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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10-Q
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended September 30, 2024
  
or
  
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  
 For the transition period from  _____________ to _____________
  
Commission File Number:  1-14303
_______________________________________________________________________________

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware38-3161171
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
 
One Dauch Drive, Detroit, Michigan
48211-1198
(Address of Principal Executive Offices)(Zip Code)

(313) 758-2000
(Registrant's Telephone Number, Including Area Code)
_______________________________________________________________________________
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☑ No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☑ No  ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ☑         Accelerated filer  ☐         Non-accelerated filer   ☐         Smaller reporting company   ☐         Emerging growth company   ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.01 per shareAXLNew York Stock Exchange

As of November 5, 2024, the latest practicable date, the number of shares of the registrant's Common Stock, par value $0.01 per share, outstanding was 117,581,028 shares.
 
Internet Website Access to Reports

The website for American Axle & Manufacturing Holdings, Inc. is www.aam.com.  Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Exchange Act are available free of charge through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission (SEC).  The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.


AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2024
TABLE OF CONTENTS 
 
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FORWARD-LOOKING STATEMENTS

In this Quarterly Report on Form 10-Q (Quarterly Report), we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 and relate to trends and events that may affect our future financial position and operating results. The terms such as “will,” “may,” “could,” “would,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “project,” "target," and similar words or expressions, as well as statements in future tense, are intended to identify forward-looking statements.

Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks and may differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

•global economic conditions, including the impact of inflation, recession or recessionary concerns, or slower growth in the markets in which we operate;
•reduced purchases of our products by General Motors Company (GM), Stellantis N.V. (Stellantis), Ford Motor Company (Ford) or other customers;
•our ability to respond to changes in technology, increased competition or pricing pressures;
•our ability to develop and produce new products that reflect market demand;
•lower-than-anticipated market acceptance of new or existing products;
•our ability to attract new customers and programs for new products;
•reduced demand for our customers' products (particularly light trucks and sport utility vehicles (SUVs) produced by GM, Stellantis and Ford);
•risks inherent in our global operations (including tariffs and the potential consequences thereof to us, our suppliers, and our customers and their suppliers, adverse changes in trade agreements, such as the United States-Mexico-Canada Agreement (USMCA), compliance with customs and trade regulations, immigration policies, political stability or geopolitical conflicts, taxes and other law changes, potential disruptions of production and supply, and currency rate fluctuations);
•supply shortages and the availability of natural gas or other fuel and utility sources in certain regions, labor shortages, including increased labor costs, or price increases in raw material and/or freight, utilities or other operating supplies for us or our customers as a result of pandemic or epidemic illness such as COVID-19, geopolitical conflicts, natural disasters or otherwise;
•a significant disruption in operations at one or more of our key manufacturing facilities;
•risks inherent in transitioning our business from internal combustion engine vehicle products to hybrid and electric vehicle products;
•our ability to realize the expected revenues from our new and incremental business backlog;
•negative or unexpected tax consequences, including those resulting from tax litigation;
•risks related to a failure of our information technology systems and networks, including cloud-based applications, and risks associated with current and emerging technology threats and damage from computer viruses, unauthorized access, cyber attacks and other similar disruptions;
•our suppliers', our customers' and their suppliers' ability to maintain satisfactory labor relations and avoid or minimize work stoppages;
•cost or availability of financing for working capital, capital expenditures, research and development (R&D) or other general corporate purposes including acquisitions, as well as our ability to comply with financial covenants;
•our customers' and suppliers' availability of financing for working capital, capital expenditures, R&D or other general corporate purposes;
•an impairment of our goodwill, other intangible assets, or long-lived assets if our business or market conditions indicate that the carrying values of those assets exceed their fair values;
•liabilities arising from warranty claims, product recall or field actions, product liability and legal proceedings to which we are or may become a party, or the impact of product recall or field actions on our customers;
•our ability or our customers' and suppliers' ability to successfully launch new product programs on a timely basis;
•risks of environmental issues, including impacts of climate-related events, that could result in unforeseen issues or costs at our facilities, or risks of noncompliance with environmental laws and regulations, including reputational damage;
•our ability to maintain satisfactory labor relations and avoid work stoppages;
•our ability to consummate strategic initiatives and successfully integrate acquisitions and joint ventures;
•our ability to achieve the level of cost reductions required to sustain global cost competitiveness or our ability to recover certain cost increases from our customers;
•price volatility in, or reduced availability of, fuel;
•our ability to protect our intellectual property and successfully defend against assertions made against us;
•adverse changes in laws, government regulations or market conditions affecting our products or our customers' products;
•our ability or our customers' and suppliers' ability to comply with regulatory requirements and the potential costs of such compliance;
•changes in liabilities arising from pension and other postretirement benefit obligations;
•our ability to attract and retain qualified personnel in key positions and functions; and
•other unanticipated events and conditions that may hinder our ability to compete.

It is not possible to foresee or identify all such factors and we make no commitment to update any forward-looking statement or to disclose any facts, events or circumstances after the date hereof that may affect the accuracy of any forward-looking statement.
1

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 Three Months EndedNine Months Ended
 September 30,September 30,
 2024202320242023
 (in millions, except per share data)
 
Net sales$1,504.9 $1,551.9 $4,744.1 $4,616.5 
 
Cost of goods sold1,333.6 1,421.3 4,157.0 4,147.1 
 
Gross profit171.3 130.6 587.1 469.4 
 
Selling, general and administrative expenses94.6 81.8 298.1 271.2 
Amortization of intangible assets20.8 21.4 62.1 64.2 
Impairment charge (Note 2)12.0 — 12.0 — 
Restructuring and acquisition-related costs2.2 3.5 9.7 16.2 
Operating income41.7 23.9 205.2 117.8 
 
Interest expense(45.2)(50.8)(142.1)(151.5)
 
Interest income7.1 7.1 21.5 18.9 
 
Other income (expense)
Debt refinancing and redemption costs(0.2)(0.3)(0.5)(0.3)
Loss on equity securities— (1.2)(0.1)(1.2)
Other income (expense), net(5.5)1.9 (14.3)5.1 
 
Income (loss) before income taxes(2.1)(19.4)69.7 (11.2)
 
Income tax expense (benefit)(12.1)(2.0)21.0 3.3 
 
Net income (loss)$10.0 $(17.4)$48.7 $(14.5)
 
Basic earnings (loss) per share$0.08 $(0.15)$0.40 $(0.12)
 
Diluted earnings (loss) per share$0.08 $(0.15)$0.40 $(0.12)

See accompanying notes to condensed consolidated financial statements.
2

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months EndedNine Months Ended
September 30,September 30,
2024202320242023
(in millions)
Net income (loss) $10.0 $(17.4)$48.7 $(14.5)
Other comprehensive income (loss)
Defined benefit plans, net of tax (a)
(0.6)(1.1)(1.8)(2.5)
     Foreign currency translation adjustments21.6 (16.1)(8.0)(12.0)
     Changes in hedges, net of tax (b)
(28.2)— (36.4)19.8 
Other comprehensive income (loss)(7.2)(17.2)(46.2)5.3 
Comprehensive income (loss)$2.8 $(34.6)$2.5 $(9.2)
(a)
Amounts are net of tax of $0.3 million and $0.9 million for the three and nine months ended September 30, 2024 and $0.2 million and $1.1 million for the three and nine months ended September 30, 2023.
(b)
Amounts are net of tax of $6.6 million and $6.2 million for the three and nine months ended September 30, 2024 and $(1.6) million and $(3.3) million for the three and nine months ended September 30, 2023.

See accompanying notes to condensed consolidated financial statements.
3

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30, 2024December 31, 2023
 (Unaudited) 
Assets(in millions)
Current assets 
Cash and cash equivalents$542.5 $519.9 
Accounts receivable, net900.1 818.5 
Inventories, net465.6 482.9 
Prepaid expenses and other169.2 185.3 
Current assets held-for-sale58.1 — 
Total current assets2,135.5 2,006.6 
Property, plant and equipment, net1,657.0 1,760.9 
Deferred income taxes188.3 169.4 
Goodwill174.1 182.1 
Other intangible assets, net477.5 532.8 
GM postretirement cost sharing asset109.3 111.9 
Operating lease right-of-use assets112.6 115.6 
Other assets and deferred charges474.0 477.0 
Total assets$5,328.3 $5,356.3 
Liabilities and Stockholders’ Equity  
Current liabilities  
Current portion of long-term debt$42.7 $17.0 
Accounts payable805.7 773.9 
Accrued compensation and benefits205.4 200.1 
Deferred revenue17.1 16.6 
Current portion of operating lease liabilities23.6 21.9 
Accrued expenses and other175.3 172.1 
Current liabilities held-for-sale24.4 — 
Total current liabilities1,294.2 1,201.6 
Long-term debt, net2,638.3 2,751.9 
Deferred revenue42.1 70.4 
Deferred income taxes15.9 16.5 
Long-term portion of operating lease liabilities91.2 95.5 
Postretirement benefits and other long-term liabilities630.3 615.5 
Total liabilities4,712.0 4,751.4 
Stockholders' equity  
Common stock, par value $0.01 per share; 150.0 million shares authorized;
128.3 million shares issued as of September 30, 2024 and 127.4 million shares issued as of December 31, 2023
1.3 1.3 
Paid-in capital1,394.3 1,382.6 
Accumulated deficit(234.5)(283.2)
Treasury stock at cost, 10.7 million shares as of September 30, 2024 and 10.3 million shares as of December 31, 2023
(235.7)(232.9)
Accumulated other comprehensive income (loss)
Defined benefit plans, net of tax(147.1)(145.3)
Foreign currency translation adjustments(150.3)(142.3)
Unrecognized gain (loss) on hedges, net of tax(11.7)24.7 
Total stockholders' equity616.3 604.9 
Total liabilities and stockholders' equity$5,328.3 $5,356.3 
 See accompanying notes to condensed consolidated financial statements. 
4

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months Ended
 September 30,
 20242023
(in millions)
Operating activities  
Net income (loss)$48.7 $(14.5)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization354.3 365.8 
Impairment charge (Note 2)12.0 — 
Deferred income taxes(21.2)(37.2)
Stock-based compensation11.7 10.3 
Pensions and other postretirement benefits, net of contributions(7.0)(9.0)
Loss on disposal of property, plant and equipment, net5.3 3.9 
Loss on equity securities0.1 1.2 
Debt refinancing and redemption costs0.5 0.3 
Changes in operating assets and liabilities
Accounts receivable(106.1)(67.5)
Inventories7.9 2.7 
Accounts payable and accrued expenses45.0 123.7 
Deferred revenue(28.3)(18.0)
Other assets and liabilities(18.7)(18.5)
Net cash provided by operating activities304.2 343.2 
Investing activities  
Purchases of property, plant and equipment(170.0)(138.6)
Proceeds from sale of property, plant and equipment3.6 0.8 
Proceeds from government grants2.0 — 
Acquisition of business, net of cash acquired(6.7)(1.9)
Proceeds from sale of equity securities0.8 — 
Proceeds from insurance claim — 17.0 
Other investing activities(3.9)(4.0)
Net cash used in investing activities(174.2)(126.7)
Financing activities  
Payments of Revolving Credit Facility— (25.0)
Proceeds from issuance of long-term debt7.0 35.1 
Payments of long-term debt(99.2)(89.8)
Debt issuance costs(1.7)(3.2)
Purchase of treasury stock(2.8)(14.7)
Other financing activities(9.3)(10.6)
Net cash used in financing activities(106.0)(108.2)
Effect of exchange rate changes on cash(1.4)(4.2)
Net increase in cash and cash equivalents22.6 104.1 
Cash and cash equivalents at beginning of period519.9 511.5 
Cash and cash equivalents at end of period$542.5 $615.6 
Supplemental cash flow information
     Interest paid$138.2 $132.5 
     Income taxes paid, net$31.7 $41.4 
See accompanying notes to condensed consolidated financial statements.
5

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Common StockAccumulated
SharesParPaid-inRetained EarningsTreasuryOther Comprehensive
OutstandingValueCapital(Accumulated Deficit)StockIncome (Loss)
(in millions)
Balance at January 1, 2023114.6 $1.3 $1,369.2 $(249.6)$(218.2)$(275.4)
Net loss— — — (5.1)— — 
Vesting of stock-based compensation4.0 — — — — — 
Stock-based compensation— — 3.4 — — — 
Purchase of treasury stock(1.6)— — — (14.5)— 
Changes in hedges— — — — — 2.5 
Foreign currency translation adjustments— — — — — 8.8 
Defined benefit plans, net— — — — — (0.7)
Balance at March 31, 2023117.0 $1.3 $1,372.6 $(254.7)$(232.7)$(264.8)
Net income— — — 8.0 — — 
Vesting of stock-based compensation0.1 — — — — — 
Stock-based compensation— — 3.4 — — — 
Purchase of treasury stock— — — — (0.2)— 
Changes in hedges— — — — — 17.3 
Foreign currency translation adjustments— — — — — (4.7)
Defined benefit plans, net— — — — — (0.7)
Balance at June 30, 2023117.1 $1.3 $1,376.0 $(246.7)$(232.9)$(252.9)
Net loss— — — (17.4)— — 
Stock-based compensation— — 3.5 — — — 
Changes in hedges— — — — — — 
Foreign currency translation adjustments— — — — — (16.1)
Defined benefit plans, net— — — — — (1.1)
Balance at September 30, 2023117.1 $1.3 $1,379.5 $(264.1)$(232.9)$(270.1)

6

Common StockAccumulated
SharesParPaid-inRetained EarningsTreasuryOther Comprehensive
OutstandingValueCapital(Accumulated Deficit)StockIncome (Loss)
(in millions)
Balance at January 1, 2024117.1 $1.3 $1,382.6 $(283.2)$(232.9)$(262.9)
Net income— — — 20.5 — — 
Vesting of stock-based compensation0.8 — — — — — 
Stock-based compensation— — 3.8 — — — 
Purchase of treasury stock(0.4)— — — (2.7)— 
Changes in hedges— — — — — 10.8 
Foreign currency translation adjustments— — — — — (15.3)
Defined benefit plans, net— — — — — (0.6)
Balance at March 31, 2024117.5 $1.3 $1,386.4 $(262.7)$(235.6)$(268.0)
Net income— — — 18.2 — — 
Vesting of stock-based compensation0.1 — — — — — 
Stock-based compensation— — 4.0 — — — 
Purchase of treasury stock— — — — (0.1)— 
Changes in hedges— — — — — (19.0)
Foreign currency translation adjustments— — — — — (14.3)
Defined benefit plans, net— — — — — (0.6)
Balance at June 30, 2024117.6 $1.3 $1,390.4 $(244.5)$(235.7)$(301.9)
Net income— — — 10.0 — — 
Stock-based compensation— — 3.9 — — — 
Changes in hedges— — — — — (28.2)
Foreign currency translation adjustments— — — — — 21.6 
Defined benefit plans, net— — — — — (0.6)
Balance at September 30, 2024117.6 $1.3 $1,394.3 $(234.5)$(235.7)$(309.1)

See accompanying notes to condensed consolidated financial statements.
7

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization As a leading global tier 1 automotive and mobility supplier, AAM designs, engineers and manufactures Driveline and Metal Forming technologies to support electric, hybrid, and internal combustion vehicles. Headquartered in Detroit with over 80 facilities in 18 countries, AAM is bringing the future faster for a safer and more sustainable tomorrow.

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, 2023 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 materially 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, 2023.

Effect of New Accounting Standards and Other Regulatory Pronouncements

Accounting Standards Update 2023-07
On November 27, 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2023-07 - Improvements to Reportable Segment Disclosures (Topic 280). ASU 2023-07 enhances existing annual segment requirements to include disclosure of significant segment expenses and other segment items by reportable segment that are regularly used by the Chief Operating Decision Maker (CODM) to evaluate segment performance. This guidance also requires annual disclosure of the title and position of the CODM. ASU 2023-07 also expands interim segment disclosure requirements to include all existing annual segment disclosures in addition to the new disclosure requirements for significant segment expenses and other segment items. We adopted this guidance retrospectively on January 1, 2024 for the annual requirements and will adopt the interim requirements on January 1, 2025. We are currently finalizing our assessment of the impact that this standard will have on our segment disclosures.
Accounting Standards Update 2023-09
On December 14, 2023, the FASB issued ASU 2023-09 - Improvements to Income Tax Disclosures (Topic 740). ASU 2023-09 expands the existing disclosure requirements for the annual rate reconciliation between the effective tax rate and the statutory federal tax rate by requiring reconciliation items to be disaggregated by defined categories and disclosed as both percentages and amounts. ASU 2023-09 also requires the disaggregation of income taxes paid by jurisdiction for each annual period presented. This guidance becomes effective at the beginning of our 2025 fiscal year and may be applied either retrospectively or prospectively. We expect to adopt this guidance on January 1, 2025 and we are currently assessing the impact that this standard will have on our consolidated financial statements.

8
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Securities and Exchange Commission (SEC) Rule
In the first quarter of 2024, the SEC adopted "The Enhancement and Standardization of Climate-Related Disclosures for Investors," a rule that expands disclosure requirements, including climate-related risks and financial statement impacts, as well as disclosures related to greenhouse gas (GHG) emissions. The annual disclosures related to climate-related risks and financial statement impacts are required beginning with our 2025 fiscal year and the disclosures related to GHG emissions are required beginning with our 2026 fiscal year. The GHG emissions disclosures are also subject to limited assurance requirements by 2029 and reasonable assurance requirements by 2033. We are currently assessing the impact that this rule will have on our consolidated financial statements. In April 2024, the SEC issued an order staying the rule pending legal review of the petitions challenging the rule. This order does not amend the compliance dates required by the rule.
9
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ASSETS AND LIABILITIES HELD-FOR-SALE

In October 2024, we entered into a definitive agreement to sell our commercial vehicle axle business and related assets in India (AAM India Manufacturing Corporation Pvt., Ltd.) to Bharat Forge Limited for a sales price of $65 million, subject to certain customary adjustments at closing. The sale is expected to close in the fourth quarter of 2024, subject to customary closing conditions, including the receipt of regulatory approvals.

As a result, the assets and liabilities associated with this business have met the criteria to be classified as held-for-sale as of September 30, 2024. As such, $58.1 million of assets and $24.4 million of liabilities are classified as held-for-sale in our Condensed Consolidated Balance Sheet as of September 30, 2024. These amounts are classified entirely as current as we expect to complete the sale in the fourth quarter of 2024. Upon reclassification to held-for-sale in the third quarter of 2024, we recorded an impairment charge of $12.0 million to reduce the carrying value of this business to fair value less cost to sell. This impairment charge was primarily driven by approximately $30 million of accumulated currency translation adjustments that were included in the calculation of the carrying value of this business.

The sale of AAM India Manufacturing Corporation Pvt., Ltd. did not qualify for classification as discontinued operations as the sale does not represent a strategic shift in our business that has had, or will have, a major effect on our operations and financial results. As such, no reclassification of the assets and liabilities as held-for-sale was required in our Condensed Consolidated Balance Sheet as of December 31, 2023.
10
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INVENTORIES

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, 2024December 31, 2023
 (in millions)
   
Raw materials and work-in-progress$393.7 $411.5 
Finished goods105.2 103.5 
Gross inventories498.9 515.0 
Inventory valuation reserves(33.3)(32.1)
Inventories, net$465.6 $482.9 

11
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, 2024:
Consolidated
(in millions)
Balance at December 31, 2023$182.1 
Reclassification to Assets held-for-sale(8.3)
Foreign currency translation0.3 
Balance at September 30, 2024$174.1 

We conduct our annual goodwill impairment test in the fourth quarter of each year, as well as whenever adverse events or changes in circumstances indicate a possible impairment. In performing this test, we utilize a third-party valuation specialist to assist management in determining the fair value of our reporting units. Fair value of each reporting unit is estimated based on a combination of discounted cash flows and the use of pricing multiples derived from an analysis of comparable public companies multiplied against historical and/or anticipated financial metrics of each reporting unit. These calculations contain uncertainties as they require management to make assumptions including, but not limited to, market comparables, future cash flows of the reporting units, and appropriate discount and long-term growth rates. This fair value determination is categorized as Level 3 within the fair value hierarchy.

At September 30, 2024, accumulated goodwill impairment losses were $1,435.5 million. All remaining goodwill is attributable to our Driveline reporting unit.

In October 2024, we entered into a definitive agreement to sell AAM India Manufacturing Corporation Pvt., Ltd. As a result, we have classified $8.3 million of goodwill associated with this business as held-for-sale as of September 30, 2024. See Note 2 - Assets and Liabilities Held-For-Sale for more detail.

Other Intangible Assets The following table provides a reconciliation of the gross carrying amount and associated accumulated amortization for AAM's other intangible assets, which are all subject to amortization:
September 30,December 31,
20242023
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
(in millions)
Capitalized computer software$60.9 $(51.7)$9.2 $54.2 $(49.2)$5.0 
Customer platforms856.2 (475.7)380.5 856.2 (428.2)428.0 
Customer relationships53.0 (25.6)27.4 53.0 (23.1)29.9 
Technology and other154.2 (93.8)60.4 154.3 (84.4)69.9 
Total$1,124.3 $(646.8)$477.5 $1,117.7 $(584.9)$532.8 

Amortization expense for our intangible assets was $20.8 million for the three months ended September 30, 2024 and $21.4 million for the three months ended September 30, 2023, and was $62.1 million for the nine months ended September 30, 2024 and $64.2 million for the nine months ended September 30, 2023. Estimated amortization expense for the years 2024 through 2028 is expected to be in the range of approximately $80 million to $85 million per year.
12
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT

Long-term debt consists of the following:
 
 September 30, 2024December 31, 2023
 (in millions)
   
Revolving Credit Facility$— $— 
Term Loan A Facility484.3 484.3 
Term Loan B Facility648.0 648.0 
6.875% Notes due 2028
400.0 400.0 
6.50% Notes due 2027
500.0 500.0 
6.25% Notes due 2026
45.9 127.6 
5.00% Notes due 2029
600.0 600.0 
Foreign credit facilities and other40.2 51.8 
Total debt2,718.4 2,811.7 
    Less: Current portion of long-term debt42.7 17.0 
Long-term debt2,675.7 2,794.7 
    Less: Debt issuance costs37.4 42.8 
Long-term debt, net$2,638.3 $2,751.9 

Senior Secured Credit Facilities American Axle & Manufacturing Holdings, Inc. (Holdings) and American Axle & Manufacturing, Inc. (AAM, Inc.) are parties to an amended and restated credit agreement that was entered into on March 11, 2022 and amended on December 13, 2022, June 28, 2023 and May 16, 2024 (as so amended, the Amended and Restated Credit Agreement) which provides for a term loan A facility (the Term Loan A Facility), term loan B facility (the Term Loan B Facility) and a multi-currency revolving credit facility (the Revolving Credit Facility and together with the Term Loan A Facility and the Term Loan B Facility, the Senior Secured Credit Facilities).

On May 16, 2024, Holdings and AAM, Inc. entered into a refinancing facility agreement (the Refinancing Facility Agreement), that established a new Term Loan B Facility of $648.0 million (the New Term Loan B Facility) and amended the Amended and Restated Credit Agreement to, among other things, update the applicable interest rate on the New Term Loan B Facility. The proceeds from the New Term Loan B Facility, together with $2.2 million cash on hand, were used to a) prepay the entire principal amount of the then-outstanding Term Loan B Facility, b) pay all accrued and unpaid interest due under the then-outstanding Term Loan B Facility and c) pay fees, costs and expenses payable in connection with the refinancing of the Term Loan B Facility. The New Term Loan B Facility will mature on December 13, 2029 (TLB Maturity), subject to a springing maturity that will apply if on any date prior to the TLB Maturity any of AAM's senior notes exceed $250 million outstanding within 91 days of the maturity date of such senior notes. In connection with the Refinancing Facility Agreement, we paid $1.7 million of debt refinancing costs and paid accrued interest of $0.5 million relating to the Term Loan B Facility. The terms of the Term Loan A Facility and the Revolving Credit Facility under the Amended and Restated Credit Agreement, including their respective interest rates and maturity dates in the first quarter of 2027, remain unchanged.

On June 28, 2023, Holdings and AAM, Inc. entered into the First Amendment to the Amended and Restated Credit Agreement (the First Amendment), which, among other things, increased the maximum levels of the total net leverage ratio covenant and reduced the minimum levels of cash interest expense coverage ratio covenant for the period from June 28, 2023 through the filing of our second quarter 2024 results, subject to certain conditions (the Amendment Period), modified certain categories of the applicable margin (determined based on the total net leverage ratio of Holdings) for the duration of the Amendment Period with respect to interest rates under the Term Loan A Facility and the Revolving Credit Facility, and modified certain covenants restricting the ability of Holdings, AAM, Inc. and certain subsidiaries of Holdings to create, incur, assume, or permit to exist certain additional indebtedness and liens and to make or agree to pay or make certain restricted payments, voluntary payments and distributions. As of the date of the First Amendment, the terms of the then-outstanding Term Loan B Facility under the Amended and Restated Credit Agreement, including maturity dates, interest rates and their applicable margins, remained unchanged. We paid debt issuance costs of $3.2 million in the nine months ended September 30, 2023 related to the First Amendment. The Amendment Period is no longer in effect following the filing of our second quarter 2024 results in August 2024.
13
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At September 30, 2024, we had $892.2 million available under the Revolving Credit Facility. This availability reflects a reduction of $32.8 million primarily for standby letters of credit issued against the facility. In the nine months ended September 30, 2023, we repaid $25.0 million on our Revolving Credit Facility that had been drawn in the fourth quarter of 2022.

As of September 30, 2024, we have prepaid $6.5 million of the outstanding principal on our Term Loan A Facility and $15.2 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 through the end of 2024 and under the Term Loan B Facility through the end of 2026.

In the first nine months of 2023, we made voluntary prepayments of the outstanding principal on our Term Loan A facility and the then-outstanding Term Loan B facility and expensed $0.3 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of these borrowings.

The 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 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.

Redemption of 6.25% Notes Due 2026 In the second quarter of 2024, we voluntarily redeemed a portion of our 6.25% Notes due 2026. This resulted in a principal payment of $30.0 million and $0.4 million in accrued interest. We also expensed approximately $0.1 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing.

In the third quarter of 2024, we voluntarily redeemed an additional portion of our 6.25% Notes due 2026. This resulted in a principal payment of $50.0 million and $1.2 million in accrued interest. We also expensed approximately $0.2 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing. Additionally, in the nine months ended September 30, 2024, we completed an open market repurchase of our 6.25% Notes due 2026 of $1.7 million.

Repayment of Tekfor Group Indebtedness In the nine months ended September 30, 2024, we repaid $6.6 million of outstanding indebtedness that we assumed upon our acquisition of Tekfor in June 2022.

Foreign credit facilities and Other We utilize local currency credit facilities to finance the operations of certain foreign subsidiaries. At September 30, 2024, $40.2 million was outstanding under our foreign credit facilities, as compared to $51.8 million at December 31, 2023. At September 30, 2024, an additional $74.7 million was available under our foreign credit facilities.

Weighted-Average Interest Rate The weighted-average interest rate of our long-term debt outstanding was 6.8% at September 30, 2024 and 7.1% at December 31, 2023.
14
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. DERIVATIVES

Our business and financial results are affected by fluctuations in global financial markets, including currency exchange rates and interest 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 contracts to reduce the effects of fluctuations in exchange rates relating to certain foreign currencies. As of September 30, 2024 and December 31, 2023, we had currency forward contracts outstanding with a total notional amount of $254.9 million and $206.9 million, respectively, that hedge our exposure to changes in foreign currency exchange rates for certain payroll expenses into the second quarter of 2027 and the purchase of certain direct and indirect inventory and other working capital items into the fourth quarter of 2025.

Fixed-to-fixed cross-currency swap In the second quarter of 2024, we discontinued our existing €200.0 million fixed-to-fixed cross-currency swap that was designated as a cash flow hedge and entered into a new fixed-to-fixed cross-currency swap that is designated as a fair value hedge. The fixed-to-fixed cross currency swap reduces the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans. At September 30, 2024, we had a notional amount outstanding under the fixed-to-fixed cross-currency swap of €175.0 million, which was equivalent to $194.8 million. The fixed-to-fixed cross-currency swap hedges our exposure to changes in exchange rates on the intercompany loans through the second quarter of 2027.

Variable-to-fixed interest rate swaps In 2023, we entered into variable-to-fixed interest rate swaps to reduce the variability of cash flows associated with interest payments on our variable rate debt. As of September 30, 2024, we have $700.0 million notional amount hedged in relation to our variable-to-fixed interest rate swaps into the third quarter of 2027, $200.0 million of which continues into the fourth quarter of 2029.

The following table summarizes the reclassification of pre-tax derivative gains and losses into net income (loss) from accumulated other comprehensive income (loss) for those derivative instruments designated as cash flow and fair value hedges under Accounting Standards Codification (ASC) 815 - Derivatives and Hedging:
 LocationGain (Loss) Reclassified DuringTotal of Financial Loss Expected
 of Gain (Loss)Three Months EndedNine Months EndedStatement to be Reclassified
   Reclassified intoSeptember 30,September 30,Line ItemDuring the
   Net Income (Loss)20242023202420232024Next 12 Months
  (in millions)
Currency forward contractsCost of Goods Sold$2.0 $5.5 $12.4 $14.3 $4,157.0 $(6.2)
Fixed-to-fixed cross-currency swapOther Income (Expense), net(7.4)6.7 (0.4)2.7 (14.3)— 
Variable-to-fixed interest rate swapInterest Expense1.2 1.1 2.6 1.9 (142.1)(0.6)

See Note 8 - 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, 2024 and 2023.

The following table summarizes the amount and location of gains and losses recognized in the Condensed Consolidated Statements of Operations for those derivative instruments not designated as hedging instruments under ASC 815:
 LocationGain (Loss) Recognized DuringTotal of Financial
 of Gain (Loss)Three Months EndedNine Months EndedStatement
  Recognized in September 30,September 30,Line Item
   Net Income (Loss)20242023202420232024
  (in millions)
Currency forward contractsOther Income (Expense), net$(1.9)$0.1 $(3.6)$3.8 $(14.3)
15
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. FAIR VALUE

ASC 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 carrying 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:
 
 Fair Value 
September 30, 2024December 31, 2023Input
 (in millions) 
Balance Sheet Classification   
Cash equivalents$235.0 $328.3 Level 1
Prepaid expenses and other   
Cash flow hedges - currency forward contracts3.2 15.9 Level 2
Nondesignated - currency forward contracts— 0.8 Level 2
Other assets and deferred charges
     Cash flow hedges - currency forward contracts0.2 5.4 Level 2
     Investment in equity securities— 0.8 Level 1
Accrued expenses and other
     Cash flow hedges - currency forward contracts9.3 — Level 2
Cash flow hedges - fixed-to-fixed cross-currency swap— 9.4 Level 2
     Cash flow hedges - variable-to-fixed interest rate swap6.9 5.0 Level 2
     Nondesignated - currency forward contracts2.3 — Level 2
Postretirement benefits and other long-term liabilities
     Cash flow hedges - currency forward contracts7.0 — Level 2
Fair value hedges - fixed-to-fixed cross-currency swap10.6 — Level 2
     Cash flow hedges - variable-to-fixed interest rate swap17.5 16.5 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 had previously invested in the equity securities of REE Automotive, which were measured at fair value each reporting period, with changes in fair value reported as a gain or loss within Other income (expense), net in our Condensed Consolidated Statement of Operations. During the nine months ended September 30, 2024, we sold all of our remaining equity securities of REE Automotive.
16
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

We estimated the fair value of the amounts outstanding on our debt using available market information and other observable data, to be as follows:
 
 September 30, 2024December 31, 2023 
 Carrying  AmountFair ValueCarrying  AmountFair Value
 
Input
 (in millions) 
     
Revolving Credit Facility$— $— $— $— Level 2
Term Loan A Facility484.3 484.9 484.3 483.6 Level 2
Term Loan B Facility648.0 648.8 648.0 649.6 Level 2
6.875% Notes due 2028
400.0 396.0 400.0 387.0 Level 2
6.50% Notes due 2027
500.0 498.8 500.0 501.9 Level 2
6.25% Notes due 2026
45.9 45.8 127.6 126.3 Level 2
5.00% Notes due 2029
600.0 546.0 600.0 529.5 Level 2

17
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (AOCI)

Reclassification adjustments and other activity impacting accumulated other comprehensive income (loss) during the three and nine months ended September 30, 2024 and September 30, 2023 are as follows (in millions):

Defined Benefit PlansForeign Currency Translation AdjustmentsUnrecognized Gain (Loss) on HedgesTotal
Balance at June 30, 2024
$(146.5)$(171.9)$16.5 $(301.9)
Other comprehensive income (loss) before reclassifications— 21.6 (39.0)(17.4)
Income tax effect of other comprehensive income (loss) before reclassifications— — 8.3 8.3 
Amounts reclassified from accumulated other comprehensive income (loss)(0.9)(a)— 4.2 (b)3.3 
Income taxes reclassified into net income0.3 — (1.7)(1.4)
Net change in accumulated other comprehensive income (loss)(0.6)21.6 (28.2)(7.2)
Balance at September 30, 2024
$(147.1)$(150.3)$(11.7)$(309.1)

Defined Benefit PlansForeign Currency Translation AdjustmentsUnrecognized Gain (Loss) on HedgesTotal
Balance at June 30, 2023
$(148.3)$(145.6)$41.0 $(252.9)
Other comprehensive income (loss) before reclassifications— (16.1)14.9 (1.2)
Income tax effect of other comprehensive income (loss) before reclassifications— — (3.3)(3.3)
Amounts reclassified from accumulated other comprehensive income (loss)(1.3)(a)— (13.3)(b)(14.6)
Income taxes reclassified into net loss0.2 — 1.7 1.9 
Net change in accumulated other comprehensive income (loss)(1.1)(16.1)— (17.2)
Balance at September 30, 2023
$(149.4)$(161.7)$41.0 $(270.1)

(a)
These amounts were reclassified from AOCI to Other income (expense), net for the three months ended September 30, 2024 and September 30, 2023.
(b)
The amounts reclassified from AOCI included $(2.0) million in cost of goods sold (COGS), $(1.2) million in interest expense and $7.4 million in Other income (expense), net for the three months ended September 30, 2024 and $(5.5) million in COGS, $(1.1) million in interest expense and $(6.7) million in Other income (expense), net for the three months ended September 30, 2023.
18
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Defined Benefit PlansForeign Currency Translation AdjustmentsUnrecognized Gain (Loss) on HedgesTotal
Balance at December 31, 2023
$(145.3)$(142.3)$24.7 $(262.9)
Other comprehensive loss before reclassifications— (8.0)(28.0)(36.0)
Income tax effect of other comprehensive loss before reclassifications— — 5.9 5.9 
Amounts reclassified from accumulated other comprehensive income (loss)(2.7)(a)— (14.6)(b)(17.3)
Income taxes reclassified into net income0.9 — 0.3 1.2 
Net change in accumulated other comprehensive income (loss)(1.8)(8.0)(36.4)(46.2)
Balance at September 30, 2024
$(147.1)$(150.3)$(11.7)$(309.1)

Defined Benefit PlansForeign Currency Translation AdjustmentsUnrecognized Gain (Loss) on HedgesTotal
Balance at December 31, 2022
$(146.9)$(149.7)$21.2 $(275.4)
Other comprehensive income (loss) before reclassifications— (12.0)42.0 30.0 
Income tax effect of other comprehensive income (loss) before reclassifications— — (4.3)(4.3)
Amounts reclassified from accumulated other comprehensive income (loss)(3.6)(a)— (18.9)(b)(22.5)
Income taxes reclassified into net loss1.1 — 1.0 2.1 
Net change in accumulated other comprehensive income (loss)(2.5)(12.0)19.8 5.3 
Balance at September 30, 2023
$(149.4)$(161.7)$41.0 $(270.1)

(a)
These amounts were reclassified from AOCI to Other income (expense), net for the nine months ended September 30, 2024 and September 30, 2023.
(b)
The amounts reclassified from AOCI included $(12.4) million in cost of goods sold (COGS), $(2.6) million in interest expense and $0.4 million in Other income (expense), net for the nine months ended September 30, 2024 and $(14.3) million in COGS, $(1.9) million in interest expense and $(2.7) million in Other income (expense), net for the nine months ended September 30, 2023.
19
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. EMPLOYEE BENEFIT PLANS

The components of net periodic benefit cost (credit) are as follows:
 Pension Benefits
 Three Months EndedNine Months Ended
 September 30,September 30,
 2024202320242023