0.2 billion
of a Euro denominated term loan, approximately
$1.0 billion
of a U.S. dollar denominated term loan and approximately
$0.7 billion
of outstanding MPG bonds. Upon settlement of the debt, we paid approximately
$24.6 million
of accrued interest. In addition, we expensed
$2.7 million
of prepayment premiums related to the extinguishment of MPG's debt, which has been presented in the Debt refinancing and redemption costs line item within our condensed consolidated statements of income for both the three and nine months ended September 30, 2017.
Foreign credit facilities
We utilize local currency credit facilities to finance the operations of certain foreign subsidiaries. At
September 30, 2017
,
$52.3 million
was outstanding under our foreign credit facilities and an additional
$99.9 million
was available.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The weighted-average interest rate of our long-term debt outstanding was
5.7%
at
September 30, 2017
and
6.6%
at
December 31, 2016
.
Accounting Standards Codification 820 -
Fair Value Measurement
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, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
|
|
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
|
Input
|
|
|
(in millions)
|
|
|
Balance Sheet Classification
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
126.1
|
|
|
$
|
126.1
|
|
|
$
|
187.2
|
|
|
$
|
187.2
|
|
|
Level 1
|
Prepaid expenses and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges - currency forward contracts
|
|
1.1
|
|
|
1.1
|
|
|
—
|
|
|
—
|
|
|
Level 2
|
Nondesignated - currency forward contracts
|
|
1.0
|
|
|
1.0
|
|
|
—
|
|
|
—
|
|
|
Level 2
|
Nondesignated - currency option contracts
|
|
1.5
|
|
|
1.5
|
|
|
—
|
|
|
—
|
|
|
Level 2
|
Other assets and deferred charges
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges - currency forward contracts
|
|
2.1
|
|
|
2.1
|
|
|
—
|
|
|
—
|
|
|
Level 2
|
Cash flow hedges - variable-to-fixed interest rate swap
|
|
0.3
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
Level 2
|
Accrued expenses and other
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges - currency forward contracts
|
|
3.8
|
|
|
3.8
|
|
|
12.3
|
|
|
12.3
|
|
|
Level 2
|
Cash flow hedges - variable-to-fixed interest rate swap
|
|
0.2
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
Level 2
|
Nondesignated - currency forward contracts
|
|
0.2
|
|
|
0.2
|
|
|
1.4
|
|
|
1.4
|
|
|
Level 2
|
Postretirement benefits and other long-term liabilities
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges - currency forward contracts
|
|
0.5
|
|
|
0.5
|
|
|
11.4
|
|
|
11.4
|
|
|
Level 2
|
Cash flow hedges - variable-to-fixed interest rate swap
|
|
2.1
|
|
|
2.1
|
|
|
—
|
|
|
—
|
|
|
Level 2
|
The carrying values of our cash, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to the short-term maturities of these instruments. The carrying values of our borrowings under the foreign credit facilities approximate 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:
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
|
|
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
|
Input
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Level 2
|
Term Loan A Facility
|
|
93.8
|
|
|
93.3
|
|
|
—
|
|
|
—
|
|
|
Level 2
|
Term Loan B Facility
|
|
1,530.6
|
|
|
1,521.1
|
|
|
—
|
|
|
—
|
|
|
Level 2
|
7.75% Notes due 2019
|
|
200.0
|
|
|
219.0
|
|
|
200.0
|
|
|
221.0
|
|
|
Level 2
|
6.625% Notes due 2022
|
|
550.0
|
|
|
567.2
|
|
|
550.0
|
|
|
566.1
|
|
|
Level 2
|
6.50% Notes due 2027
|
|
500.0
|
|
|
502.8
|
|
|
—
|
|
|
—
|
|
|
Level 2
|
6.25% Notes due 2025
|
|
700.0
|
|
|
711.7
|
|
|
—
|
|
|
—
|
|
|
Level 2
|
6.25% Notes due 2021
|
|
400.0
|
|
|
411.0
|
|
|
400.0
|
|
|
412.0
|
|
|
Level 2
|
5.125% Notes due 2019
|
|
200.0
|
|
|
200.5
|
|
|
200.0
|
|
|
201.7
|
|
|
Level 2
|
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 derivative contracts
From time to time, we use foreign currency forward and option contracts to reduce the effects of fluctuations in exchange rates relating to the Mexican Peso, Euro, Brazilian Real, British Pound Sterling, Thai Baht, Swedish Krona, Chinese Yuan, Polish Zloty and Indian Rupee. As of
September 30, 2017
, we have currency forward and option contracts outstanding with a notional amount of
$218.1 million
that hedge our exposure to changes in foreign currency exchange rates for certain payroll expenses into the second quarter of 2020 and certain direct and indirect inventory and other working capital items into the second quarter of 2018.
Variable-to-fixed interest rate swap
In the second quarter of 2017, we entered into a variable-to-fixed interest rate swap to reduce the variability of cash flows associated with interest payments on our variable rate debt. We have the following notional amounts hedged in relation to our variable-to-fixed interest rate swap:
$750.0 million
through May 2018,
$600.0 million
through May 2019,
$450.0 million
through May 2020 and
$200.0 million
through May 2021.
The following table summarizes the reclassification of derivative losses into net income from accumulated other comprehensive loss for those derivative instruments designated as cash flow hedges under Accounting Standards Codification 815 -
Derivatives and Hedging
(ASC 815):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss Reclassified During
|
|
Loss Expected to
|
|
|
Location of Loss
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
be Reclassified
|
|
|
Reclassified into
|
|
September 30,
|
|
September 30,
|
|
During the
|
|
|
Net Income
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Next 12 Months
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency forward contracts
|
|
Cost of Goods Sold
|
|
$
|
(0.7
|
)
|
|
$
|
(2.6
|
)
|
|
$
|
(4.6
|
)
|
|
$
|
(6.9
|
)
|
|
$
|
(2.6
|
)
|
Variable-to-fixed interest rate swap
|
|
Interest Expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
See Note 13 - Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (AOCI) for amounts recognized in other comprehensive income (loss) during the three and nine months ended September 30, 2017 and 2016.
The following table summarizes the amount and location of gains (losses) recognized in the Condensed Consolidated Statements of Income for those derivative instruments not designated as hedging instruments under ASC 815:
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized During
|
|
|
Location of Gain (Loss)
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
Recognized in
|
|
September 30,
|
|
September 30,
|
|
|
Net Income
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency forward contracts
|
|
Cost of Goods Sold
|
|
$
|
0.4
|
|
|
$
|
(1.3
|
)
|
|
$
|
6.1
|
|
|
$
|
(4.0
|
)
|
Currency forward contracts
|
|
Other Income, Net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.7
|
)
|
Currency option contracts
|
|
Cost of Goods Sold
|
|
0.3
|
|
|
—
|
|
|
1.4
|
|
|
—
|
|
|
|
9.
|
EMPLOYEE BENEFIT PLANS
|
The components of net periodic benefit cost (credit) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
0.7
|
|
|
$
|
0.8
|
|
|
$
|
2.6
|
|
|
$
|
2.3
|
|
Interest cost
|
|
7.2
|
|
|
7.3
|
|
|
21.4
|
|
|
21.9
|
|
Expected asset return
|
|
(11.1
|
)
|
|
(10.7
|
)
|
|
(32.7
|
)
|
|
(32.1
|
)
|
Amortized loss
|
|
1.9
|
|
|
1.3
|
|
|
5.4
|
|
|
4.1
|
|
Amortized prior service cost (credit)
|
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
Settlement
|
|
2.9
|
|
|
—
|
|
|
2.9
|
|
|
—
|
|
Net periodic benefit cost (credit)
|
|
$
|
1.5
|
|
|
$
|
(1.3
|
)
|
|
$
|
(0.5
|
)
|
|
$
|
(3.8
|
)
|
|
|
|
|
|
|
|
|
|
Other Postretirement Benefits
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
$
|
0.3
|
|
|
$
|
0.3
|
|
Interest cost
|
|
3.3
|
|
|
3.5
|
|
|
9.9
|
|
|
10.5
|
|
Amortized loss
|
|
0.2
|
|
|
0.1
|
|
|
0.5
|
|
|
0.3
|
|
Amortized prior service credit
|
|
(0.8
|
)
|
|
(0.7
|
)
|
|
(2.1
|
)
|
|
(2.0
|
)
|
Net periodic benefit cost
|
|
$
|
2.8
|
|
|
$
|
3.0
|
|
|
$
|
8.6
|
|
|
$
|
9.1
|
|
The noncurrent liabilities associated with our pension and other postretirement benefit plans are classified as postretirement benefits and other long-term liabilities on our Condensed Consolidated Balance Sheets. As of
September 30, 2017
and
December 31, 2016
, we have a noncurrent pension liability of
$141.0 million
and
$113.5 million
, respectively. As of
September 30, 2017
and
December 31, 2016
, we have a noncurrent other postretirement benefits liability of
$540.3 million
and
$542.6 million
, respectively.
Due to the availability of our pre-funded pension balances (previous contributions in excess of prior required pension contributions) related to our U.S. pension plans, as well as contributions we made in 2015 for one of our U.K. pension plans, the cash payments to our pension trusts will be insignificant in 2017. We expect our cash payments for other postretirement benefit obligations in 2017, net of GM cost sharing, to be approximately
$16 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 estimate our costs based on the contractual arrangements with our customers, existing customer warranty terms and internal and external warranty data, which includes a determination of our warranty claims and actions taken to improve product quality and minimize warranty claims. We continuously evaluate these estimates and our customers' administration of their warranty programs. We closely monitor actual warranty claim data and adjust the liability, as necessary, on a quarterly basis.
The following table provides a reconciliation of changes in the product warranty liability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
47.9
|
|
|
$
|
37.9
|
|
|
$
|
42.9
|
|
|
$
|
36.6
|
|
Accruals
|
|
4.4
|
|
|
4.4
|
|
|
14.0
|
|
|
12.4
|
|
Payments
|
|
(2.1
|
)
|
|
(3.0
|
)
|
|
(4.5
|
)
|
|
(6.7
|
)
|
Adjustment to prior period accruals
|
|
(3.7
|
)
|
|
—
|
|
|
(6.3
|
)
|
|
(3.1
|
)
|
Foreign currency translation
|
|
0.2
|
|
|
—
|
|
|
0.6
|
|
|
0.1
|
|
Ending balance
|
|
$
|
46.7
|
|
|
$
|
39.3
|
|
|
$
|
46.7
|
|
|
$
|
39.3
|
|
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
$5.7 million
in the
three
months ended
September 30, 2017
as compared to
$17.8 million
in the
three
months ended
September 30, 2016
. Our effective income tax rate was
6.2%
in the
third
quarter of
2017
as compared to
22.4%
in the
third
quarter of
2016
. Income tax expense was
$15.6 million
in the
nine
months ended
September 30, 2017
as compared to
$53.8 million
in the
nine
months ended
September 30, 2016
. Our effective income tax rate was
6.3%
in the first
nine
months of 2017 as compared to
21.7%
in the first
nine
months of 2016.
Our effective income tax rate for the
three
months ended
September 30, 2017
is lower than our effective income tax rate for the
three
months ended
September 30, 2016
as a result of an increase in the proportionate share of income attributable to lower tax rate jurisdictions. In addition, subsequent to the acquisition of MPG, we re-evaluated our valuation allowance position with regard to jurisdictions in which consolidated state tax returns are filed and recorded an income tax benefit for the three months ended September 30, 2017.
Our effective income tax rate for the nine months ended September 30, 2017 is lower than our effective income tax rate for the nine months ended September 30, 2016 as a result of an increase in the proportionate share of income attributable to lower tax rate jurisdictions. In addition, subsequent to the acquisition of MPG, we re-evaluated our valuation allowance position with regard to jurisdictions in which consolidated state tax returns are filed and recorded an income tax benefit for the nine months ended September 30, 2017. This was partially offset by a discrete tax adjustment related to certain non-deductible transaction and acquisition-related costs.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Our income tax expense and effective tax rate for the
three
and
nine
months ended
September 30, 2017
, and
September 30, 2016
, reflect the impact of favorable foreign tax rates, partially offset by our inability to realize a tax benefit for current foreign losses.
Based on the status of audits outside the U.S., and the protocol of finalizing audits by the relevant tax authorities, it is not possible to estimate the timing or impact of changes, if any, to previously recorded uncertain tax positions. As of
September 30, 2017
and December 31, 2016, we have recorded a liability for unrecognized income tax benefits and related interest and penalties of
$54.4 million
and
$30.7 million
, respectively. In January 2016, we completed negotiations with the Mexican tax authorities to settle transfer pricing audits. Including these settlements, we made payments of
$26.1 million
in the first
nine
months of 2016 to the Mexican tax authorities related to transfer pricing matters.
Although it is difficult to estimate with certainty the amount of our tax liabilities for the years that remain subject to audit, we do not expect the settlements will be materially different from what we have recorded in unrecognized tax benefits. We will continue to monitor the progress and conclusions of current and future audits and will adjust our estimated liability as necessary.
|
|
12.
|
EARNINGS PER SHARE (EPS)
|
We present earnings per share using the two-class method. This method allocates undistributed earnings between common shares and non-vested share based payment awards that entitle the holder to non-forfeitable dividend rights. Our participating securities include non-vested restricted stock units.
The following table sets forth the computation of our basic and diluted EPS available to shareholders of common stock (excluding participating securities):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
(in millions, except per share data)
|
Numerator
|
|
|
|
|
|
|
|
|
Net income attributable to AAM
|
|
$
|
86.2
|
|
|
$
|
61.7
|
|
|
$
|
230.8
|
|
|
$
|
193.8
|
|
Less: Net income attributable to participating securities
|
|
(1.9
|
)
|
|
(1.4
|
)
|
|
(5.1
|
)
|
|
(4.4
|
)
|
Net income attributable to common shareholders - Basic and Dilutive
|
|
$
|
84.3
|
|
|
$
|
60.3
|
|
|
$
|
225.7
|
|
|
$
|
189.4
|
|
|
|
|
|
|
|
|
|
|
Denominators
|
|
|
|
|
|
|
|
|
|
|
Basic common shares outstanding -
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding
|
|
113.9
|
|
|
78.3
|
|
|
101.5
|
|
|
78.2
|
|
Less: Participating securities
|
|
(2.6
|
)
|
|
(1.8
|
)
|
|
(2.3
|
)
|
|
(1.8
|
)
|
Weighted-average common shares outstanding
|
|
111.3
|
|
|
76.5
|
|
|
99.2
|
|
|
76.4
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities -
|
|
|
|
|
|
|
|
|
|
|
Dilutive stock-based compensation
|
|
0.4
|
|
|
0.5
|
|
|
0.4
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares outstanding -
|
|
|
|
|
|
|
|
|
|
|
Adjusted weighted-average shares after assumed conversions
|
|
111.7
|
|
|
77.0
|
|
|
99.6
|
|
|
76.8
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
$
|
0.76
|
|
|
$
|
0.79
|
|
|
$
|
2.28
|
|
|
$
|
2.48
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
$
|
0.75
|
|
|
$
|
0.78
|
|
|
$
|
2.27
|
|
|
$
|
2.47
|
|
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. There were no stock options excluded from the calculation of
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
diluted EPS at
September 30, 2017
. The number of stock options outstanding, which were not included in the calculation of diluted EPS, was
0.2 million
, with an exercise price of
$26.02
, at
September 30, 2016
.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
13.
|
RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (AOCI)
|
Reclassification adjustments and other activity impacting accumulated other comprehensive income (loss) during the
three
months ended
September 30, 2017
and
September 30, 2016
are as follows
(in millions)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Plans
|
|
Foreign Currency Translation Adjustments
|
|
Unrecognized Loss on Cash Flow Hedges
|
|
Total
|
Balance at June 30, 2017
|
$
|
(242.9
|
)
|
|
$
|
(85.9
|
)
|
|
$
|
(3.3
|
)
|
|
$
|
(332.1
|
)
|
|
|
|
|
|
|
|
|
Other comprehensive income before reclassifications
|
—
|
|
|
42.8
|
|
|
0.4
|
|
|
43.2
|
|
|
|
|
|
|
|
|
|
Income tax effect of other comprehensive income before reclassifications
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive loss
|
4.1
|
|
(a)
|
—
|
|
|
0.7
|
|
(b)
|
4.8
|
|
|
|
|
|
|
|
|
|
Income tax benefit reclassified into net income
|
(1.0
|
)
|
|
—
|
|
|
—
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income
|
3.1
|
|
|
42.8
|
|
|
1.1
|
|
|
47.0
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2017
|
$
|
(239.8
|
)
|
|
$
|
(43.1
|
)
|
|
$
|
(2.2
|
)
|
|
$
|
(285.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Plans
|
|
Foreign Currency Translation Adjustments
|
|
Unrecognized Loss on Cash Flow Hedges
|
|
Total
|
Balance at June 30, 2016
|
$
|
(219.2
|
)
|
|
$
|
(103.4
|
)
|
|
$
|
(15.7
|
)
|
|
$
|
(338.3
|
)
|
|
|
|
|
|
|
|
|
Other comprehensive loss before reclassifications
|
—
|
|
|
(0.8
|
)
|
|
(6.7
|
)
|
|
(7.5
|
)
|
|
|
|
|
|
|
|
|
Income tax effect of other comprehensive loss before reclassifications
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive loss
|
0.7
|
|
(a)
|
—
|
|
|
2.6
|
|
(b)
|
3.3
|
|
|
|
|
|
|
|
|
|
Income tax benefit reclassified into net income
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income (loss)
|
0.6
|
|
|
(0.8
|
)
|
|
(4.1
|
)
|
|
(4.3
|
)
|
|
|
|
|
|
|
|
|
Balance at September 30, 2016
|
$
|
(218.6
|
)
|
|
$
|
(104.2
|
)
|
|
$
|
(19.8
|
)
|
|
$
|
(342.6
|
)
|
|
|
|
(a)
|
The amount reclassified from AOCI included $4.2 million in cost of goods sold (COGS) and $(0.1) million in selling, general & administrative expenses (SG&A) for the three months ended September 30, 2017 and $1.0 million in COGS and $(0.3) million in SG&A for the three months ended September 30, 2016.
|
|
|
(b)
|
The amounts reclassified from AOCI are included in COGS.
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Reclassification adjustments and other activity impacting accumulated other comprehensive income (loss) during the
nine
months ended
September 30, 2017
and
September 30, 2016
are as follows
(in millions)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Plans
|
|
Foreign Currency Translation Adjustments
|
|
Unrecognized Loss on Cash Flow Hedges
|
|
Total
|
Balance at December 31, 2016
|
$
|
(243.5
|
)
|
|
$
|
(122.4
|
)
|
|
$
|
(23.7
|
)
|
|
$
|
(389.6
|
)
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications
|
(1.7
|
)
|
|
79.3
|
|
|
16.2
|
|
|
93.8
|
|
|
|
|
|
|
|
|
|
Income tax effect of other comprehensive income (loss) before reclassifications
|
0.6
|
|
|
—
|
|
|
0.7
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive loss
|
6.6
|
|
(a)
|
—
|
|
|
4.6
|
|
(b)
|
11.2
|
|
|
|
|
|
|
|
|
|
Income tax benefit reclassified into net income
|
(1.8
|
)
|
|
—
|
|
|
—
|
|
|
(1.8
|
)
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income
|
3.7
|
|
|
79.3
|
|
|
21.5
|
|
|
104.5
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2017
|
$
|
(239.8
|
)
|
|
$
|
(43.1
|
)
|
|
$
|
(2.2
|
)
|
|
$
|
(285.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Plans
|
|
Foreign Currency Translation Adjustments
|
|
Unrecognized Loss on Cash Flow Hedges
|
|
Total
|
Balance at December 31, 2015
|
$
|
(223.9
|
)
|
|
(119.2
|
)
|
|
$
|
(13.4
|
)
|
|
$
|
(356.5
|
)
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications
|
5.7
|
|
|
15.0
|
|
|
(13.3
|
)
|
|
7.4
|
|
|
|
|
|
|
|
|
|
Income tax effect of other comprehensive income (loss) before reclassifications
|
(2.0
|
)
|
|
—
|
|
|
—
|
|
|
(2.0
|
)
|
|
|
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive loss
|
2.4
|
|
(a)
|
—
|
|
|
6.9
|
|
(b)
|
9.3
|
|
|
|
|
|
|
|
|
|
Income tax benefit reclassified into net income
|
(0.8
|
)
|
|
—
|
|
|
—
|
|
|
(0.8
|
)
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income (loss)
|
5.3
|
|
|
15.0
|
|
|
(6.4
|
)
|
|
13.9
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2016
|
$
|
(218.6
|
)
|
|
$
|
(104.2
|
)
|
|
$
|
(19.8
|
)
|
|
$
|
(342.6
|
)
|
|
|
|
(a)
|
The amount reclassified from AOCI included $7.0 million in COGS and $(0.4) million in SG&A for the nine months ended September 30, 2017 and $3.3 million in COGS and $(0.9) million in SG&A for the nine months ended September 30, 2016.
|
|
|
(b)
|
The amounts reclassified from AOCI are included in COGS.
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Prior to the acquisition of MPG on April 6, 2017, we operated in one reportable segment: the manufacture, engineer, design and validation of driveline systems and related components and chassis modules for light trucks, sport utility vehicles (SUVs), crossover vehicles, passenger cars and commercial vehicles. Subsequent to the acquisition of MPG, our business was organized into four business units, each representing a reportable segment under ASC 280
Segment Reporting
. The four segments are Driveline, Metal Forming, Powertrain and Casting. The results of each segment are regularly reviewed by the chief operating decision maker to assess the performance of the segment and make decisions regarding the allocation of resources to the segments.
Our product offerings by segment are as follows:
|
|
•
|
Driveline products consist primarily of axles, driveshafts, power transfer units, rear drive modules, and electric and hybrid driveline products and systems for light trucks, SUVs, crossover vehicles, passenger cars and commercial vehicles;
|
|
|
•
|
Metal Forming products consist primarily of axle shafts, ring and pinion gears, differential gears, transmission gears and shafts and suspension components for OEMs and Tier 1 automotive suppliers;
|
|
|
•
|
The Powertrain segment products consist primarily of transmission module and differential assemblies, transmission valve bodies, connecting rod forging and assemblies, torsional vibration dampers, and variable valve timing products for OEMs and Tier I automotive suppliers; and
|
|
|
•
|
The Casting segment produces both thin wall castings and high strength ductile iron castings, as well as differential cases, steering knuckles, control arms, and turbo charger housings for the global light, commercial and industrial markets.
|
We use Segment Adjusted EBITDA as the measure of earnings to assess the performance of each segment and determine the resources to be allocated to the segments. Segment Adjusted EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization for our reportable segments, excluding the impact of restructuring and acquisition-related costs, debt refinancing and redemption costs and non-recurring items. The following tables represent information by reportable segment for the three months ended September 30, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2017
|
|
|
Driveline
|
|
Metal Forming
|
|
Powertrain
|
|
Casting
|
|
Total
|
Sales
|
|
$
|
1,007.9
|
|
|
$
|
368.2
|
|
|
$
|
260.9
|
|
|
$
|
226.6
|
|
|
$
|
1,863.6
|
|
Less: intersegment sales
|
|
0.2
|
|
|
106.8
|
|
|
3.8
|
|
|
28.4
|
|
|
139.2
|
|
Net external sales
|
|
$
|
1,007.7
|
|
|
$
|
261.4
|
|
|
$
|
257.1
|
|
|
$
|
198.2
|
|
|
$
|
1,724.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA
|
|
$
|
181.4
|
|
|
$
|
70.7
|
|
|
$
|
36.8
|
|
|
$
|
8.8
|
|
|
$
|
297.7
|
|
|
|
Three Months Ended September 30, 2016
|
|
|
Driveline
|
|
Metal Forming
|
|
Powertrain
|
|
Casting
|
|
Total
|
Sales
|
|
$
|
956.1
|
|
|
$
|
137.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,093.3
|
|
Less: intersegment sales
|
|
0.1
|
|
|
86.3
|
|
|
—
|
|
|
—
|
|
|
86.4
|
|
Net external sales
|
|
$
|
956.0
|
|
|
$
|
50.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,006.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA
|
|
$
|
134.4
|
|
|
$
|
22.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
156.7
|
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following tables represent information by reportable segment for the nine months ended September 30, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2017
|
|
|
Driveline
|
|
Metal Forming
|
|
Powertrain
|
|
Casting
|
|
Total
|
Sales
|
|
$
|
3,028.7
|
|
|
$
|
887.5
|
|
|
$
|
544.5
|
|
|
$
|
452.2
|
|
|
$
|
4,912.9
|
|
Less: intersegment sales
|
|
1.1
|
|
|
315.1
|
|
|
6.0
|
|
|
58.6
|
|
|
380.8
|
|
Net external sales
|
|
$
|
3,027.6
|
|
|
$
|
572.4
|
|
|
$
|
538.5
|
|
|
$
|
393.6
|
|
|
$
|
4,532.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA
|
|
$
|
513.5
|
|
|
$
|
170.5
|
|
|
$
|
88.7
|
|
|
$
|
34.3
|
|
|
$
|
807.0
|
|
|
|
Nine Months Ended September 30, 2016
|
|
|
Driveline
|
|
Metal Forming
|
|
Powertrain
|
|
Casting
|
|
Total
|
Sales
|
|
$
|
2,840.4
|
|
|
$
|
414.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,254.8
|
|
Less: intersegment sales
|
|
3.8
|
|
|
249.5
|
|
|
—
|
|
|
—
|
|
|
253.3
|
|
Net external sales
|
|
$
|
2,836.6
|
|
|
$
|
164.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,001.5
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA
|
|
$
|
391.9
|
|
|
$
|
79.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
471.3
|
|
Total assets by reportable segment as of September 30, 2017 and December 31, 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
Driveline
|
|
Metal Forming
|
|
Powertrain
|
|
Casting
|
|
Corporate and Eliminations
|
|
Total
|
Total assets
|
|
$
|
2,362.7
|
|
|
$
|
2,155.8
|
|
|
$
|
1,825.1
|
|
|
$
|
1,018.0
|
|
|
$
|
696.7
|
|
|
$
|
8,058.3
|
|
|
|
December 31, 2016
|
|
|
Driveline
|
|
Metal Forming
|
|
Powertrain
|
|
Casting
|
|
Corporate and Eliminations
|
|
Total
|
Total assets
|
|
$
|
2,183.9
|
|
|
$
|
410.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
829.7
|
|
|
$
|
3,423.9
|
|
Assets included in the Corporate and Eliminations column in the table above represent AAM corporate assets, as well as eliminations of intercompany assets.
The following table represents a reconciliation of Segment Adjusted EBITDA to consolidated income before income taxes for the three and nine months ended September 30, 2017 and 2016.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Segment Adjusted EBITDA
|
$
|
297.7
|
|
|
$
|
156.7
|
|
|
$
|
807.0
|
|
|
$
|
471.3
|
|
Interest expense
|
(57.5
|
)
|
|
(23.2
|
)
|
|
(139.9
|
)
|
|
(70.2
|
)
|
Depreciation and amortization
|
(122.6
|
)
|
|
(49.9
|
)
|
|
(303.4
|
)
|
|
(150.4
|
)
|
Restructuring and acquisition-related costs
|
(22.8
|
)
|
|
—
|
|
|
(90.5
|
)
|
|
—
|
|
Pension settlement
|
(2.9
|
)
|
|
—
|
|
|
(2.9
|
)
|
|
—
|
|
Acquisition-related fair value inventory adjustment
|
—
|
|
|
—
|
|
|
(24.9
|
)
|
|
—
|
|
Impact of change in accounting principle
|
—
|
|
|
—
|
|
|
3.7
|
|
|
—
|
|
Debt refinancing and redemption costs
|
—
|
|
|
—
|
|
|
(2.7
|
)
|
|
—
|
|
Asset impairment charge
|
—
|
|
|
(3.4
|
)
|
|
—
|
|
|
(3.4
|
)
|
Investment gain related to the final distribution of the Reserve Yield Plus Fund
|
—
|
|
|
—
|
|
|
—
|
|
|
1.0
|
|
Other
|
0.1
|
|
|
(0.7
|
)
|
|
0.2
|
|
|
(0.7
|
)
|
Income before income taxes
|
$
|
92.0
|
|
|
$
|
79.5
|
|
|
$
|
246.6
|
|
|
$
|
247.6
|
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
15.
|
SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
|
Holdings has no significant assets other than its
100%
ownership in AAM, Inc. and Metaldyne Performance Group, Inc. (MPG Inc.), and no direct subsidiaries other than AAM, Inc. and MPG Inc. The
7.75%
Notes,
6.625%
Notes,
6.50%
Notes,
6.25%
Notes (due 2025),
6.25%
Notes (due 2021) and
5.125%
Notes are senior unsecured obligations of AAM, Inc.; all of which are fully and unconditionally guaranteed, on a joint and several basis, by Holdings and substantially all domestic subsidiaries of AAM, Inc. and, as of May 17, 2017, MPG Inc, and substantially all domestic subsidiaries of MPG 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 September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
AAM Inc.
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Elims
|
|
Consolidated
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
$
|
—
|
|
|
$
|
250.0
|
|
|
$
|
529.0
|
|
|
$
|
945.4
|
|
|
$
|
—
|
|
|
$
|
1,724.4
|
|
Intercompany
|
|
—
|
|
|
0.2
|
|
|
80.0
|
|
|
7.0
|
|
|
(87.2
|
)
|
|
—
|
|
Total net sales
|
|
—
|
|
|
250.2
|
|
|
609.0
|
|
|
952.4
|
|
|
(87.2
|
)
|
|
1,724.4
|
|
Cost of goods sold
|
|
—
|
|
|
229.6
|
|
|
546.3
|
|
|
738.0
|
|
|
(87.2
|
)
|
|
1,426.7
|
|
Gross profit
|
|
—
|
|
|
20.6
|
|
|
62.7
|
|
|
214.4
|
|
|
—
|
|
|
297.7
|
|
Selling, general and administrative expenses
|
|
—
|
|
|
57.8
|
|
|
24.7
|
|
|
19.8
|
|
|
—
|
|
|
102.3
|
|
Amortization of intangible assets
|
|
—
|
|
|
1.5
|
|
|
22.3
|
|
|
0.6
|
|
|
—
|
|
|
24.4
|
|
Restructuring and acquisition-related costs
|
|
—
|
|
|
21.6
|
|
|
—
|
|
|
1.2
|
|
|
—
|
|
|
22.8
|
|
Operating income (loss)
|
|
—
|
|
|
(60.3
|
)
|
|
15.7
|
|
|
192.8
|
|
|
—
|
|
|
148.2
|
|
Non-operating income (expense), net
|
|
—
|
|
|
(60.8
|
)
|
|
5.5
|
|
|
(0.9
|
)
|
|
—
|
|
|
(56.2
|
)
|
Income (loss) before income taxes
|
|
—
|
|
|
(121.1
|
)
|
|
21.2
|
|
|
191.9
|
|
|
—
|
|
|
92.0
|
|
Income tax expense (benefit)
|
|
—
|
|
|
(29.0
|
)
|
|
17.8
|
|
|
16.9
|
|
|
—
|
|
|
5.7
|
|
Earnings from equity in subsidiaries
|
|
86.2
|
|
|
29.9
|
|
|
25.5
|
|
|
—
|
|
|
(141.6
|
)
|
|
—
|
|
Net income (loss) before royalties
|
|
86.2
|
|
|
(62.2
|
)
|
|
28.9
|
|
|
175.0
|
|
|
(141.6
|
)
|
|
86.3
|
|
Royalties
|
|
—
|
|
|
84.9
|
|
|
1.3
|
|
|
(86.2
|
)
|
|
—
|
|
|
—
|
|
Net income after royalties
|
|
86.2
|
|
|
22.7
|
|
|
30.2
|
|
|
88.8
|
|
|
(141.6
|
)
|
|
86.3
|
|
Net income attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
Net income attributable to AAM
|
|
$
|
86.2
|
|
|
$
|
22.7
|
|
|
$
|
30.2
|
|
|
$
|
88.7
|
|
|
$
|
(141.6
|
)
|
|
$
|
86.2
|
|
Other comprehensive income, net of tax
|
|
47.0
|
|
|
16.7
|
|
|
42.6
|
|
|
51.3
|
|
|
(110.6
|
)
|
|
47.0
|
|
Comprehensive income attributable to AAM
|
|
$
|
133.2
|
|
|
$
|
39.4
|
|
|
$
|
72.8
|
|
|
$
|
140.0
|
|
|
$
|
(252.2
|
)
|
|
$
|
133.2
|
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
AAM Inc.
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Elims
|
|
Consolidated
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
$
|
—
|
|
|
$
|
274.7
|
|
|
$
|
49.9
|
|
|
$
|
682.3
|
|
|
$
|
—
|
|
|
$
|
1,006.9
|
|
Intercompany
|
|
—
|
|
|
3.7
|
|
|
62.7
|
|
|
4.4
|
|
|
(70.8
|
)
|
|
—
|
|
Total net sales
|
|
—
|
|
|
278.4
|
|
|
112.6
|
|
|
686.7
|
|
|
(70.8
|
)
|
|
1,006.9
|
|
Cost of goods sold
|
|
—
|
|
|
265.4
|
|
|
94.9
|
|
|
536.2
|
|
|
(70.8
|
)
|
|
825.7
|
|
Gross profit
|
|
—
|
|
|
13.0
|
|
|
17.7
|
|
|
150.5
|
|
|
—
|
|
|
181.2
|
|
Selling, general and administrative expenses
|
|
—
|
|
|
71.3
|
|
|
—
|
|
|
7.3
|
|
|
—
|
|
|
78.6
|
|
Amortization of intangible assets
|
|
—
|
|
|
1.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
Operating income (loss)
|
|
—
|
|
|
(59.6
|
)
|
|
17.7
|
|
|
143.2
|
|
|
—
|
|
|
101.3
|
|
Non-operating income (expense), net
|
|
—
|
|
|
(24.9
|
)
|
|
2.9
|
|
|
0.2
|
|
|
—
|
|
|
(21.8
|
)
|
Income (loss) before income taxes
|
|
—
|
|
|
(84.5
|
)
|
|
20.6
|
|
|
143.4
|
|
|
—
|
|
|
79.5
|
|
Income tax expense
|
|
—
|
|
|
7.9
|
|
|
0.1
|
|
|
9.8
|
|
|
—
|
|
|
17.8
|
|
Earnings (loss) from equity in subsidiaries
|
|
61.7
|
|
|
87.4
|
|
|
(7.1
|
)
|
|
—
|
|
|
(142.0
|
)
|
|
—
|
|
Net income (loss) before royalties
|
|
61.7
|
|
|
(5.0
|
)
|
|
13.4
|
|
|
133.6
|
|
|
(142.0
|
)
|
|
61.7
|
|
Royalties
|
|
—
|
|
|
66.7
|
|
|
—
|
|
|
(66.7
|
)
|
|
—
|
|
|
—
|
|
Net income after royalties
|
|
61.7
|
|
|
61.7
|
|
|
13.4
|
|
|
66.9
|
|
|
(142.0
|
)
|
|
61.7
|
|
Net income attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income attributable to AAM
|
|
$
|
61.7
|
|
|
$
|
61.7
|
|
|
$
|
13.4
|
|
|
$
|
66.9
|
|
|
$
|
(142.0
|
)
|
|
$
|
61.7
|
|
Other comprehensive income (loss), net of tax
|
|
(4.3
|
)
|
|
(4.3
|
)
|
|
1.0
|
|
|
(3.3
|
)
|
|
6.6
|
|
|
(4.3
|
)
|
Comprehensive income attributable to AAM
|
|
$
|
57.4
|
|
|
$
|
57.4
|
|
|
$
|
14.4
|
|
|
$
|
63.6
|
|
|
$
|
(135.4
|
)
|
|
$
|
57.4
|
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Income
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
AAM Inc.
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Elims
|
|
Consolidated
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
$
|
—
|
|
|
$
|
806.9
|
|
|
$
|
1,139.8
|
|
|
$
|
2,585.4
|
|
|
$
|
—
|
|
|
$
|
4,532.1
|
|
Intercompany
|
|
—
|
|
|
2.4
|
|
|
214.7
|
|
|
19.9
|
|
|
(237.0
|
)
|
|
—
|
|
Total net sales
|
|
—
|
|
|
809.3
|
|
|
1,354.5
|
|
|
2,605.3
|
|
|
(237.0
|
)
|
|
4,532.1
|
|
Cost of goods sold
|
|
—
|
|
|
752.2
|
|
|
1,188.0
|
|
|
2,004.1
|
|
|
(237.0
|
)
|
|
3,707.3
|
|
Gross profit
|
|
—
|
|
|
57.1
|
|
|
166.5
|
|
|
601.2
|
|
|
—
|
|
|
824.8
|
|
Selling, general and administrative expenses
|
|
—
|
|
|
196.0
|
|
|
45.7
|
|
|
47.4
|
|
|
—
|
|
|
289.1
|
|
Amortization of intangible assets
|
|
—
|
|
|
4.3
|
|
|
45.0
|
|
|
1.5
|
|
|
—
|
|
|
50.8
|
|
Restructuring and acquisition-related costs
|
|
—
|
|
|
87.0
|
|
|
—
|
|
|
3.5
|
|
|
|
|
|
90.5
|
|
Operating income (loss)
|
|
—
|
|
|
(230.2
|
)
|
|
75.8
|
|
|
548.8
|
|
|
—
|
|
|
394.4
|
|
Non-operating income (expense), net
|
|
—
|
|
|
(148.7
|
)
|
|
14.9
|
|
|
(14.0
|
)
|
|
—
|
|
|
(147.8
|
)
|
Income (loss) before income taxes
|
|
—
|
|
|
(378.9
|
)
|
|
90.7
|
|
|
534.8
|
|
|
—
|
|
|
246.6
|
|
Income tax expense (benefit)
|
|
—
|
|
|
(62.2
|
)
|
|
42.0
|
|
|
35.8
|
|
|
—
|
|
|
15.6
|
|
Earnings from equity in subsidiaries
|
|
230.8
|
|
|
202.9
|
|
|
41.4
|
|
|
—
|
|
|
(475.1
|
)
|
|
—
|
|
Net income (loss) before royalties
|
|
230.8
|
|
|
(113.8
|
)
|
|
90.1
|
|
|
499.0
|
|
|
(475.1
|
)
|
|
231.0
|
|
Royalties
|
|
—
|
|
|
253.6
|
|
|
2.6
|
|
|
(256.2
|
)
|
|
—
|
|
|
—
|
|
Net income after royalties
|
|
230.8
|
|
|
139.8
|
|
|
92.7
|
|
|
242.8
|
|
|
(475.1
|
)
|
|
231.0
|
|
Net income attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|
(0.2
|
)
|
Net income attributable to AAM
|
|
$
|
230.8
|
|
|
$
|
139.8
|
|
|
$
|
92.7
|
|
|
$
|
242.6
|
|
|
$
|
(475.1
|
)
|
|
$
|
230.8
|
|
Other comprehensive income, net of tax
|
|
104.5
|
|
|
55.3
|
|
|
74.7
|
|
|
94.8
|
|
|
(224.8
|
)
|
|
104.5
|
|
Comprehensive income attributable to AAM
|
|
$
|
335.3
|
|
|
$
|
195.1
|
|
|
$
|
167.4
|
|
|
$
|
337.4
|
|
|
$
|
(699.9
|
)
|
|
$
|
335.3
|
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
AAM Inc.
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Elims
|
|
Consolidated
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
$
|
—
|
|
|
$
|
866.3
|
|
|
$
|
161.4
|
|
|
$
|
1,973.8
|
|
|
$
|
—
|
|
|
$
|
3,001.5
|
|
Intercompany
|
|
—
|
|
|
8.1
|
|
|
185.7
|
|
|
12.2
|
|
|
(206.0
|
)
|
|
—
|
|
Total net sales
|
|
—
|
|
|
874.4
|
|
|
347.1
|
|
|
1,986.0
|
|
|
(206.0
|
)
|
|
3,001.5
|
|
Cost of goods sold
|
|
—
|
|
|
833.5
|
|
|
284.3
|
|
|
1,543.1
|
|
|
(206.0
|
)
|
|
2,454.9
|
|
Gross profit
|
|
—
|
|
|
40.9
|
|
|
62.8
|
|
|
442.9
|
|
|
—
|
|
|
546.6
|
|
Selling, general and administrative expenses
|
|
—
|
|
|
206.8
|
|
|
—
|
|
|
25.0
|
|
|
—
|
|
|
231.8
|
|
Amortization of intangible assets
|
|
—
|
|
|
3.5
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
3.6
|
|
Operating income (loss)
|
|
—
|
|
|
(169.4
|
)
|
|
62.8
|
|
|
417.8
|
|
|
—
|
|
|
311.2
|
|
Non-operating income (expense), net
|
|
—
|
|
|
(72.7
|
)
|
|
8.4
|
|
|
0.7
|
|
|
—
|
|
|
(63.6
|
)
|
Income (loss) before income taxes
|
|
—
|
|
|
(242.1
|
)
|
|
71.2
|
|
|
418.5
|
|
|
—
|
|
|
247.6
|
|
Income tax expense
|
|
—
|
|
|
28.9
|
|
|
0.3
|
|
|
24.6
|
|
|
—
|
|
|
53.8
|
|
Earnings (loss) from equity in subsidiaries
|
|
193.8
|
|
|
266.6
|
|
|
(28.0
|
)
|
|
—
|
|
|
(432.4
|
)
|
|
—
|
|
Net income (loss) before royalties
|
|
193.8
|
|
|
(4.4
|
)
|
|
42.9
|
|
|
393.9
|
|
|
(432.4
|
)
|
|
193.8
|
|
Royalties
|
|
—
|
|
|
198.2
|
|
|
—
|
|
|
(198.2
|
)
|
|
—
|
|
|
—
|
|
Net income after royalties
|
|
193.8
|
|
|
193.8
|
|
|
42.9
|
|
|
195.7
|
|
|
(432.4
|
)
|
|
193.8
|
|
Net income attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income attributable to AAM
|
|
$
|
193.8
|
|
|
$
|
193.8
|
|
|
$
|
42.9
|
|
|
$
|
195.7
|
|
|
$
|
(432.4
|
)
|
|
$
|
193.8
|
|
Other comprehensive income, net of tax
|
|
13.9
|
|
|
13.9
|
|
|
23.2
|
|
|
16.9
|
|
|
(54.0
|
)
|
|
13.9
|
|
Comprehensive income attributable to AAM
|
|
$
|
207.7
|
|
|
$
|
207.7
|
|
|
$
|
66.1
|
|
|
$
|
212.6
|
|
|
$
|
(486.4
|
)
|
|
$
|
207.7
|
|
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/Reclassifications
|
|
Consolidated
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
—
|
|
|
$
|
188.5
|
|
|
$
|
0.1
|
|
|
$
|
361.0
|
|
|
$
|
—
|
|
|
$
|
549.6
|
|
Accounts receivable, net
|
|
—
|
|
|
134.4
|
|
|
320.2
|
|
|
667.4
|
|
|
—
|
|
|
1,122.0
|
|
Intercompany receivables
|
|
—
|
|
|
3,559.1
|
|
|
465.9
|
|
|
8.0
|
|
|
(4,033.0
|
)
|
|
—
|
|
Inventories, net
|
|
—
|
|
|
34.0
|
|
|
151.2
|
|
|
211.4
|
|
|
—
|
|
|
396.6
|
|
Prepaid expenses and other
|
|
—
|
|
|
27.4
|
|
|
12.1
|
|
|
105.0
|
|
|
—
|
|
|
144.5
|
|
Total current assets
|
|
—
|
|
|
3,943.4
|
|
|
949.5
|
|
|
1,352.8
|
|
|
(4,033.0
|
)
|
|
2,212.7
|
|
Property, plant and equipment, net
|
|
—
|
|
|
234.1
|
|
|
788.5
|
|
|
1,280.1
|
|
|
—
|
|
|
2,302.7
|
|
Goodwill
|
|
—
|
|
|
—
|
|
|
1,220.2
|
|
|
434.4
|
|
|
—
|
|
|
1,654.6
|
|
Intangible assets, net
|
|
—
|
|
|
21.9
|
|
|
1,178.1
|
|
|
36.6
|
|
|
—
|
|
|
1,236.6
|
|
Intercompany notes and accounts receivable
|
|
14.6
|
|
|
—
|
|
|
260.9
|
|
|
—
|
|
|
(275.5
|
)
|
|
—
|
|
Other assets and deferred charges
|
|
—
|
|
|
717.4
|
|
|
137.2
|
|
|
129.8
|
|
|
(332.7
|
)
|
|
651.7
|
|
Investment in subsidiaries
|
|
2,735.0
|
|
|
1,917.2
|
|
|
708.9
|
|
|
—
|
|
|
(5,361.1
|
)
|
|
—
|
|
Total assets
|
|
$
|
2,749.6
|
|
|
$
|
6,834.0
|
|
|
$
|
5,243.3
|
|
|
$
|
3,233.7
|
|
|
$
|
(10,002.3
|
)
|
|
$
|
8,058.3
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6.8
|
|
|
$
|
—
|
|
|
$
|
6.8
|
|
Accounts payable
|
|
—
|
|
|
130.2
|
|
|
238.2
|
|
|
488.0
|
|
|
—
|
|
|
856.4
|
|
Intercompany payables
|
|
1,313.0
|
|
|
499.7
|
|
|
2,010.2
|
|
|
210.1
|
|
|
(4,033.0
|
)
|
|
—
|
|
Accrued expenses and other
|
|
—
|
|
|
183.0
|
|
|
56.3
|
|
|
182.5
|
|
|
—
|
|
|
421.8
|
|
Total current liabilities
|
|
1,313.0
|
|
|
812.9
|
|
|
2,304.7
|
|
|
887.4
|
|
|
(4,033.0
|
)
|
|
1,285.0
|
|
Intercompany notes and accounts payable
|
|
—
|
|
|
76.9
|
|
|
—
|
|
|
198.6
|
|
|
(275.5
|
)
|
|
—
|
|
Long-term debt, net
|
|
—
|
|
|
4,096.3
|
|
|
4.6
|
|
|
68.4
|
|
|
—
|
|
|
4,169.3
|
|
Other long-term liabilities
|
|
—
|
|
|
742.2
|
|
|
594.0
|
|
|
163.9
|
|
|
(332.7
|
)
|
|
1,167.4
|
|
Total liabilities
|
|
1,313.0
|
|
|
5,728.3
|
|
|
2,903.3
|
|
|
1,318.3
|
|
|
(4,641.2
|
)
|
|
6,621.7
|
|
Total AAM Stockholders’ equity
|
|
1,432.8
|
|
|
1,105.7
|
|
|
2,340.0
|
|
|
1,911.6
|
|
|
(5,357.3
|
)
|
|
1,432.8
|
|
Noncontrolling interests in subsidiaries
|
|
3.8
|
|
|
—
|
|
|
—
|
|
|
3.8
|
|
|
(3.8
|
)
|
|
3.8
|
|
Total stockholders’ equity
|
|
1,436.6
|
|
|
1,105.7
|
|
|
2,340.0
|
|
|
1,915.4
|
|
|
(5,361.1
|
)
|
|
1,436.6
|
|
Total liabilities and stockholders’ equity
|
|
$
|
2,749.6
|
|
|
$
|
6,834.0
|
|
|
$
|
5,243.3
|
|
|
$
|
3,233.7
|
|
|
$
|
(10,002.3
|
)
|
|
$
|
8,058.3
|
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
AAM Inc.
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Elims
|
|
Consolidated
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
—
|
|
|
$
|
84.3
|
|
|
$
|
1.6
|
|
|
$
|
395.3
|
|
|
$
|
—
|
|
|
$
|
481.2
|
|
Accounts receivable, net
|
|
—
|
|
|
126.7
|
|
|
21.9
|
|
|
411.4
|
|
|
—
|
|
|
560.0
|
|
Intercompany receivables
|
|
—
|
|
|
442.6
|
|
|
326.0
|
|
|
9.1
|
|
|
(777.7
|
)
|
|
—
|
|
Inventories, net
|
|
—
|
|
|
31.3
|
|
|
21.5
|
|
|
129.5
|
|
|
—
|
|
|
182.3
|
|
Prepaid expenses and other
|
|
—
|
|
|
29.4
|
|
|
0.5
|
|
|
45.9
|
|
|
—
|
|
|
75.8
|
|
Total current assets
|
|
—
|
|
|
714.3
|
|
|
371.5
|
|
|
991.2
|
|
|
(777.7
|
)
|
|
1,299.3
|
|
Property, plant and equipment, net
|
|
—
|
|
|
213.7
|
|
|
102.9
|
|
|
777.1
|
|
|
—
|
|
|
1,093.7
|
|
Goodwill
|
|
—
|
|
|
—
|
|
|
147.8
|
|
|
6.2
|
|
|
—
|
|
|
154.0
|
|
Intangible assets, net
|
|
—
|
|
|
22.8
|
|
|
—
|
|
|
5.7
|
|
|
—
|
|
|
28.5
|
|
Intercompany notes and accounts receivable
|
|
—
|
|
|
343.9
|
|
|
242.2
|
|
|
—
|
|
|
(586.1
|
)
|
|
—
|
|
Other assets and deferred charges
|
|
—
|
|
|
644.9
|
|
|
39.8
|
|
|
163.7
|
|
|
—
|
|
|
848.4
|
|
Investment in subsidiaries
|
|
827.6
|
|
|
1,544.4
|
|
|
—
|
|
|
—
|
|
|
(2,372.0
|
)
|
|
—
|
|
Total assets
|
|
$
|
827.6
|
|
|
$
|
3,484.0
|
|
|
$
|
904.2
|
|
|
$
|
1,943.9
|
|
|
$
|
(3,735.8
|
)
|
|
$
|
3,423.9
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3.3
|
|
|
$
|
—
|
|
|
$
|
3.3
|
|
Accounts payable
|
|
—
|
|
|
80.6
|
|
|
35.8
|
|
|
265.9
|
|
|
—
|
|
|
382.3
|
|
Intercompany payables
|
|
—
|
|
|
324.8
|
|
|
153.4
|
|
|
299.5
|
|
|
(777.7
|
)
|
|
—
|
|
Accrued expenses and other
|
|
—
|
|
|
142.2
|
|
|
4.3
|
|
|
119.4
|
|
|
—
|
|
|
265.9
|
|
Total current liabilities
|
|
—
|
|
|
547.6
|
|
|
193.5
|
|
|
688.1
|
|
|
(777.7
|
)
|
|
651.5
|
|
Intercompany notes and accounts payable
|
|
321.8
|
|
|
14.6
|
|
|
7.5
|
|
|
242.2
|
|
|
(586.1
|
)
|
|
—
|
|
Long-term debt, net
|
|
—
|
|
|
1,339.7
|
|
|
4.1
|
|
|
57.1
|
|
|
—
|
|
|
1,400.9
|
|
Investment in subsidiaries obligation
|
|
—
|
|
|
—
|
|
|
124.7
|
|
|
—
|
|
|
(124.7
|
)
|
|
—
|
|
Other long-term liabilities
|
|
—
|
|
|
754.5
|
|
|
0.6
|
|
|
110.6
|
|
|
—
|
|
|
865.7
|
|
Total liabilities
|
|
321.8
|
|
|
2,656.4
|
|
|
330.4
|
|
|
1,098.0
|
|
|
(1,488.5
|
)
|
|
2,918.1
|
|
Total stockholders’ equity
|
|
505.8
|
|
|
827.6
|
|
|
573.8
|
|
|
845.9
|
|
|
(2,247.3
|
)
|
|
505.8
|
|
Total liabilities and stockholders’ equity
|
|
$
|
827.6
|
|
|
$
|
3,484.0
|
|
|
$
|
904.2
|
|
|
$
|
1,943.9
|
|
|
$
|
(3,735.8
|
)
|
|
$
|
3,423.9
|
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
AAM Inc.
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Elims
|
|
Consolidated
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
—
|
|
|
$
|
276.4
|
|
|
$
|
9.0
|
|
|
$
|
135.3
|
|
|
$
|
—
|
|
|
$
|
420.7
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
—
|
|
|
(43.1
|
)
|
|
(73.3
|
)
|
|
(162.3
|
)
|
|
—
|
|
|
(278.7
|
)
|
Proceeds from sale of property, plant and equipment
|
|
—
|
|
|
0.3
|
|
|
0.3
|
|
|
1.1
|
|
|
—
|
|
|
1.7
|
|
Purchase buyouts of leased equipment
|
|
—
|
|
|
(12.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12.6
|
)
|
Proceeds from sale of business, net
|
|
—
|
|
|
7.5
|
|
|
(1.6
|
)
|
|
—
|
|
|
—
|
|
|
5.9
|
|
Acquisition of business, net of cash acquired
|
|
—
|
|
|
(953.5
|
)
|
|
64.6
|
|
|
(6.6
|
)
|
|
—
|
|
|
(895.5
|
)
|
Net cash used in investing activities
|
|
—
|
|
|
(1,001.4
|
)
|
|
(10.0
|
)
|
|
(167.8
|
)
|
|
—
|
|
|
(1,179.2
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net debt activity
|
|
—
|
|
|
926.1
|
|
|
(0.5
|
)
|
|
(12.1
|
)
|
|
—
|
|
|
913.5
|
|
Debt issuance costs
|
|
—
|
|
|
(90.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(90.8
|
)
|
Employee stock option exercises
|
|
—
|
|
|
0.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
Purchase of treasury stock
|
|
(7.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7.0
|
)
|
Intercompany activity
|
|
7.0
|
|
|
(7.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net cash provided by (used in) financing activities
|
|
—
|
|
|
829.2
|
|
|
(0.5
|
)
|
|
(12.1
|
)
|
|
—
|
|
|
816.6
|
|
Effect of exchange rate changes on cash
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10.3
|
|
|
—
|
|
|
10.3
|
|
Net increase (decrease) in cash and cash equivalents
|
|
—
|
|
|
104.2
|
|
|
(1.5
|
)
|
|
(34.3
|
)
|
|
—
|
|
|
68.4
|
|
Cash and cash equivalents at beginning of period
|
|
—
|
|
|
84.3
|
|
|
1.6
|
|
|
395.3
|
|
|
—
|
|
|
481.2
|
|
Cash and cash equivalents at end of period
|
|
$
|
—
|
|
|
$
|
188.5
|
|
|
$
|
0.1
|
|
|
$
|
361.0
|
|
|
$
|
—
|
|
|
$
|
549.6
|
|
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
AAM Inc.
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Elims
|
|
Consolidated
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
—
|
|
|
$
|
114.8
|
|
|
$
|
20.9
|
|
|
$
|
155.3
|
|
|
$
|
—
|
|
|
$
|
291.0
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
—
|
|
|
(25.9
|
)
|
|
(12.0
|
)
|
|
(120.8
|
)
|
|
—
|
|
|
(158.7
|
)
|
Proceeds from sale of property, plant and equipment
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|
0.4
|
|
|
—
|
|
|
0.7
|
|
Proceeds from government grants
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.8
|
|
|
—
|
|
|
2.8
|
|
Final distribution of Reserve Yield Plus Fund
|
|
—
|
|
|
1.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.0
|
|
Acquisition of business, net of cash acquired
|
|
—
|
|
|
—
|
|
|
(5.6
|
)
|
|
—
|
|
|
—
|
|
|
(5.6
|
)
|
Intercompany activity
|
|
—
|
|
|
—
|
|
|
(2.0
|
)
|
|
—
|
|
|
2.0
|
|
|
—
|
|
Net cash used in investing activities
|
|
—
|
|
|
(24.9
|
)
|
|
(19.3
|
)
|
|
(117.6
|
)
|
|
2.0
|
|
|
(159.8
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net debt activity
|
|
—
|
|
|
(0.4
|
)
|
|
(0.3
|
)
|
|
23.3
|
|
|
—
|
|
|
22.6
|
|
Employee stock option exercises
|
|
—
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
Purchase of treasury stock
|
|
(5.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.3
|
)
|
Intercompany activity
|
|
5.3
|
|
|
(5.3
|
)
|
|
—
|
|
|
2.0
|
|
|
(2.0
|
)
|
|
—
|
|
Net cash provided by (used in) financing activities
|
|
—
|
|
|
(5.4
|
)
|
|
(0.3
|
)
|
|
25.3
|
|
|
(2.0
|
)
|
|
17.6
|
|
Effect of exchange rate changes on cash
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.6
|
|
|
—
|
|
|
2.6
|
|
Net increase in cash and cash equivalents
|
|
—
|
|
|
84.5
|
|
|
1.3
|
|
|
65.6
|
|
|
—
|
|
|
151.4
|
|
Cash and cash equivalents at beginning of period
|
|
—
|
|
|
52.0
|
|
|
—
|
|
|
230.5
|
|
|
—
|
|
|
282.5
|
|
Cash and cash equivalents at end of period
|
|
$
|
—
|
|
|
$
|
136.5
|
|
|
$
|
1.3
|
|
|
$
|
296.1
|
|
|
$
|
—
|
|
|
$
|
433.9
|
|