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, ~~2021~~2022

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)


Delaware						38-3161171
(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 class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	AXL	New York Stock Exchange

As of November ~~2, 2021,~~1, 2022, the latest practicable date, the number of shares of the registrant's Common Stock, par value $0.01 per share, outstanding was ~~114,060,741~~114,554,229 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, ~~2021~~2022

TABLE OF CONTENTS


			Page Number

FORWARD-LOOKING STATEMENTS			1

Part I		FINANCIAL INFORMATION	2

	Item 1	Financial Statements	2
		Condensed Consolidated Statements of Operations	2
		Condensed Consolidated Statements of Comprehensive Income (Loss)	3
		Condensed Consolidated Balance Sheets	4
		Condensed Consolidated Statements of Cash Flows	5
		Condensed Consolidated Statements of Stockholders' Equity	6
		Notes to Condensed Consolidated Financial Statements	8

	Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	3332

	Item 3	Quantitative and Qualitative Disclosures About Market Risk	46

	Item 4	Controls and Procedures	47

Part II		OTHER INFORMATION	48

	Item 1A	Risk Factors	48

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	48

	Item 6	Exhibits	49

		Signatures	50

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:

•significant disruptions in production, sales and/or supply as a result of public health crises, including pandemic or epidemic illness such as ~~Novel Coronavirus (COVID-19),~~COVID-19, or otherwise;

•global economic ~~conditions;~~conditions, including the impact of inflation 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), immigration policies, political stability or geopolitical conflicts, taxes and other law changes, potential disruptions of production and supply, and currency rate fluctuations);

•supply shortages, such as the semiconductor shortage that the automotive industry is currently experiencing 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 pandemics, geopolitical conflicts, natural disasters or otherwise;

•a significant disruption in operations at one or more of our key manufacturing facilities;

•negative or unexpected tax consequences;

•risks related to a failure of our information technology systems and networks, and risks associated with current and emerging technology threats and damage from computer viruses, unauthorized access, cyber attacks and other similar disruptions;

•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 suppliers', our customers' and their suppliers' ability to maintain satisfactory labor relations and avoid work stoppages;

•our ability to consummate and successfully integrate acquisitions and joint ventures;

•our ability to achieve the level of cost reductions required to sustain global cost competitiveness;

•our ability to realize the expected revenues from our new and incremental business backlog;

•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 ~~associates;~~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.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
		(in millions, except per share data)									(in millions, except per share data)

Net sales	Net sales	$	1,213.1	$	1,414.1	$	3,921.5	$	3,272.9	Net sales	$	1,535.2	$	1,213.1	$	4,409.7	$	3,921.5

Cost of goods sold	Cost of goods sold	1,047.5		1,164.3		3,338.8		2,926.7		Cost of goods sold	1,357.8		1,047.5		3,872.0		3,338.8

Gross profit	Gross profit	165.6		249.8		582.7		346.2		Gross profit	177.4		165.6		537.7		582.7

Selling, general and administrative expenses	Selling, general and administrative expenses	90.5		66.5		266.7		230.6		Selling, general and administrative expenses	85.7		90.5		256.6		266.7

Amortization of intangible assets	Amortization of intangible assets	21.4		21.6		64.3		65.0		Amortization of intangible assets	21.5		21.4		64.4		64.3

Impairment charges (Note 4)		—		—		—		510.0

Restructuring and acquisition-related costs	Restructuring and acquisition-related costs	7.4		9.7		40.8		38.6		Restructuring and acquisition-related costs	7.9		7.4		26.4		40.8

Loss on sale of business	Loss on sale of business	—		—		2.7		1.0		Loss on sale of business	—		—		—		2.7

Operating income (loss)		46.3		152.0		208.2		(499.0)
Operating income										Operating income	62.3		46.3		190.3		208.2

Interest expense	Interest expense	(49.7)		(53.9)		(150.7)		(160.0)		Interest expense	(44.8)		(49.7)		(132.2)		(150.7)

Interest income	Interest income	2.7		3.4		8.2		9.2		Interest income	5.4		2.7		11.6		8.2

Other income (expense)	Other income (expense)									Other income (expense)
Debt refinancing and redemption costs	Debt refinancing and redemption costs	(31.6)		(5.2)		(34.0)		(6.7)		Debt refinancing and redemption costs	(0.2)		(31.6)		(6.0)		(34.0)
Unrealized gain on equity securities		19.4		—		19.4		—
Gain on bargain purchase of business										Gain on bargain purchase of business	1.4		—		13.0		—
Unrealized gain (loss) on equity securities										Unrealized gain (loss) on equity securities	(2.3)		19.4		(24.0)		19.4
Other expense, net	Other expense, net	(3.1)		(1.6)		(1.3)		(3.8)		Other expense, net	(1.0)		(3.1)		(4.4)		(1.3)

Income (loss) before income taxes	Income (loss) before income taxes	(16.0)		94.7		49.8		(660.3)		Income (loss) before income taxes	20.8		(16.0)		48.3		49.8

Income tax benefit	Income tax benefit	(13.6)		(22.5)		(2.4)		(63.1)		Income tax benefit	(5.7)		(13.6)		(2.1)		(2.4)

Net income (loss)	Net income (loss)	$	(2.4)	$	117.2	$	52.2	$	(597.2)	Net income (loss)	$	26.5	$	(2.4)	$	50.4	$	52.2

Net income attributable to noncontrolling interests		—		—		—		(0.1)

Net income (loss) attributable to AAM		$	(2.4)	$	117.2	$	52.2	$	(597.3)


Basic earnings (loss) per share	Basic earnings (loss) per share	$	(0.02)	$	0.99	$	0.44	$	(5.28)	Basic earnings (loss) per share	$	0.22	$	(0.02)	$	0.42	$	0.44

Diluted earnings (loss) per share	Diluted earnings (loss) per share	$	(0.02)	$	0.99	$	0.44	$	(5.28)	Diluted earnings (loss) per share	$	0.22	$	(0.02)	$	0.42	$	0.44

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


											Three Months Ended				Nine Months Ended
		Three Months Ended				Nine Months Ended					September 30,				September 30,
		September 30,				September 30,					2022		2021		2022		2021
		2021		2020		2021		2020
		(in millions)									(in millions)
Net income (loss)	Net income (loss)	$	(2.4)	$	117.2	$	52.2	$	(597.2)	Net income (loss)	$	26.5	$	(2.4)	$	50.4	$	52.2

Other comprehensive income (loss)	Other comprehensive income (loss)									Other comprehensive income (loss)
Defined benefit plans, net of tax (a)	Defined benefit plans, net of tax (a)	2.2		1.7		6.5		5.0		Defined benefit plans, net of tax (a)	1.5		2.2		4.1		6.5
Foreign currency translation adjustments	Foreign currency translation adjustments	(9.6)		14.0		(8.4)		(30.0)		Foreign currency translation adjustments	(34.4)		(9.6)		(70.7)		(8.4)
Changes in cash flow hedges, net of tax (b)	Changes in cash flow hedges, net of tax (b)	(1.8)		6.7		3.0		(19.3)		Changes in cash flow hedges, net of tax (b)	19.1		(1.8)		33.1		3.0
Other comprehensive income (loss)	Other comprehensive income (loss)	(9.2)		22.4		1.1		(44.3)		Other comprehensive income (loss)	(13.8)		(9.2)		(33.5)		1.1

Comprehensive income (loss)	Comprehensive income (loss)	$	(11.6)	$	139.6	$	53.3	$	(641.5)	Comprehensive income (loss)	$	12.7	$	(11.6)	$	16.9	$	53.3

Net income attributable to noncontrolling interests		—		—		—		(0.1)
Foreign currency translation adjustments attributable to noncontrolling interests		—		—		—		0.3

Comprehensive income (loss) attributable to AAM		$	(11.6)	$	139.6	$	53.3	$	(641.3)


(a)			Amounts are net of tax of $(0.4) million and $(1.4) million for the three and nine months ended September 30, 2022, and $(0.6) million and $(1.7) million for the three and nine months ended September 30, 2021, ~~and $(0.4)~~respectively.
(b)			Amounts are net of tax of $(4.9) million and ~~$(1.2)~~$(7.6) million for the three and nine months ended September 30, ~~2020, respectively.~~
~~(b)~~			~~Amounts are net of tax of~~2022, and $(0.7) million and $(2.7) million for the three and nine months ended September 30, 2021, ~~and $(0.2) million and $1.6 million for the three and nine months ended September 30, 2020,~~ respectively.

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
		(Unaudited)					(Unaudited)
Assets	Assets	(in millions)				Assets	(in millions)
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	500.7	$	557.0	Cash and cash equivalents	$	472.3	$	530.2
Accounts receivable, net	Accounts receivable, net	739.6		793.2		Accounts receivable, net	974.6		762.8
Inventories, net	Inventories, net	417.9		323.2		Inventories, net	446.8		410.4
Prepaid expenses and other	Prepaid expenses and other	163.8		203.6		Prepaid expenses and other	161.8		152.6

Total current assets	Total current assets	1,822.0		1,877.0		Total current assets	2,055.5		1,856.0

Property, plant and equipment, net	Property, plant and equipment, net	1,992.3		2,163.8		Property, plant and equipment, net	1,905.3		1,996.1
Deferred income taxes	Deferred income taxes	126.5		107.8		Deferred income taxes	135.7		121.1
Goodwill	Goodwill	184.1		185.7		Goodwill	179.3		183.8
Other intangible assets, net	Other intangible assets, net	717.7		780.7		Other intangible assets, net	636.2		697.2
GM postretirement cost sharing asset	GM postretirement cost sharing asset	233.9		237.0		GM postretirement cost sharing asset	200.2		201.1
Operating lease right-of-use assets	Operating lease right-of-use assets	121.2		116.6		Operating lease right-of-use assets	111.8		123.7
Other assets and deferred charges	Other assets and deferred charges	444.8		447.7		Other assets and deferred charges	455.6		456.7
Total assets	Total assets	$	5,642.5	$	5,916.3	Total assets	$	5,679.6	$	5,635.7

Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current liabilities	Current liabilities					Current liabilities

Current portion of long-term debt	Current portion of long-term debt	$	14.6	$	13.7	Current portion of long-term debt	$	19.2	$	18.8
Accounts payable	Accounts payable	605.0		578.9		Accounts payable	779.6		612.8
Accrued compensation and benefits	Accrued compensation and benefits	197.4		170.9		Accrued compensation and benefits	202.1		195.2
Deferred revenue	Deferred revenue	25.7		23.4		Deferred revenue	29.2		28.1
Current portion of operating lease liabilities	Current portion of operating lease liabilities	24.4		22.6		Current portion of operating lease liabilities	23.2		24.6
Accrued expenses and other	Accrued expenses and other	136.1		169.8		Accrued expenses and other	161.0		160.4

Total current liabilities	Total current liabilities	1,003.2		979.3		Total current liabilities	1,214.3		1,039.9

Long-term debt, net	Long-term debt, net	3,104.1		3,441.3		Long-term debt, net	2,974.1		3,085.7
Deferred revenue	Deferred revenue	88.2		91.0		Deferred revenue	70.1		94.8
Deferred income taxes	Deferred income taxes	15.1		13.2		Deferred income taxes	14.9		13.5
Long-term portion of operating lease liabilities	Long-term portion of operating lease liabilities	97.6		94.4		Long-term portion of operating lease liabilities	89.6		99.9
Postretirement benefits and other long-term liabilities	Postretirement benefits and other long-term liabilities	901.5		923.9		Postretirement benefits and other long-term liabilities	830.1		844.1
Total liabilities	Total liabilities	5,209.7		5,543.1		Total liabilities	5,193.1		5,177.9

Stockholders' equity	Stockholders' equity					Stockholders' equity
Common stock, par value $0.01 per share; 150.0 million shares authorized;	Common stock, par value $0.01 per share; 150.0 million shares authorized;					Common stock, par value $0.01 per share; 150.0 million shares authorized;
122.5 million shares issued as of September 30, 2021 and 121.3 million shares issued as of December 31, 2020		1.3		1.2
123.2 million shares issued as of September 30, 2022 and 122.5 million shares issued as of December 31, 2021						123.2 million shares issued as of September 30, 2022 and 122.5 million shares issued as of December 31, 2021	1.3		1.3
Paid-in capital	Paid-in capital	1,346.5		1,333.3		Paid-in capital	1,365.2		1,351.5
Accumulated deficit	Accumulated deficit	(267.6)		(319.8)		Accumulated deficit	(263.5)		(313.9)
Treasury stock at cost, 8.4 million shares as of September 30, 2021 and 8.0 million shares as of December 31, 2020		(216.3)		(212.0)
Accumulated other comprehensive loss
Treasury stock at cost, 8.7 million shares as of September 30, 2022 and 8.5 million shares as of December 31, 2021						Treasury stock at cost, 8.7 million shares as of September 30, 2022 and 8.5 million shares as of December 31, 2021	(218.2)		(216.3)
Accumulated other comprehensive income (loss)						Accumulated other comprehensive income (loss)
Defined benefit plans, net of tax	Defined benefit plans, net of tax	(304.5)		(311.0)		Defined benefit plans, net of tax	(237.8)		(241.9)
Foreign currency translation adjustments	Foreign currency translation adjustments	(109.5)		(101.1)		Foreign currency translation adjustments	(182.0)		(111.3)
Unrecognized loss on cash flow hedges, net of tax		(17.1)		(20.1)
Total AAM stockholders' equity		432.8		370.5
Noncontrolling interests in subsidiaries		—		2.7
Unrecognized gain (loss) on cash flow hedges, net of tax						Unrecognized gain (loss) on cash flow hedges, net of tax	21.5		(11.6)

Total stockholders' equity	Total stockholders' equity	432.8		373.2		Total stockholders' equity	486.5		457.8
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	5,642.5	$	5,916.3	Total liabilities and stockholders' equity	$	5,679.6	$	5,635.7

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Nine Months Ended					Nine Months Ended
		September 30,					September 30,
		2021		2020			2022		2021
		(in millions)					(in millions)
Operating activities	Operating activities					Operating activities
Net income (loss)		$	52.2	$	(597.2)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Net income						Net income	$	50.4	$	52.2
Adjustments to reconcile net income to net cash provided by operating activities						Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	Depreciation and amortization	421.2		393.7		Depreciation and amortization	367.1		421.2
Impairment charges		—		510.0

Deferred income taxes	Deferred income taxes	(17.1)		(38.4)		Deferred income taxes	(13.2)		(17.1)
Stock-based compensation	Stock-based compensation	13.2		14.4		Stock-based compensation	13.7		13.2
Pensions and other postretirement benefits, net of contributions	Pensions and other postretirement benefits, net of contributions	(9.3)		(6.5)		Pensions and other postretirement benefits, net of contributions	(7.0)		(9.3)
Loss on sale of business	Loss on sale of business	2.7		1.0		Loss on sale of business	—		2.7
Loss on disposal of property, plant and equipment, net		2.1		16.4
Unrealized gain on equity securities		(19.4)		—
Loss (gain) on disposal of property, plant and equipment, net						Loss (gain) on disposal of property, plant and equipment, net	(1.8)		2.1
Unrealized loss (gain) on equity securities						Unrealized loss (gain) on equity securities	24.0		(19.4)
Gain on bargain purchase of business						Gain on bargain purchase of business	(13.0)		—
Debt refinancing and redemption costs	Debt refinancing and redemption costs	34.0		6.7		Debt refinancing and redemption costs	6.0		34.0
Changes in operating assets and liabilities	Changes in operating assets and liabilities					Changes in operating assets and liabilities
Accounts receivable	Accounts receivable	46.7		(88.0)		Accounts receivable	(205.5)		46.7
Inventories	Inventories	(94.1)		56.9		Inventories	(11.9)		(94.1)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	37.0		5.6		Accounts payable and accrued expenses	167.1		37.0
Deferred revenue	Deferred revenue	3.3		(6.6)		Deferred revenue	(13.8)		3.3
Other assets and liabilities	Other assets and liabilities	(36.5)		(21.6)		Other assets and liabilities	(61.7)		(36.5)
Net cash provided by operating activities	Net cash provided by operating activities	436.0		246.4		Net cash provided by operating activities	300.4		436.0

Investing activities	Investing activities					Investing activities
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(115.8)		(146.3)		Purchases of property, plant and equipment	(117.9)		(115.8)
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	1.8		1.6		Proceeds from sale of property, plant and equipment	4.3		1.8

Purchase buyouts of leased equipment		—		(0.1)

Proceeds (payments) for sale of business, net of cash divested		0.9		(4.4)
Acquisition of business (Note 14)		(4.9)		—

Proceeds from sale of business, net of cash divested						Proceeds from sale of business, net of cash divested	—		0.9
Acquisition of business, net of cash acquired (Note 14)						Acquisition of business, net of cash acquired (Note 14)	(88.3)		(4.9)
Proceeds from insurance claim (Note 15)	Proceeds from insurance claim (Note 15)	23.1		—		Proceeds from insurance claim (Note 15)	6.3		23.1
Other investing activities						Other investing activities	(1.8)		—
Net cash used in investing activities	Net cash used in investing activities	(94.9)		(149.2)		Net cash used in investing activities	(197.4)		(94.9)

Financing activities	Financing activities					Financing activities

Proceeds from Revolving Credit Facility		—		350.0
Payments of Revolving Credit Facility		—		(350.0)

Proceeds from issuance of long-term debt	Proceeds from issuance of long-term debt	622.7		408.9		Proceeds from issuance of long-term debt	222.0		622.7
Payments of long-term debt	Payments of long-term debt	(999.9)		(482.2)		Payments of long-term debt	(368.8)		(999.9)
Debt issuance costs	Debt issuance costs	(9.2)		(11.0)		Debt issuance costs	(4.4)		(9.2)

Purchase of treasury stock	Purchase of treasury stock	(4.3)		(2.7)		Purchase of treasury stock	(1.9)		(4.3)
Other financing activities	Other financing activities	(3.5)		(0.6)		Other financing activities	5.3		(3.5)

Net cash used in financing activities	Net cash used in financing activities	(394.2)		(87.6)		Net cash used in financing activities	(147.8)		(394.2)

Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(3.2)		(4.3)		Effect of exchange rate changes on cash	(13.1)		(3.2)

Net increase (decrease) in cash and cash equivalents		(56.3)		5.3
Net decrease in cash and cash equivalents						Net decrease in cash and cash equivalents	(57.9)		(56.3)

Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	557.0		532.0		Cash and cash equivalents at beginning of period	530.2		557.0

Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	500.7	$	537.3	Cash and cash equivalents at end of period	$	472.3	$	500.7

Supplemental cash flow information	Supplemental cash flow information					Supplemental cash flow information
Interest paid	Interest paid	$	153.5	$	138.0	Interest paid	$	117.4	$	153.5
Income taxes paid (refunds received), net		$	17.8	$	(5.2)
Income taxes paid, net						Income taxes paid, net	$	28.5	$	17.8
Non-cash investing activities: Deferred consideration for acquisition of business	Non-cash investing activities: Deferred consideration for acquisition of business	$	10.0	$	—	Non-cash investing activities: Deferred consideration for acquisition of business	$	—	$	10.0

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)


		Common Stock									Accumulated		Noncontrolling			Common Stock									Accumulated		Noncontrolling
		Shares	Par		Paid-in		Retained Earnings		Treasury		Other Comprehensive		Interest			Shares	Par		Paid-in		Retained Earnings		Treasury		Other Comprehensive		Interest
		Outstanding	Value		Capital		(Accumulated Deficit)		Stock		Income (Loss)		in Subsidiaries			Outstanding	Value		Capital		(Accumulated Deficit)		Stock		Income (Loss)		in Subsidiaries
		(in millions)														(in millions)

Balance at January 1, 2020		112.6	$	1.2	$	1,313.9	$	248.6	$	(209.3)	$	(376.8)	$	2.8
Net income (loss)		—	—		—		(501.3)		—		—		0.1
Balance at January 1, 2021															Balance at January 1, 2021	113.3	$	1.2	$	1,333.3	$	(319.8)	$	(212.0)	$	(432.2)	$	2.7
Net income															Net income	—	—		—		38.6		—		—		—
Vesting of restricted stock units and performance shares	Vesting of restricted stock units and performance shares	0.8	—		—		—		—		—		—		Vesting of restricted stock units and performance shares	1.0	0.1		—		—		—		—		—
Stock-based compensation	Stock-based compensation	—	—		4.6		—		—		—		—		Stock-based compensation	—	—		5.3		—		—		—		—
Modified-retrospective application of ASU 2016-13		—	—		—		(7.1)		—		—		—

Purchase of treasury stock	Purchase of treasury stock	(0.4)	—		—		—		(2.4)		—		—		Purchase of treasury stock	(0.4)	—		—		—		(4.0)		—		—
Changes in cash flow hedges	Changes in cash flow hedges	—	—		—		—		—		(34.7)		—		Changes in cash flow hedges	—	—		—		—		—		(0.3)		—
Foreign currency translation adjustments	Foreign currency translation adjustments	—	—		—		—		—		(48.5)		(0.3)		Foreign currency translation adjustments	—	—		—		—		—		(11.0)		—
Defined benefit plans, net	Defined benefit plans, net	—	—		—		—		—		1.6		—		Defined benefit plans, net	—	—		—		—		—		2.1		—
Balance at March 31, 2020		113.0	$	1.2	$	1,318.5	$	(259.8)	$	(211.7)	$	(458.4)	$	2.6
Net loss		—	—		—		(213.2)		—		—		—
Sale of business (Note 14)															Sale of business (Note 14)	—	—		—		—		—		—		(2.7)
Balance at March 31, 2021															Balance at March 31, 2021	113.9	$	1.3	$	1,338.6	$	(281.2)	$	(216.0)	$	(441.4)	$	—
Net income															Net income	—	—		—		16.0		—		—		—
Vesting of restricted stock units and performance shares	Vesting of restricted stock units and performance shares	0.3	—		—		—		—		—		—		Vesting of restricted stock units and performance shares	0.2	—		—		—		—		—		—
Stock-based compensation	Stock-based compensation	—	—		4.7		—		—		—		—		Stock-based compensation	—	—		4.7		—		—		—		—
Purchase of treasury stock	Purchase of treasury stock	—	—		—		—		(0.3)		—		—		Purchase of treasury stock	—	—		—		—		(0.2)		—		—
Changes in cash flow hedges	Changes in cash flow hedges	—	—		—		—		—		8.7		—		Changes in cash flow hedges	—	—		—		—		—		5.1		—
Foreign currency translation adjustments	Foreign currency translation adjustments	—	—		—		—		—		4.8		—		Foreign currency translation adjustments	—	—		—		—		—		12.2		—
Defined benefit plans, net	Defined benefit plans, net	—	—		—		—		—		1.7		—		Defined benefit plans, net	—	—		—		—		—		2.2		—

Balance at June 30, 2020		113.3	$	1.2	$	1,323.2	$	(473.0)	$	(212.0)	$	(443.2)	$	2.6
Net income		—	—		—		117.2		—		—		—
Balance at June 30, 2021															Balance at June 30, 2021	114.1	$	1.3	$	1,343.3	$	(265.2)	$	(216.2)	$	(421.9)	$	—
Net loss															Net loss	—	—		—		(2.4)		—		—		—

Stock-based compensation	Stock-based compensation	—	—		5.1		—		—		—		—		Stock-based compensation	—	—		3.2		—		—		—		—

Purchase of treasury stock															Purchase of treasury stock	—	—		—		—		(0.1)		—		—
Changes in cash flow hedges	Changes in cash flow hedges	—	—		—		—		—		6.7		—		Changes in cash flow hedges	—	—		—		—		—		(1.8)		—
Foreign currency translation adjustments	Foreign currency translation adjustments	—	—		—		—		—		14.0		—		Foreign currency translation adjustments	—	—		—		—		—		(9.6)		—
Defined benefit plans, net	Defined benefit plans, net	—	—		—		—		—		1.7		—		Defined benefit plans, net	—	—		—		—		—		2.2		—

Balance at September 30, 2020		113.3	$	1.2	$	1,328.3	$	(355.8)	$	(212.0)	$	(420.8)	$	2.6
Balance at September 30, 2021															Balance at September 30, 2021	114.1	$	1.3	$	1,346.5	$	(267.6)	$	(216.3)	$	(431.1)	$	—


		Common Stock									Accumulated		Noncontrolling			Common Stock									Accumulated		Noncontrolling
		Shares	Par		Paid-in		Retained Earnings		Treasury		Other Comprehensive		Interest			Shares	Par		Paid-in		Retained Earnings		Treasury		Other Comprehensive		Interest
		Outstanding	Value		Capital		(Accumulated Deficit)		Stock		Income (Loss)		in Subsidiaries			Outstanding	Value		Capital		(Accumulated Deficit)		Stock		Income (Loss)		in Subsidiaries
		(in millions)														(in millions)

Balance at January 1, 2021		113.3	$	1.2	$	1,333.3	$	(319.8)	$	(212.0)	$	(432.2)	$	2.7
Balance at January 1, 2022															Balance at January 1, 2022	114.0	$	1.3	$	1,351.5	$	(313.9)	$	(216.3)	$	(364.8)	$	—
Net income	Net income	—	—		—		38.6		—		—		—		Net income	—	—		—		1.0		—		—		—
Vesting of restricted stock units and performance shares		1.0	0.1		—		—		—		—		—
Vesting of restricted stock units															Vesting of restricted stock units	0.7	—		—		—		—		—		—
Stock-based compensation	Stock-based compensation	—	—		5.3		—		—		—		—		Stock-based compensation	—	—		4.5		—		—		—		—

Purchase of treasury stock	Purchase of treasury stock	(0.4)	—		—		—		(4.0)		—		—		Purchase of treasury stock	(0.2)	—		—		—		(1.8)		—		—
Changes in cash flow hedges	Changes in cash flow hedges	—	—		—		—		—		(0.3)		—		Changes in cash flow hedges	—	—		—		—		—		15.7		—
Foreign currency translation adjustments	Foreign currency translation adjustments	—	—		—		—		—		(11.0)		—		Foreign currency translation adjustments	—	—		—		—		—		6.0		—
Defined benefit plans, net	Defined benefit plans, net	—	—		—		—		—		2.1		—		Defined benefit plans, net	—	—		—		—		—		1.3		—
Sale of business (Note 14)		—	—		—		—		—		—		(2.7)
Balance at March 31, 2021		113.9	$	1.3	$	1,338.6	$	(281.2)	$	(216.0)	$	(441.4)	$	—

Balance at March 31, 2022															Balance at March 31, 2022	114.5	$	1.3	$	1,356.0	$	(312.9)	$	(218.1)	$	(341.8)	$	—
Net income	Net income	—	—		—		16.0		—		—		—		Net income	—	—		—		22.9		—		—		—
Vesting of restricted stock units and performance shares		0.2	—		—		—		—		—		—
Stock-based compensation		—	—		4.7		—		—		—		—
Purchase of treasury stock		—	—		—		—		(0.2)		—		—
Changes in cash flow hedges		—	—		—		—		—		5.1		—
Foreign currency translation adjustments		—	—		—		—		—		12.2		—
Defined benefit plans, net		—	—		—		—		—		2.2		—
Balance at June 30, 2021		114.1	$	1.3	$	1,343.3	$	(265.2)	$	(216.2)	$	(421.9)	$	—
Net loss		—	—		—		(2.4)		—		—		—

Stock-based compensation	Stock-based compensation	—	—		3.2		—		—		—		—		Stock-based compensation	—	—		4.6		—		—		—		—
Purchase of treasury stock	Purchase of treasury stock	—	—		—		—		(0.1)		—		—		Purchase of treasury stock	—	—		—		—		(0.1)		—		—
Changes in cash flow hedges	Changes in cash flow hedges	—	—		—		—		—		(1.8)		—		Changes in cash flow hedges	—	—		—		—		—		(1.7)		—
Foreign currency translation adjustments	Foreign currency translation adjustments	—	—		—		—		—		(9.6)		—		Foreign currency translation adjustments	—	—		—		—		—		(42.3)		—
Defined benefit plans, net	Defined benefit plans, net	—	—		—		—		—		2.2		—		Defined benefit plans, net	—	—		—		—		—		1.3		—
Balance at June 30, 2022															Balance at June 30, 2022	114.5	$	1.3	$	1,360.6	$	(290.0)	$	(218.2)	$	(384.5)	$	—
Net income															Net income	—	—		—		26.5		—		—		—

Balance at September 30, 2021		114.1	$	1.3	$	1,346.5	$	(267.6)	$	(216.3)	$	(431.1)	$	—
Stock-based compensation															Stock-based compensation	—	—		4.6		—		—		—		—

Changes in cash flow hedges															Changes in cash flow hedges	—	—		—		—		—		19.1		—
Foreign currency translation adjustments															Foreign currency translation adjustments	—	—		—		—		—		(34.4)		—
Defined benefit plans, net															Defined benefit plans, net	—	—		—		—		—		1.5		—

Balance at September 30, 2022															Balance at September 30, 2022	114.5	$	1.3	$	1,365.2	$	(263.5)	$	(218.2)	$	(398.3)	$	—

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, ~~2021~~2022

(Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization ~~We are~~As a leading global ~~Tier~~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 nearly 85 facilities in 18 countries, AAM is bringing the ~~automotive industry. We design, engineer and manufacture driveline and metal forming technologies that are making the next generation of vehicles smarter, lighter,~~future faster for a safer and more efficient. We employ approximately 20,000 associates, operating at nearly 80 facilities in 17 countries, to support our customers on global and regional platforms with a continued focus on delivering quality, operational excellence and technology leadership.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, ~~2020~~2021 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. These estimates and assumptions are impacted by risks and uncertainties, including those associated with ~~the Novel Coronavirus (COVID-19) pandemic and~~COVID-19, the semiconductor supply shortage that is impacting the automotive ~~industry.~~industry, inflationary pressures, fluctuations in interest and foreign exchange rates, and the conflict between Russia and Ukraine. While we have made estimates and assumptions based on the facts and circumstances available as of the date of this report, the full impact of ~~COVID-19 and the semiconductor shortage~~these matters cannot be predicted, and actual results could differ materially from those estimates and assumptions.

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, ~~2020.~~

~~Commencement of Lease of European Headquarters and Engineering Center (EHEC)~~

In the first quarter of 2021, the lease of our new EHEC in Langen, Germany commenced. This lease has a term of 20 years and is classified as a finance lease. We recognized a right-of-use (ROU) asset and finance lease liability of approximately $49 million upon commencement of this lease. The ROU asset is presented in Property, plant and equipment, net and the finance lease liability is presented in Accrued expenses and other (current portion), and Postretirement benefits and other long-term liabilities (long-term portion) in our Condensed Consolidated Balance Sheet at September 30, 2021.

~~Leases Not Yet Commenced~~

As of September 30, 2021, we have entered into an additional lease that has not commenced of approximately $40 million, for a lease of a facility in the United States, which has a term of 15 years. This lease is expected to commence in the fourth quarter of 2021 and is expected to be classified as a finance lease.

~~AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

Effect of New Accounting Standards and Other Regulatory Pronouncements

Accounting Standard Update ~~2020-04~~2021-10

On ~~March 12, 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2020-04 -~~ ~~Reference Rate Reform (Topic 848),~~ ~~and has subsequently issued ASU 2021-01 -~~ ~~Reference Rate Reform (Topic 848)~~. This guidance provides optional expedients and exceptions that are intended to ease the burden of updating contracts to contain a new reference rate due to the discontinuation of the London Inter-Bank Offered Rate (LIBOR). This guidance is available immediately and may be implemented in any period prior to the guidance expiration on December 31, 2022. We expect to utilize certain of the optional expedients and exceptions available under ASU 2020-04 and ASU 2021-01 and we do not expect the adoption of this guidance to have a material impact on our financial statements.

~~Accounting Standard Update 2019-12~~

~~On December 18, 2019,~~November 17, 2021, the FASB issued ASU ~~2019-12~~2021-10 - ~~Income Taxes~~Government Assistance (Topic ~~740)~~832). This guidance ~~is intended to simplify the accounting and disclosure~~established requirements for ~~income taxes by removing various exceptions~~annual disclosures about certain types of material government assistance, including government grants and ~~requires that the effect of an enacted change in~~ tax ~~laws or rates on current tax expense be included in the annual effective tax rate computation in the interim period of the enactment.~~credits. This guidance became effective and we prospectively adopted this guidance on January 1, ~~2021.~~2022. The adoption of this ~~guidance~~standard did not have a material impact on our condensed consolidated financial statements.

Coronavirus Aid, Relief, and Economic Security Act

The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was enacted on March 27, 2020 in the United States. The key provisions of the CARES Act, as they remain applicable to AAM, include the following:

•The ability to use net operating losses (NOLs) to offset income without the 80% taxable income limitation enacted as part of the Tax Cuts and Jobs Act (TCJA) of 2017, and to carry back NOLs to offset prior year income for five years. These are temporary provisions that apply to NOLs incurred in 2018, 2019 or 2020 tax years. We recognized a tax benefit of $5.2 million during the nine months ended September 30, 2021 and $14.4 million for the year ended December 31, 2020 related to our ability to carry back prior year losses, as well as projected current year losses, under the CARES Act to years with the previous 35% tax rate. We received an income tax ~~refund~~refunds of ~~approximately~~$5.4 million and $6.0 million ~~during~~in the first quarter of 2022 and 2021, respectively, as a result of this provision of the CARES Act.

•The ability to defer the payment of the employer portion of social security taxes incurred between March 27, 2020 and December 31, 2020, with 50% of the deferred amount ~~to be~~ paid by December 31, 2021 and the remaining 50% to be paid by December 31, 2022. At September 30, ~~2021,~~2022, we had deferred ~~$15.2~~$7.6 million of social security taxes, ~~50% of~~ which ~~will be paid in the fourth quarter of 2021 and the remainder~~are expected to be paid in the fourth quarter of 2022.

•The ability to claim an Employee Retention Credit (ERC), which is a refundable payroll tax credit, for 50% of qualified wages or benefits, subject to certain limitations, that are paid to an employee when they are not providing services due to COVID-19. The ERC applied to qualified wages paid or incurred during the period March 13, 2020 through December 31, 2020 and was available to eligible employers whose operations were fully or partially suspended due to COVID-19, or whose gross receipts declined by more than 50% when compared to the applicable period in the prior year. At September 30, 2021, we have a refundable ERC amount of $6.3 million included in Prepaid expenses and other in our Condensed Consolidated Balance Sheet.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. RESTRUCTURING AND ACQUISITION-RELATED COSTS

In the first quarter of 2020, we initiated a new global restructuring program (the 2020 Program). The primary objectives of the 2020 Program are to achieve efficiencies within our corporate and business unit support teams to reduce cost in our business, and to structurally adjust our operations to a new level of market demand based on the impact of COVID-19. We expect to incur costs under the 2020 Program ~~into~~through 2022.

In the second quarter of 2021, we completed the acquisition of a manufacturing facility in Emporium, Pennsylvania (Emporium), and subsequently determined that we will cease production at the facility in 2022 and relocate the production capacity to other AAM manufacturing facilities. As a result, during the nine months ended September 30, 2022, we incurred restructuring charges related to the anticipated closure of the facility and expect to incur costs associated with the closure of the facility through 2022.

A summary of our restructuring activity for the first nine months of ~~2021~~2022 and ~~2020~~2021 is shown below:


		Severance Charges		Implementation Costs		Total			Severance Charges		Implementation Costs		Total
		(in millions)
Accrual at December 31, 2019		$	4.8	$	7.4	$	12.2
Charges		19.9		11.9		31.8
Cash utilization		(19.9)		(11.0)		(30.9)

Accrual at September 30, 2020		$	4.8	$	8.3	$	13.1
									(in millions)
Accrual at December 31, 2020	Accrual at December 31, 2020	$	1.7	$	9.8	$	11.5	Accrual at December 31, 2020	$	1.7	$	9.8	$	11.5
Charges	Charges	2.7		33.2		35.9		Charges	2.7		33.2		35.9
Cash utilization	Cash utilization	(3.9)		(39.7)		(43.6)		Cash utilization	(3.9)		(39.7)		(43.6)

Accrual at September 30, 2021	Accrual at September 30, 2021	$	0.5	$	3.3	$	3.8	Accrual at September 30, 2021	$	0.5	$	3.3	$	3.8

Accrual at December 31, 2021								Accrual at December 31, 2021	$	0.7	$	2.7	$	3.4
Charges								Charges	3.4		15.8		19.2
Cash utilization								Cash utilization	(1.3)		(13.9)		(15.2)

Accrual at September 30, 2022								Accrual at September 30, 2022	$	2.8	$	4.6	$	7.4

As part of our restructuring actions, we incurred total severance charges of approximately ~~$2.7~~$3.4 million and ~~$19.9~~$2.7 million during the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. We also incurred total implementation costs of approximately ~~$33.2~~$15.8 million and ~~$11.9~~$33.2 million during the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Implementation costs consist primarily of professional fees and plant exit costs.

~~Substantially all~~We incurred $12.4 million of ~~the~~ restructuring costs under the 2020 Program and incurred ~~during~~$6.8 million of costs associated with the anticipated closure of Emporium in the nine months ended September 30, ~~2021 were~~2022. We have incurred $99.7 million of total restructuring costs under the 2020 ~~Program.~~Program since inception and have incurred $10.5 million of total costs related to the anticipated closure of Emporium.

Approximately $1.3 million and $12.0 million of our total restructuring costs for the nine months ended September 30, 2022 related to our Driveline and Metal Forming segments, respectively, while the remainder were corporate costs. Approximately $3.9 million and $3.1 million of our total restructuring costs for the nine months ended September 30, 2021 related to our Driveline and Metal Forming segments, respectively, while the remainder were corporate costs. Approximately $14.4 million and $13.1 million of our total restructuring costs for the nine months ended September 30, 2020 related to our Driveline and Metal Forming segments, respectively, while the remainder were corporate costs. We expect to incur approximately ~~$45~~$20 million to ~~$55~~$30 million of total restructuring charges in ~~2021, substantially all of which are expected to be under~~2022 associated with the 2020 ~~Program.~~

~~During the nine months ended September 30, 2021 we completed~~Program, our ~~acquisition~~closure of ~~a manufacturing facility in~~ Emporium ~~Pennsylvania,~~ and ~~we continue to incur integration costs~~potential restructuring actions related to our acquisition of ~~MPG.~~the Tekfor Group (Tekfor).

On June 1, 2022, our acquisition of Tekfor became effective. The following table represents a summary of acquisition-related charges incurred ~~in the nine months ended September 30, 2021 and 2020 associated with~~primarily related to our acquisition ~~and~~of Tekfor, as well as integration ~~costs:~~costs incurred for acquisitions:


		Acquisition-Related Costs		Integration Expenses			Total			Acquisition-Related Costs		Integration Expenses		Total
		(in millions)				(in millions)
Charges for the nine months ended September 30, 2022									Charges for the nine months ended September 30, 2022	$	5.8	$	1.4	$	7.2
Charges for the nine months ended September 30, 2021	Charges for the nine months ended September 30, 2021	$	0.3	$	4.6		$	4.9	Charges for the nine months ended September 30, 2021	0.3		4.6		4.9
Charges for the nine months ended September 30, 2020		—		6.8			6.8

Acquisition-related costs primarily consist of advisory, legal, accounting, valuation and certain other professional or consulting fees incurred. Integration expenses primarily reflect costs incurred for information technology infrastructure and enterprise resource planning ~~systems.~~systems, and consulting fees incurred in conjunction with integration activities. Total restructuring charges and acquisition-related charges are presented on a separate line item titled Restructuring and acquisition-related costs in our Condensed Consolidated Statements of Operations and totaled $7.9 million and $26.4 million for the three and nine months ended September 30, 2022, respectively, and $7.4 million and $40.8 million for the three and nine months ended September 30, 2021, ~~respectively, and $9.7 million and $38.6 million for the three and nine months ended September 30, 2020,~~ respectively.

109

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, 2021 December 31, 2020
(in millions)

Raw materials and work-in-progress $ 352.9 $ 276.2
Finished goods 87.5 70.4
Gross inventories 440.4 346.6
Inventory valuation reserves (22.5) (23.4)
Inventories, net $ 417.9 $ 323.2


	September 30, 2022		December 31, 2021
	(in millions)

Raw materials and work-in-progress	$	398.2	$	339.7
Finished goods	76.7		89.3
Gross inventories	474.9		429.0
Inventory valuation reserves	(28.1)		(18.6)
Inventories, net	$	446.8	$	410.4

1110

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill The following table provides a reconciliation of changes in goodwill for the nine months ended September 30, ~~2021:~~2022:

Consolidated

(in millions)

Balance at December 31, ~~2020~~2021

~~185.7~~183.8

Foreign currency translation

~~(1.6)~~(4.5)

Balance at September 30, ~~2021~~2022

~~184.1~~179.3

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.

In the first quarter of 2020, the reduction in global automotive production volumes caused by the impact of COVID-19 represented an indicator to test our goodwill for impairment. This reduction in production volumes began in March of 2020 and resulted in lower forecasted sales volumes in the periods included in our long-range plan as revised in the first quarter of 2020.

~~As a result of this~~At September 30, 2022, accumulated goodwill impairment ~~test in the first quarter of 2020, we determined that the carrying values of both our Driveline and Metal Forming reporting units~~losses were greater than their respective fair values. As such, we recorded a goodwill impairment charge of $510.0 million in the first quarter of 2020, of which $210.8 million was associated with our Driveline reporting unit and $299.2 million was associated with our Metal Forming reporting unit. The Metal Forming impairment charge represented a full impairment of the goodwill associated with that reporting unit. As a result, all$1,435.5 million. All remaining goodwill is attributable to our Driveline reporting unit.

These impairment charges were primarily the result of a decline in the projected cash flows of these reporting units under our revised long-range plan completed in the first quarter of 2020. The revision to our long-range plan was driven by lower forecasted sales volumes in the internal and external data sources used to form our projections primarily due to the reduction in global automotive production volumes caused by the impact of COVID-19. The impairment charges were also the result of changes in certain market-related inputs to the analysis to reflect macro-economic changes caused by the impact of COVID-19, including increased discount rates and lower pricing multiples for comparable public companies. At September 30, 2021, accumulated goodwill impairment losses were $1,435.5 million.

The reduction in production volumes and changes to macro-economic factors caused by the impact of COVID-19 also represented an indicator to test our long-lived assets, including other intangible assets and property, plant and equipment, for impairment. We completed this test in the first quarter of 2020 and there was no impairment of these assets.

~~AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

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,
2021 2020
Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount
(in millions)
Capitalized computer software $ 48.9 $ (38.2) $ 10.7 $ 47.6 $ (33.9) $ 13.7
Customer platforms 856.2 (285.4) 570.8 856.2 (237.9) 618.3
Customer relationships 53.0 (15.4) 37.6 53.0 (12.8) 40.2
Technology and other 156.3 (57.7) 98.6 156.7 (48.2) 108.5
Total $ 1,114.4 $ (396.7) $ 717.7 $ 1,113.5 $ (332.8) $ 780.7


	September 30,						December 31,
	2022						2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in millions)
Capitalized computer software	$	51.3	$	(42.0)	$	9.3	$	47.3	$	(37.0)	$	10.3
Customer platforms	856.2		(348.9)		507.3		856.2		(301.3)		554.9
Customer relationships	53.0		(18.8)		34.2		53.0		(16.2)		36.8
Technology and other	153.8		(68.4)		85.4		156.1		(60.9)		95.2
Total	$	1,114.3	$	(478.1)	$	636.2	$	1,112.6	$	(415.4)	$	697.2

Amortization expense for our intangible assets was $21.5 million and $64.4 million for the three and nine months ended September 30, 2022, respectively, and $21.4 million and $64.3 million for the three and nine months ended September 30, ~~2021, respectively, and $21.6 million and $65.0 million for the three and nine months ended September 30, 2020, respectively.~~2021. Estimated amortization expense for the years ~~2021~~2022 through ~~2025~~2026 is expected to be in the range of approximately $80 million to $85 million per year.

1311

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, 2021		December 31, 2020			September 30, 2022		December 31, 2021
		(in millions)					(in millions)

Revolving Credit Facility	Revolving Credit Facility	$	—	$	—	Revolving Credit Facility	$	—	$	—
Term Loan A Facility due 2024		301.8		323.0
Term Loan B Facility due 2024		850.0		1,088.8
Term Loan A Facility						Term Loan A Facility	520.0		301.8
Term Loan B Facility						Term Loan B Facility	750.0		850.0
6.875% Notes due 2028	6.875% Notes due 2028	400.0		400.0		6.875% Notes due 2028	400.0		400.0

6.50% Notes due 2027	6.50% Notes due 2027	500.0		500.0		6.50% Notes due 2027	500.0		500.0
6.25% Notes due 2026	6.25% Notes due 2026	400.0		400.0		6.25% Notes due 2026	180.0		400.0
6.25% Notes due 2025		—		700.0

5.00% Notes due 2029	5.00% Notes due 2029	600.0		—		5.00% Notes due 2029	600.0		600.0
Foreign credit facilities and other	Foreign credit facilities and other	102.2		88.8		Foreign credit facilities and other	70.2		86.1
Total debt	Total debt	3,154.0		3,500.6		Total debt	3,020.2		3,137.9

Less: Current portion of long-term debt	Less: Current portion of long-term debt	14.6		13.7		Less: Current portion of long-term debt	19.2		18.8
Long-term debt	Long-term debt	3,139.4		3,486.9		Long-term debt	3,001.0		3,119.1
Less: Debt issuance costs	Less: Debt issuance costs	35.3		45.6		Less: Debt issuance costs	26.9		33.4
Long-term debt, net	Long-term debt, net	$	3,104.1	$	3,441.3	Long-term debt, net	$	2,974.1	$	3,085.7

Senior Secured Credit Facilities In 2017, American Axle & Manufacturing Holdings, Inc. (Holdings) and American Axle & Manufacturing, Inc. (AAM, Inc.) entered into a credit agreement which was amended on July 29, 2019 and further amended on April 28, 2020, and June 11, 2021 (the Credit Agreement). 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. The Credit Agreement ~~as amended in July 2019 (First Amendment), includes~~originally included a $340 million term loan A facility (the Term Loan A ~~Facility due 2024)~~Facility), a $1.55 billion term loan B facility (the Term Loan B ~~Facility due 2024)~~Facility) and a $925 million multi-currency revolving credit facility (the Revolving Credit Facility, and together with the Term Loan A Facility ~~due 2024~~ and the Term Loan B Facility, ~~due 2024,~~ the Senior Secured Credit Facilities).

In March 2022, Holdings and AAM, Inc. entered into the Amended & Restated Credit Agreement. The Amended & Restated Credit Agreement, among other things, increased the principal amount of the Term Loan A Facility ~~due 2024 and~~to $520.0 million, extended the maturity date of the Term Loan BA Facility ~~due 2024 have been paid down from~~and the ~~original amounts through both scheduled~~Revolving Credit Facility each to March 11, 2027, and ~~voluntary payments. There are no current maturities~~established the use under the Term Loan A ~~due 2024~~Facility and ~~there are no scheduled payments under~~Revolving Credit Facility of the Secured Overnight Financing Rate (SOFR) and the minimum Adjusted Term ~~Loan B due 2024 until maturity.~~

~~In April 2020, Holdings, AAM, Inc.,~~SOFR Rate for Eurodollar-based loans denominated in U.S. Dollars and ~~certain subsidiaries~~the Sterling Overnight Index Average (SONIA) and the minimum adjusted daily simple SONIA for loans denominated in Sterling. The Amended & Restated Credit Agreement also removed the senior secured net leverage ratio covenant, increased the maximum levels of Holdings entered into the Second Amendment (Second Amendment) to the Credit Agreement. For the period from April 1, 2020 through March 31, 2022 (the Amendment Period), the Second Amendment, among other things, replaced the total net leverage ratio covenant ~~with a new senior secured net leverage ratio covenant, reduced the minimum levels of~~for certain periods, modified the cash interest expense coverage ratio covenant, and modified certain covenants restricting the ability of Holdings, AAM and certain subsidiaries of Holdings to create, incur, assume or permit to exist certain additional indebtedness and liens, to make investments and to make or agree to pay or make certain restricted payments, voluntary payments and distributions. ~~The Second Amendment also increased the maximum levels~~We expensed $0.2 million of ~~the total net leverage ratio covenant after the Amendment Period, modified the applicable margin with respect to~~debt refinancing costs, paid accrued interest ~~rates under the Term Loan A Facility due 2024~~of $1.0 million, and interest rates and commitment fees under the Revolving Credit Facility, and increased the minimum adjusted London Interbank Offered Rate for Eurodollar-based loans under the Term Loan A Facility due 2024 and Revolving Credit Facility. The applicable margin for the Term Loan B Facility remains unchanged. We paid debt issuance costs of ~~$4.6~~$4.4 million in the nine months ended September 30, ~~2020~~2022 related to the ~~Second Amendment.~~Amended & Restated Credit Agreement.

The terms of the Term Loan B Facility, including the maturity date, interest rates and applicable margin with respect to such interest rates, under the Amended & Restated Credit Agreement remain unchanged. There are no significant current maturities under the Term Loan A Facility and there are no scheduled payments due under the Term Loan B Facility until maturity in 2024.

In ~~June 2021, Holdings, AAM, Inc., and certain subsidiaries~~the first quarter of ~~Holdings entered into an agreement (the Agreement) amending~~2022, we made a voluntary prepayment of $25.0 million on our Term Loan B Facility. As a result, we expensed approximately $0.2 million for the ~~Second Amendment to the Credit Agreement. For the Amendment Period, the Agreement modified~~write-off of a covenant in the Second Amendment restricting the ability of Holdings, AAM and certain subsidiaries of Holdings to make certain voluntary payments and distributions of, or in respect of, certain senior unsecured notes of AAM during the Amendment Period, which modification permits voluntary payments and redemptionsportion of the ~~6.25% senior notes due 2025 issued by AAM.~~unamortized debt issuance costs that we had been amortizing over the expected life of this borrowing.

1412

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In the second quarter of 2022, we made a voluntary prepayment of $25.0 million on our Term Loan B Facility. As a result, we 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 this borrowing.

In the third quarter of 2022, we made voluntary prepayments totaling $50.0 million on our Term Loan B Facility. As a result, we 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 this borrowing.

In the first quarter of 2021, we made a voluntary prepayment of $100.0 million on our Term Loan B Facility ~~due 2024~~ and $4.3 million on our Term Loan A ~~Facility due 2024.~~Facility. As a result, we expensed approximately $1.1 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of these borrowings.

In the second quarter of 2021, we made voluntary prepayments totaling $138.8 million on our Term Loan B Facility ~~due 2024~~ and $4.2 million on our Term Loan A ~~Facility due 2024.~~Facility. As a result, we expensed approximately $1.3 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.

In the third quarter of 2021, we made a voluntary prepayment of $12.7 million on our Term Loan A ~~Facility due 2024.~~Facility. As a result, we 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 this borrowing.

At September 30, ~~2021,~~2022, we had ~~$895.2~~$893.5 million available under the Revolving Credit Facility. This availability reflects a reduction of ~~$29.8~~$31.5 million for standby letters of credit issued against the facility. The proceeds of the Revolving Credit Facility are used for general corporate purposes.

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 first quarter of 2022, we used the proceeds from the upsized Term Loan A Facility to voluntarily redeem a portion of our 6.25% Notes due 2026. This resulted in a principal payment of $220.0 million and $0.2 million in accrued interest. We also expensed approximately $1.8 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, and approximately $3.4 million for the payment of an early redemption premium.

5.00% Notes due 2029 In the third quarter of 2021, we issued ~~$600~~$600.0 million in aggregate principal amount of 5.00% senior notes due 2029 (the 5.00% Notes). Proceeds from the 5.00% Notes were used to fund the redemption of the remaining ~~$600~~$600.0 million of our former 6.25% senior notes due ~~2025 described below.~~2025. We paid debt issuance costs of $9.2 million in the nine months ended September 30, 2021 related to the 5.00% Notes.

Redemption of 6.25% Notes due 2025In ~~July~~the third quarter of 2021, we voluntarily redeemed ~~a portion of~~ our 6.25% Notes due 2025. This resulted in a principal ~~payment of $100~~payments totaling $700.0 million and ~~$1.8~~$19.4 million in accrued interest. We also expensed approximately $1.4 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, and approximately $3.1 million for the payment of an early redemption premium.

In September of 2021, we voluntarily redeemed the remaining portion of our 6.25% Notes due 2025. This resulted in a principal payment of $600 million and $17.6 million in accrued interest. We also expensed approximately $8.2$9.6 million for the write-off of the unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing, and approximately ~~$18.8~~$21.9 million for the payment of an early redemption premium.

~~6.875% Notes due 2028~~ In the second quarter of 2020, we issued $400 million in aggregate principal amount of 6.875% senior notes due 2028 (the 6.875% Notes). Proceeds from the 6.875% Notes were used primarily to fund the redemption of the remaining $350 million of 6.625% senior notes due 2022 described below and for general corporate purposes. We paid debt issuance costs of $6.4 million in the nine months ended September 30, 2020 related to the 6.875% Notes.

~~Redemption~~Repayment of ~~6.625% Notes due 2022~~Tekfor Group Indebtedness InUpon the acquisition of Tekfor, we assumed $23.4 million of existing Tekfor indebtedness, of which we repaid $10.7 million in the first ~~quarter~~nine months of ~~2020, we voluntarily redeemed a portion of our 6.625% Notes due~~ 2022. This resulted in a principal payment of $100.0 million and $2.0 million in accrued interest. We also expensed approximately $0.4 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, and approximately $1.1 million for an early redemption premium.

In the third quarter of 2020, we voluntarily redeemed the remaining portion of our 6.625% Notes due 2022. This resulted in a principal payment of $350 million and $5.7 million in accrued interest. We also expensed approximately $1.3 million for the write-off of the unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing, and approximately $3.9 million for the payment of an early redemption premium.

Foreign credit facilities and Other We utilize local currency credit facilities to finance the operations of certain foreign subsidiaries. At September 30, ~~2021, $102.2~~2022, $70.2 million was outstanding under our foreign credit facilities, as compared to ~~$88.8~~$86.1 million at December 31, ~~2020.~~2021. At September 30, ~~2021,~~2022, an additional ~~$62.3~~$64.7 million was available under our foreign credit facilities.

Weighted-Average Interest Rate The weighted-average interest rate of our long-term debt outstanding was ~~5.6%~~5.8% at September 30, ~~2021~~2022 and ~~5.8%~~5.6% at December 31, ~~2020.~~ 2021.

1513

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 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 contracts to reduce the effects of fluctuations in exchange rates relating to certain foreign currencies. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had currency forward contracts outstanding with a total notional amount of ~~$167.3~~$172.8 million and ~~$178.2~~$164.7 million, respectively, that hedge our exposure to changes in foreign currency exchange rates for certain payroll expenses into the second quarter of ~~2024~~2025 and the purchase of certain direct and indirect inventory and other working capital items into the second quarter of ~~2022.~~2023.

Fixed-to-fixed cross-currency swap In ~~2019,~~2020, we entered into a fixed-to-fixed cross-currency swap to reduce the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans. In the ~~first~~second quarter of ~~2020,~~2022, we discontinued this fixed-to-fixed cross-currency swap, which was in an asset position of ~~$9.8~~$9.7 million on the date that it was discontinued.

Also in the ~~first~~second quarter of ~~2020,~~2022, we entered into a new fixed-to-fixed cross-currency swap to reduce the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans. ~~The~~We had notional ~~amount of the~~amounts outstanding under fixed-to-fixed cross-currency ~~swap is~~swaps of €200.0 million ~~which was equivalent to $231.5 million and $244.2 million~~ at both September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, which were equivalent to $195.9 million and $226.9 million, respectively. The fixed-to-fixed cross-currency swap hedges our exposure to changes in exchange rates on the intercompany loans into the second quarter of 2024.

Variable-to-fixed interest rate swap In 2019, 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. WeIn the second quarter of 2022, we discontinued this variable-to-fixed interest rate swap, which was in an asset position of $6.1 million on the date that it was discontinued.

Also in the second quarter of 2022, we entered into a new variable-to-fixed interest rate swap to reduce the variability of cash flows associated with interest payments on our variable rate debt. As of September 30, 2022, we have ~~the following~~$500.0 million notional ~~amounts~~amount hedged in relation to our variable-to-fixed interest rate ~~swap: $750.0 million through May 2022, $600.0 million through May 2023 and $500.0 million through May 2024.~~swap into the third quarter of 2027.

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 hedges under ~~ASC~~Accounting Standards Codification (ASC) 815 - Derivatives and Hedging:


		Location	Gain (Loss) Reclassified During								Total of Financial		Gain (Loss) Expected			Location	Gain (Loss) Reclassified During								Total of Financial		Gain Expected
		of Gain (Loss)	Three Months Ended				Nine Months Ended				Statement		to be Reclassified			of Gain (Loss)	Three Months Ended				Nine Months Ended				Statement		to be Reclassified
		Reclassified into	September 30,				September 30,				Line Item		During the			Reclassified into	September 30,				September 30,				Line Item		During the
		Net Income	2021		2020		2021		2020		2021		Next 12 Months			Net Income	2022		2021		2022		2021		2022		Next 12 Months
			(in millions)														(in millions)

Currency forward contracts	Currency forward contracts	Cost of Goods Sold	$	1.1	$	(1.3)	$	5.2	$	(2.3)	$	3,338.8	$	1.1	Currency forward contracts	Cost of Goods Sold	$	1.5	$	1.1	$	4.6	$	5.2	$	3,872.0	$	5.6
Fixed-to-fixed cross-currency swap	Fixed-to-fixed cross-currency swap	Other Income (Expense), net	6.0		(9.3)		14.0		(9.3)		(1.3)		1.7		Fixed-to-fixed cross-currency swap	Other Income (Expense), net	13.8		6.0		31.7		14.0		(4.4)		0.3
Variable-to-fixed interest rate swap	Variable-to-fixed interest rate swap	Interest Expense	(3.5)		(4.1)		(11.4)		(10.1)		(150.7)		(12.5)		Variable-to-fixed interest rate swap	Interest Expense	(0.1)		(3.5)		(3.5)		(11.4)		(132.2)		5.3

See Note 12 - 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, ~~2021~~2022 and ~~2020.~~2021.

1614

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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:

Gain (Loss) Recognized During Total of Financial
Location of Gain (Loss) Three Months Ended Nine Months Ended Statement Line
Recognized in September 30, September 30, Item
Net Income 2021 2020 2021 2020 2021
(in millions)

Currency forward contracts Cost of Goods Sold $ — $ 0.9 $ — $ (6.7) $ 3,338.8
Currency forward contracts Other Income (Expense), net (0.5) — (0.1) (0.5) (1.3)


	Location	Gain (Loss) Recognized During								Total of Financial
	of Gain (Loss)	Three Months Ended				Nine Months Ended				Statement
	Recognized in	September 30,				September 30,				Line Item
	Net Income	2022		2021		2022		2021		2022
		(in millions)


Currency forward contracts	Other Income (Expense), net	$	0.3	$	(0.5)	$	1.4	$	(0.1)	$	(4.4)

1715

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:

September 30, 2021

December 31, 2020

Fair Value

Input

September 30, 2022

December 31, 2021

Input

(in millions)

Balance Sheet Classification

Cash equivalents

238.3

206.7

Level 1

Cash equivalents

292.0

196.5

Level 1

Prepaid expenses and other

Cash flow hedges - currency forward contracts

2.0

5.8

Level 2

Cash flow hedges - currency forward contracts

5.7

2.2

Level 2

Cash flow hedges - variable-to-fixed interest rate swap

3.4

4.9

Level 2

Cash flow hedges - variable-to-fixed interest rate swap

2.5

1.9

Level 2

Nondesignated - currency forward contracts

—

0.2

Level 2

Nondesignated - currency forward contracts

0.2

Level 2

Other assets and deferred charges

Cash flow hedges - currency forward contracts

1.2

3.3

Level 2

Cash flow hedges - currency forward contracts

1.6

1.4

Level 2

Cash flow hedges - fixed-to-fixed cross-currency swap

15.3

—

Level 2

Cash flow hedges - variable-to-fixed interest rate swap

4.3

8.6

Level 2

Cash flow hedges - variable-to-fixed interest rate swap

9.4

2.2

Level 2

Investment in equity securities

22.4

—

Level 1

Investment in equity securities

3.4

27.4

Level 1

Accrued expenses and other

Cash flow hedges - currency forward contracts

0.9

0.1

Level 2

Cash flow hedges - currency forward contracts

—

0.3

Level 2

Cash flow hedges - variable-to-fixed interest rate swap

13.4

17.8

Level 2

Cash flow hedges - variable-to-fixed interest rate swap

—

9.6

Level 2

Postretirement benefits and other long-term liabilities

Cash flow hedges - currency forward contracts

0.9

0.1

Level 2

Cash flow hedges - currency forward contracts

0.1

0.6

Level 2

Cash flow hedges - fixed-to-fixed cross-currency swap

7.1

20.6

Level 2

Cash flow hedges - fixed-to-fixed cross-currency swap

—

3.7

Level 2

Cash flow hedges - variable-to-fixed interest rate swap

18.8

32.1

Level 2

Cash flow hedges - variable-to-fixed interest rate swap

—

12.7

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 have an investment in the equity securities of REE Automotive, an e-mobility ~~company that completed a merger with a Special Purpose Acquisition Company in the third quarter of 2021 and became a publicly traded entity.~~company. These equity securities are measured at fair value each reporting period with changes in fair value reported through an unrealized gain or loss within Other income (expense), net in our Condensed Consolidated Statement of Operations. As of September 30, ~~2021,~~2022, our investment in REE shares was valued at ~~$22.4~~$3.4 million based on a closing price on that date of ~~$4.54~~$0.68 per share. ~~We are subject to a customary restriction on transferring our shares of REE Automotive until January 2022.~~

1816

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, 2021				December 31, 2020						September 30, 2022				December 31, 2021
		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Input		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Input
		(in millions)										(in millions)

Revolving Credit Facility	Revolving Credit Facility	$	—	$	—	$	—	$	—	Level 2	Revolving Credit Facility	$	—	$	—	$	—	$	—	Level 2
Term Loan A Facility due 2024		301.8		298.7		323.0		318.6		Level 2
Term Loan B Facility due 2024		850.0		847.9		1,088.8		1,071.1		Level 2
Term Loan A Facility											Term Loan A Facility	520.0		507.7		301.8		301.8		Level 2
Term Loan B Facility											Term Loan B Facility	750.0		731.3		850.0		847.9		Level 2

6.875% Notes due 2028	6.875% Notes due 2028	400.0		424.0		400.0		426.0		Level 2	6.875% Notes due 2028	400.0		342.0		400.0		430.0		Level 2

6.50% Notes due 2027	6.50% Notes due 2027	500.0		520.0		500.0		523.8		Level 2	6.50% Notes due 2027	500.0		422.5		500.0		519.4		Level 2
6.25% Notes due 2026	6.25% Notes due 2026	400.0		412.0		400.0		411.0		Level 2	6.25% Notes due 2026	180.0		165.2		400.0		408.5		Level 2
6.25% Notes due 2025		—		—		700.0		724.3		Level 2

5.00% Notes due 2029	5.00% Notes due 2029	600.0		583.5		—		—		Level 2	5.00% Notes due 2029	600.0		450.0		600.0		588.0		Level 2

1917

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. EMPLOYEE BENEFIT PLANS

The components of net periodic benefit cost (credit) are as follows:


		Pension Benefits									Pension Benefits
		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
		(in millions)									(in millions)

Service cost	Service cost	$	0.5	$	0.5	$	1.5	$	1.5	Service cost	$	0.5	$	0.5	$	1.4	$	1.5
Interest cost	Interest cost	4.4		5.4		13.0		16.2		Interest cost	4.1		4.4		12.5		13.0
Expected asset return	Expected asset return	(9.7)		(9.6)		(29.1)		(28.9)		Expected asset return	(8.0)		(9.7)		(23.8)		(29.1)
Amortized loss	Amortized loss	2.7		2.1		8.1		6.4		Amortized loss	2.0		2.7		5.8		8.1

Net periodic benefit credit	Net periodic benefit credit	$	(2.1)	$	(1.6)	$	(6.5)	$	(4.8)	Net periodic benefit credit	$	(1.4)	$	(2.1)	$	(4.1)	$	(6.5)

		Other Postretirement Benefits									Other Postretirement Benefits
		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
		(in millions)									(in millions)

Service cost	Service cost	$	—	$	0.1	$	0.2	$	0.3	Service cost	$	0.1	$	—	$	0.2	$	0.2
Interest cost	Interest cost	2.1		2.6		6.3		7.7		Interest cost	2.1		2.1		6.3		6.3
Amortized loss	Amortized loss	0.4		0.3		1.2		0.8		Amortized loss	0.2		0.4		0.4		1.2
Amortized prior service credit	Amortized prior service credit	(0.3)		(0.4)		(1.1)		(1.2)		Amortized prior service credit	(0.3)		(0.3)		(0.7)		(1.1)

Net periodic benefit cost	Net periodic benefit cost	$	2.2	$	2.6	$	6.6	$	7.6	Net periodic benefit cost	$	2.1	$	2.2	$	6.2	$	6.6

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, ~~2021~~2022 and December 31, ~~2020,~~2021, we have a noncurrent pension liability of ~~$125.0~~$113.9 million and ~~$141.2~~$121.3 million, respectively. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we have a noncurrent other postretirement benefits liability of ~~$549.8~~$476.2 million and ~~$556.7~~$481.2 million, respectively.

Due to the availability of our pre-funded pension balances (previous contributions in excess of prior required pension contributions), we expect our regulatory pension funding requirements in ~~2021~~2022 to be less than $1 million. We expect our cash payments for other postretirement benefit obligations in ~~2021,~~2022, net of GM cost sharing, to be approximately ~~$17~~$16.5 million.

2018

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. PRODUCT WARRANTIES

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 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					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
		(in millions)									(in millions)

Beginning balance	Beginning balance	$	64.3	$	63.9	$	66.7	$	62.0	Beginning balance	$	61.9	$	64.3	$	59.5	$	66.7
Accruals	Accruals	5.7		4.4		14.1		9.2		Accruals	3.4		5.7		11.3		14.1
Payments	Payments	(11.7)		(3.8)		(14.3)		(5.8)		Payments	(4.5)		(11.7)		(8.6)		(14.3)
Adjustment to prior period accruals	Adjustment to prior period accruals	(0.4)		(0.1)		(8.4)		(0.6)		Adjustment to prior period accruals	(7.3)		(0.4)		(7.9)		(8.4)
Foreign currency translation	Foreign currency translation	(0.3)		0.2		(0.5)		(0.2)		Foreign currency translation	(0.8)		(0.3)		(1.6)		(0.5)
Ending balance	Ending balance	$	57.6	$	64.6	$	57.6	$	64.6	Ending balance	$	52.7	$	57.6	$	52.7	$	57.6

2119

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. INCOME TAXES

We adjust our effective tax rate each quarter based on our estimated annual effective tax rate. We also record the tax impact of certain discrete, unusual or infrequently occurring items, including changes in judgment about valuation allowances and the effects of changes in tax laws or rates on deferred tax balances, 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.

Our income tax benefit and effective income tax rate for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		Three Months Ended						Nine Months Ended							Three Months Ended						Nine Months Ended
		September 30,						September 30,							September 30,						September 30,
		2021			2020			2021			2020				2022			2021			2022			2021
		(in millions)													(in millions)

Income tax benefit	Income tax benefit	$	(13.6)		$	(22.5)		$	(2.4)		$	(63.1)		Income tax benefit	$	(5.7)		$	(13.6)		$	(2.1)		$	(2.4)
Effective income tax rate	Effective income tax rate	85.0		%	(23.8)		%	(4.8)		%	9.6		%	Effective income tax rate	(27.4)		%	85.0		%	(4.3)		%	(4.8)		%

For the three and nine months ended September 30, 2022, we recognized a net income tax benefit of approximately $7.5 million related to the release of a valuation allowance in a foreign jurisdiction. During the three and nine months ended September 30, 2021, we recognized a net income tax benefit of approximately $5.2 million related to our ability to carry back prior year losses to tax years with the higher 35% corporate income tax ~~rate.~~rate under provisions of the CARES Act.

During the three months ended September 30, 2020, we released a partial valuation allowance that had been established in the second quarter of 2020 as a result of final regulations issued on July 28, 2020 by the Internal Revenue Service and the U.S. Department of Treasury. This resulted in aOur effective income tax ~~benefit of approximately $36 million~~rate for the three months ended September 30, ~~2020.~~

In the nine months ended September 30, 2020, we finalized an advance pricing agreement in a foreign jurisdiction, which resulted in a tax benefit of approximately $6.8 million and we recognized a tax benefit of approximately $7.0 million related to our ability to carry back projected current year losses under the CARES Act. In addition, we recognized a net tax benefit of approximately $7.5 million related to our ability to carry back losses from prior years under the CARES Act. This income tax benefit was the result of our ability to carry back losses to tax years with the higher 35% corporate income tax rate.

~~Our effective income tax rates for the three and nine months ended September 30, 2021 vary~~2022 varies from our effective income tax ~~rates~~rate for the three ~~and nine~~ months ended September 30, ~~2020~~2021 primarily as a result of the ~~items discussed above. In addition, our~~release of the foreign valuation allowance during the three months ended September 30, 2022 as noted above, as well as the mix of earnings on a jurisdictional basis during these periods. Our effective income tax rate for the nine months ended September 30, ~~2021~~2022 varies from our effective income tax rate for the nine months ended September 30, ~~2020~~2021 primarily as a result of the ~~impact~~$13.0 million gain on bargain purchase of business recognized in the nine months ended September 30, 2022, which was not subject to income tax, as well as the release of the ~~goodwill impairment charge recorded~~foreign valuation allowance during the ~~first quarter~~nine months ended September 30, 2022 and the mix of ~~2020, which had no corresponding income tax benefit.~~ earnings on a jurisdictional basis during these periods.

For the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, our effective income tax rates vary from the U.S. federal statutory rate ~~of 21%~~ primarily due to the discrete items ~~discussed~~noted above, ~~as well as~~the benefit from foreign derived intangible income deductions, the change in jurisdictional mix of earnings, and favorable foreign tax rates and the impact of tax ~~credits, and~~credits. In addition, for the ~~effect~~nine months ended September 30, 2022, our effective income tax rate varies from the U.S. federal statutory rate as a result of the ~~goodwill impairment charge in the first nine months~~gain on bargain purchase of ~~2020.~~business recognized during this period.

In accordance with the guidance in ASC 740 - Income Taxes, we review the likelihood that we will realize the benefit of deferred tax assets and estimate whether recoverability of our deferred tax assets is "more likely than not" based on the available evidence. During the three months ended September 30, 2022, we released a valuation allowance against the net deferred tax assets in a foreign jurisdiction resulting in a net tax benefit of approximately $7.5 million. Due to the uncertainty associated with the extent and ultimate impact of the significant supply chain constraints affecting the automotive industry, including COVID-19, ~~and~~ the semiconductor shortage and resulting impact on global automotive production volumes, and the conflict between Russia and Ukraine, we may experience lower than projected earnings in certain jurisdictions in future periods, and as a result, it is reasonably possible that changes in valuation allowances could be recognized in future ~~periods.~~periods and such changes could be material to our financial statements.

2220

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Other Income Tax Matters

We operate in multiple jurisdictions throughout the world and the income tax returns of several subsidiaries in various tax jurisdictions are currently under examination. ~~We are currently under a~~During their examination of our 2015 U.S. federal income tax ~~examination for~~return, the Internal Revenue Service (IRS) asserted that income earned by a Luxembourg subsidiary from its Mexican branch operations should be categorized as foreign base company sales income (FBCSI) under Section 954(d) of the Internal Revenue Code and recognized currently as taxable income on our 2015 U.S. federal income tax return. As a result of this assertion, the IRS issued a Notice of Proposed Adjustment (NOPA). AAM disagreed with the NOPA, believes that the proposed adjustment is without merit and contested the matter through the IRS’s administrative appeals process. No resolution was reached in the appeals process and on September 15, 2022, the IRS issued a Notice of Deficiency with an asserted tax liability of approximately $7 million related to the 2015 tax year, as calculated by the IRS, after utilizing available net operating losses and income tax credits. We believe it is likely that we will be successful in ultimately defending our position. As such, we have not recorded any impact of the IRS’s proposed adjustment in our condensed consolidated financial statements. In the event AAM is not successful in defending its position, the potential additional income tax expense, including estimated interest charges, related to tax years 2015 through ~~2018. Based on~~2021, is estimated to be in the ~~status~~range of ~~ongoing~~approximately $275 million to $325 million. We expect to pay the asserted tax ~~audits,~~liability of approximately $7 million related to 2015, plus related interest, during the first half of 2023.

In a matter of related interest, in May 2020, the U.S Tax Court ruled against another U.S. corporation, finding that the income it earned through a Mexican branch of its Luxembourg subsidiary corporation was FBCSI. In that situation, the taxpayer appealed the U.S. Tax Court decision to the U.S. Court of Appeals for the Sixth Circuit. In December 2021, the U.S. Court of Appeals affirmed, in a split decision, the Tax Court decision in favor of the IRS. In January 2022, the taxpayer in the above referenced matter filed a petition for rehearing and ~~the protocol of finalizing audits~~this petition was denied by the ~~relevant~~U.S. Court of Appeals for the Sixth Circuit in March 2022. In June 2022, the taxpayer filed a petition with the United States Supreme Court to review the judgment of the U.S. Court of Appeals for the Sixth Circuit and this petition is pending.

Notwithstanding the decisions rendered thus far in that case, and because our position is based upon different facts and circumstances, including but not limited to, differences in structure, and different income tax ~~authorities,~~regulations in effect for our tax years under examination, we continue to believe, after consultation with tax and legal counsel that it is more likely than not ~~possible~~that our structure does not give rise to ~~estimate~~FBCSI. We intend to continue to vigorously contest the ~~impact~~conclusions reached in the Notice of ~~changes,~~Deficiency with the IRS and, if ~~any, to previously recorded uncertain tax positions.~~ necessary, through litigation.

Negative or unexpected outcomes of ~~these~~tax examinations and audits, and any related litigation, could have a material adverse impact on our results of operations, financial condition and cash flows. We will continue to monitor the progress and conclusions of all ongoing audits and other communications with tax authorities and will adjust our estimated liability as necessary. On June 1, 2022, our acquisition of Tekfor became effective and we recorded a liability for unrecognized income tax benefits of $12.6 million as of June 1, 2022 associated with the acquired entities. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we have recorded a liability for unrecognized income tax benefits and related interest and penalties of ~~$22.3~~$35.5 million and ~~$22.2~~$23.4 million, respectively.

2321

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. EARNINGS (LOSS) PER SHARE (EPS)

We present EPS using the two-class method. This method allocates undistributed earnings between common shares and non-vested ~~share based~~share-based payment awards that entitle the holder to non-forfeitable dividend rights. Our participating securities ~~include~~are our 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					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
		(in millions, except per share data)									(in millions, except per share data)
Numerator	Numerator									Numerator
Net income (loss) attributable to AAM		$	(2.4)	$	117.2	$	52.2	$	(597.3)
Net income (loss)										Net income (loss)	$	26.5	$	(2.4)	$	50.4	$	52.2
Less: Net income attributable to participating securities	Less: Net income attributable to participating securities	—		(5.1)		(2.0)		—		Less: Net income attributable to participating securities	(1.1)		—		(2.0)		(2.0)

Net income (loss) attributable to common shareholders - Basic and Dilutive	Net income (loss) attributable to common shareholders - Basic and Dilutive	$	(2.4)	$	112.1	$	50.2	$	(597.3)	Net income (loss) attributable to common shareholders - Basic and Dilutive	$	25.4	$	(2.4)	$	48.4	$	50.2

Denominators	Denominators									Denominators
Basic common shares outstanding -	Basic common shares outstanding -									Basic common shares outstanding -
Weighted-average shares outstanding	Weighted-average shares outstanding	118.5		118.4		118.5		117.7		Weighted-average shares outstanding	119.6		118.5		119.3		118.5
Less: Participating securities	Less: Participating securities	(4.4)		(5.1)		(4.6)		(4.7)		Less: Participating securities	(5.0)		(4.4)		(4.9)		(4.6)
Weighted-average common shares outstanding	Weighted-average common shares outstanding	114.1		113.3		113.9		113.0		Weighted-average common shares outstanding	114.6		114.1		114.4		113.9

Effect of dilutive securities -	Effect of dilutive securities -									Effect of dilutive securities -
Dilutive stock-based compensation	Dilutive stock-based compensation	—		—		0.2		—		Dilutive stock-based compensation	1.5		—		0.9		0.2

Diluted shares outstanding -	Diluted shares outstanding -									Diluted shares outstanding -
Adjusted weighted-average shares after assumed conversions	Adjusted weighted-average shares after assumed conversions	114.1		113.3		114.1		113.0		Adjusted weighted-average shares after assumed conversions	116.1		114.1		115.3		114.1

Basic EPS	Basic EPS	$	(0.02)	$	0.99	$	0.44	$	(5.28)	Basic EPS	$	0.22	$	(0.02)	$	0.42	$	0.44

Diluted EPS	Diluted EPS	$	(0.02)	$	0.99	$	0.44	$	(5.28)	Diluted EPS	$	0.22	$	(0.02)	$	0.42	$	0.44

2422

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. 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, ~~2021~~2022 and September 30, ~~2020~~2021 are as follows (in millions):

Defined Benefit Plans Foreign Currency Translation Adjustments Unrecognized Gain (Loss) on Cash Flow Hedges Total
Balance at June 30, 2021 $ (306.7) $ (99.9) $ (15.3) $ (421.9)
Other comprehensive income (loss) before reclassifications — (9.6) 2.5 (7.1)
Income tax effect of other comprehensive income (loss) before reclassifications — — (1.2) (1.2)
Amounts reclassified from accumulated other comprehensive loss 2.8 (a) — (3.6) (b) (0.8)
Income taxes reclassified into net income (0.6) — 0.5 (0.1)
Net change in accumulated other comprehensive loss 2.2 (9.6) (1.8) (9.2)
Balance at September 30, 2021 $ (304.5) $ (109.5) $ (17.1) $ (431.1)


	Defined Benefit Plans			Foreign Currency Translation Adjustments		Unrecognized Gain (Loss) on Cash Flow Hedges			Total
Balance at June 30, 2022	$	(239.3)		$	(147.6)	$	2.4		$	(384.5)

Other comprehensive income (loss) before reclassifications	—			(34.4)		39.2			4.8

Income tax effect of other comprehensive income (loss) before reclassifications	—			—		(7.8)			(7.8)

Amounts reclassified from accumulated other comprehensive income (loss)	1.9		(a)	—		(15.2)		(b)	(13.3)

Income taxes reclassified into net income	(0.4)			—		2.9			2.5

Net change in accumulated other comprehensive income (loss)	1.5			(34.4)		19.1			(13.8)

Balance at September 30, 2022	$	(237.8)		$	(182.0)	$	21.5		$	(398.3)

Defined Benefit Plans Foreign Currency Translation Adjustments Unrecognized Gain (Loss) on Cash Flow Hedges Total
Balance at June 30, 2020 $ (256.6) $ (144.9) $ (41.7) $ (443.2)
Other comprehensive income (loss) before reclassifications — 14.0 (7.8) 6.2
Income tax effect of other comprehensive income (loss) before reclassifications — — 2.6 2.6
Amounts reclassified from accumulated other comprehensive loss 2.1 (a) — 14.7 (b) 16.8
Income taxes reclassified into net income (0.4) — (2.8) (3.2)
Net change in accumulated other comprehensive loss 1.7 14.0 6.7 22.4
Balance at September 30, 2020 $ (254.9) $ (130.9) $ (35.0) $ (420.8)


	Defined Benefit Plans			Foreign Currency Translation Adjustments		Unrecognized Gain (Loss) on Cash Flow Hedges			Total
Balance at June 30, 2021	$	(306.7)		$	(99.9)	$	(15.3)		$	(421.9)

Other comprehensive income (loss) before reclassifications	—			(9.6)		2.5			(7.1)

Income tax effect of other comprehensive income (loss) before reclassifications	—			—		(1.2)			(1.2)

Amounts reclassified from accumulated other comprehensive loss	2.8		(a)	—		(3.6)		(b)	(0.8)

Income taxes reclassified into net income	(0.6)			—		0.5			(0.1)

Net change in accumulated other comprehensive loss	2.2			(9.6)		(1.8)			(9.2)

Balance at September 30, 2021	$	(304.5)		$	(109.5)	$	(17.1)		$	(431.1)


(a)			These amounts were reclassified from AOCI to Other income (expense), net for the three months ended September 30, ~~2021~~2022 and September 30, ~~2020.~~2021.

(b)			The amounts reclassified from AOCI included ~~$(1.1)~~$(1.5) million in cost of goods sold (COGS), $0.1 million in interest expense and $(13.8) million in Other income (expense), net for the three months ended September 30, 2022 and $(1.1) million in COGS, $3.5 million in interest expense and $(6.0) million in Other income (expense), net for the three months ended September 30, ~~2021 and $1.3 million in COGS, $4.1 million in interest expense and $9.3 million in Other income (expense), net for the three months ended September 30, 2020.~~2021.

2523

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, 2021 and September 30, 2020 are as follows~~ ~~(in millions)~~:

Defined Benefit Plans Foreign Currency Translation Adjustments Unrecognized Gain (Loss) on Cash Flow Hedges Total
Balance at December 31, 2020 $ (311.0) $ (101.1) $ (20.1) $ (432.2)
Other comprehensive income (loss) before reclassifications — (8.9) 13.5 4.6
Income tax effect of other comprehensive income (loss) before reclassifications — — (3.3) (3.3)
Amounts reclassified from accumulated other comprehensive loss 8.2 (a) 0.5 (7.8) (b) 0.9
Income taxes reclassified into net income (1.7) — 0.6 (1.1)
Net change in accumulated other comprehensive loss 6.5 (8.4) 3.0 1.1
Balance at September 30, 2021 $ (304.5) $ (109.5) $ (17.1) $ (431.1)


	Defined Benefit Plans			Foreign Currency Translation Adjustments		Unrecognized Gain (Loss) on Cash Flow Hedges			Total
Balance at December 31, 2021	$	(241.9)		$	(111.3)	$	(11.6)		$	(364.8)

Other comprehensive income (loss) before reclassifications	—			(70.7)		73.5			2.8

Income tax effect of other comprehensive income (loss) before reclassifications	—			—		(13.5)			(13.5)

Amounts reclassified from accumulated other comprehensive loss	5.5		(a)	—		(32.8)		(b)	(27.3)

Income taxes reclassified into net income	(1.4)			—		5.9			4.5

Net change in accumulated other comprehensive income (loss)	4.1			(70.7)		33.1			(33.5)

Balance at September 30, 2022	$	(237.8)		$	(182.0)	$	21.5		$	(398.3)

Defined Benefit Plans Foreign Currency Translation Adjustments Unrecognized Gain (Loss) on Cash Flow Hedges Total
Balance at December 31, 2019 $ (259.9) $ (101.2) $ (15.7) $ (376.8)
Other comprehensive income (loss) before reclassifications — (29.7) (42.6) (72.3)
Income tax effect of other comprehensive income (loss) before reclassifications — — 5.7 5.7
Amounts reclassified from accumulated other comprehensive loss 6.2 (a) — 21.7 (b) 27.9
Income taxes reclassified into net income (1.2) — (4.1) (5.3)
Net change in accumulated other comprehensive loss 5.0 (29.7) (19.3) (44.0)
Balance at September 30, 2020 $ (254.9) $ (130.9) $ (35.0) $ (420.8)


	Defined Benefit Plans			Foreign Currency Translation Adjustments		Unrecognized Gain (Loss) on Cash Flow Hedges			Total
Balance at December 31, 2020	$	(311.0)		$	(101.1)	$	(20.1)		$	(432.2)

Other comprehensive income (loss) before reclassifications	—			(8.9)		13.5			4.6

Income tax effect of other comprehensive income (loss) before reclassifications	—			—		(3.3)			(3.3)

Amounts reclassified from accumulated other comprehensive loss	8.2		(a)	0.5		(7.8)		(b)	0.9

Income taxes reclassified into net income	(1.7)			—		0.6			(1.1)

Net change in accumulated other comprehensive loss	6.5			(8.4)		3.0			1.1

Balance at September 30, 2021	$	(304.5)		$	(109.5)	$	(17.1)		$	(431.1)


(a)			These amounts were reclassified from AOCI to Other income (expense), net for the nine months ended September 30, ~~2021~~2022 and September 30, ~~2020.~~2021.

(b)			The amounts reclassified from AOCI included ~~$(5.2)~~$(4.6) million in cost of goods sold (COGS), $3.5 million in interest expense and $(31.7) million in Other income (expense), net for the nine months ended September 30, 2022 and $(5.2) million in COGS, $11.4 million in interest expense and $(14.0) million in Other income (expense), net for the nine months ended September 30, ~~2021 and $2.3 million in COGS, $10.1 million in interest expense and $9.3 million in Other income (expense), net for the nine months ended September 30, 2020.~~2021.

2624

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. REVENUE FROM CONTRACTS WITH CUSTOMERS

Net sales recognized from contracts with customers, disaggregated by segment and geographical location, are presented in the following table for the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. Net sales are attributed to regions based on the location of production. Intersegment sales have been excluded from the table.

In the first quarter of 2021, we reorganized our segments and moved certain of our Driveline facilities to our Metal Forming segment. The amounts previously reported in the tables below for the three and nine months ended September 30, 2020 have been retrospectively recast to reflect this change.


	Three Months Ended September 30, 2022
	(in millions)
	Driveline		Metal Forming		Total
North America	$	817.5	$	332.0	$	1,149.5
Asia	124.4		13.0		137.4
Europe	92.2		106.6		198.8
South America	25.7		23.8		49.5
Total	$	1,059.8	$	475.4	$	1,535.2

	Three Months Ended September 30, 2021
	Driveline		Metal Forming		Total
North America	$	647.4	$	279.9	$	927.3
Asia	107.8		11.8		119.6
Europe	84.9		49.6		134.5
South America	29.5		2.2		31.7
Total	$	869.6	$	343.5	$	1,213.1


	Nine Months Ended September 30, 2022
	Driveline		Metal Forming		Total
North America	$	2,465.1	$	939.6	$	3,404.7
Asia	334.5		31.9		366.4
Europe	298.6		243.7		542.3
South America	61.8		34.5		96.3
Total	$	3,160.0	$	1,249.7	$	4,409.7

	Nine Months Ended September 30, 2021
	Driveline		Metal Forming		Total
North America	$	2,143.2	$	876.6	$	3,019.8
Asia	329.9		36.0		365.9
Europe	288.7		171.7		460.4
South America	67.7		7.7		75.4
Total	$	2,829.5	$	1,092.0	$	3,921.5

Three Months Ended September 30, 2021
Driveline Metal Forming Total
North America $ 647.4 $ 279.9 $ 927.3
Asia 107.8 11.8 119.6
Europe 84.9 49.6 134.5
South America 29.5 2.2 31.7
Total $ 869.6 $ 343.5 $ 1,213.1
Three Months Ended September 30, 2020
Driveline Metal Forming Total
North America $ 801.5 $ 321.4 $ 1,122.9
Asia 116.7 12.2 128.9
Europe 94.1 53.4 147.5
South America 12.3 2.5 14.8
Total $ 1,024.6 $ 389.5 $ 1,414.1
Nine Months Ended September 30, 2021
Driveline Metal Forming Total
North America $ 2,143.2 $ 876.6 $ 3,019.8
Asia 329.9 36.0 365.9
Europe 288.7 171.7 460.4
South America 67.7 7.7 75.4
Total $ 2,829.5 $ 1,092.0 $ 3,921.5
Nine Months Ended September 30, 2020
Driveline Metal Forming Total
North America $ 1,766.3 $ 753.6 $ 2,519.9
Asia 307.9 28.3 336.2
Europe 239.3 139.1 378.4
South America 32.7 5.7 38.4
Total $ 2,346.2 $ 926.7 $ 3,272.9

2725

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Contract Assets and Liabilities

The following table summarizes our beginning and ending balances for accounts receivable and contract liabilities associated with our contracts with ~~customers:~~customers (in millions):

Accounts Receivable, Net Contract Liabilities (Current) Contract Liabilities (Long-term)
December 31, 2020 $ 793.2 $ 23.4 $ 91.0
September 30, 2021 739.6 25.7 88.2
Increase/(decrease) $ (53.6) $ 2.3 $ (2.8)



	Accounts Receivable, Net		Contract Liabilities (Current)		Contract Liabilities (Long-term)
December 31, 2021	$	762.8	$	28.1	$	94.8
September 30, 2022	974.6		29.2		70.1
Increase/(decrease)	$	211.8	$	1.1	$	(24.7)

Contract liabilities relate to deferred revenue associated with various settlements and commercial agreements for which we have a future performance obligation to the customer. We recognize this deferred revenue into revenue over the life of the associated program as we satisfy our performance obligations to the customer. We do not have contract assets as defined in ASC 606. ~~During the nine months ended September 30, 2021, we~~We amortized ~~approximately $17.3 million of~~ previously recorded contract liabilities into revenue as we satisfied performance obligations with our ~~customers.~~customers of approximately $23.3 million and $17.3 million for the nine months ended September 30, 2022 and 2021, respectively.

2826

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. ACQUISITIONS AND DISPOSITIONS

Acquisition of Tekfor Group

On June 1, 2022, our acquisition of Tekfor Group became effective and we paid a total purchase price of $94.4 million, which was funded entirely with cash on hand. Tekfor Group manufactures high-performance components, modules and fasteners, including traditional powertrain and driveline components (for both internal combustion and hybrid applications), and e-mobility components. Our acquisition of Tekfor contributes to diversifying our geographic and customer sales mix, while also increasing our electrification product portfolio.

The acquisition of Tekfor Group was accounted for under the acquisition method under ASC 805 - Business Combinations 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.

The following represents the preliminary fair values of the assets acquired and liabilities assumed resulting from the acquisition, including measurement period adjustments recorded in the third quarter of 2022 (in millions):


	Initial Allocation		Adjustments		September 30, 2022
Total consideration transferred	$	94.4	$	—	$	94.4

Cash and cash equivalents	$	14.3	$	—	$	14.3
Accounts receivable	33.1		0.6		33.7
Inventories	44.9		1.4		46.3
Prepaid expenses and other long-term assets	30.8		(0.5)		30.3
Deferred income tax assets	3.5		—		3.5
Property, plant and equipment	105.7		(0.1)		105.6
Total assets acquired	$	232.3	$	1.4	$	233.7
Accounts payable	33.3		0.2		33.5
Accrued expenses and other	26.3		0.6		26.9
Deferred income tax liabilities	1.0		—		1.0
Debt	23.4		—		23.4
Postretirement benefits and other long-term liabilities	42.3		(0.8)		41.5
Net assets acquired	$	106.0	$	1.4	$	107.4

Gain on bargain purchase of business	$	11.6	$	1.4	$	13.0

The gain on bargain purchase of business was primarily the result of current macroeconomic factors such as the supply chain disruptions impacting the automotive industry, including the conflict between Russia and Ukraine, the semiconductor supply shortage, and increasing input costs, including materials, freight and utilities. The preliminary allocation of the purchase price to the assets acquired and liabilities assumed 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.

The primary areas of the preliminary purchase price allocation that are not yet finalized relate to property, plant and equipment, right-of-use assets and lease liabilities and deferred income tax assets and 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.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Included in net sales and net income for the period from the acquisition effective date on June 1, 2022 through September 30, 2022 was approximately $121 million and $10 million, respectively, attributable to Tekfor Group. The net income amount includes the gain on bargain purchase of business of $13.0 million that was recognized as a result of the acquisition, as well as a one-time expense of $5.0 million for the step-up of inventory to fair value.

Unaudited Pro Forma Financial Information

Unaudited pro forma net sales for AAM, on a combined basis with Tekfor Group for the nine months ended September 30, 2022 and September 30, 2021, were $4.55 billion and $4.20 billion, respectively, excluding Tekfor Group sales to AAM during those periods. Unaudited pro forma net income amounts for the nine months ended September 30, 2022 and September 30, 2021 were approximately $40 million and $75 million, respectively. Unaudited pro forma earnings per share amounts for the nine months ended September 30, 2022 and September 30, 2021 were $0.33 per share and $0.63 per share, respectively. Unaudited pro forma net income for the nine months ended September 30, 2021 includes a one-time gain of approximately $15 million associated with a Tekfor Group entity as a result of a favorable tax ruling in a foreign jurisdiction.

The unaudited pro forma net income amounts for the nine months ended September 30, 2022 and September 30, 2021 have been adjusted for approximately $4 million, net of tax, related to the step-up of inventory to fair value as a result of the acquisition, approximately $5 million, net of tax, for acquisition-related costs, and approximately $13 million for the gain on bargain purchase of business recognized, which was not subject to tax. This resulted in a net reclassification of approximately $4 million from unaudited pro forma net income for the first nine months of 2022 into unaudited pro forma net income for the first nine months of 2021, as we are required to disclose the unaudited pro forma amounts as if the acquisition of Tekfor Group had been completed on January 1, 2021.

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 Manufacturing Facility in Emporium, Pennsylvania

In May 2021, AAM completed our acquisition of a manufacturing facility in Emporium, Pennsylvania, under which we acquired $14.9 million of net assets that consisted of $5.9 million of inventory and $9.0 million of property, plant and equipment. The purchase price was $14.9 million, which consisted of $4.9 million of cash and $10.0 million of a deferred consideration liability that will be paid to seller at $2.5 million annually over the period 2022 through 2025. As the value of the net assets acquired was equal to the purchase price, no goodwill or gain on bargain purchase was recognized for this acquisition for the period ended September 30, 2021.

The operating results of this manufacturing facility ~~for the period from our acquisition date through September 30, 2021~~ were insignificant to AAM's Condensed Consolidated ~~Statement~~Statements of Operations for ~~this period.~~the nine months ended September 30, 2022 and September 30, 2021. Further, we have not disclosed pro forma revenue and earnings for the nine months ended September 30, 2021 ~~and 2020~~ as the operating results of this manufacturing facility would be insignificant to AAM's consolidated results for ~~these periods.~~the period.

Sale of Interest in Consolidated Joint Venture

In the nine months ended September 30, 2021, we completed the sale of our ownership interest in a consolidated joint venture and received cash proceeds of approximately $2.6 million. As a result of the sale and deconsolidation of this joint venture, we recognized a loss of $2.7 ~~million.~~million in the first nine months of 2021. Subsequent to the sale of this joint venture, we no longer present noncontrolling interest in our condensed consolidated financial statements as all consolidated entities are ~~wholly-owned.~~wholly owned.

2928

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. MANUFACTURING FACILITY FIRE AND INSURANCE RECOVERY

On September 22, 2020, a significant industrial fire occurred at our Malvern Manufacturing Facility in Ohio (Malvern Fire). All associates were evacuated safely and without injury and we were able to maintain continuity of supply to our customers without any significant disruptions.

Our insurance policies are expected to cover the repair, replacement or actual cash value of the assets that incurred loss or damage, less our applicable deductible of $1.0 million. In addition, our insurance policies are expected to provide coverage for interruption to our business, including lost or reduced profits and reimbursement for certain expenses and costs that are incurred relating to the fire. In the nine months ended September 30, ~~2021,~~2022, we recorded ~~$13.7~~$2.2 million of charges primarily related to transportation and freight ~~asset repairs~~ and other costs incurred to resume or relocate operations and ensure continuity of supply to our customers. We also recorded an estimated insurance recovery of ~~$24.8~~$8.6 million and received reimbursements and advances under our insurance policies of approximately ~~$51.1~~$14.0 million, of which approximately ~~$28.0~~$7.7 million is presented as an operating cash flow and ~~approximately $23.1~~$6.3 million is presented as an investing cash flow in our Condensed Consolidated Statement of Cash Flows. This resulted in net pre-tax income in our Condensed Consolidated Statement of Operations of approximately ~~$11.1~~$6.4 million in Cost of goods sold for the nine months ended September 30, ~~2021.~~2022. At September 30, ~~2021, $16.9~~2022, $5.9 million of insurance recovery receivable is included in Prepaid expenses and other in our Condensed Consolidated Balance Sheet.

Since the date of the Malvern Fire and the establishment of the insurance claim, we have incurred ~~$50.3~~$54.6 million of total charges primarily related to site services and clean-up, transportation and freight, asset repairs and other costs incurred to resume or relocate operations and ensure continuity of supply to our customers. In addition, we have recorded a total of $27.0 million of costs primarily associated with the write-down of property, plant and equipment as a result of damage from the fire. We have recorded total estimated insurance recoveries of ~~$79.1~~$90.1 million and have received total reimbursements and advances under our insurance policies of ~~$62.2~~$84.2 million, of which $11.1 million was received in 2020, $59.1 million was received in 2021 and ~~$51.1~~$14.0 million was received in the first nine months of ~~2021.~~2022.

In the fourth quarter of 2020, we determined that we will cease production at the Malvern Manufacturing Facility and relocate production capacity to other AAM manufacturing ~~facilities during 2021.~~facilities. As such, we cannot estimate the total claim eligible costs that we will incur as a result of the Malvern Fire and the associated relocation of production capacity to other AAM manufacturing facilities. At September 30, ~~2021,~~2022, we have estimated the amount of expected insurance proceeds recoverable in consideration of the policy provisions, estimated repair costs or actual cash value of damaged assets, and claim eligible expenses incurred from the date of the fire. We expect the claim settlement process to continue through ~~2021 and,~~2022 based on the provisions of the ~~policy, the process could continue into 2022.~~policy. We will update our estimates as additional information becomes available, however, the actual impact on our results of operations, financial position or cash flows, or the timing of such impact, could differ from our estimates.

3029

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. SEGMENT REPORTING

Our business is organized into Driveline and Metal Forming segments, with each representing a reportable segment under ASC 280 - Segment ~~Reporting~~Reporting. . In the first quarter of 2021, we completed a reorganization of our segments, which included moving certain locations that were previously reported under our Driveline segment to our Metal Forming segment in order to better align our product and process technologies. The amounts in the tables below for the three and nine months ended September 30, 2020 have been retrospectively recast to reflect this reorganization.

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 front and rear axles, driveshafts, differential assemblies, clutch modules, balance shaft systems, disconnecting driveline technology, and electric and hybrid driveline products and systems for light trucks, sport utility vehicles (SUVs), crossover vehicles, passenger cars and commercial vehicles; and

•Metal Forming products consist primarily of ~~axle~~engine, transmission, driveline and ~~transmission shafts, ring~~safety-critical components for traditional internal combustion engine and ~~pinion gears, differential gears~~electric vehicle architectures including light vehicles, commercial vehicles and ~~assemblies, connecting rods and variable valve timing~~off-highway vehicles, as well as products for ~~Original Equipment Manufacturers and Tier 1 automotive suppliers.~~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. We define EBITDA to be earnings before interest expense, income taxes, depreciation and amortization. Segment Adjusted EBITDA is defined as EBITDA for our reportable segments excluding the impact of restructuring and acquisition-related costs, debt refinancing and redemption costs, loss on the sale of a business, impairment charges, pension settlements, unrealized gains or losses on equity securities, and non-recurring items.

On June 1, 2022, our acquisition of Tekfor became effective and we began consolidating the results of Tekfor on that date, which are reported in our Metal Forming segment for the three and nine months ended September 30, 2022.

The following tables represent information by reportable segment for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in millions):
Three Months Ended September 30, 2021
Driveline Metal Forming Total
Sales $ 870.4 $ 422.7 $ 1,293.1
Less: intersegment sales 0.8 79.2 80.0
Net external sales $ 869.6 $ 343.5 $ 1,213.1
Segment Adjusted EBITDA $ 128.4 $ 54.8 $ 183.2
Three Months Ended September 30, 2020
Driveline Metal Forming Total
Sales $ 1,025.0 $ 497.4 $ 1,522.4
Less: intersegment sales 0.4 107.9 108.3
Net external sales $ 1,024.6 $ 389.5 $ 1,414.1
Segment Adjusted EBITDA $ 199.5 $ 97.6 $ 297.1


	Three Months Ended September 30, 2022
	Driveline		Metal Forming		Total
Sales	$	1,061.1	$	591.2	$	1,652.3
Less: Intersegment sales	1.3		115.8		117.1
Net external sales	$	1,059.8	$	475.4	$	1,535.2

Segment Adjusted EBITDA	$	146.4	$	52.0	$	198.4

	Three Months Ended September 30, 2021
	Driveline		Metal Forming		Total
Sales	$	870.4	$	422.7	$	1,293.1
Less: Intersegment sales	0.8		79.2		80.0
Net external sales	$	869.6	$	343.5	$	1,213.1

Segment Adjusted EBITDA	$	128.4	$	54.8	$	183.2

3130

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


	Nine Months Ended September 30, 2022
	Driveline		Metal Forming		Total
Sales	$	3,163.6	$	1,585.9	$	4,749.5
Less: intersegment sales	3.6		336.2		339.8
Net external sales	$	3,160.0	$	1,249.7	$	4,409.7

Segment Adjusted EBITDA	$	420.3	$	169.3	$	589.6

	Nine Months Ended September 30, 2021
	Driveline		Metal Forming		Total
Sales	$	2,831.9	$	1,352.1	$	4,184.0
Less: intersegment sales	2.4		260.1		262.5
Net external sales	$	2,829.5	$	1,092.0	$	3,921.5

Segment Adjusted EBITDA	$	450.2	$	218.5	$	668.7

~~The following tables represent information~~

Total assets by reportable segment ~~for the nine months ended~~as of September 30, 2022 and December 31, 2021 ~~and 2020~~were as follows (in millions):

Nine Months Ended September 30, 2021
Driveline Metal Forming Total
Sales $ 2,831.9 $ 1,352.1 $ 4,184.0
Less: intersegment sales 2.4 260.1 262.5
Net external sales $ 2,829.5 $ 1,092.0 $ 3,921.5
Segment Adjusted EBITDA $ 450.2 $ 218.5 $ 668.7
Nine Months Ended September 30, 2020
Driveline Metal Forming Total
Sales $ 2,346.7 $ 1,147.7 $ 3,494.4
Less: intersegment sales 0.5 221.0 221.5
Net external sales $ 2,346.2 $ 926.7 $ 3,272.9
Segment Adjusted EBITDA $ 309.0 $ 149.3 $ 458.3


	September 30, 2022
	Driveline		Metal Forming		Other		Total
Total Assets	$	2,898.8	$	1,748.9	$	1,031.9	$	5,679.6
	December 31, 2021
	Driveline		Metal Forming		Other		Total
Total Assets	$	2,925.6	$	1,576.9	$	1,133.2	$	5,635.7

Assets included in the Other column in the table above represent AAM Corporate assets, as well as eliminations of intercompany assets.

The following table represents a reconciliation of Total Segment Adjusted EBITDA to consolidated income (loss) before income taxes for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~ 2021:~~(in millions)~~:
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Total segment adjusted EBITDA $ 183.2 $ 297.1 $ 668.7 $ 458.3
Interest expense (49.7) (53.9) (150.7) (160.0)
Depreciation and amortization (135.6) (125.0) (421.2) (393.7)
Restructuring and acquisition-related costs (7.4) (9.7) (40.8) (38.6)
Loss on sale of business — — (2.7) (1.0)
Unrealized gain on equity securities 19.4 — 19.4 —
Debt refinancing and redemption costs (31.6) (5.2) (34.0) (6.7)
Impairment charges — — — (510.0)
Non-recurring items:
Malvern Fire charges, net of recoveries 5.7 (8.6) 11.1 (8.6)
Income (loss) before income taxes $ (16.0) $ 94.7 $ 49.8 $ (660.3)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)
Total segment adjusted EBITDA	$	198.4	$	183.2	$	589.6	$	668.7
Interest expense	(44.8)		(49.7)		(132.2)		(150.7)
Depreciation and amortization	(124.8)		(135.6)		(367.1)		(421.2)
Restructuring and acquisition-related costs	(7.9)		(7.4)		(26.4)		(40.8)

Loss on sale of business	—		—		—		(2.7)
Unrealized gain (loss) on equity securities	(2.3)		19.4		(24.0)		19.4
Debt refinancing and redemption costs	(0.2)		(31.6)		(6.0)		(34.0)

Non-recurring items:
Malvern Fire charges, net of recoveries	1.0		5.7		6.4		11.1
Acquisition-related fair value inventory adjustment	—		—		(5.0)		—
Gain on bargain purchase of business	1.4		—		13.0		—

Income (loss) before income taxes	$	20.8	$	(16.0)	$	48.3	$	49.8

3231

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This management’s discussion and analysis (MD&A) should be read in conjunction with the unaudited condensed consolidated financial statements and notes appearing elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Unless the context otherwise requires, references to "we," "our," "us" or "AAM" shall mean collectively (i) American Axle & Manufacturing Holdings, Inc. (Holdings), a Delaware corporation, (ii) American Axle & Manufacturing, Inc. (AAM, Inc.), a Delaware corporation, and its direct and indirect subsidiaries, and, (iii) Metaldyne Performance Group, Inc. (MPG) and its direct and indirect subsidiaries. AAM Inc. and MPG are ~~wholly-owned~~wholly owned subsidiaries of Holdings.

COMPANY OVERVIEW

~~We are~~As a leading global ~~Tier~~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 nearly 85 facilities in 18 countries, AAM is bringing the ~~automotive industry. We design, engineer and manufacture driveline and metal forming technologies that are making the next generation of vehicles smarter, lighter,~~future faster for a safer and more efficient. We employ approximately 20,000 associates, operating at nearly 80 facilities in 17 countries, to support our customers on global and regional platforms with a focus on quality, operational excellence and technology leadership.sustainable tomorrow.

Major Customers

We are a primary supplier of driveline components to General Motors Company (GM) for its full-size rear-wheel drive (RWD) light trucks, sport utility vehicles (SUVs), and crossover vehicles manufactured in North America, supplying a significant portion of GM’s rear axle and four-wheel drive and all-wheel drive (4WD/AWD) axle requirements for these vehicle platforms. We also supply GM with various products from our Metal Forming segment. Sales to GM were approximately ~~37%~~40% of our consolidated net sales in the first nine months of ~~2021, 40% in~~2022, and 37% for both the first nine months of ~~2020,~~2021 and ~~39% for~~ the full year ~~2020.~~2021.

We also supply driveline system products to Stellantis N.V. (Stellantis) for programs including the heavy-duty Ram full-size pickup trucks and its derivatives, the AWD Chrysler Pacifica and the AWD Jeep Cherokee. In addition, we sell various products to Stellantis from our Metal Forming segment. Sales to Stellantis were approximately ~~19%~~18% of our consolidated net sales in the first nine months of ~~2021, 18% in~~2022, and 19% for both the first nine months of ~~2020,~~2021 and ~~19% for~~ the full year ~~2020.~~2021.

We are also a supplier to Ford Motor Company (Ford) for driveline system products on certain vehicle programs including the Ford Bronco Sport, Ford Edge, Ford Escape and Lincoln Nautilus, and we sell various products to Ford from our Metal Forming segment. Sales to Ford were approximately ~~12%~~11% of our consolidated net sales ~~in each~~for the first nine months of 2022, and 12% for both the first nine months of 2021 ~~the first nine months of 2020~~ and the full year ~~2020.~~2021.

No other customer represented 10% or more of consolidated net sales during these periods.

~~COVID-19 Update~~Supply Chain Constraints Impacting the Automotive Industry

InDuring the first nine months of 2021, our operations continued to return to more normalized levels of production and we did not experience significant reductions in production volumes as a direct result of the impact of COVID-19, as were experienced in the first nine months of 2020. Continuing to sustain increased levels of production will depend on future developments, including the number of COVID-19 cases reported, the potential reimplementation of shelter-in-place orders, and customer production levels, which are outside of our control. We continue to monitor the impact of COVID-19 on our operations, as well as the operations of our customers and suppliers, as a resurgence in cases could have a sudden and significant impact on our operations, financial condition and financial results.

~~Semiconductor Shortage and Other Supply Chain Constraints~~

~~In the first nine months of 2021,~~2022, the automotive industry ~~experienced, and continues~~has continued to experience significant disruptions in the supply chain, including a shortage of semiconductor chips used by our customers, increased metal and commodity costs, higher utility costs, increased transportation costs, higher labor costs and labor shortages. As a result, we have experienced increased volatility in our production schedules, including manufacturing downtime, often with little notice from customers, higher inventory levels and increased labor costs, which have negatively impacted our results of operations and cash flows during this period. We continue to work with customers and suppliers in our effort to protect continuity of supply as we expect these challenges to continue ~~into~~throughout 2022. Due to the ongoing uncertainty associated with the impact of the COVID-19 pandemic, the conflict between Russia and Ukraine and other factors causing, or exacerbating, these supply chain constraints, the ultimate impact on our net sales, results of operations and cash flows is unknown.

RESULTS OF OPERATIONS –– THREE MONTHS ENDED SEPTEMBER 30, ~~2021~~2022 AS COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, ~~2020~~2021

Net Sales ~~Net sales were $1,213.1 million~~


	Three Months Ended September 30,
(in millions)	2022		2021		Change		Percent Change
Net sales	$	1,535.2	$	1,213.1	$	322.1	26.6	%

The increase in the third quarter of ~~2021, as compared to $1,414.1 million in the third quarter of 2020. The change in net sales in the third quarter of 2021,~~2022, as compared to the third quarter of ~~2020, primarily~~2021, reflects ~~a reduction in production volumes on certain vehicle programs that we support~~approximately $92 million as a result of ~~the semiconductor shortage that is impacting the automotive industry, the impact~~our acquisition of which we estimate to be approximately $245 million for the third quarter of 2021. This was partially offset by an increase of approximately $86 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments.Tekfor in 2022. In addition, we estimate that net sales in the ~~third quarter of 2020~~three months ended September 30, 2022 and September 30, 2021 were ~~adversely~~ impacted by ~~approximately $87 million as a result of the impact of COVID-19.~~

~~Cost of Goods Sold~~ Cost of goods sold was $1,047.5 million in the third quarter of 2021, as compared to $1,164.3 million in the third quarter of 2020. The decrease in cost of goods sold principally reflects the reduction in production volumes on certain vehicle programs that we support resulting from the semiconductor shortage ~~which we estimate reduced costs of goods sold~~and other supply chain constraints affecting the automotive industry by approximately ~~$162~~$109 million and $245 million, respectively, resulting in an increase in sales of approximately $136 million for the three months ended September 30, ~~2021. This decrease~~2022.

Cost of Goods Sold


	Three Months Ended September 30,
(in millions)	2022		2021		Change		Percent Change
Cost of goods sold	$	1,357.8	$	1,047.5	$	310.3	29.6	%

The change in cost of goods sold ~~was partially offset by~~reflects an increase of approximately ~~$117~~$92 million ~~related to metal market costs and~~as the impact on production volumes of ~~foreign exchange. In addition, we estimate that~~the semiconductor shortage and other supply chain constraints affecting the automotive industry lessened in the three months ended September 30, 2022, as compared to the three months ended September 30, 2021, and cost of goods sold ~~was reduced in the third quarter of 2020~~increased by approximately ~~$71~~$88 million as a result of our acquisition of Tekfor in 2022. Cost of goods sold was also impacted by increased net manufacturing costs, including metal and commodity costs, utility costs and transportation costs. For the ~~impact~~three months ended September 30, 2022, material costs were approximately 60% of ~~COVID-19.~~total cost of goods sold, as compared to approximately 59% for the three months ended September 30, 2021.

In the first quarter of 2021, one of our Major Customers announced its intention to cease production operations in Brazil in 2021 as part of their restructuring actions. This decision ~~impacts~~impacted certain of the programs that we ~~support~~supported and, as a result, we ~~have~~ accelerated approximately $10 million of depreciation on certain property, plant and equipment in the third quarter of 2021.

~~For the three months ended September 30, 2021, material costs were approximately 59% of total cost of goods sold, as compared to approximately 58% for the three months ended September 30, 2020.~~Gross Profit


	Three Months Ended September 30,
(in millions)	2022		2021		Change		Percent Change
Gross profit	$	177.4	$	165.6	$	11.8	7.1	%

Gross ~~Profit~~ ~~Gross profit~~margin was ~~$165.6 million~~11.6% in the third quarter of ~~2021,~~2022, as compared to ~~$249.8 million in the third quarter of 2020. Gross margin was~~ 13.7% in the third quarter of ~~2021, as compared to 17.7% in the third quarter of 2020.~~2021. Gross profit and gross margin were impacted by the factors discussed in Net Sales and Cost of Goods Sold above.

Selling, General and Administrative Expenses (SG&A)


	Three Months Ended September 30,
(in millions)	2022		2021		Change		Percent Change
Selling, general & administrative expenses	$	85.7	$	90.5	$	(4.8)	(5.3)	%

SG&A ~~(including research and development (R&D))~~as a percentage of net sales was ~~$90.5 million or~~5.6% in the third quarter of 2022, as compared to 7.5% of net sales in the third quarter of ~~2021, as compared to $66.5 million or 4.7% of net sales in the third quarter of 2020. R&D~~2021. Research and development (R&D) expense, net of customer engineering, design and development (ED&D) recoveries, was approximately $35.4 million in the third quarter of 2022, as compared to $34.7 million in the third quarter of ~~2021, as compared~~2021. The decrease in SG&A expense is primarily related to ~~$18.0 million in~~lower compensation-related expense, partially offset by the ~~third quarter of 2020. The~~ increase in ~~SG&A in the third quarter of 2021, as compared to the third quarter of 2020, was primarily attributable to an increase in net~~ R&D expense as the third quarter 2020 amount included a customer ED&D recovery of approximately $15 million. In addition, SG&A expense increased as a result of higher compensation-related expense, as temporary salary reductions were implemented in the second quarter of 2020 and continued into the third quarter of 2020 in response to COVID-19, and as a result of higher incentive compensation accruals in the third quarter of 2021 as compared to the third quarter of 2020.expense.

Amortization of Intangible Assets Amortization expense related to intangible assets was $21.5 million for the three months ended September 30, 2022 and $21.4 million for the three months ended September 30, ~~2021 and $21.6 million for the three months ended September 30, 2020.~~2021.

Restructuring and Acquisition-Related Costs Restructuring and acquisition-related costs were $7.9 million in the third quarter of 2022 and $7.4 million in the third quarter of ~~2021 and $9.7 million in the third quarter of 2020. See Note 2 - Restructuring and Acquisition-Related Costs for additional detail.~~2021.

Operating Income Operating income was $62.3 million in the third quarter of 2022, as compared to $46.3 million in the third quarter of ~~2021, as compared to $152.0 million~~2021. Operating margin was 4.1% in the third quarter of ~~2020. Operating margin was~~2022, as compared to 3.8% in the third quarter of ~~2021, as compared to 10.7% in the third quarter of 2020.~~2021. The changes in operating income and operating margin were primarily due to factors discussed in Net Sales and Cost of Goods Sold ~~and SG&A~~ above.

Interest Expense and Interest Income Interest expense was $44.8 million in the third quarter of 2022, as compared to $49.7 million in the third quarter of ~~2021, as compared to $53.9 million~~2021. The decrease in interest expense was primarily the ~~third quarter~~result of ~~2020. Interest income was $2.7 million in the third quarter of 2021, as compared to $3.4 million in the third quarter of 2020.~~our ongoing debt reduction initiatives and our previous refinancing actions. The weighted-average interest rate of our long-term debt outstanding was 5.7% in the third quarter of 2022 and 5.9% in the third quarter of ~~2021 and 5.6%~~2021.

Interest income was $5.4 million in the third quarter of ~~2020.~~

2022, as compared to $2.7 million in the third quarter of 2021.

Debt Refinancing and Redemption Costs In the third quarter of 2022, we made voluntary prepayments totaling $50.0 million on our Term Loan B Facility. As a result, we 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 this borrowing.

In ~~July~~the third quarter of 2021, we voluntarily redeemed ~~a portion of~~ our 6.25% Notes due 2025. This resulted in a principal ~~payment of $100~~payments totaling $700.0 million and ~~$1.8~~$19.4 million in accrued interest. We also expensed approximately $1.4 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, and approximately $3.1 million for the payment of an early redemption premium.

Gain on Bargain Purchase of Business On June 1, 2022, our acquisition of Tekfor became effective, which resulted in a gain on bargain purchase. During the third quarter, the gain on bargain purchase was increased by approximately $1.4 million as a result of ~~2020, we voluntarily redeemed~~measurement period adjustments recorded during the ~~remaining portion of our 6.625% Notes due 2022. This resulted in a principal payment of $350 million~~period. See Note 14 - Acquisitions and ~~$5.7 million in accrued interest. We also expensed approximately $1.3 million~~Dispositions for the write-off of the unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing, and approximately $3.9 million for the payment of an early redemption premium.additional detail on this acquisition.

Unrealized ~~Gain~~Loss on Equity Securities We have an investment in the equity securities of REE Automotive, an e-mobility ~~company that completed a merger with a Special Purpose Acquisition Company in the third quarter of 2021 and became a publicly traded entity.~~company. These equity securities are measured at fair value each reporting period with changes in fair value reported through an unrealized gain or loss within Other income (expense), net in our Condensed Consolidated Statement of Operations. As of September 30, ~~2021,~~2022, our investment in REE shares was valued at ~~$22.4~~$3.4 million resulting in an unrealized ~~gain~~loss of ~~$19.4~~$2.3 million for the ~~third quarter 2021.~~three months ended September 30, 2022.

Other Expense, Net Other expense, net includes the net effect of foreign exchange gains and losses, our proportionate share of earnings from equity in unconsolidated subsidiaries, and all components of net periodic pension and postretirement benefit costs other than service cost. Other expense, net was $1.0 million in the third quarter of 2022, as compared to $3.1 million in the third quarter of ~~2021, as compared to $1.6 million in the third quarter of 2020.~~2021.

Income Tax Benefit Income tax benefit was $5.7 million for the three months ended September 30, 2022, as compared to $13.6 million for the three months ended September 30, ~~2021,~~2021. Our effective income tax rate was (27.4)% in the third quarter of 2022, as compared to ~~$22.5 million for~~85.0% in the third quarter of 2021. For the three months ended September 30, ~~2020. Our effective~~2022, we recognized a net income tax ~~rate was 85.0%~~benefit of $7.5 million related to the release of a valuation allowance in ~~the third quarter of 2021, as compared to (23.8)% in the third quarter of 2020.~~

a foreign jurisdiction. During the three months ended September 30, 2021, we recognized a net income tax benefit of approximately $5.2 million related to our ability to carry back prior year losses to tax years with the higher 35% corporate income tax ~~rate.~~

~~During~~rate under provisions of the three months ended September 30, 2020, we released a partial valuation allowance that had been established in the second quarter of 2020 as a result of final regulations issued on July 28, 2020 by the Internal Revenue Service and the U.S. Department of Treasury. This resulted in a tax benefit of approximately $36 million for the three months ended September 30, 2020.CARES Act.

Our effective income tax rate for the three months ended September 30, ~~2021~~2022 varies from our effective income tax rate for the three months ended September 30, ~~2020~~2021 primarily as a result of the ~~items discussed above.~~release of the foreign valuation allowance during the three months ended September 30, 2022 as noted above, as well as the mix of earnings on a jurisdictional basis during these periods. For the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, our effective income tax rates vary from the U.S. federal statutory rate ~~of 21%~~ primarily due to the discrete items ~~discussed~~noted above, ~~as well as~~the benefit from foreign derived intangible income deductions, the change in jurisdictional mix of earnings, and favorable foreign tax rates and the impact of tax credits.

Net Income (Loss) ~~Attributable to AAM~~ and Earnings (Loss) Per Share (EPS) Net income ~~(loss) attributable~~was $26.5 million in the third quarter of 2022, as compared to ~~AAM was~~ a loss of $2.4 million in the third quarter of ~~2021, as compared to income of $117.2 million in the third quarter of 2020.~~2021. Diluted ~~EPS~~earnings per share was ~~a loss of $0.02 cents~~$0.22 per share in the third quarter of ~~2021,~~2022, as compared to ~~earnings~~diluted loss per share of ~~$0.99~~$0.02 in the third quarter of ~~2020.~~2021. Net income (loss) ~~attributable to AAM~~ and EPS for the third quarters of ~~2021~~2022 and ~~2020~~2021 were primarily impacted by the factors discussed above.

RESULTS OF OPERATIONS –– NINE MONTHS ENDED SEPTEMBER 30, ~~2021~~2022 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, ~~2020~~2021

Net Sales ~~Net sales were $3,921.5 million~~


	Nine Months Ended September 30,
(in millions)	2022		2021		Change		Percent Change
Net sales	$	4,409.7	$	3,921.5	$	488.2	12.4	%

The increase in the first nine months of ~~2021 as compared to $3,272.9 million in the first nine months of 2020. The increase in net sales in the first nine months of 2021,~~2022, as compared to the first nine months of ~~2020,~~2021, primarily reflects ~~increased production volumes as net sales in the first nine months of 2020 were adversely impacted by an estimated $1,203~~approximately $55 million associated with the decline in global automotive production as a result of COVID-19. Net sales for the first nine months of 2021, as compared to the first nine months of 2020, also increased by approximately $212 million associated with thenet effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments. ~~These increases were partially offset~~Net sales also increased in the first nine months of 2022 by ~~a reduction in production volumes on certain vehicle programs that we support~~approximately $121 million as a result of our acquisition of Tekfor in the second quarter of 2022. In addition, we estimate that sales in the first nine months of 2022 and 2021 were impacted by the semiconductor shortage ~~that is impacting~~and other supply chain constraints affecting the automotive industry ~~the impact~~by approximately $303 million and $471 million, respectively, resulting in an increase in sales of ~~which we estimate to be~~ approximately ~~$471~~$168 million for the nine months ended September 30, ~~2021.~~2022.

Cost of Goods Sold

~~Cost of goods sold was $3,338.8 million in the first nine months of 2021 as compared to $2,926.7 million in the first nine months of 2020.~~


	Nine Months Ended September 30,
(in millions)	2022		2021		Change		Percent Change
Cost of goods sold	$	3,872.0	$	3,338.8	$	533.2	16.0	%

The change in ~~cost of goods sold principally reflects the net increase in production volumes on the vehicle programs that we support as we estimate that~~ cost of goods sold in the first nine months of ~~2020 was impacted by approximately $841 million associated with~~2022, as compared to the ~~decline in global automotive production volumes as a result of COVID-19. Cost of goods sold in the~~first nine months ~~ended September 30,~~of 2021, ~~also increased by~~primarily reflects approximately ~~$260~~$81 million related to metal market costs and the impact of foreign exchange. ~~These increases were partially offset~~Cost of goods sold was also impacted by ~~a reduction in~~increased net manufacturing costs, including metal and commodity costs, utility costs and transportation costs. In addition, cost of goods sold increased by approximately $119 million as the impact on production volumes ~~resulting from~~of the semiconductor shortage ~~which we estimate reduced~~and other supply chain constraints affecting the automotive industry lessened in the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, and increased by approximately $116 million as a result of our acquisition of Tekfor in the second quarter of 2022. For the nine months ended September 30, 2022, material costs were approximately 61% of total costs of goods sold byas compared to approximately ~~$322 million~~60% for the nine months ended September 30, 2021.

In the first quarter of 2021, one of our Major Customers announced its intention to cease production operations in Brazil in 2021 as part of their restructuring actions. This decision ~~impacts~~impacted certain of the programs that we ~~support~~supported and, as a result, we ~~have~~ accelerated depreciation on certain property, plant and equipment beginning in the first quarter of 2021. The impact on cost of goods sold of this acceleration was approximately $32 million in the first nine months of ~~2021 and we do not expect any additional impact in the fourth quarter of~~ 2021.

For the nine months ended September 30, 2021, material costs were approximately 60% of total costs of goods sold as compared to approximately 54% for the nine months ended September 30, 2020. Material costs as a percentage of cost of goods soldGross Profit


	Nine Months Ended September 30,
(in millions)	2022		2021		Change		Percent Change
Gross profit	$	537.7	$	582.7	$	(45.0)	(7.7)	%

Gross margin was ~~impacted~~12.2% in the first nine months of ~~2020 as a result of lower product shipments caused by COVID-19, which drove lower material costs and caused fixed costs to be a greater component of cost of goods sold.~~

~~Gross Profit~~ ~~Gross profit was $582.7 million in the first nine months of 2021~~2022 as compared to ~~$346.2 million in the first nine months of 2020. Gross margin was~~ 14.9% in the first nine months of ~~2021 as compared to 10.6% in the first nine months of 2020.~~2021. Gross profit and gross margin were impacted by the factors discussed in Net Sales and Cost of Goods Sold above. While we were able to significantly reduce our variable costs during the nine months ended September 30, 2020, the sharp decline in sales that began during the first quarter and extended into the second quarter as a result of the impact of COVID-19, as well as the magnitude of the decline in sales, resulted in a reduction of both gross profit and gross margin.

~~SG&A~~

Selling, General and Administrative Expenses (SG&A)


	Nine Months Ended September 30,
(in millions)	2022		2021		Change		Percent Change
Selling, general & administrative expenses	$	256.6	$	266.7	$	(10.1)	(3.8)	%

SG&A ~~(including R&D)~~as a percentage of net sales was ~~$266.7 million or~~5.8% in the first nine months of 2022 as compared to 6.8% of net sales in the first nine months of ~~2021 as compared to $230.6 million or 7.0% of net sales in the first nine months of 2020.~~2021. R&D expense, net of ED&D recoveries, was approximately $105.3 million in the first nine months of 2022 as compared to $96.5 million in the first nine months of ~~2021 as compared~~2021. The decrease in SG&A expense is primarily related to ~~$86.3 million in~~lower compensation-related expense, partially offset by the ~~first nine months of 2020. The~~ increase in ~~SG&A in the first nine months of 2021, as compared to the first nine months of 2020, was primarily attributable to an increase in net~~ R&D expense as expense for the first nine months of 2020 included a customer ED&D recovery of approximately $15 million. In addition, SG&A expense increased as a result of higher compensation-related expense, as temporary salary reductions were implemented in the first nine months of 2020 in response to COVID-19, and as a result of higher incentive compensation accruals in the first nine months of 2021.expense.

Amortization of Intangible Assets Amortization expense related to intangible assets ~~for the nine months ended September 30, 2021~~ was ~~$64.3 million as compared to $65.0~~$64.4 million for the nine months ended September 30, ~~2020.~~

~~Impairment Charges~~ In2022 and $64.3 million for the ~~first~~ nine months of 2020, the reduction in global automotive production volumes caused by the impact of COVID-19 represented an indicator to test our goodwill for impairment. As a result of this goodwill impairment test, we determined that the carrying values of our Driveline and Metal Forming reporting units were greater than their respective fair values. As such, we recorded a total goodwill impairment charge of $510.0 million in the first nine months of 2020. See Note 4 - Goodwill and Other Intangible Assets for further detail.ended September 30, 2021.

Restructuring and Acquisition-Related Costs Restructuring and acquisition-related costs were $26.4 million for the nine months ended September 30, 2022, as compared to $40.8 million for the nine months ended September 30, ~~2021, as compared~~2021. We expect to ~~$38.6~~incur approximately $20 million ~~for~~to $30 million of total restructuring charges in 2022.

On June 1, 2022, our acquisition of Tekfor became effective. During the nine months ended September 30, ~~2020.~~ 2022, we incurred $5.8 million of acquisition-related costs associated with this acquisition. Acquisition-related costs primarily consist of advisory, legal, accounting, valuation and certain other professional or consulting fees incurred. We do not expect to incur significant additional acquisition-related costs in the fourth quarter of 2022.

We expect to incur approximately ~~$45 million to $55~~$5 million of total ~~restructuring charges~~integration costs in ~~2021. In addition, we expect to incur up to $10 million~~2022 associated with the acquisition of Tekfor and other past acquisitions completed. Integration expenses primarily reflect costs incurred for information technology infrastructure and enterprise resource planning systems, and consulting fees incurred in conjunction with integration ~~charges in 2021 as we finalize the integration of ERP systems at legacy MPG locations.~~activities. See Note 2 - Restructuring and Acquisition-Related Costs for additional detail regarding our restructuring, acquisition and integration activity.

Loss on Sale of Business In the first nine months of 2021, we completed the sale of our ownership interest in a consolidated joint venture. As a result of the sale and deconsolidation of this joint venture, we recognized a loss of $2.7 million. In the first nine months of 2020, we finalized certain customary post-closing calculations associated with the sale of the U.S. operations of our casting business that was completed in the fourth quarter of 2019, resulting in an additional loss on sale of $1.0 million.

Operating Income ~~(Loss)~~ Operating income ~~(loss)~~ was ~~income~~$190.3 million in the first nine months of 2022 as compared to $208.2 million in the first nine months of ~~2021 as compared to a loss of $499.0 million~~2021. Operating margin was 4.3% in the first nine months of ~~2020. Operating margin was~~2022 as compared to 5.3% in the first nine months of ~~2021 as compared to (15.2)% in the first nine months of 2020.~~2021. The changes in operating income ~~(loss)~~ and operating margin were due primarily to the factors discussed in Net Sales, Cost of Goods Sold, ~~Gross Profit,~~ SG&A and ~~Impairment Charges~~Restructuring and Acquisition-Related Costs above.

Interest Expense and Interest Income Interest expense was $132.2 million in the first nine months of 2022 as compared to $150.7 million in the first nine months of ~~2021 as compared to $160.0 million~~2021. The decrease in interest expense was primarily the ~~first nine months~~result of ~~2020. Interest income was $8.2 million in the first nine months of 2021 as compared to $9.2 million in the first nine months of 2020.~~our ongoing debt reduction initiatives and our previous refinancing actions. The weighted-average interest rate of our long-term debt outstanding was 5.6% for the nine months ended September 30, 2022 and 5.9% for the nine months ended September 30, ~~2021 and 5.6% for the nine months ended September 30, 2020.~~2021. We expect our interest expense for the full year ~~2021~~2022 to be approximately ~~$195~~$180 million.

Interest income was $11.6 million in the first nine months of 2022 as compared to ~~$205 million.~~$8.2 million in the first nine months of 2021.

Debt Refinancing and Redemption Costs In the first nine months of 2022, we amended and restated our existing Credit Agreement. See Note 5 - Long-Term Debt for further detail on the Amended & Restated Credit Agreement. As a result, we incurred $0.2 million of third-party debt refinancing costs during the nine months ended September 30, 2022.

In the first quarter of ~~2021,~~2022, we ~~made a voluntary prepayment of $100.0 million on our Term Loan B Facility due 2024 and $4.3 million on our~~used the proceeds from the upsized Term Loan A Facility to voluntarily redeem a portion of our 6.25% Notes due ~~2024. As~~2026. This resulted in a ~~result, we~~principal payment of $220 million and $0.2 million in accrued interest. We also expensed approximately ~~$1.1~~$1.8 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 borrowing, and approximately $3.4 million for the payment of an early redemption premium.

In the nine months ended September 30, 2022, we made voluntary prepayments totaling $100.0 million on our Term Loan B Facility. As a result, we expensed approximately $0.6 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of this borrowing.

In the ~~second quarter of~~nine months ended September 30, 2021, we made a voluntary ~~prepayment of $138.8~~prepayments totaling $238.8 million on our Term Loan B Facility ~~due 2024~~ and ~~$4.2~~$21.2 million on our Term Loan A ~~Facility due 2024.~~Facility. As a result, we expensed approximately ~~$1.3~~$2.5 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.

In the third quarter of 2021, we made a voluntary prepayment of $12.7 million on our Term Loan A Facility due 2024. As a result, we 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 this borrowing.

~~In July of 2021, we~~ voluntarily redeemed ~~a portion of~~ our 6.25% Notes due 2025. This resulted in a principal ~~payment of $100~~payments totaling $700.0 million and ~~$1.8~~$19.4 million in accrued interest. We also expensed approximately $1.4 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, and approximately $3.1 million for the payment of an early redemption premium.

~~In the first quarter~~Gain on Bargain Purchase of ~~2020, we voluntarily redeemed a portion~~Business On June 1 2022, our acquisition of ~~our 6.625% Notes due 2022. This~~Tekfor became effective, which resulted in a ~~principal payment~~gain on bargain purchase of ~~$100.0 million~~$13.0 million. See Note 14 - Acquisitions and ~~$2.0 million in accrued interest. We also expensed approximately $0.4 million~~Dispositions 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, and approximately $1.1 million for an early redemption premium.~~

additional detail on this acquisition.

Unrealized ~~Gain~~Loss on Equity Securities We have an investment in the equity securities of REE Automotive, an e-mobility ~~company that completed a merger with a Special Purpose Acquisition Company in the third quarter of 2021 and became a publicly traded entity.~~company. These equity securities are measured at fair value each reporting period with changes in fair value reported through an unrealized holding gain or loss within Other income (expense), net in our Condensed Consolidated Statement of Operations. As of September 30, ~~2021,~~2022, our investment in REE shares was valued at ~~$22.4~~$3.4 million resulting in an unrealized ~~gain~~loss of ~~$19.4~~$24.0 million for the nine months ended September 30, ~~2021.~~2022.

Other Expense, Net Other expense, net includes the net effect of foreign exchange gains and losses, our proportionate share of earnings from equity in unconsolidated subsidiaries, and all components of net periodic pension and postretirement benefit costs other than service cost. Other expense, net was $4.4 million in the first nine months of 2022 as compared to $1.3 million in the first nine months of ~~2021 as compared to $3.8 million in the first nine months of 2020.~~2021.

Income Tax Benefit Income tax benefit was $2.1 million for the nine months ended September 30, 2022 as compared to $2.4 million for the nine months ended September 30, ~~2021 as compared to $63.1 million for the nine months ended September 30, 2020.~~2021. Our effective income tax rate was (4.3)% in the first nine months of 2022 as compared to (4.8)% in the first nine months of ~~2021 as compared to 9.6% in~~2021. For the ~~first~~ nine months ended September 30, 2022, we recognized a net income tax benefit of ~~2020.~~

$7.5 million related to the release of a valuation allowance in a foreign jurisdiction. During the nine months ended September 30, 2021, we recognized a net income tax benefit of approximately $5.2 million related to our ability to carry back prior year losses to tax years with the higher 35% corporate income tax ~~rate.~~

~~In the nine months ended September 30, 2020, we finalized an advance pricing agreement in a foreign jurisdiction, which resulted in a tax benefit~~rate under provisions of ~~approximately $6.8 million, we recognized a tax benefit of approximately $7.0 million related to our ability to carry back projected current year losses under~~ the CARES ~~Act, and we recognized a net tax benefit of approximately $7.5 million related to our ability to carry back losses from prior years under the CARES~~ Act. ~~This income tax benefit was the result of our ability to carry back losses to tax years with the higher 35% corporate income tax rate.~~

Our effective income tax rate for the nine months ended September 30, ~~2021~~2022 varies from our effective income tax rate for the nine months ended September 30, ~~2020~~2021 primarily as a result of the ~~items discussed above. In addition, our effective income tax rate for~~$13.0 million gain on bargain purchase of business recognized in the nine months ended September 30, ~~2021 varies from our effective~~2022, which was not subject to income tax, ~~rate for~~as well as the release of the foreign valuation allowance during the nine months ended September 30, ~~2020 as~~2022 noted above and the mix of earnings on a ~~result of the impact of the goodwill impairment charge recorded~~jurisdictional basis during ~~the first quarter of 2020, which had no corresponding income tax benefit.~~these periods. For the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, our effective income tax rates vary from the U.S. federal statutory rate ~~of 21%~~ primarily due to the gain on bargain purchase of business, the discrete items ~~discussed~~noted above, ~~as well as~~the benefit from foreign derived intangible income deductions, the change in jurisdictional mix of earnings, and favorable foreign tax rates and the impact of tax ~~credits, and the effect of the goodwill impairment charge in the first nine months of 2020.~~credits.

Due to the uncertainty associated with the extent and ultimate impact of the significant supply chain constraints affecting the automotive industry, including COVID-19, ~~and~~ the semiconductor shortage and resulting impact on global automotive production volumes, and the conflict between Russia and Ukraine, we may experience lower than projected earnings in certain jurisdictions in future periods, and as a result, it is reasonably possible that changes in valuation allowances could be recognized in future ~~periods.~~periods and such changes could be material to our financial statements.

Net Income ~~(Loss) Attributable to AAM~~ and Earnings ~~(Loss)~~ Per Share (EPS) Net income ~~(loss) attributable~~was $50.4 million in the first nine months of 2022 as compared to ~~AAM was income of~~ $52.2 million in the first nine months of ~~2021 as compared to a loss of $597.3 million~~2021. Diluted EPS was $0.42 per share in the first nine months of ~~2020. Diluted EPS was~~2022 as compared to $0.44 per share in the first nine months of ~~2021 as compared to a loss of $5.28 per share in the first nine months of 2020.~~2021. Net income ~~(loss) attributable to AAM~~ and EPS for the first nine months of ~~2021~~2022 and ~~2020~~2021 were primarily impacted by the factors discussed above.

SEGMENT REPORTING

Our product offerings by segment are as follows:

•Driveline products consist primarily of front and rear axles, driveshafts, differential assemblies, clutch modules, balance shaft systems, disconnecting driveline technology, and electric and hybrid driveline products and systems for light trucks, SUVs, crossover vehicles, passenger cars and commercial vehicles; and

On June 1, 2022, our acquisition of Tekfor became effective and ~~Tier 1 automotive suppliers.~~we began consolidating the results of Tekfor on that date, which are reported in our Metal Forming segment for the three and nine months ended September 30, 2022.

The following table represents sales by reportable segment for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in millions):


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,						Nine Months Ended September 30,
		2021		2020		2021		2020				2022		2021			2022		2021
Driveline	Driveline	$	870.4	$	1,025.0	$	2,831.9	$	2,346.7		Driveline	$	1,061.1	$	870.4		$	3,163.6	$	2,831.9
Metal Forming	Metal Forming	422.7		497.4		1,352.1		1,147.7			Metal Forming	591.2		422.7			1,585.9		1,352.1

Eliminations	Eliminations	(80.0)		(108.3)		(262.5)		(221.5)			Eliminations	(117.1)		(80.0)			(339.8)		(262.5)
Net Sales	Net Sales	$	1,213.1	$	1,414.1	$	3,921.5	$	3,272.9		Net Sales	$	1,535.2	$	1,213.1		$	4,409.7	$	3,921.5

The ~~change in~~ Driveline ~~sales for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, primarily reflects a reduction in~~segment experienced increased production volumes on certain vehicle programs that we support as ~~a result~~the impact of the semiconductor shortage ~~that is impacting~~and other supply chain constraints affecting the automotive industry lessened in the ~~impact of which we~~three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021. We estimate ~~to be approximately $200~~that Driveline sales increased by $118 million and $199 million for the ~~third quarter~~three and nine months ended September 30, 2022, respectively, as a result of ~~2021. This was partially offset by an~~this increase ofin production volumes. The increase in Driveline sales for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, also reflects approximately ~~$55~~$37 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments. ~~Driveline sales were also adversely impacted during the three months ended September 30, 2020 by an estimated $69 million as a result of the impact of COVID-19.~~

The increase in ~~Driveline~~Metal Forming sales for the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021, primarily reflects approximately $92 million and $121 million, respectively, associated with the acquisition of Tekfor that became effective on June 1, 2022. The increase in Metal Forming sales for the nine months ended September 30, ~~2021,~~2022, as compared to the nine months ended September 30, ~~2020, primarily~~2021, also reflects increased production volumes as sales in the first nine months of 2020 were adversely impacted by an estimated $924 million associated with the decline in global automotive production as a result of COVID-19. This estimated reduction includes approximately ~~$865 million related to external customers. Driveline sales for the first nine months of 2021, as compared to the first nine months of 2020, also increased by approximately $124~~$18 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments. These increases were partially offset by a reduction in production volumes as a result of the semiconductor shortage, the impact of which we estimate to be approximately $390 million for the nine months ended September 30, 2021.

The change in Metal Forming sales for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, primarily reflects a reduction in production volumes on certain vehicle programs that we support as a result of the semiconductor shortage that is impacting the automotive industry, the impact of which we estimate to be approximately $45 million for the third quarter of 2021. This was partially offset by an increase of approximately $31 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments. Metal Forming sales were also adversely impacted during the three months ended September 30, 2020 by an estimated $18 million as a result of the impact of COVID-19.

The increase in Metal Forming sales for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, primarily reflects increased production volumes as sales in the first nine months of 2020 were adversely impacted by an estimated $447 million associated with the decline in global automotive production as a result of COVID-19. This estimated reduction includes approximately $338 million related to external customers. Metal Forming sales for the first nine months of 2021, as compared to the first nine months of 2020, also increased by approximately $88 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments. These increases were partially offset by a reduction in production volumes as a result of the semiconductor shortage, the impact of which we estimate to be approximately $81 million for the nine months ended September 30, 2021.

The amounts for Segment Adjusted EBITDA for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows (in millions):
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Driveline $ 128.4 $ 199.5 $ 450.2 $ 309.0
Metal Forming 54.8 97.6 218.5 149.3
Total segment adjusted EBITDA $ 183.2 $ 297.1 $ 668.7 $ 458.3


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021			2022		2021
Driveline	$	146.4	$	128.4		$	420.3	$	450.2
Metal Forming	52.0		54.8			169.3		218.5

Total segment adjusted EBITDA	$	198.4	$	183.2		$	589.6	$	668.7

For the three months ended September 30, ~~2021,~~2022, as compared to the three months ended September 30, ~~2020,~~2021, the increase in Segment Adjusted EBITDA for the Driveline segment was primarily attributable to a net increase in production volumes on vehicle programs we support, partially offset by increased manufacturing costs, including higher metal and commodity costs, increased labor costs and increased transportation costs.

For the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, the change in Segment Adjusted EBITDA for the Driveline segment was primarily attributable to the ~~net reduction in production volumes as~~impact of increased manufacturing costs, including higher metal and commodity costs, higher utility costs and increased transportation costs, partially offset by a result of the semiconductor shortage. For the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, the increase in Segment Adjusted EBITDA for the Driveline segment was primarily attributable to the net increase in production volumes on ~~the~~ vehicle programs ~~that~~ we ~~support, as well as improved operating performance and our continued emphasis on cost management, partially offset by increased metal and commodity costs. Driveline Segment Adjusted EBITDA for~~support.

For the three and nine months ended September 30, ~~2020 also includes~~2022, as compared to the ~~favorable impact of a $15 million ED&D recovery from a customer.~~

~~For the~~ three and nine months ended September 30, 2021, ~~as compared to the three months ended September 30, 2020,~~ the change in Segment Adjusted EBITDA for the Metal Forming segment was primarily attributable to the impact of increased net ~~reduction in production volumes as~~manufacturing costs, including higher metal and commodity costs, increased labor costs, higher utility costs and increased transportation costs, offset by a result of the semiconductor shortage. For the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, the increase in Segment Adjusted EBITDA for the Metal Forming segment was primarily attributable to the net increase in production volumes on the vehicle programs ~~that~~ we ~~support, as well as improved operating performance and our continued emphasis on cost management, partially offset by increased metal and commodity costs.~~support.

Reconciliation of Non-GAAP and GAAP Information

In addition to results reported in accordance with accounting principles generally accepted in the United States of America (GAAP) in this MD&A, we have provided certain non-GAAP financial measures such as EBITDA and Total Segment Adjusted EBITDA. Such information is reconciled to its closest GAAP measure in accordance with Securities and Exchange Commission rules below.

We define EBITDA to be earnings before interest expense, income taxes, depreciation and amortization. Total Segment Adjusted EBITDA is defined as EBITDA for our reportable segments excluding the impact of restructuring and acquisition-related costs, debt refinancing and redemption costs, loss on the sale of a business, impairment charges, pension settlements, unrealized gains or losses on equity securities, and non-recurring items. We believe that EBITDA and Total Segment Adjusted EBITDA are meaningful measures of performance as they are commonly utilized by management and investors to analyze operating performance and entity valuation. Our management, the investment community and the banking institutions routinely use EBITDA and Total Segment Adjusted EBITDA, together with other measures, to measure our operating performance relative to other Tier 1 automotive suppliers and to assess the relative mix of Adjusted EBITDA by segment. We also believe that Total Segment Adjusted EBITDA is a meaningful measure as it is used for operational planning and decision-making purposes. EBITDA and Total Segment Adjusted EBITDA are also key metrics used in our calculation of incentive compensation. These non-GAAP financial measures are not and should not be considered a substitute for any GAAP measure. Additionally, non-GAAP financial measures as presented by AAM may not be comparable to similarly titled measures reported by other companies.

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Net income (loss) $ (2.4) $ 117.2 $ 52.2 $ (597.2)
Interest expense 49.7 53.9 150.7 160.0
Income tax benefit (13.6) (22.5) (2.4) (63.1)
Depreciation and amortization 135.6 125.0 421.2 393.7
EBITDA $ 169.3 $ 273.6 $ 621.7 $ (106.6)
Restructuring and acquisition-related costs 7.4 9.7 40.8 38.6
Debt refinancing and redemption costs 31.6 5.2 34.0 6.7
Impairment charges — — — 510.0
Loss on sale of business — — 2.7 1.0
Unrealized gain on equity securities (19.4) — (19.4) —
Non-recurring items:
Malvern Fire charges, net of recoveries (5.7) 8.6 (11.1) 8.6
Total segment adjusted EBITDA $ 183.2 $ 297.1 $ 668.7 $ 458.3


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021			2022		2021
	(in millions)
Net income (loss)	$	26.5	$	(2.4)		$	50.4	$	52.2
Interest expense	44.8		49.7			132.2		150.7
Income tax benefit	(5.7)		(13.6)			(2.1)		(2.4)
Depreciation and amortization	124.8		135.6			367.1		421.2
EBITDA	$	190.4	$	169.3		$	547.6	$	621.7
Restructuring and acquisition-related costs	7.9		7.4			26.4		40.8
Debt refinancing and redemption costs	0.2		31.6			6.0		34.0

Loss on sale of business	—		—			—		2.7
Unrealized loss (gain) on equity securities	2.3		(19.4)			24.0		(19.4)
Non-recurring items:
Malvern Fire charges, net of recoveries	(1.0)		(5.7)			(6.4)		(11.1)
Gain on bargain purchase of business	(1.4)		—			(13.0)		—
Acquisition-related fair value inventory adjustment	—		—			5.0		—
Total segment adjusted EBITDA	$	198.4	$	183.2		$	589.6	$	668.7

LIQUIDITY AND CAPITAL RESOURCES

Our primary liquidity needs are to fund debt service obligations, capital expenditures and working capital requirements, in addition to advancing our strategic initiatives. We believe that operating cash flow, available cash and cash equivalent balances and available borrowing capacity under our Senior Secured Credit Facilities and foreign credit facilities will be sufficient to meet these needs.

At September 30, ~~2021,~~2022, we had ~~nearly $1.5~~over $1.4 billion of liquidity consisting of approximately ~~$501~~$472 million of cash and cash equivalents, approximately ~~$895~~$894 million of available borrowings under our Revolving Credit Facility and approximately ~~$62~~$65 million of available borrowings under foreign credit facilities. We have no significant debt maturities before 2024.

Operating Activities In the first nine months of ~~2021,~~2022, net cash provided by operating activities was ~~$436.0~~$300.4 million as compared to ~~$246.4~~$436.0 million in the first nine months of ~~2020.~~2021. The following factors impacted cash from operating activities in the first nine months of ~~2021,~~2022, as compared to the first nine months of ~~2020:~~2021:

Impact of ~~COVID-19~~Supply Chain Constraints We experienced lower earnings and cash flows from operating activities as a result of the significant ~~reduction in production volumes~~supply chain constraints that continued to impact the automotive industry during the nine months ended September 30, ~~2020 due~~2022, including increased metal and commodity costs, higher utility costs, increased transportation costs, higher labor costs and labor shortages. We expect these supply chain constraints to ~~the impact of COVID-19.~~continue through 2022.

Accounts receivable For the nine months ended September 30, ~~2021,~~2022, we experienced ~~an increase~~a decrease in cash flow from operating activities of approximately ~~$135~~$252 million related to the change in our accounts receivable balance from December 31, 2021 to September 30, 2022, as compared to the change in our accounts receivable balance from December 31, 2020 to September 30, ~~2021, as compared to the change in our accounts receivable balance from December 31, 2019 to September 30, 2020.~~2021. This change was primarily attributable to the ~~reduction in~~timing of sales to customers in the ~~third quarter of 2021 as compared to the third quarter of 2020 due primarily to the semiconductor shortage that is impacting the automotive industry.~~applicable periods.

Inventories For the nine months ended September 30, ~~2021,~~2022, we experienced ~~a decrease~~an increase in cash flow from operating activities of approximately ~~$151~~$82 million related to the change in our inventories balance from December 31, 2021 to September 30, 2022, as compared to the change in our inventories balance from December 31, 2020 to September 30, 2021, as compared to the change in our inventories balance from December 31, 2019 to September 30, 2020. This change was primarily attributable the reduction in sales in the third quarter of 2021 as compared to the third quarter of 2020 due primarily to the semiconductor shortage that is impacting the automotive industry. Cash flows from inventories were also impacted in2021. In the nine months ended September 30, 2021, ~~by increased metal and commodity costs and by other supply chain disruptions, including~~we began to increase inventory levels as a result of volatility in production schedules and unexpected downtime at certain of our manufacturing ~~facilities.~~facilities as a result of the semiconductor chip shortage that has impacted the automotive industry. This increase in inventory levels in the first nine months of 2021 was more significant than the increase in the first nine months of 2022.

Accounts payable and accrued expenses For the nine months ended September 30, 2022, we experienced an increase in cash flow from operating activities of approximately $130 million related to the change in our accounts payable and accrued expenses balance from December 31, 2021 to September 30, 2022, as compared to the change in our accounts payable and accrued expenses balance from December 31, 2020 to September 30, 2021. This change was primarily attributable to the timing of production and the associated purchases from suppliers within the applicable periods, as well as the timing of payments to suppliers.

Income taxes Income taxes paid, net was $28.5 million in the first nine months of 2022, as compared to $17.8 million in the first nine months of ~~2021, as compared to a net refund of $5.2 million in the first nine months of 2020.~~2021. During the first nine months of 2022 and 2021, we received an income tax ~~refund~~refunds of approximately $6$5.4 million and $6.0 million, respectively, related to the utilization of net operating losses under the provisions of the CARES Act. During the first nine months of 2020, we received an income tax refund of approximately $31 million related to the utilization of net operating losses under the provisions of the CARES Act and we finalized an advance pricing agreement in a foreign jurisdiction, which resulted in a cash payment to the tax authorities of $18.5 million.

Interest paid Interest paid was $117.4 million for the nine months ended September 30, 2022, as compared to $153.5 million for the nine months ended September 30, ~~2021, as compared to $138.0 million for the nine months ended September 30, 2020.~~2021. The ~~increase~~decrease in interest paid was primarily the result of ~~the timing of semi-annual interest payments on~~ our ~~6.875% Notes due 2028 that were issued in June 2020.~~ongoing debt reduction initiatives and our previous refinancing actions.

Malvern Fire In the first nine months of 2022 and 2021, we received $14.0 million and $51.1 million of cash, respectively, as reimbursements and advances under our insurance policies, of which $7.7 million and $28.0 million, ~~was~~respectively, were associated with operating expenses incurred as a result of the Malvern Fire and ~~has~~have been presented as an operating cash ~~inflow~~inflows in our Condensed Consolidated Statement of Cash Flows for ~~the period.~~these periods. At September 30, ~~2021,~~2022, we have an insurance recovery receivable of ~~$16.9~~$5.9 million, which is included in Prepaid expenses and other in our Condensed Consolidated Balance Sheet. See Note 15 - Manufacturing Facility Fire and Insurance Recovery for additional detail.

Restructuring and acquisition-related costs For the full year ~~2021,~~2022, we expect restructuring and acquisition-related payments in cash flows from operating activities to be between ~~$55~~$30 million and ~~$65~~$40 million, and we expect the timing of cash payments to approximate the timing of charges incurred.

Pension and other postretirement benefits Due to the availability of our pre-funded pension balances (previous contributions in excess of prior required pension contributions), we expect our regulatory pension funding requirements in ~~2021~~2022 to be less than $1 million. We expect our cash payments for other postretirement benefit obligations in ~~2021,~~2022, net of GM cost sharing, to be approximately ~~$17~~$16.5 million.

Investing Activities In the first nine months of ~~2021,~~2022, net cash used in investing activities was ~~$94.9~~$197.4 million as compared to ~~$149.2~~$94.9 million for the nine months ended September 30, ~~2020.~~2021. Capital expenditures were $117.9 million in the first nine months of 2022 as compared to $115.8 million in the first nine months of ~~2021 as compared~~2021. We expect our capital spending in 2022 to ~~$146.3~~be 3% to 3.5% of sales.

On June 1, 2022, our acquisition of Tekfor became effective and we paid approximately $80 million, net of cash acquired, which was funded entirely with cash on hand. Also in the first nine months of 2022, we made payments for the acquisition of a supplier in Mexico and began to pay the deferred consideration associated with our acquisition of Emporium that was completed in 2021. These payments totaled approximately $8 million in the nine months ended September 30, 2022. We paid cash of $4.9 million in the first nine months of ~~2020. We expect our capital spending in~~ 2021 ~~to be less than 4%~~for the acquisition of ~~sales.~~Emporium. See Note 14 - Acquisitions and Dispositions for further detail.

In the first nine months of 2022 and 2021, in addition to the $7.7 million and $28.0 million, respectively, of cash reimbursements and advances received under our insurance policies associated with operating expenses incurred as a result of the Malvern Fire, we received $6.3 million and $23.1 million, respectively, of cash associated with ~~property, plant~~machinery and equipment that was damaged or destroyed as a result of the Malvern Fire. This cash received has been classified as an investing cash flow based on the nature of the associated loss incurred.

Also in the first nine months of 2021, we paid $4.9 million of cash for the acquisition of the Emporium, Pennsylvania Manufacturing Facility. See Note 14 - Acquisitions and Dispositions for further detail.

Financing Activities In the first nine months of ~~2021,~~2022, net cash used in financing activities was ~~$394.2~~$147.8 million, as compared to ~~$87.6~~$394.2 million in the first nine months of ~~2020.~~2021. The following factors impacted cash from financing activities in the first nine months of ~~2021,~~2022, as compared to the first nine months of ~~2020:~~2021:

Senior Secured Credit Facilities Our Senior Secured Credit Facilities, which are comprised of our Revolving Credit Facility, our Term Loan A Facility, ~~due 2024,~~ and our Term Loan B Facility, ~~due 2024,~~ 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.

In ~~June 2021,~~March 2022, Holdings, and AAM, Inc.~~, and certain subsidiaries of Holdings~~ entered into ~~an agreement (the Agreement) amending~~ the ~~Second Amendment~~Amended & Restated Credit Agreement. The Amended & Restated Credit Agreement, among other things, increased the principal amount of the Term Loan A Facility to $520 million, extended the maturity date of the Term Loan A Facility and the Revolving Credit Facility, and established the use under the Term Loan A Facility and Revolving Credit Facility of updated reference rates. See Note 5 - Long-Term Debt for further detail on the Amended & Restated Credit Agreement. As a result, we expensed $0.2 million of debt refinancing costs, paid accrued interest of $1.0 million, and paid debt issuance costs of $4.4 million in the nine months ended September 30, 2022 related to the Amended & Restated Credit Agreement. ~~For~~

In the ~~period from April 1, 2020 through March 31,~~first nine months of 2022, ~~(the Amendment Period),~~we made voluntary prepayments totaling $100.0 million on our Term Loan B Facility. As a result, we expensed approximately $0.6 million for the ~~Agreement modified~~write-off of a covenant in the Second Amendment restricting the ability of Holdings, AAM and certain subsidiaries of Holdings to make certain voluntary payments and distributions of, or in respect of, certain senior unsecured notes of AAM during the Amendment Period, which modification permits voluntary payments and redemptionsportion of the ~~6.25% senior notes due 2025 issued by AAM.~~unamortized debt issuance costs that we had been amortizing over the expected life of this borrowing.

In the first nine months of 2021, we made voluntary prepayments ~~totaling~~of $238.8 million on our Term Loan B Facility ~~due 2024~~ and $21.2 million on our Term Loan A ~~Facility due 2024.~~Facility. As a result, we expensed approximately $2.5 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.

At September 30, ~~2021,~~2022, we had ~~$895.2~~$893.5 million available under the Revolving Credit Facility. This availability reflects a reduction of ~~$29.8~~$31.5 million for standby letters of credit issued against the facility. The ~~borrowings under~~proceeds of the Revolving Credit Facility are used for general corporate purposes. See Note 5 - Long-Term Debt for additional information regarding our Senior Secured Credit Facilities.

Redemption of 6.25% Notes due 2025In ~~July~~the third quarter of 2021, we voluntarily redeemed ~~a portion of~~ our 6.25% Notes due 2025. This resulted in a principal ~~payment of $100~~payments totaling $700 million and ~~$1.8~~$19.4 million in accrued interest. We also expensed approximately $1.4 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, and approximately $3.1 million for the payment of an early redemption premium.

~~Redemption~~Repayment of ~~6.625% Notes due 2022~~Tekfor Group Indebtedness InUpon the ~~first quarter~~acquisition of ~~2020,~~Tekfor, we voluntarily redeemed a portion of our 6.625% Notes due 2022. This resulted in a principal payment of $100.0 million and $2.0 million in accrued interest. We expensed approximately $0.4 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, and approximately $1.1 million for the payment of an early redemption premium.

~~6.875% Notes due 2028~~ In the second quarter of 2020, we issued $400 million in aggregate principal amount of 6.875% senior notes due 2028 (the 6.875% Notes). Proceeds from the 6.875% Notes were used primarily to fund the redemption of the remaining $350assumed $23.4 million of ~~6.625% senior notes due 2022 and for general corporate purposes. We paid debt issuance costs~~existing Tekfor indebtedness, of ~~$6.4~~which we repaid $10.7 million in the first nine months ~~ended September 30, 2020 related to the 6.875% Notes.~~of 2022.

Foreign credit facilities We utilize local currency credit facilities to finance the operations of certain foreign subsidiaries. At September 30, ~~2021, $102.2~~2022, $70.2 million was outstanding under our foreign credit facilities, as compared to ~~$88.8~~$86.1 million at December 31, ~~2020.~~2021. At September 30, ~~2021,~~2022, an additional ~~$62.3~~$64.7 million was available under our foreign credit facilities.

Treasury stock Treasury stock increased by ~~$4.3~~$1.9 million in the first nine months of ~~2021~~2022 to ~~$216.3~~$218.2 million as compared to ~~$212.0~~$216.3 million at year-end ~~2020,~~2021, due to the withholding and repurchase of shares of AAM stock to satisfy employee tax withholding obligations due upon the vesting of ~~performance shares and restricted stock units.~~stock-based compensation.

Subsidiary Guarantees of Registered Debt Securities Our 6.875% Notes, 6.50% Notes, 6.25% Notes, and 5.00% Notes (collectively, the Notes) are senior unsecured obligations of AAM, Inc. (Issuer); 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 MPG Inc (Subsidiary Guarantors). Holdings has no significant assets other than its 100% ownership in AAM, Inc. and MPG Inc., and no direct subsidiaries other than AAM, Inc. and MPG Inc.

Each guarantee by Holdings and/or any of the Subsidiary Guarantors is:

•a senior obligation of the relevant Subsidiary Guarantors;

•the unsecured and unsubordinated obligation of the relevant Subsidiary Guarantors; and

•of equal rank with all other existing and future unsubordinated and unsecured indebtedness of the relevant Subsidiary Guarantors.

Each guarantee by a Subsidiary Guarantor provides by its terms that it will be automatically, fully and unconditionally released and discharged upon:

•~~Any~~any sale, exchange or transfer (by merger or otherwise) of the capital stock of such Subsidiary Guarantor, or the sale or disposition of all the assets of such Subsidiary Guarantor, which sale, exchange, transfer or disposition is made in compliance with the applicable provisions of the indentures;

•the exercise by the issuer of its legal defeasance option or covenant defeasance option or the discharge of the issuer’s obligations under the indentures in accordance with the terms of the indentures; or

•the election of the issuer to affect such a release following the date that such guaranteed Notes have an investment grade rating from both Standard & Poor's Ratings Group, Inc, and Moody's Investors Service, Inc.

The following represents summarized financial information of AAM Holdings, AAM Inc. and the Subsidiary Guarantors (collectively, the Combined Entities). The information has been prepared on a combined basis and excludes any investments of AAM Holdings, AAM Inc., or the Subsidiary Guarantors in non-guarantor subsidiaries. Intercompany transactions and amounts between Combined Entities have been eliminated.


Statement of Operations Information	Statement of Operations Information	(in millions)				Statement of Operations Information	(in millions)
		Nine Months Ended September 30, 2021		Year Ended December 31, 2020			Nine Months Ended September 30, 2022		Year Ended December 31, 2021
Net sales	Net sales	$	3,011.3	$	3,649.8	Net sales	$	3,392.4	$	3,983.0
Gross profit	Gross profit	324.6		301.2		Gross profit	330.4		410.8
Loss from operations		(11.7)		(458.3)
Income (loss) from operations						Income (loss) from operations	15.6		(27.4)
Net loss	Net loss	(93.6)		(521.3)		Net loss	(67.4)		(158.6)

Balance Sheet Information	Balance Sheet Information	(in millions)				Balance Sheet Information	(in millions)
		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
Current assets	Current assets	$	950.3	$	1,155.1	Current assets	$	1,062.9	$	1,034.6
Noncurrent assets	Noncurrent assets	2,620.2		2,765.2		Noncurrent assets	2,436.7		2,524.2

Current liabilities	Current liabilities	1,139.4		1,075.9		Current liabilities	1,352.1		1,183.7
Noncurrent liabilities	Noncurrent liabilities	3,844.2		4,233.6		Noncurrent liabilities	3,658.0		3,791.1

Redeemable preferred stock	Redeemable preferred stock	—		—		Redeemable preferred stock	—		—
Noncontrolling interest	Noncontrolling interest	—		—		Noncontrolling interest	—		—

At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, amounts owed by the Combined Entities to non-guarantor entities totaled approximately ~~$810~~$925 million and ~~$660~~$800 million, respectively, and amounts owed to the Combined Entities from non-guarantor entities totaled approximately ~~$725~~$610 million and ~~$750~~$655 million, respectively.

CYCLICALITY AND SEASONALITY

Our operations are cyclical because they are directly related to worldwide automotive production, which is itself cyclical and dependent on general economic conditions and other factors. Typically, our business is also moderately seasonal as our major OEM customers historically have an extended shutdown of operations (normally 1-2 weeks) in conjunction with their model year changeover and an approximate one-week shutdown in December. Our major OEM customers also occasionally have longer shutdowns of operations (up to six weeks) for program changeovers. Accordingly, our quarterly results may reflect these trends.

LITIGATION AND ENVIRONMENTAL MATTERS

We are involved in, or potentially subject to, various legal proceedings or claims incidental to our business. These include, but are not limited to, matters arising out of product warranties, contractual matters, and environmental obligations. Although the outcome of these matters cannot be predicted with certainty, at this time we do not believe that any of these matters, individually or in the aggregate, will have a material adverse effect on our financial condition, results of operations or cash flows.

We file U.S. federal, state and local income tax returns, as well as foreign income tax returns in jurisdictions throughout the world. We are also subject to examinations of these tax returns by the relevant tax authorities. Based on the status of these audits and the protocol of finalizing audits by the relevant tax authorities, it is not possible to estimate the impact of changes, if any, to previously recorded uncertain tax positions. Negative or unexpected outcomes of these examinations and audits, and any related litigation, could have a material adverse impact on our results of operations, financial condition and cash flows.

We are subject to various federal, state, local and foreign environmental and occupational safety and health laws, regulations and ordinances, including those regulating air emissions, water discharge, waste management and environmental cleanup. We will continue to closely monitor our environmental conditions to ensure that we are in compliance with all laws, regulations and ordinances. We have made, and anticipate continuing to make, capital and other expenditures (including recurring administrative costs) to comply with environmental requirements at our current and former facilities. Such expenditures were not significant in the third quarter of ~~2021.~~2022.

We are subject to risks of environmental issues, including impacts of climate-related events, that could result in unforeseen disruptions or costs at our facilities. We did not experience any climate-related events in the third quarter of 2022 that we believe could have a material adverse impact on our results of operations, financial condition and cash flows.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

MARKET RISK

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 Exchange Risk From time to time, we use foreign currency forward contracts to reduce the effects of fluctuations in exchange rates relating to certain foreign currencies. AtAs of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had currency forward contracts with a notional amount of ~~$167.3~~$172.8 million and ~~$178.2~~$164.7 million outstanding respectively. The potential decrease in fair value of foreign exchange contracts, assuming a 10% adverse change in the foreign currency exchange rates, would be approximately ~~$15.2~~$15.7 million at September 30, ~~2021~~2022 and was ~~approximately $16.2~~$15.0 million at December 31, ~~2020.~~2021.

In ~~2019,~~2020, we entered into a fixed-to-fixed cross-currency swap to reduce the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans. In the ~~first~~second quarter of ~~2020,~~2022, we discontinued this fixed-to-fixed cross-currency swap, which was in an asset position of ~~$9.8~~$9.7 million on the date that it was discontinued.

Also in the ~~first~~second quarter of ~~2020,~~2022, we entered into a new fixed-to-fixed cross-currency swap to reduce the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans. ~~The~~We had notional ~~amount of the~~amounts outstanding under fixed-to-fixed cross-currency ~~swap is~~swaps of €200.0 million at both September 30, 2022 and December 31, 2021, which was equivalent to ~~$231.5~~$195.9 million and ~~$244.2~~$226.9 million, ~~at September 30, 2021 and December 31, 2020,~~ respectively. The fixed-to-fixed cross-currency swap hedges our exposure to changes in exchange rates on the intercompany loans into the second quarter of 2024. The potential decrease in fair value of the fixed-to-fixed cross-currency swap, assuming a 10% adverse change in the foreign currency exchange rates, would be approximately ~~$23.2~~$19.6 million at September 30, ~~2021~~2022 and was approximately ~~$24.4~~$22.7 million at December 31, ~~2020.~~2021.

Future business operations and opportunities, including the expansion of our business outside North America, may further increase the risk that cash flows resulting from these global operations may be adversely affected by changes in currency exchange rates. If and when appropriate, we intend to manage these risks by creating natural hedges in the structure of our global operations, utilizing local currency funding of these expansions and various types of foreign exchange contracts.

Interest Rate Risk We are exposed to variable interest rates on certain credit facilities. From time to time, we have used interest rate hedging to reduce the effects of fluctuations in market interest rates. In 2019, 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. AtIn the second quarter of 2022, we discontinued this variable-to-fixed interest rate swap, which was in an asset position of $6.1 million on the date that it was discontinued.

Also in the second quarter of 2022, we entered into a new variable-to-fixed interest rate swap to reduce the variability of cash flows associated with interest payments on our variable rate debt. As of September 30, ~~2021,~~2022, we have ~~the following~~$500.0 million notional ~~amounts~~amount hedged in relation to our variable-to-fixed interest rate ~~swap: $750.0 million through May 2022, $600.0 million through May 2023 and $500.0 million through May 2024.~~swap into the third quarter of 2027.

The pre-tax earnings and cash flow impact of a one-percentage-point increase in interest rates (approximately ~~18%~~17% of our weighted-average interest rate at September 30, ~~2021)~~2022) on our long-term debt outstanding, would be approximately ~~$5.0~~$7.9 million at September 30, ~~2021~~2022 and was approximately ~~$6.0~~$4.2 million at December 31, ~~2020,~~2021, on an annualized basis.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) were effective as of September 30, ~~2021.~~2022.

Changes in Internal Control over Financial Reporting

~~On January 1, 2019,~~In conjunction with our recent acquisition activity, we ~~began~~utilized our framework of internal controls over financial reporting specific to business combinations. The applicable controls address the ~~implementation~~various elements of ~~our global enterprise resource planning (ERP) systems at certain~~a business combination, including but not limited to: 1) calculation of the ~~locations~~consideration transferred; 2) identifying and properly accounting for transactions that ~~were~~are separate from the business combination; 3) use and oversight of competent and qualified personnel in performing the valuation of assets acquired ~~as part~~and liabilities assumed; 4) review of inputs and outputs to the ~~MPG acquisition. As part~~valuation models; 5) identifying and disclosing provisional amounts; and 6) tracking measurement period adjustments.

Our acquisition of ~~these implementations, we have modified the design and documentation of our internal control~~Tekfor Group became effective on June 1, 2022. We are currently integrating policies, processes and ~~procedures, where appropriate. We~~operations for the combined company and will continue to ~~implement these ERP systems at certain locations throughout 2021.~~

Due to the ongoing impact of COVID-19, a significant number of our associates have continued to work remotely in some capacity during the three months ended September 30, 2021. This has not had a material effect onevaluate our internal control over financial reporting as we ~~have maintained~~develop and execute our ~~existing controls and procedures~~integration plans. We will exclude the acquired operations of Tekfor Group from our assessment of AAM's internal control over financial reporting ~~during this period.~~for the year ended December 31, 2022 as permissible under rules and regulations of the Securities and Exchange Commission.

Except as described above with regard to ~~implementation~~the acquisition and integration of ~~ERP systems at certain legacy MPG locations,~~Tekfor Group, there were no changes in our internal control over financial reporting during the quarter ended September 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A. Risk Factors

There were no material changes from the risk factors previously disclosed in our December 31, ~~2020~~2021 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about our equity security purchases during the quarter ended September 30, ~~2021:~~2022:

ISSUER PURCHASES OF EQUITY SECURITIES
Period Total Number of Shares (or Units) Purchased Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
(in millions)
July 1 - July 31, 2021 — $ — — $ —
August 1 - August 31, 2021 2,880 9.72 — —
September 1 - September 30, 2021 2,667 8.19 — —
Total 5,547 $ 8.98 — $ —


Period	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
					(in millions)
July 1 - July 31, 2022	3,625	$	8.57	—	$	—
August 1 - August 31, 2022	1,392	9.23		—	—
September 1 - September 30, 2022	—	—		—	—
Total	5,017	$	8.75	—	$	—

Item 6. Exhibits


Number						Description of Exhibit

*22						Subsidiary Guarantors and Issuers of Guaranteed Securities

*31.1						Certification of David C. Dauch, Chairman of the Board & Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act

*31.2						Certification of Christopher J. May, Vice President & Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act

*32						Certifications of David C. Dauch, Chairman of the Board & Chief Executive Officer and Christopher J. May, Vice President & Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

**101.SCH						XBRL Taxonomy Extension Schema Document

**101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

**101.LAB						XBRL Taxonomy Extension Label Linkbase Document

**101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

**101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

** 104						Cover Page Interactive Data File (formatted in Inline XBRL contained in Exhibit 101)

Filed herewith

Submitted electronically with this Report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

(Registrant)

/s/ James G. Zaliwski

James G. Zaliwski

Chief Accounting Officer

November ~~5, 2021~~4, 2022


		Gain (Loss) Recognized During								Total of Financial
	Location of Gain (Loss)	Three Months Ended				Nine Months Ended				Statement Line
	Recognized in	September 30,				September 30,				Item
	Net Income	2021		2020		2021		2020		2021
		(in millions)

Currency forward contracts	Cost of Goods Sold	$	—	$	0.9	$	—	$	(6.7)	$	3,338.8
Currency forward contracts	Other Income (Expense), net	(0.5)		—		(0.1)		(0.5)		(1.3)