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 June 30, 2023March 31, 2024
  
or
  
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  
 For the transition period from  _____________ to _____________
  
Commission File Number:  1-14303


AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware38-3161171
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
 
One Dauch Drive, Detroit, Michigan48211-1198
(Address of Principal Executive Offices)(Zip Code)

(313) 758-2000
(Registrant's Telephone Number, Including Area Code)

 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  No 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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

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

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

As of August 1, 2023,April 30, 2024, the latest practicable date, the number of shares of the registrant's Common Stock, par value $0.01 per share, outstanding was 117,057,899117,553,022 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 JUNE 30, 2023MARCH 31, 2024
TABLE OF CONTENTS 
 
   Page Number
   
    
 
    
 
  
  
  
  
    
 
    
 
    
 
    
 
    
 
    
 
    
  
 



FORWARD-LOOKING STATEMENTS

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

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

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

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


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOMEOPERATIONS
(Unaudited)
 
Three Months EndedSix Months EndedThree Months Ended
June 30,June 30, March 31,
2023202220232022 20242023
(in millions, except per share data) (in millions, except per share data)
Net salesNet sales$1,570.7 $1,438.3 $3,064.6 $2,874.5 
Net sales
Net sales
Cost of goods sold
Cost of goods sold
Cost of goods soldCost of goods sold1,392.5 1,264.8 2,725.8 2,514.2 
Gross profitGross profit178.2 173.5 338.8 360.3 
Gross profit
Gross profit
Selling, general and administrative expenses
Selling, general and administrative expenses
Selling, general and administrative expensesSelling, general and administrative expenses91.1 84.8 189.4 170.9 
Amortization of intangible assetsAmortization of intangible assets21.4 21.4 42.8 42.9 
Amortization of intangible assets
Amortization of intangible assets
Restructuring and acquisition-related costs
Restructuring and acquisition-related costs
Restructuring and acquisition-related costsRestructuring and acquisition-related costs7.9 9.6 12.7 18.5 
Operating incomeOperating income57.8 57.7 93.9 128.0 
Operating income
Operating income
Interest expense
Interest expense
Interest expenseInterest expense(50.2)(42.7)(100.7)(87.4)
Interest incomeInterest income5.9 3.2 11.8 6.2 
Interest income
Interest income
Other income (expense)Other income (expense)
Debt refinancing and redemption costs (0.2) (5.8)
Gain on bargain purchase of business 11.6  11.6 
Other income (expense)
Other income (expense)
Unrealized gain (loss) on equity securities
Unrealized gain (loss) on equity securities
Unrealized gain (loss) on equity securitiesUnrealized gain (loss) on equity securities0.3 (3.7) (21.7)
Other income (expense), netOther income (expense), net(0.5)(2.4)3.2 (3.4)
Income before income taxes13.3 23.5 8.2 27.5 
Income (loss) before income taxes
Income (loss) before income taxes
Income (loss) before income taxes
Income tax expenseIncome tax expense5.3 0.6 5.3 3.6 
Income tax expense
Income tax expense
Net income$8.0 $22.9 $2.9 $23.9 
Net income (loss)
Net income (loss)
Net income (loss)
Basic earnings per share$0.07 $0.19 $0.02 $0.20 
Basic earnings (loss) per share
Basic earnings (loss) per share
Basic earnings (loss) per share
Diluted earnings per share$0.07 $0.19 $0.02 $0.20 
Diluted earnings (loss) per share
Diluted earnings (loss) per share
Diluted earnings (loss) per share

See accompanying notes to condensed consolidated financial statements.
2


AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months Ended
Three Months Ended
Three Months Ended
March 31,March 31,
202420242023
(in millions)
(in millions)
(in millions)
Net income (loss)
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)
Defined benefit plans, net of tax (a)
Foreign currency translation adjustments
Changes in cash flow hedges, net of tax (b)
Other comprehensive income (loss)
Comprehensive income
Comprehensive income
Comprehensive income
Three Months EndedSix Months Ended
June 30,June 30,
2023202220232022
(in millions)
Net income$8.0 $22.9 $2.9 $23.9 
Other comprehensive income (loss)
Defined benefit plans, net of tax (a)
(0.7)1.3 (1.4)2.6 
Foreign currency translation adjustments(4.7)(42.3)4.1 (36.3)
Changes in cash flow hedges, net of tax (b)
17.3 (1.7)19.8 14.0 
Other comprehensive income (loss)11.9 (42.7)22.5 (19.7)
Comprehensive income (loss)$19.9 $(19.8)$25.4 $4.2 
(a)Amounts are net of tax of $0.4 million and $0.9$0.3 million for the three and six months ended June 30, 2023March 31, 2024 and $(0.5) million and $(1.0)$0.5 million for the three and six months ended June 30, 2022.March 31, 2023.
(b)Amounts are net of tax of $(3.5) million and $(1.7)$(3.0) million for the three and six months ended June 30, 2023March 31, 2024 and $0.2 million and $(2.7)$1.8 million for the three and six months ended June 30, 2022.March 31, 2023.

See accompanying notes to condensed consolidated financial statements.
3


AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2023December 31, 2022 March 31, 2024December 31, 2023
(Unaudited)  (Unaudited) 
AssetsAssets(in millions)Assets(in millions)
Current assetsCurrent assets Current assets 
Cash and cash equivalentsCash and cash equivalents$511.1 $511.5 
Accounts receivable, netAccounts receivable, net921.1 820.2 
Inventories, netInventories, net477.1 463.9 
Prepaid expenses and otherPrepaid expenses and other200.3 197.8 
Total current assetsTotal current assets2,109.6 1,993.4 
Total current assets
Total current assets
Property, plant and equipment, net
Property, plant and equipment, net
Property, plant and equipment, netProperty, plant and equipment, net1,817.9 1,903.0 
Deferred income taxesDeferred income taxes135.8 119.0 
GoodwillGoodwill181.7 181.6 
Other intangible assets, netOther intangible assets, net574.2 616.2 
GM postretirement cost sharing assetGM postretirement cost sharing asset128.2 127.6 
Operating lease right-of-use assetsOperating lease right-of-use assets103.3 107.2 
Other assets and deferred chargesOther assets and deferred charges456.7 421.4 
Total assetsTotal assets$5,507.4 $5,469.4 
Liabilities and Stockholders’ EquityLiabilities and Stockholders’ Equity  
Liabilities and Stockholders’ Equity
Liabilities and Stockholders’ Equity 
Current liabilitiesCurrent liabilities  Current liabilities 
Current portion of long-term debt
Current portion of long-term debt
Current portion of long-term debtCurrent portion of long-term debt$16.3 $75.9 
Accounts payableAccounts payable828.4 734.0 
Accrued compensation and benefitsAccrued compensation and benefits183.8 186.6 
Deferred revenueDeferred revenue15.9 28.1 
Current portion of operating lease liabilitiesCurrent portion of operating lease liabilities20.8 21.1 
Accrued expenses and otherAccrued expenses and other168.4 153.6 
Total current liabilitiesTotal current liabilities1,233.6 1,199.3 
Total current liabilities
Total current liabilities
Long-term debt, net
Long-term debt, net
Long-term debt, netLong-term debt, net2,853.9 2,845.1 
Deferred revenueDeferred revenue69.3 73.4 
Deferred income taxesDeferred income taxes6.4 10.7 
Long-term portion of operating lease liabilitiesLong-term portion of operating lease liabilities84.1 87.2 
Postretirement benefits and other long-term liabilitiesPostretirement benefits and other long-term liabilities615.3 626.4 
Total liabilitiesTotal liabilities4,862.6 4,842.1 
Stockholders' equityStockholders' 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;
127.4 million shares issued as of June 30, 2023 and 123.3 million shares issued as of December 31, 20221.3 1.3 
128.2 million shares issued as of March 31, 2024 and 127.4 million shares issued as of December 31, 2023
128.2 million shares issued as of March 31, 2024 and 127.4 million shares issued as of December 31, 2023
128.2 million shares issued as of March 31, 2024 and 127.4 million shares issued as of December 31, 2023
Paid-in capitalPaid-in capital1,376.0 1,369.2 
Accumulated deficitAccumulated deficit(246.7)(249.6)
Treasury stock at cost, 10.3 million shares as of June 30, 2023 and 8.7 million shares as of December 31, 2022(232.9)(218.2)
Treasury stock at cost, 10.7 million shares as of March 31, 2024 and 10.3 million shares as of December 31, 2023
Accumulated other comprehensive income (loss)Accumulated other comprehensive income (loss)
Defined benefit plans, net of tax
Defined benefit plans, net of tax
Defined benefit plans, net of taxDefined benefit plans, net of tax(148.3)(146.9)
Foreign currency translation adjustmentsForeign currency translation adjustments(145.6)(149.7)
Unrecognized gain on cash flow hedges, net of taxUnrecognized gain on cash flow hedges, net of tax41.0 21.2 
Total stockholders' equityTotal stockholders' equity644.8 627.3 
Total stockholders' equity
Total stockholders' equity
Total liabilities and stockholders' equityTotal liabilities and stockholders' equity$5,507.4 $5,469.4 
 See accompanying notes to condensed consolidated financial statements. 
4


AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended Three Months Ended
June 30, March 31,
20232022 20242023
(in millions)
(in millions)(in millions)
Operating activitiesOperating activities  Operating activities 
Net income$2.9 $23.9 
Adjustments to reconcile net income to net cash provided by operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization
Depreciation and amortization
Depreciation and amortizationDepreciation and amortization245.4 242.3 
Deferred income taxes
Deferred income taxes
Deferred income taxesDeferred income taxes(21.0)(14.2)
Stock-based compensationStock-based compensation6.8 9.1 
Pensions and other postretirement benefits, net of contributionsPensions and other postretirement benefits, net of contributions(7.0)(4.6)
Loss (gain) on disposal of property, plant and equipment, net3.2 (2.2)
Unrealized loss on equity securities 21.7 
Gain on bargain purchase of business (11.6)
Debt refinancing and redemption costs 5.8 
Loss on disposal of property, plant and equipment, net
Loss on disposal of property, plant and equipment, net
Loss on disposal of property, plant and equipment, net
Unrealized loss (gain) on equity securities
Changes in operating assets and liabilitiesChanges in operating assets and liabilities
Changes in operating assets and liabilities
Changes in operating assets and liabilities
Accounts receivable
Accounts receivable
Accounts receivableAccounts receivable(97.4)(147.1)
InventoriesInventories(7.9)(25.4)
Accounts payable and accrued expensesAccounts payable and accrued expenses99.2 145.7 
Deferred revenueDeferred revenue(17.2)(7.7)
Other assets and liabilitiesOther assets and liabilities(42.1)(20.5)
Net cash provided by operating activitiesNet cash provided by operating activities164.9 215.2 
Investing activities
Investing activities
Investing activitiesInvesting activities    
Purchases of property, plant and equipmentPurchases of property, plant and equipment(90.7)(71.2)
Proceeds from sale of property, plant and equipmentProceeds from sale of property, plant and equipment0.4 4.2 
Acquisition of business, net of cash acquiredAcquisition of business, net of cash acquired(1.3)(87.6)
Proceeds from insurance claim (Note 15)17.0 4.6 
Acquisition of business, net of cash acquired
Acquisition of business, net of cash acquired
Proceeds from insurance claim
Other investing activitiesOther investing activities(3.3)(0.2)
Net cash used in investing activitiesNet cash used in investing activities(77.9)(150.2)
Financing activitiesFinancing activities  
Financing activities
Financing activities  
Payments of Revolving Credit Facility
Payments of Revolving Credit Facility
Payments of Revolving Credit FacilityPayments of Revolving Credit Facility(25.0)— 
Proceeds from issuance of long-term debtProceeds from issuance of long-term debt33.9 220.7 
Payments of long-term debtPayments of long-term debt(71.2)(310.6)
Debt issuance costs(3.1)(4.4)
Purchase of treasury stock
Purchase of treasury stock
Purchase of treasury stockPurchase of treasury stock(14.7)(1.9)
Other financing activitiesOther financing activities(7.3)9.5 
Net cash used in financing activitiesNet cash used in financing activities(87.4)(86.7)
Net cash used in financing activities
Net cash used in financing activities
Effect of exchange rate changes on cash
Effect of exchange rate changes on cash
Effect of exchange rate changes on cashEffect of exchange rate changes on cash (7.1)
Net decrease in cash and cash equivalentsNet decrease in cash and cash equivalents(0.4)(28.8)
Net decrease in cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at beginning of period
Cash and cash equivalents at beginning of periodCash and cash equivalents at beginning of period511.5 530.2 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$511.1 $501.4 
Cash and cash equivalents at end of period
Cash and cash equivalents at end of period
Supplemental cash flow informationSupplemental cash flow information
Supplemental cash flow information
Supplemental cash flow information
Interest paid
Interest paid
Interest paid Interest paid$88.8 $86.5 
Income taxes paid, net Income taxes paid, net$40.6 $20.5 
See accompanying notes to condensed consolidated financial statements.
5


AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Common StockCommon StockAccumulated
SharesSharesParPaid-inRetained EarningsTreasuryOther Comprehensive
OutstandingOutstandingValueCapital(Accumulated Deficit)StockIncome (Loss)
(in millions)(in millions)
Common StockAccumulated
SharesParPaid-inRetained EarningsTreasuryOther Comprehensive
OutstandingValueCapital(Accumulated Deficit)StockIncome (Loss)
(in millions)
Balance at January 1, 2022114.0 $1.3 $1,351.5 $(313.9)$(216.3)$(364.8)
Net income— — — 1.0 — — 
Balance at January 1, 2023
Balance at January 1, 2023
Balance at January 1, 2023
Net loss
Vesting of stock-based compensationVesting of stock-based compensation0.7 — — — — — 
Stock-based compensationStock-based compensation— — 4.5 — — — 
Purchase of treasury stock
Purchase of treasury stock
Purchase of treasury stockPurchase of treasury stock(0.2)— — — (1.8)— 
Changes in cash flow hedgesChanges in cash flow hedges— — — — — 15.7 
Foreign currency translation adjustmentsForeign currency translation adjustments— — — — — 6.0 
Defined benefit plans, netDefined benefit plans, net— — — — — 1.3 
Balance at March 31, 2022114.5 $1.3 $1,356.0 $(312.9)$(218.1)$(341.8)
Net income— — — 22.9 — — 
Stock-based compensation— — 4.6 — — — 
Purchase of treasury stock— — — — (0.1)— 
Changes in cash flow hedges— — — — — (1.7)
Foreign currency translation adjustments— — — — — (42.3)
Defined benefit plans, net— — — — — 1.3 
Balance at June 30, 2022114.5 $1.3 $1,360.6 $(290.0)$(218.2)$(384.5)
Balance at March 31, 2023
Balance at March 31, 2023
Balance at March 31, 2023

Common StockCommon StockAccumulated
SharesSharesParPaid-inRetained EarningsTreasuryOther Comprehensive
OutstandingOutstandingValueCapital(Accumulated Deficit)StockIncome (Loss)
(in millions)(in millions)
Common StockAccumulated
SharesParPaid-inRetained EarningsTreasuryOther Comprehensive
OutstandingValueCapital(Accumulated Deficit)StockIncome (Loss)
(in millions)
Balance at January 1, 2023114.6 $1.3 $1,369.2 $(249.6)$(218.2)$(275.4)
Net loss   (5.1)  
Balance at January 1, 2024
Balance at January 1, 2024
Balance at January 1, 2024
Net income
Vesting of stock-based compensationVesting of stock-based compensation4.0      
Stock-based compensationStock-based compensation  3.4    
Purchase of treasury stock
Purchase of treasury stock
Purchase of treasury stockPurchase of treasury stock(1.6)   (14.5) 
Changes in cash flow hedgesChanges in cash flow hedges     2.5 
Foreign currency translation adjustmentsForeign currency translation adjustments     8.8 
Defined benefit plans, netDefined benefit plans, net     (0.7)
Balance at March 31, 2023117.0 $1.3 $1,372.6 $(254.7)$(232.7)$(264.8)
Net income   8.0   
Vesting of restricted stock units0.1      
Stock-based compensation  3.4    
Purchase of treasury stock    (0.2) 
Changes in cash flow hedges     17.3 
Foreign currency translation adjustments     (4.7)
Defined benefit plans, net     (0.7)
Balance at June 30, 2023117.1 $1.3 $1,376.0 $(246.7)$(232.9)$(252.9)
Balance at March 31, 2024
Balance at March 31, 2024
Balance at March 31, 2024

See accompanying notes to condensed consolidated financial statements.
6


AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023MARCH 31, 2024
(Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

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

Basis of Presentation We have prepared the accompanying interim condensed consolidated financial statements in accordance with the instructions to Form 10-Q under the Securities Exchange Act of 1934. These condensed consolidated financial statements are unaudited but include all normal recurring adjustments, which we consider necessary for a fair presentation of the information set forth herein. Results of operations for the periods presented are not necessarily indicative of the results for the full fiscal year.

The balance sheet at December 31, 20222023 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 significant disruptions in the supply chain that continue to impact the automotive industry, including volatility in metal, commodity and utility costs, shortages of certain raw materials and components, including semiconductor chips, increased transportation costs, higher labor costs and labor shortages. 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 these matters cannot be predicted, and actualActual results could differ materially from those estimates and assumptions.estimates.

For further information, refer to the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2022.2023.

Effect of New Accounting Standards and Other Regulatory Pronouncements

Accounting Standards Update 2023-07

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

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. RESTRUCTURING AND ACQUISITION-RELATED COSTS

Securities and Exchange Commission (SEC) Rule
In the first quarter of 2020, we initiated2024, the SEC adopted "The Enhancement and Standardization of Climate-Related Disclosures for Investors," a global restructuring program (the 2020 Program). The primary objectives of the 2020 Program are to achieve efficiencies within our corporaterule that expands disclosure requirements, including climate-related risks 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 complete restructuring actions under the 2020 Program in 2023.
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 and relocate the production capacity to other AAM manufacturing facilities. As a result, during the six months ended June 30, 2023, we incurred restructuring charges related to the closure of the facility and we expect to complete restructuring actions associated with the closure of the facility in 2023.
In 2022, we completed our acquisition of Tekfor Group (Tekfor) and initiated certain restructuring actions associated with the acquired entities in the first quarter of 2023. We expect to incur restructuring costs associated with the acquired entities through 2023.
A summary of our restructuring activity for the first six months of 2023 and 2022 is shown below:
Severance ChargesImplementation CostsTotal
(in millions)
Accrual at December 31, 2021$0.7 $2.7 $3.4 
Charges1.3 10.3 11.6 
Cash utilization(1.2)(10.6)(11.8)
Accrual at June 30, 2022$0.8 $2.4 $3.2 
Accrual at December 31, 2022$2.4 $1.4 $3.8 
Charges1.4 9.3 10.7 
Cash utilization(2.1)(7.4)(9.5)
Accrual at June 30, 2023$1.7 $3.3 $5.0 
As part of our restructuring actions, we incurred total severance charges of approximately $1.4 million and $1.3 million during the six months ended June 30, 2023 and 2022, respectively. We also incurred total implementation costs of approximately $9.3 million and $10.3 million during the six months ended June 30, 2023 and 2022, respectively. Implementation costs consist primarily of plant exit costs. We incurred $4.9 million of restructuring costs under the 2020 Program, $4.4 million of costs associated with the anticipated closure of Emporium, and $1.4 million of costs related to restructuring actions associated with Tekfor in the six months ended June 30, 2023. We have incurred $105.5 million of total restructuring costs under the 2020 Program since inception and have incurred $16.5 million of total costs related to the anticipated closure of Emporium. Substantially all of our total restructuring costs for the six months ended June 30, 2023 related to our Metal Forming segment. Approximately $1.0 million and $6.1 million of our total restructuring costs for the six months ended June 30, 2022 related to our Driveline and Metal Forming segments, respectively, while the remainder were corporate costs. We expect to incur approximately $10 million to $20 million of total restructuring charges in 2023 associated with the 2020 Program, our closure of Emporium and restructuring actions related to Tekfor.
The following table represents a summary of acquisition-related charges incurred primarily related to our acquisition of Tekfor,financial statement impacts, as well as integration costs incurred for acquisitions:
Acquisition-Related CostsIntegration ExpensesTotal
(in millions)
Charges for the six months ended June 30, 2023$ $2.0 $2.0 
Charges for the six months ended June 30, 20225.7 1.2 6.9 
Acquisition-related costs primarily consistdisclosures related to greenhouse gas (GHG) emissions. The annual disclosures related to climate-related risks and financial statement impacts are required beginning with our 2025 fiscal year and the disclosures related to GHG emissions are required beginning with our 2026 fiscal year. The GHG emissions disclosures are also subject to limited assurance requirements by 2029 and reasonable assurance requirements by 2033. We are currently assessing the impact that this rule will have on our consolidated financial statements. In April 2024, the SEC issued an order staying the rule pending legal review of 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, 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 Income and totaled $7.9 million and $9.6 million for the three months ended June 30, 2023 and June 30, 2022, respectively, and $12.7 million and $18.5 million forpetitions challenging the six months ended June 30, 2023 and June 30, 2022, respectively.rule. This order does not amend the compliance dates required by the rule.
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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3.2. 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:
June 30, 2023December 31, 2022 March 31, 2024December 31, 2023
(in millions) (in millions)
    
Raw materials and work-in-progressRaw materials and work-in-progress$423.5 $398.9 
Finished goodsFinished goods88.0 92.5 
Gross inventoriesGross inventories511.5 491.4 
Inventory valuation reservesInventory valuation reserves(34.4)(27.5)
Inventories, netInventories, net$477.1 $463.9 

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4.3. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill The following table provides a reconciliation of changes in goodwill for the sixthree months ended June 30, 2023:March 31, 2024:
Consolidated
(in millions)
Balance at December 31, 20222023$181.6182.1 
Foreign currency translation0.1(0.7)
Balance at June 30, 2023March 31, 2024$181.7181.4 

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

At June 30, 2023,March 31, 2024, accumulated goodwill impairment losses were $1,435.5 million. All remaining goodwill is attributable to our Driveline reporting unit.

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:
June 30,December 31,
20232022
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
(in millions)
March 31,March 31,December 31,
202420242023
Gross Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
(in millions)(in millions)
Capitalized computer softwareCapitalized computer software$52.9 $(46.2)$6.7 $52.2 $(43.2)$9.0 
Customer platformsCustomer platforms856.2 (396.4)459.8 856.2 (364.7)491.5 
Customer relationshipsCustomer relationships53.0 (21.4)31.6 53.0 (19.7)33.3 
Technology and otherTechnology and other154.0 (77.9)76.1 154.1 (71.7)82.4 
TotalTotal$1,116.1 $(541.9)$574.2 $1,115.5 $(499.3)$616.2 

Amortization expense for our intangible assets was $21.4$20.7 million for both the three months ended June 30, 2023March 31, 2024 and June 30, 2022, and was $42.8$21.4 million for the sixthree months ended June 30, 2023 and $42.9 million for the six months ended June 30, 2022.March 31, 2023. Estimated amortization expense for the years 20232024 through 20272028 is expected to be in the range of approximately $80 million to $85 million per year.
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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5.4. LONG-TERM DEBT

Long-term debt consists of the following:
 
June 30, 2023December 31, 2022 March 31, 2024December 31, 2023
(in millions) (in millions)
    
Revolving Credit FacilityRevolving Credit Facility$ $25.0 
Term Loan A FacilityTerm Loan A Facility500.5 520.0 
Term Loan B FacilityTerm Loan B Facility664.9 675.0 
6.875% Notes due 20286.875% Notes due 2028400.0 400.0 
6.50% Notes due 20276.50% Notes due 2027500.0 500.0 
6.25% Notes due 20266.25% Notes due 2026180.0 180.0 
5.00% Notes due 20295.00% Notes due 2029600.0 600.0 
Foreign credit facilities and otherForeign credit facilities and other73.3 72.7 
Total debtTotal debt2,918.7 2,972.7 
Less: Current portion of long-term debt Less: Current portion of long-term debt16.3 75.9 
Less: Current portion of long-term debt
Less: Current portion of long-term debt
Long-term debtLong-term debt2,902.4 2,896.8 
Less: Debt issuance costs Less: Debt issuance costs48.5 51.7 
Long-term debt, netLong-term debt, net$2,853.9 $2,845.1 

Senior Secured Credit Facilities Our Senior Secured Credit Facilities are comprised of the Revolving Credit Facility, Term Loan A Facility and Term Loan B Facility. The Revolving Credit Facility and Term Loan A Facility mature in the first quarter of 2027 and the Term Loan B Facility matures in the fourth quarter of 2029. At June 30, 2023,March 31, 2024, we had $891.2$892.3 million available under the Revolving Credit Facility. This availability reflects a reduction of $33.8$32.7 million primarily for standby letters of credit issued against the facility. In the first quarter of 2023, we paid $25.0 million on our Revolving Credit Facility that had been drawn in the fourth quarter of 2022.

On June 28, 2023, Holdings and AAM, Inc. entered into the First Amendment to the Amended and Restated Credit Agreement (the First Amendment), which covers the period from June 28, 2023 through the filing of our second quarter 2024 results, or earlier at AAM's option, subject to certain conditions (the Amendment Period). The First Amendment, among other things, increased the maximum levels of the total net leverage ratio covenant and reduced the minimum levels of cash interest expense coverage ratio covenant during the Amendment Period, modified certain categories of the applicable margin (determined based on the total net leverage ratio of Holdings) for the duration of the Amendment Period with respect to interest rates under the Term Loan A Facility and the Revolving Credit Facility, and modified certain covenants restricting the ability of Holdings, AAM, Inc. and certain subsidiaries of Holdings to create, incur, assume, or permit to exist certain additional indebtedness and liens and to make or agree to pay or make certain restricted payments, voluntary payments and distributions. The terms of the Term Loan B Facility under the Amended and Restated Credit Agreement, including maturity dates, interest rates and their applicable margins, remain unchanged. We paid debt issuance costs of $3.1 million in the three months ended June 30, 2023 related to the First Amendment.

As of June 30, 2023,March 31, 2024, we have prepaid $23.0$19.5 million of the outstanding principal on our Term Loan A Facility and $18.6 million of the outstanding principal on our Term Loan B Facility. These payments satisfy our obligation for principal payments under the Term Loan A Facility through the end of 2024 and under the Term Loan B Facility forthrough the next four quarters.

In March 2022, Holdings and AAM, Inc. entered into the Amended and Restated Credit Agreement. The Amended and Restated Credit Agreement, among other things, increased the principal amountend of the Term Loan A Facility to $520.0 million, extended the maturity date of the Term Loan A Facility and the Revolving Credit Facility each to March 11, 2027, and established the use under the Term Loan A Facility and Revolving Credit Facility of the Secured Overnight Financing Rate (SOFR) and the minimum Adjusted Term SOFR Rate for Eurodollar-based loans denominated in U.S. Dollars and the Sterling Overnight Index Average (SONIA) and the minimum adjusted daily simple SONIA for loans denominated in Sterling. 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 six months ended June 30, 2022 related to the Amended and Restated Credit Agreement.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Also in the first six months of 2022, we made voluntary prepayments of $50.0 million on our Term Loan B Facility. As a result, 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 this borrowing.2026.

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 dueDue 2026In the first quarter of 2022,2024, we used the proceeds from the upsized Term Loan A Facility to voluntarily redeem a portioncompleted an open market repurchase of our 6.25% Notes due 2026. This resulted in a principal payment2026 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.$1.7 million.

Repayment of Tekfor Group Indebtedness UponIn the first quarter of 2024, we repaid $6.6 million of outstanding indebtedness that we assumed upon our acquisition of Tekfor in June 2022, we assumed $23.4 million of existing Tekfor indebtedness, of which we repaid $10.7 million in the second quarter of 2022.

Foreign credit facilities and Other We utilize local currency credit facilities to finance the operations of certain foreign subsidiaries. At June 30, 2023, $73.3March 31, 2024, $42.4 million was outstanding under our foreign credit facilities, as compared to $72.7$51.8 million at December 31, 2022.2023. At June 30, 2023,March 31, 2024, an additional $72.8$83.4 million was available under our foreign credit facilities.

Weighted-Average Interest Rate The weighted-average interest rate of our long-term debt outstanding was 6.6%7.1% at both June 30, 2023March 31, 2024 and December 31, 2022.2023.
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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6.5. DERIVATIVES

Our business and financial results are affected by fluctuations in global financial markets, including interestcurrency exchange rates and currency exchangeinterest 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 June 30, 2023March 31, 2024 and December 31, 2022,2023, we had currency forward contracts outstanding with a total notional amount of $197.6$227.3 million and $179.9$206.9 million, respectively, that hedge our exposure to changes in foreign currency exchange rates for certain payroll expenses into the firstfourth quarter of 2026 and the purchase of certain direct and indirect inventory and other working capital items into the firstfourth quarter of 2024.

Fixed-to-fixed cross-currency swap In 2022, 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. We had notional amounts outstanding under fixed-to-fixed cross-currency swaps of €200.0 million at both June 30, 2023March 31, 2024 and December 31, 2022,2023, which were equivalent to $218.0$215.8 million and $213.9$220.7 million, respectively. The fixed-to-fixed cross-currency swap hedges our exposure to changes in exchange rates on the intercompany loans intothrough the second quarter of 2024.

Variable-to-fixed interest rate swaps In 2022, and in the first quarter of 2023, we entered into variable-to-fixed interest rate swaps to reduce the variability of cash flows associated with interest payments on our variable rate debt. As of June 30, 2023,March 31, 2024, we have $700.0 million notional amount hedged in relation to our variable-to-fixed interest rate swaps into the third quarter of 2027, $200.0 million of which continues into the fourth quarter of 2029.

The following table summarizes the reclassification of pre-tax derivative gains and losses into net income (loss) from accumulated other comprehensive income (loss) for those derivative instruments designated as cash flow hedges under Accounting Standards Codification (ASC) 815 - Derivatives and Hedging:
LocationGain (Loss) Reclassified DuringTotal of FinancialGain ExpectedLocationGain (Loss) Reclassified DuringTotal of FinancialGain Expected
of Gain (Loss)Three Months EndedSix Months EndedStatementto be Reclassified of Gain (Loss)Three Months EndedStatementto be Reclassified
  Reclassified intoJune 30,June 30,Line ItemDuring the   Reclassified intoMarch 31,Line ItemDuring the
  Net Income20232022202320222023Next 12 Months   Net Income202420232024Next 12 Months
 (in millions)  (in millions)
Currency forward contractsCurrency forward contractsCost of Goods Sold$5.5 $1.9 $8.8 $3.1 $2,725.8 $17.3 
Currency forward contracts
Currency forward contracts
Fixed-to-fixed cross-currency swapFixed-to-fixed cross-currency swapOther Income (Expense), net(1.3)11.9 (4.0)17.9 3.2 0.3 
Variable-to-fixed interest rate swapVariable-to-fixed interest rate swapInterest Expense0.2 (0.5)0.8 (3.4)(100.7)4.5 

See Note 127 - Reclassifications Outout of Accumulated Other Comprehensive Income (Loss) (AOCI) for amounts recognized in other comprehensive income during the three and six months ended June 30, 2023March 31, 2024 and 2022.2023.

The following table summarizes the amount and location of gains and losses recognized in the Condensed Consolidated Statements of IncomeOperations for those derivative instruments not designated as hedging instruments under ASC 815:
 LocationGain Recognized DuringTotal of Financial
 of GainThree Months EndedSix Months EndedStatement
  Recognized inJune 30,June 30,Line Item
   Net Income20232022202320222023
  (in millions)
Currency forward contractsOther Income (Expense), net$1.6 $0.1 $3.7 $1.1 $3.2 
 LocationGain Recognized DuringTotal of Financial
 of GainThree Months EndedStatement
  Recognized inMarch 31,Line Item
   Net Income202420232024
  (in millions)
Currency forward contractsOther Income (Expense), net$1.1 $2.1 $ 
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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7.6. FAIR VALUE

ASC 820 - Fair Value Measurement defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The definition is based on an exit price rather than an entry price, regardless of whether the entity plans to hold or sell the asset. This guidance also establishes a fair value hierarchy to prioritize inputs used in measuring fair value as follows:

Level 1:  Observable inputs such as quoted prices in active markets;
Level 2:  Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3:  Unobservable inputs in which there is little or no market data, which require the reporting entity to develop
its own assumptions.

Financial instruments   The estimated carrying value of our financial assets and liabilities that are recognized at fair value on a recurring basis, using available market information and other observable data, are as follows:
 
Fair Value  Fair Value 
June 30, 2023December 31, 2022Input
March 31, 2024March 31, 2024December 31, 2023Input
(in millions)  (in millions) 
Balance Sheet ClassificationBalance Sheet Classification   Balance Sheet Classification  
Cash equivalentsCash equivalents$324.1 $363.6 Level 1Cash equivalents$222.2 $$328.3 Level 1Level 1
Prepaid expenses and otherPrepaid expenses and other   Prepaid expenses and other   
Cash flow hedges - currency forward contractsCash flow hedges - currency forward contracts17.3 8.2 Level 2Cash flow hedges - currency forward contracts17.0 15.9 15.9 Level 2Level 2
Cash flow hedges - variable-to-fixed interest rate swap4.5 2.4 Level 2
Nondesignated - currency forward contracts
Nondesignated - currency forward contracts
Nondesignated - currency forward contractsNondesignated - currency forward contracts1.4 0.5 Level 21.0 0.8 0.8 Level 2Level 2
Other assets and deferred chargesOther assets and deferred charges
Cash flow hedges - currency forward contracts Cash flow hedges - currency forward contracts7.6 3.0 Level 2
Cash flow hedges - currency forward contracts
Cash flow hedges - currency forward contracts6.0 5.4 Level 2
Cash flow hedges - variable-to-fixed interest rate swap15.1 8.5 Level 2
Investment in equity securities
Investment in equity securities
Investment in equity securities Investment in equity securities1.9 1.9 Level 10.9 0.8 0.8 Level 1Level 1
Accrued expenses and otherAccrued expenses and other
Cash flow hedges - fixed-to-fixed cross-currency swapCash flow hedges - fixed-to-fixed cross-currency swap6.5 — Level 2
Cash flow hedges - fixed-to-fixed cross-currency swap
Cash flow hedges - fixed-to-fixed cross-currency swap4.5 9.4 Level 2
Cash flow hedges - variable-to-fixed interest rate swap Cash flow hedges - variable-to-fixed interest rate swap2.0 5.0 Level 2
Postretirement benefits and other long-term liabilitiesPostretirement benefits and other long-term liabilities
Postretirement benefits and other long-term liabilities
Postretirement benefits and other long-term liabilities
Cash flow hedges - fixed-to-fixed cross-currency swap 1.5 Level 2
Cash flow hedges - variable-to-fixed interest rate swap
Cash flow hedges - variable-to-fixed interest rate swap
Cash flow hedges - variable-to-fixed interest rate swap5.9 16.5 Level 2

The carrying values of our cash, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to the short-term maturities of these instruments. The carrying values of our borrowings under the foreign credit facilities approximate their fair value due to the frequent resetting of the interest rates.

We have an investment in the equity securities of REE Automotive, an e-mobility company. These equity securitieswhich 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 Income.Operations. As of June 30, 2023,March 31, 2024, our investment in REE shares was valued at $1.9$0.9 million based on a closing price on that date of $0.38$5.84 per share.
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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:
 
June 30, 2023December 31, 2022  March 31, 2024December 31, 2023 
Carrying  AmountFair ValueCarrying  AmountFair Value
 
Input
Carrying  AmountFair ValueCarrying  AmountFair Value
 
Input
(in millions)  (in millions) 
    
Revolving Credit Facility
Revolving Credit Facility
Revolving Credit FacilityRevolving Credit Facility$ $ $25.0 $25.0 Level 2$ $$ $$— $$— Level 2Level 2
Term Loan A FacilityTerm Loan A Facility500.5 489.9 520.0 510.3 Level 2Term Loan A Facility484.3 482.4 482.4 484.3 484.3 483.6 483.6 Level 2Level 2
Term Loan B FacilityTerm Loan B Facility664.9 662.4 675.0 658.1 Level 2Term Loan B Facility648.0 648.8 648.8 648.0 648.0 649.6 649.6 Level 2Level 2
6.875% Notes due 20286.875% Notes due 2028400.0 370.0 400.0 355.4 Level 2
6.875% Notes due 2028
6.875% Notes due 2028400.0 396.0 400.0 387.0 Level 2
6.50% Notes due 2027
6.50% Notes due 2027
6.50% Notes due 20276.50% Notes due 2027500.0 471.3 500.0 452.5 Level 2500.0 495.0 495.0 500.0 500.0 501.9 501.9 Level 2Level 2
6.25% Notes due 20266.25% Notes due 2026180.0 174.2 180.0 165.7 Level 26.25% Notes due 2026125.9 124.6 124.6 127.6 127.6 126.3 126.3 Level 2Level 2
5.00% Notes due 20295.00% Notes due 2029600.0 499.5 600.0 474.9 Level 2
5.00% Notes due 2029
5.00% Notes due 2029600.0 538.5 600.0 529.5 Level 2

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

Reclassification adjustments and other activity impacting accumulated other comprehensive income (loss) during the three months ended March 31, 2024 and March 31, 2023 are as follows (in millions):

Defined Benefit PlansForeign Currency Translation AdjustmentsUnrecognized Gain (Loss) on Cash Flow HedgesTotal
Balance at December 31, 2023$(145.3)$(142.3)$24.7 $(262.9)
Other comprehensive income (loss) before reclassifications (15.3)23.8 8.5 
Income tax effect of other comprehensive income (loss) before reclassifications  (5.0)(5.0)
Amounts reclassified from accumulated other comprehensive income (loss)(0.9)(a) (10.0)(b)(10.9)
Income taxes reclassified into net income (loss)0.3  2.0 2.3 
Net change in accumulated other comprehensive income (loss)(0.6)(15.3)10.8 (5.1)
Balance at March 31, 2024$(145.9)$(157.6)$35.5 $(268.0)

Defined Benefit PlansForeign Currency Translation AdjustmentsUnrecognized Gain (Loss) on Cash Flow HedgesTotal
Balance at December 31, 2022$(146.9)$(149.7)$21.2 $(275.4)
Other comprehensive income before reclassifications— 8.8 1.9 10.7 
Income tax effect of other comprehensive income before reclassifications— — 2.2 2.2 
Amounts reclassified from accumulated other comprehensive income (loss)(1.2)(a)— (1.2)(b)(2.4)
Income taxes reclassified into net income (loss)0.5 — (0.4)0.1 
Net change in accumulated other comprehensive income (loss)(0.7)8.8 2.5 10.6 
Balance at March 31, 2023$(147.6)$(140.9)$23.7 $(264.8)

(a)These amounts were reclassified from AOCI to Other income (expense), net for the three months ended March 31, 2024 and March 31, 2023.
(b)The amounts reclassified from AOCI included $(4.7) million in cost of goods sold (COGS), $(0.3) million in interest expense and $(5.0) million in Other income (expense), net for the three months ended March 31, 2024 and $(3.3) million in COGS, $(0.6) million in interest expense and $2.7 million in Other income (expense), net for the three months ended March 31, 2023.

15

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 BenefitsPension Benefits
Three Months EndedSix Months Ended Three Months Ended
June 30,June 30, March 31,
2023202220232022 20242023
(in millions) (in millions)
 
Service costService cost$0.2 $0.4 $0.5 $0.9 
Service cost
Service cost
Interest costInterest cost6.1 4.2 12.1 8.4 
Expected asset returnExpected asset return(7.3)(7.8)(14.5)(15.8)
Amortized lossAmortized loss1.1 1.9 2.1 3.8 
Net periodic benefit cost (credit)$0.1 $(1.3)$0.2 $(2.7)
Net periodic benefit cost
Net periodic benefit cost
Net periodic benefit cost
 
Other Postretirement BenefitsOther Postretirement Benefits
Three Months EndedSix Months Ended Three Months Ended
June 30,June 30, March 31,
2023202220232022 20242023
(in millions) (in millions)
  
Service costService cost$0.1 $— $0.1 $0.1 
Service cost
Service cost
Interest costInterest cost2.5 2.1 5.0 4.2 
Amortized loss (gain)(2.1)0.1 (4.2)0.2 
Amortized gain
Amortized prior service creditAmortized prior service credit(0.1)(0.2)(0.2)(0.4)
Net periodic benefit cost$0.4 $2.0 $0.7 $4.1 
Net periodic benefit cost (credit)
Net periodic benefit cost (credit)
Net periodic benefit cost (credit)

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 June 30, 2023March 31, 2024 and December 31, 2022,2023, we have a noncurrent pension liability of $69.6$72.7 million and $73.5$74.7 million, respectively. As of June 30, 2023March 31, 2024 and December 31, 2022,2023, we have a noncurrent other postretirement benefits liability of $302.0$268.4 million and $304.8$268.9 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 20232024 to be less than $1.0 million. We expect our cash payments for other postretirement benefit obligations in 2023,2024, net of GM cost sharing, to be approximately $14.6$11.0 million.
16

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 EndedSix Months EndedThree Months Ended
June 30,June 30, March 31,
2023202220232022 20242023
(in millions) (in millions)
  
Beginning balanceBeginning balance$61.4 $60.4 $54.1 $59.5 
Beginning balance
Beginning balance
Accruals Accruals3.6 3.9 12.3 7.9 
PaymentsPayments(2.5)(1.0)(4.3)(4.1)
Adjustment to prior period accruals(0.4)(0.6)(0.4)(0.6)
Foreign currency translation
Foreign currency translation
Foreign currency translation Foreign currency translation(0.4)(0.8) (0.8)
Ending balanceEnding balance$61.7 $61.9 $61.7 $61.9 




17

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. 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 months ended March 31, 2024 and 2023. Net sales are attributed to regions based on the location of production. Intersegment sales have been excluded from the table.

Three Months Ended March 31, 2024
(in millions)
DrivelineMetal FormingTotal
North America$828.0 $345.9 $1,173.9 
Asia142.7 8.0 150.7 
Europe121.5 124.3 245.8 
South America14.2 22.3 36.5 
Total$1,106.4 $500.5 $1,606.9 
Three Months Ended March 31, 2023
DrivelineMetal FormingTotal
North America$783.0 $328.5 $1,111.5 
Asia105.8 6.7 112.5 
Europe99.8 122.9 222.7 
South America25.2 22.0 47.2 
Total$1,013.8 $480.1 $1,493.9 

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 (in millions):
Accounts Receivable, NetContract Liabilities (Current)Contract Liabilities (Long-term)
December 31, 2023$818.5 $16.6 $70.4 
March 31, 2024960.5 15.0 69.9 
Increase/(decrease)$142.0 $(1.6)$(0.5)

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. We amortized previously recorded contract liabilities into revenue as we satisfied performance obligations with our customers of approximately $4.0 million and $7.6 million for the three months ended March 31, 2024 and 2023, respectively.

18

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. RESTRUCTURING AND ACQUISITION-RELATED COSTS

In 2022, we completed our acquisition of Tekfor Group (Tekfor) and in 2023 initiated certain restructuring actions associated with the acquired entities. We expect to incur restructuring costs associated with the acquired entities throughout 2024.
In the first quarter of 2024, we initiated a global restructuring program (the 2024 Program) focused on optimizing our cost structure. We expect to incur costs under the 2024 Program into 2026.
A summary of our restructuring activity for the first three months of 2024 and 2023 is shown below:
Severance ChargesImplementation CostsTotal
(in millions)
Accrual at December 31, 2022$2.4 $1.4 $3.8 
Charges0.3 3.7 4.0 
Cash utilization(0.7)(2.5)(3.2)
Accrual at March 31, 2023$2.0 $2.6 $4.6 
Accrual at December 31, 2023$3.0 $1.7 $4.7 
Charges0.2 1.2 1.4 
Cash utilization(1.6)(1.1)(2.7)
Accrual at March 31, 2024$1.6 $1.8 $3.4 
As part of our restructuring actions, we incurred total severance charges of approximately $0.2 million and $0.3 million during the three months ended March 31, 2024 and 2023, respectively. We also incurred total implementation costs of approximately $1.2 million and $3.7 million during the three months ended March 31, 2024 and 2023, respectively. Implementation costs consist primarily of plant exit costs. We incurred $0.2 million of costs related to restructuring actions associated with Tekfor and $1.2 million of costs under the 2024 Program in the three months ended March 31, 2024. We have incurred $2.3 million of total restructuring costs related to restructuring actions associated with Tekfor. Approximately $1.1 million of our total restructuring costs for the three months ended March 31, 2024 related to our Metal Forming segment, while the remainder were corporate costs. Substantially all of our total restructuring costs for the three months ended March 31, 2023 related to our Metal Forming segment. We expect to incur approximately $10 million to $20 million of total restructuring charges in 2024 associated with Tekfor and the 2024 Program.
The following table represents a summary of integration charges incurred primarily related to our acquisition of Tekfor:
Integration Expenses
(in millions)
Charges for the three months ended March 31, 2024$1.1
Charges for the three months ended March 31, 20230.8 
Integration expenses primarily reflect costs incurred for information technology infrastructure and enterprise resource planning 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 $2.5 million and $4.8 million for the three months ended March 31, 2024 and March 31, 2023, respectively.
19

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. 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 expense and effective income tax rate for the three and six months ended June 30,March 31, 2024 and 2023 and 2022 are as follows:

Three Months EndedSix Months Ended
June 30,June 30,
2023202220232022Three Months Ended
March 31,March 31,
202420242023
(in millions) (in millions)
  
Income tax expenseIncome tax expense$5.3 $0.6 $5.3 $3.6 
Income tax expense
Income tax expense
Effective income tax rateEffective income tax rate39.8 %2.6 %64.6 %13.1 %Effective income tax rate43.7 %— %

During the three months ended June 30, 2023, we recognized an income tax benefit of approximately $3.2 million related to the release of a valuation allowance in a foreign jurisdiction. For the threeMarch 31, 2024 and six months ended June 30, 2023, in computing our estimated annual effective tax rate, we recorded a full valuation allowance against the deferred tax asset on the current year estimated disallowed interest expense in the U.S. In addition, during the three months ended March 31, 2023, we recorded a valuation allowance against a portion of the deferred tax asset on prior year disallowed interest expense in the U.S. and reduced our liability for unrecognized income tax benefits and related interest and penalties as a result of a change in estimate on previously recorded unrecognized tax benefits in certain jurisdictions, resulting in net tax expense of $3.4 million during the sixthree months ended June 30,March 31, 2023.

Our effective income tax ratesrate for the three and six months ended June 30, 2023 varyMarch 31, 2024 varies from our effective income tax ratesrate for the three and six months ended June 30, 2022March 31, 2023 primarily as a result of the mix of earnings on a jurisdictional basis and the impact of the discrete items noted above, the $11.6 million gain on bargain purchase of business that was recognized in both the three and six months ended June 30, 2022, which was not subject to income tax, and the mix of earnings on a jurisdictional basis.above.

For the three and six months ended June 30, 2023,March 31, 2024, our effective income tax rates varyrate varies from the U.S. federal statutory rate primarily due to the unfavorable impact related to the disallowed interest expense deductions in the U.S. and tax expense related to global intangible low-taxed income (GILTI), net of the favorable impact of the reduction in unrecognized tax benefits, as well as favorablecertain foreign tax rates and the impact of tax credits. For the three and six months ended June 30, 2022,March 31, 2023, our effective income tax rates varyrate varies from the U.S. federal statutory rate primarily due to the gain on bargain purchaseunfavorable impact related to the disallowed interest expense deductions in the U.S. and tax expense related to GILTI, net of business that was recognized, a benefit from foreign derived intangible income deductions, the changeimpact of the reduction in jurisdictional mix of earnings,unrecognized tax benefits, favorable foreign tax rates and the impact of tax credits.

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. Due to the uncertainty associated with the extent and ultimate impact of the significant supply chain constraints affecting the automotive industry, including volatility in metal and commodity costs, higher utility costs, increased transportation costs, higher labor costs and labor shortages,If 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 and such changes could be material to our financial statements.


1820

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Other Income Tax Matters

During their examination of our 2015 U.S. federal income tax 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, in September 2022, the IRS issued a Notice of Deficiency. The IRS subsequently issued a Notice of Tax Due in December 2022 and AAM paid the assessed tax and interest of $10.1 million in January 2023. We have filed a claim for refund for the amount of tax and interest paid related to this matter for the 2015 tax year and, if necessary, will filein December 2023, we filed suit in the U.S. Court of Federal Claims.

We believe, after consultation with tax and legal counsel, that it is more likely than not that our structure did not give rise to FBCSI, and it's 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 as of, and for the three and six months ended, June 30,March 31, 2024 and March 31, 2023, with the exception of the cash payment and associated income tax receivable of $10.1 million paid by AAM to the IRS in the first quarter of 2023. As of June 30, 2023,March 31, 2024, 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 2022,2023, is estimated to be in the range of approximately $285$300 million to $335$350 million.

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 this petition was denied. Finally, in June 2022, the taxpayer filed a petition with the U.S. Supreme Court to review the judgment of the U.S. Court of Appeals for the Sixth Circuit and in November 2022 that petition was also denied. Notwithstanding the decisions rendered 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 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 that our structure does not give rise to FBCSI.

Negative or unexpected outcomes of 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. As of June 30, 2023March 31, 2024 and December 31, 2022,2023, we have recorded a liability for unrecognized income tax benefits and related interest and penalties of $29.6$30.4 million and $40.5$38.1 million, respectively.
1921

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11.13. 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 payment awards that entitle the holder to non-forfeitable dividend rights. Our participating securities 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 EndedSix Months EndedThree Months Ended
June 30,June 30, March 31,
2023202220232022 20242023
(in millions, except per share data) (in millions, except per share data)
NumeratorNumerator  
Net income$8.0 $22.9 $2.9 $23.9 
Net income (loss)
Net income (loss)
Net income (loss)
Less: Net income attributable to participating securities Less: Net income attributable to participating securities(0.1)(1.0)(0.1)(1.0)
Net income attributable to common shareholders - Basic and Dilutive$7.9 $21.9 $2.8 $22.9 
Net income (loss) attributable to common shareholders - Basic and Dilutive
Net income (loss) attributable to common shareholders - Basic and Dilutive
Net income (loss) attributable to common shareholders - Basic and Dilutive
DenominatorsDenominators  
Denominators
Denominators
Basic common shares outstanding -Basic common shares outstanding -  
Basic common shares outstanding -
Basic common shares outstanding -
Weighted-average shares outstanding
Weighted-average shares outstanding
Weighted-average shares outstanding Weighted-average shares outstanding120.4 119.5 120.1 119.2 
Less: Weighted-average participating securities Less: Weighted-average participating securities(3.4)(5.0)(4.0)(4.8)
Weighted-average common shares outstanding Weighted-average common shares outstanding117.0 114.5 116.1 114.4 
Effect of dilutive securities -Effect of dilutive securities -  
Effect of dilutive securities -
Effect of dilutive securities -
Dilutive stock-based compensation
Dilutive stock-based compensation
Dilutive stock-based compensation Dilutive stock-based compensation0.2 0.8 0.2 0.6 
Diluted shares outstanding -Diluted shares outstanding -  
Diluted shares outstanding -
Diluted shares outstanding -
Adjusted weighted-average shares after assumed conversions
Adjusted weighted-average shares after assumed conversions
Adjusted weighted-average shares after assumed conversions Adjusted weighted-average shares after assumed conversions117.2 115.3 116.3 115.0 
  
Basic EPSBasic EPS$0.07 $0.19 $0.02 $0.20 
Basic EPS
Basic EPS
  
Diluted EPSDiluted EPS$0.07 $0.19 $0.02 $0.20 
Diluted EPS
Diluted EPS


20

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

Reclassification adjustmentsBasic and other activity impacting accumulated other comprehensive income (loss) duringdilutive loss per share are the sixsame for the three months ended June 30,March 31, 2023 and June 30, 2022 are as follows (in millions):

Defined Benefit PlansForeign Currency Translation AdjustmentsUnrecognized Gain (Loss) on Cash Flow HedgesTotal
Balance at March 31, 2023$(147.6)$(140.9)$23.7 $(264.8)
Other comprehensive income (loss) before reclassifications (4.7)25.2 20.5 
Income tax effect of other comprehensive income (loss) before reclassifications  (3.2)(3.2)
Amounts reclassified from accumulated other comprehensive income (loss)(1.1)(a) (4.4)(b)(5.5)
Income taxes reclassified into net income0.4  (0.3)0.1 
Net change in accumulated other comprehensive income (loss)(0.7)(4.7)17.3 11.9 
Balance at June 30, 2023$(148.3)$(145.6)$41.0 $(252.9)

Defined Benefit PlansForeign Currency Translation AdjustmentsUnrecognized Gain (Loss) on Cash Flow HedgesTotal
Balance at March 31, 2022$(240.6)$(105.3)$4.1 $(341.8)
Other comprehensive income (loss) before reclassifications— (42.3)11.4 (30.9)
Income tax effect of other comprehensive income (loss) before reclassifications— — (2.2)(2.2)
Amounts reclassified from accumulated other comprehensive income (loss)1.8 (a)— (13.3)(b)(11.5)
Income taxes reclassified into net income(0.5)— 2.4 1.9 
Net change in accumulated other comprehensive income (loss)1.3 (42.3)(1.7)(42.7)
Balance at June 30, 2022$(239.3)$(147.6)$2.4 $(384.5)

(a)These amounts were reclassified from AOCI to Other income (expense), net for the three months ended June 30, 2023 and June 30, 2022.
(b)The amounts reclassified from AOCI included $(5.5) million in cost of goods sold (COGS), $(0.2) million in interest expense and $1.3 million in Other income (expense), net for the three months ended June 30, 2023 and $(1.9) million in COGS, $0.5 million in interest expense and $(11.9) million in Other income (expense), net for the three months ended June 30, 2022.
21

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Defined Benefit PlansForeign Currency Translation AdjustmentsUnrecognized Gain (Loss) on Cash Flow HedgesTotal
Balance at December 31, 2022$(146.9)$(149.7)$21.2 $(275.4)
Other comprehensive income before reclassifications 4.1 27.1 31.2 
Income tax effect of other comprehensive income before reclassifications  (1.0)(1.0)
Amounts reclassified from accumulated other comprehensive income (loss)(2.3)(a) (5.6)(b)(7.9)
Income taxes reclassified into net income0.9  (0.7)0.2 
Net change in accumulated other comprehensive income (loss)(1.4)4.1 19.8 22.5 
Balance at June 30, 2023$(148.3)$(145.6)$41.0 $(252.9)

Defined Benefit PlansForeign Currency Translation AdjustmentsUnrecognized Gain (Loss) on Cash Flow HedgesTotal
Balance at December 31, 2021$(241.9)$(111.3)$(11.6)$(364.8)
Other comprehensive income (loss) before reclassifications— (36.3)34.3 (2.0)
Income tax effect of other comprehensive income (loss) before reclassifications— — (5.7)(5.7)
Amounts reclassified from accumulated other comprehensive income (loss)3.6 (a)— (17.6)(b)(14.0)
Income taxes reclassified into net income(1.0)— 3.0 2.0 
Net change in accumulated other comprehensive income (loss)2.6 (36.3)14.0 (19.7)
Balance at June 30, 2022$(239.3)$(147.6)$2.4 $(384.5)

(a)These amounts were reclassified from AOCI to Other income (expense), net for the six months ended June 30, 2023 and June 30, 2022.
(b)The amounts reclassified from AOCI included $(8.8) million in cost of goods sold (COGS), $(0.8) million in interest expense and $4.0 million in Other income (expense), net for the six months ended June 30, 2023 and $(3.1) million in COGS, $3.4 million in interest expense and $(17.9) million in Other income (expense), net for the six months ended June 30, 2022.

because the effect of potentially dilutive stock-based compensation would have been antidilutive. Excluded potentially dilutive shares were 0.2 million for the three months ended March 31, 2023.
22

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 six months ended June 30, 2023 and 2022. 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 2023, we moved a plant location that was 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 table below for the three and six months ended June 30, 2022 have been recast to reflect this reorganization.

Three Months Ended June 30, 2023
(in millions)
DrivelineMetal FormingTotal
North America$827.1 $332.6 $1,159.7 
Asia118.5 10.5 129.0 
Europe111.4 119.2 230.6 
South America29.4 22.0 51.4 
Total$1,086.4 $484.3 $1,570.7 
Three Months Ended June 30, 2022
DrivelineMetal FormingTotal
North America$808.9 $319.1 $1,128.0 
Asia93.1 8.4 101.5 
Europe100.6 77.9 178.5 
South America22.1 8.2 30.3 
Total$1,024.7 $413.6 $1,438.3 
Six Months Ended June 30, 2023
DrivelineMetal FormingTotal
North America$1,610.1 $661.1 $2,271.2 
Asia224.3 17.2 241.5 
Europe211.2 242.1 453.3 
South America54.6 44.0 98.6 
Total$2,100.2 $964.4 $3,064.6 
Six Months Ended June 30, 2022
DrivelineMetal FormingTotal
North America$1,617.5 $637.7 $2,255.2 
Asia210.1 18.9 229.0 
Europe206.4 137.1 343.5 
South America36.1 10.7 46.8 
Total$2,070.1 $804.4 $2,874.5 


23

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 (in millions):
Accounts Receivable, NetContract Liabilities (Current)Contract Liabilities (Long-term)
December 31, 2022$820.2 $28.1 $73.4 
June 30, 2023921.1 15.9 69.3 
Increase/(decrease)$100.9 $(12.2)$(4.1)

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. We amortized previously recorded contract liabilities into revenue as we satisfied performance obligations with our customers of approximately $21.5 million and $15.6 million for the six months ended June 30, 2023 and 2022, respectively.

24

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 fair values of the assets acquired and liabilities assumed resulting from the acquisition (in millions):
Total consideration transferred$94.4 
Cash and cash equivalents$14.3 
Accounts receivable33.7
Inventories46.3
Prepaid expenses and other long-term assets30.1
Deferred income tax assets5.0
Property, plant and equipment105.5
Total assets acquired$234.9 
Accounts payable33.5
Accrued expenses and other28.1
Debt23.4
Postretirement benefits and other long-term liabilities41.9
Net assets acquired$108.0 
Gain on bargain purchase of business$13.6 

The gain on bargain purchase of business was primarily the result of 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.

We finalized the valuation of the assets and liabilities of Tekfor in the first quarter of 2023 as we concluded the customary post-closing reviews associated with the acquisition. There were no adjustments to the purchase price allocation in the three or six months ended June 30, 2023.

Included in net sales and net income for the period from January 1, 2023 through June 30, 2023 was approximately $199 million and a loss of approximately $8 million, respectively, attributable to Tekfor. Included in net sales and net income for the period from the acquisition effective date on June 1, 2022 through June 30, 2022 was approximately $29 million and $7 million, respectively, attributable to Tekfor. The net income amount for the second quarter 2022 includes the gain on bargain purchase of business of $11.6 million, which was prior to subsequent measurement period adjustments resulting in the final gain on bargain purchase of business of $13.6 million, as well as a one-time expense of $5.0 million for the step-up of inventory to fair value.


25

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unaudited Pro Forma Financial Information

Unaudited pro forma net sales for AAM, on a combined basis with Tekfor for the six months ended June 30, 2022 were $3.0 billion, excluding Tekfor sales to AAM during the period. Unaudited pro forma net income for the six months ended June 30, 2022 was approximately $20.0 million. Unaudited pro forma earnings per share for the six months ended June 30, 2022 was $0.17 per share.

The unaudited pro forma net income amount for the six months ended June 30, 2022 has been adjusted by 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 $12 million for the gain on bargain purchase of business recognized, which was not subject to tax. This resulted in a net adjustment to pro forma net income of approximately $3 million for the first six months of 2022 as we are required to disclose the unaudited pro forma amounts as if the acquisition of Tekfor 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.
26

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. MANUFACTURING FACILITY FIRE AND INSURANCE RECOVERY

In the third quarter of 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. In the fourth quarter of 2022, we finalized the claim with our insurance providers. In January 2023, we collected the final $24.0 million associated with this claim, of which $7.0 million has been presented as an operating cash inflow and $17.0 million has been presented as an investing cash inflow in our Condensed Consolidated Statement of Cash Flows for the first six months of 2023. There was no impact on our Condensed Consolidated Statement of Income for the six months ended June 30, 2023 associated with the Malvern Fire.

Our insurance policies covered 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 provided coverage for interruption to our business, including lost or reduced profits and reimbursement for certain expenses and costs that were incurred related to the fire. In the six months ended June 30, 2022, we recorded $1.4 million of charges primarily related to transportation and freight 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 $6.8 million and received reimbursements and advances under our insurance policies of approximately $11.7 million, of which approximately $7.1 million was presented as an operating cash flow and $4.6 million was 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 Income of approximately $5.4 million in Cost of goods sold for the six months ended June 30, 2022.


27

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. 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 engine, transmission, driveline and safety-critical components for traditional internal combustion engine and electric vehicle architectures including light vehicles, commercial vehicles and off-highway vehicles, as well as products for 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, pension settlements, unrealized gains or losses on equity securities, pension curtailment and settlement charges 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. In the first quarter of 2023, we moved a plant location that was 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 six months ended June 30, 2022 have been recast to reflect this reorganization.

The following tables represent information by reportable segment for the three and six months ended June 30,March 31, 2024 and 2023 and 2022 (in millions):
Three Months Ended June 30, 2023
DrivelineMetal FormingTotal
Three Months Ended March 31, 2024
Three Months Ended March 31, 2024
Three Months Ended March 31, 2024
DrivelineDrivelineMetal FormingTotal
SalesSales$1,086.5 $634.2 $1,720.7 
Less: Intersegment salesLess: Intersegment sales0.1 149.9 150.0 
Net external salesNet external sales$1,086.4 $484.3 $1,570.7 
Segment Adjusted EBITDASegment Adjusted EBITDA$152.1 $39.5 $191.6 
Segment Adjusted EBITDA
Segment Adjusted EBITDA
Three Months Ended June 30, 2022
DrivelineMetal FormingTotal
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
DrivelineDrivelineMetal FormingTotal
SalesSales$1,024.7 $557.7 $1,582.4 
Less: Intersegment salesLess: Intersegment sales— 144.1 144.1 
Net external salesNet external sales$1,024.7 $413.6 $1,438.3 
Segment Adjusted EBITDASegment Adjusted EBITDA$132.4 $62.7 $195.1 
Segment Adjusted EBITDA
Segment Adjusted EBITDA









2823

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Six Months Ended June 30, 2023
DrivelineMetal FormingTotal
Sales$2,100.3 $1,253.3 $3,353.6 
Less: Intersegment sales0.1 288.9 289.0 
Net external sales$2,100.2 $964.4 $3,064.6 
Segment Adjusted EBITDA$266.2 $100.8 $367.0 
Six Months Ended June 30, 2022
DrivelineMetal FormingTotal
Sales$2,070.1 $1,082.8 $3,152.9 
Less: Intersegment sales— 278.4 278.4 
Net external sales$2,070.1 $804.4 $2,874.5 
Segment Adjusted EBITDA$255.2 $136.0 $391.2 

The following table represents a reconciliation of Total Segment Adjusted EBITDA to consolidated income (loss) before income taxes for the three and six months ended June 30, 2023March 31, 2024 and 2022:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(in millions)
Total segment adjusted EBITDA$191.6 $195.1 $367.0 $391.2 
Interest expense(50.2)(42.7)(100.7)(87.4)
Depreciation and amortization(120.5)(121.9)(245.4)(242.3)
Restructuring and acquisition-related costs(7.9)(9.6)(12.7)(18.5)
Unrealized gain (loss) on equity securities0.3 (3.7) (21.7)
Debt refinancing and redemption costs (0.2) (5.8)
Non-recurring items:
Malvern Fire insurance recoveries (charges), net (0.1) 5.4 
Acquisition-related fair value inventory adjustment (5.0) (5.0)
     Gain on bargain purchase of business 11.6  11.6 
Income before income taxes$13.3 $23.5 $8.2 $27.5 
2023:
Three Months Ended March 31,
20242023
(in millions)
Total segment adjusted EBITDA$205.6 $175.4 
Interest expense(49.0)(50.5)
Depreciation and amortization(117.8)(124.9)
Restructuring and acquisition-related costs(2.5)(4.8)
Unrealized gain (loss) on equity securities0.1 (0.3)
Income (loss) before income taxes$36.4 $(5.1)
2924


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, 2022.2023.

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 subsidiaries of Holdings.

COMPANY OVERVIEW

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

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 39%40% of our consolidated net sales for the first sixthree months of 2024 and 39% for both the first three months of 2023 41% for the first six months of 2022 and 40% for the full year 2022.2023.

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 and the AWD Chrysler Pacifica.derivatives. In addition, we sell various products to Stellantis from our Metal Forming segment. Sales to Stellantis were approximately 17%14% of our consolidated net sales for the first sixthree months of 2024, 17% for the first three months of 2023 and 18%16% for both the first six months of 2022 and the full year 2022.2023.

We are also a supplier to Ford Motor Company (Ford) for driveline system products on certain vehicle programs including the Bronco Sport, Maverick, Edge, Escape and Lincoln Nautilus, and we also sell various products to Ford from our Metal Forming segment. Sales to Ford were approximately 11%13% of our consolidated net sales for both the first sixthree months of 2024, 11% for the first three months of 2023 and the first six months of 2022 and 12% for the full year 2022.2023.

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

Supply Chain Constraints Impacting the Automotive IndustryCommercial Matters

DuringIn April 2024, one of our largest customers notified AAM that production purchase orders related to a previously announced contract to supply e-Beam axles for a future vehicle program were terminated. We believe that the first six monthstermination of 2023 and 2022,these purchase orders reflects, in part, the automotive industry continued to experience significant disruptions inuncertainty currently underlying the supply chain,electric vehicle environment, including volatility in metal, commodityestimated volumes and utilitythe timing of production. We have submitted a cancellation claim to recover certain costs shortagesincurred in connection with the terminated purchase orders. As of certain raw materialsMarch 31, 2024, we have approximately $70 million of assets in our Condensed Consolidated Balance Sheet associated with this program, consisting of capitalized engineering, design and components, including semiconductor chips, increased transportation costs, higher labordevelopment costs and labor shortages.other commercial amounts. As a result,of the date of this filing, we have continuedbelieve we are entitled to experience volatilityclaim and recover the full amount. However, due to the nature of the cancellation claim process, and the need to reach final resolution with the customer, the ultimate amount to be recovered is not determinable and could differ materially from the amount included in our production schedules, including manufacturing downtime, often with limited notice from customers, higher inventory levels and increased labor costs, which have negatively impacted our results of operations and cash flows during these periods. In addition, during the six months ended June 30, 2023, we experienced lower margins at certain of our locations as a result of production inefficiencies and capacity constraints due, in part, to labor shortages impacting our operations. We continue to work with customers and suppliers in our effort to protect continuity of supply as we expect these challenges to continue throughout 2023. Due to the ongoing uncertainty associated with these supply chain constraints, the ultimate impact on our net sales, results of operations and cash flows is unknown.

Condensed Consolidated Balance Sheet.

30


Effect of New Regulatory Pronouncements

Securities and Exchange Commission (SEC) Rule - Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure

On July 26, 2023, the SEC adopted “Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure,” a rule that enhances and standardizes disclosures regarding cybersecurity risk management and governance, as well as material cybersecurity incidents. Under this rule, companies will now be required to make annual disclosures describing their processes for identifying and managing material cybersecurity risks, how management assesses and manages such risks, and the Board of Directors’ oversight of cybersecurity risks. Companies must also disclose in a Form 8-K the nature, scope and timing of any material cybersecurity incidents identified and the material impact or reasonably likely material impact on the company.

This rule becomes effective 30 days after publication in the Federal Register, and requires public companies to comply with the annual cybersecurity risk disclosure requirements beginning with fiscal years ending on or after December 15, 2023, and to comply with the Form 8-K disclosure of material cybersecurity incidents on the later of 90 days after the rule was published in the Federal Register or December 18, 2023.




3125


RESULTS OF OPERATIONS –– THREE MONTHS ENDED JUNE 30, 2023MARCH 31, 2024 AS COMPARED TO THREE MONTHS ENDED JUNE 30, 2022MARCH 31, 2023

Net Sales  

Three Months Ended June 30,
Three Months Ended March 31,Three Months Ended March 31,
(in millions)(in millions)20232022ChangePercent Change(in millions)20242023ChangePercent Change
Net salesNet sales$1,570.7 $1,438.3 $132.4 9.2 %Net sales$1,606.9 $$1,493.9 $$113.0 7.6 7.6 %
The increase in the second quarterfirst three months of 2023,2024, as compared to the second quarterfirst three months of 2022,2023, primarily reflects approximately $69 million as a result of our acquisition of Tekfor that was completed in the second quarter of 2022 and increased production volumes on certain vehicle programs that we support, including those associated with program launches in 2023 from our new and incremental business backlog. These increases were partially offset by a reduction in sales ofas well as approximately $38$6 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments.

Cost of Goods Sold

Three Months Ended June 30,
Three Months Ended March 31,Three Months Ended March 31,
(in millions)(in millions)20232022ChangePercent Change(in millions)20242023ChangePercent Change
Cost of goods soldCost of goods sold$1,392.5 $1,264.8 $127.7 10.1 %Cost of goods sold$1,408.4 $$1,333.3 $$75.1 5.6 5.6 %
The change in cost of goods sold in the first three months of 2024, as compared to the first three months of 2023, primarily reflects an increase of approximately $68 million as a result of our acquisition of Tekfor in 2022, as well as the impact of increased production volumes on certain vehicle programs that we support.support, as well as an increase of approximately $13 million associated with the effect of metal market pass-through costs and the impact of foreign exchange related to translation adjustments. For the three months ended June 30, 2023,March 31, 2024, material costs were approximately 58% of total costcosts of goods sold as compared to approximately 62%56% for the three months ended June 30, 2022. The decrease in material costs as a percentage of cost of goods sold was primarily the result of lower metal costs and increased labor costs in the second quarter of 2023, as compared to the second quarter of 2022.March 31, 2023.

Gross Profit  

Three Months Ended June 30,
Three Months Ended March 31,Three Months Ended March 31,
(in millions)(in millions)20232022ChangePercent Change(in millions)20242023ChangePercent Change
Gross profitGross profit$178.2 $173.5 $4.7 2.7 %Gross profit$198.5 $$160.6 $$37.9 23.6 23.6 %
Gross margin was 11.3%12.4% in the second quarterfirst three months of 2023,2024 as compared to 12.1%10.8% in the second quarterfirst three months of 2022.2023. Gross profit and gross margin were impacted by the factors discussed in Net Sales and Cost of Goods Sold above.


3226


Selling, General and Administrative Expenses (SG&A)

Three Months Ended June 30,
Three Months Ended March 31,Three Months Ended March 31,
(in millions)(in millions)20232022ChangePercent Change(in millions)20242023ChangePercent Change
Selling, general & administrative expensesSelling, general & administrative expenses$91.1 $84.8 $6.3 7.4 %Selling, general & administrative expenses$98.3 $$98.3 $$— — — %
SG&A as a percentage of net sales was 5.8%6.1% in the second quarterfirst three months of 2023,2024 as compared to 5.9%6.6% of net sales in the second quarterfirst three months of 2022.2023.  Research and development (R&D) expense, net of customer engineering, design and development (ED&D) recoveries, was approximately $37.1$36.7 million in the second quarterfirst three months of 2023,2024, as compared to $35.2$42.8 million in the second quarterfirst three months of 2022. In addition to the increase2023. The decrease in R&D expense in the change in SG&A expense is primarily related to higher compensation-related expense, as well as the impactfirst quarter of three months of Tekfor results for the quarter ended June 30, 2023,2024, as compared to one monththe first quarter of Tekfor results from the acquisition effective date on June 1, 2022 through June 30, 2022.2023, was offset by increased compensation-related expense.

Amortization of Intangible Assets Amortization expense related to intangible assets was $21.4$20.7 million for both the three months ended June 30, 2023 andMarch 31, 2024 as compared to $21.4 million for the three months ended June 30, 2022.March 31, 2023.

Restructuring and Acquisition-Related Costs Restructuring and acquisition-related costs were $7.9$2.5 million for the three months ended March 31, 2024, as compared to $4.8 million for the three months ended March 31, 2023. In 2024, we expect to incur approximately $10 million to $20 million of total restructuring charges. In addition, we expect to incur up to $5 million of integration costs in the second quarter2024 associated with our acquisition of 2023 and $9.6 million in the second quarter of 2022.Tekfor. See Note 211 - Restructuring and Acquisition-Related Costs for additional detail regarding our restructuring, acquisition and integration activity.

Operating Income  Operating income was $57.8$77.0 million in the second quarterfirst three months of 2023,2024 as compared to $57.7$36.1 million in the second quarterfirst three months of 2022.2023. Operating margin was 3.7%4.8% in the second quarterfirst three months of 2023,2024, as compared to 4.0%2.4% in the second quarterfirst three months of 2022.2023. The changes in operating income and operating margin were due primarily due to the factors discussed in Net Sales and Cost of Goods Sold and SG&A above.Sold.

Interest Expense and Interest Income  Interest expense was $50.2$49.0 million in the second quarterfirst three months of 2023,2024 as compared to $42.7$50.5 million in the second quarterfirst three months of 2022.2023. The weighted-average interest rate of our long-term debt outstanding was 6.7% in7.1% for the second quarter of 2023three months ended March 31, 2024 and 5.4% in6.6% for the second quarter of 2022.three months ended March 31, 2023. We expect our interest expense for the full year 2024 to be approximately $190 million to $200 million.

Interest income was $8.3 million in the first three months of 2024 as compared to $5.9 million in the second quarterfirst three months of 2023, as compared to $3.2 million in the second quarter of 2022.

Debt Refinancing and Redemption Costs 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.

Gain on Bargain Purchase of Business On June 1, 2022, our acquisition of Tekfor became effective, which resulted in a gain on bargain purchase of $11.6 million in the second quarter of 2022. This amount was prior to subsequent measurement period adjustments resulting in the final gain on bargain purchase of business of $13.6 million. See Note 14 - Acquisitions and Dispositions for additional detail on this acquisition.2023.

Unrealized Gain (Loss) on Equity Securities We have an investment in the equity securities of REE Automotive, an e-mobility company. These equity securitieswhich 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 Income. As of June 30, 2023,Operations. We recognized an unrealized gain on our investment in REE shares was valued at $1.9Automotive of $0.1 million resulting in an unrealized gainthe first quarter of $0.3 million for the three months ended June 30, 2023. During the three months ended June 30, 2022, we recognized2024, as compared to an unrealized loss of $3.7$0.3 million on this investment.in the first quarter of 2023.

Other Income (Expense), Net Other income (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 income (expense), net was expensede minimis in the first three months of $0.52024, and was income of $3.7 million in the second quarterfirst three months of 2023, as compared to expense of $2.4 million in the second quarter of 2022.2023.


3327


Income Tax Expense Income tax expense was $5.3$15.9 million for the three months ended June 30, 2023, as compared to $0.6 millionMarch 31, 2024, and we had no income tax expense for the three months ended June 30, 2022.March 31, 2023. Our effective income tax rate was 39.8%43.7% in the second quarterfirst three months of 2023,2024 as compared to 2.6% in the second quarter of 2022. For the three months ended June 30, 2023, we recognized an income tax benefit of approximately $3.2 million related to the release of a valuation allowance in a foreign jurisdiction and recorded a full valuation allowance against the deferred tax asset on the current year estimated disallowed interest expense in the U.S.

Our effective income tax rate for the three months ended June 30, 2023 varies from our effective income tax rate for the three months ended June 30, 2022 primarily as a result of the impact of the items noted above, as well as the $11.6 million gain on bargain purchase of business that was recognized in the three months ended June 30, 2022, which was not subject to income tax, and the mix of earnings on a jurisdictional basis.

Net Income and Earnings Per Share (EPS) Net income was $8.0 million in the second quarter of 2023, as compared to $22.9 million in the second quarter of 2022. Diluted earnings per share was $0.07 per share in the second quarter of 2023, as compared to $0.19 in the second quarter of 2022. Net income and EPS for the second quarters of 2023 and 2022 were primarily impacted by the factors discussed above.
34



RESULTS OF OPERATIONS –– SIX MONTHS ENDED JUNE 30, 2023 AS COMPARED TO SIX MONTHS ENDED JUNE 30, 2022

Net Sales

Six Months Ended June 30,
(in millions)20232022ChangePercent Change
Net sales$3,064.6 $2,874.5 $190.1 6.6 %
The increase0.0% in the first sixthree months of 2023, as compared to the first six months of 2022, primarily reflects approximately $170 million as a result of our acquisition of Tekfor that was completed in the second quarter of 2022 and increased production volumes on certain vehicle programs that we support, including those associated with program launches in 2023 from our new and incremental business backlog. These increases were partially offset by a reduction in sales 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.

Cost of Goods Sold

Six Months Ended June 30,
(in millions)20232022ChangePercent Change
Cost of goods sold$2,725.8 $2,514.2 $211.6 8.4 %
The change in cost of goods sold in the first six months of 2023, as compared to the first six months of 2022, primarily reflects approximately $169 million as a result of our acquisition of Tekfor, as well as the impact of increased production volumes on certain vehicle programs that we support. For the six months ended June 30, 2023, material costs were approximately 57% of total costs of goods sold as compared to approximately 61% for the six months ended June 30, 2022. The decrease in material costs as a percentage of cost of goods sold was primarily the result of lower metal costs and increased labor costs in the first six months of 2023, as compared to the first six months of 2022.

Gross Profit  

Six Months Ended June 30,
(in millions)20232022ChangePercent Change
Gross profit$338.8 $360.3 $(21.5)(6.0)%
Gross margin was 11.1% in the first six months of 2023 as compared to 12.5% in the first six months of 2022. Gross profit and gross margin were impacted by the factors discussed in Net Sales and Cost of Goods Sold above.


35


Selling, General and Administrative Expenses (SG&A)

Six Months Ended June 30,
(in millions)20232022ChangePercent Change
Selling, general & administrative expenses$189.4 $170.9 $18.5 10.8 %
SG&A as a percentage of net sales was 6.2% in the first six months of 2023 as compared to 5.9% of net sales in the first six months of 2022.  R&D expense, net of ED&D recoveries, was approximately $79.9 million in the first six months of 2023, as compared to $69.9 million in the first six months of 2022. In addition to the increase in R&D expense, the change in SG&A expense is primarily related to higher compensation-related expense, as well as the impact of six months of Tekfor results for the six months ended June 30, 2023, as compared to one month of Tekfor results from the acquisition effective date on June 1, 2022 through June 30, 2022.

Amortization of Intangible Assets Amortization expense related to intangible assets was $42.8 million for the six months ended June 30, 2023 as compared to $42.9 million for the six months ended June 30, 2022.

Restructuring and Acquisition-Related Costs Restructuring and acquisition-related costs were $12.7 million for the six months ended June 30, 2023, as compared to $18.5 million for the six months ended June 30, 2022.

On June 1, 2022, our acquisition of Tekfor became effective. During the six months ended June 30, 2022, we incurred $5.7 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.

In 2023, we expect to incur approximately $10 million to $20 million of total restructuring charges. In addition, we expect to incur up to $10 million of integration costs in 2023 associated with our acquisition of Tekfor. See Note 2 - Restructuring and Acquisition-Related Costs for additional detail regarding our restructuring, acquisition and integration activity.

Operating Income  Operating income was $93.9 million in the first six months of 2023 as compared to $128.0 million in the first six months of 2022. Operating margin was 3.1% in the first six months of 2023, as compared to 4.5% in the first six months of 2022.  The changes in operating income and operating margin were due primarily to the factors discussed in Net Sales, Cost of Goods Sold and SG&A above.

Interest Expense and Interest Income  Interest expense was $100.7 million in the first six months of 2023 as compared to $87.4 million in the first six months of 2022. The weighted-average interest rate of our long-term debt outstanding was 6.7% for the six months ended June 30, 2023 and 5.5% for the six months ended June 30, 2022. We expect our interest expense for the full year 2023 to be approximately $195 million to $205 million.

Interest income was $11.8 million in the first six months of 2023 as compared to $6.2 million in the first six months of 2022.

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

Also in the first six months of 2022, we made voluntary prepayments of $50.0 million on our Term Loan B Facility. As a result, 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 this borrowing.

In addition, in the first six months 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 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.


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Gain on Bargain Purchase of Business On June 1, 2022, our acquisition of Tekfor became effective, which resulted in a gain on bargain purchase of $11.6 million in the second quarter of 2022. This amount was prior to subsequent measurement period adjustments resulting in the final gain on bargain purchase of business of $13.6 million. See Note 14 - Acquisitions and Dispositions for 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. 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 Income. The fair value of REE shares was principally unchanged during the six months ended June 30, 2023. We recognized an unrealized loss on our investment in REE shares of $21.7 million for the six months ended June 30, 2022.

Other Income (Expense), Net Other income (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 income (expense), net was income of $3.2 million in the first six months of 2023 as compared to expense of $3.4 million in the first six months of 2022.

Income Tax Expense Income tax expense was $5.3 million for the six months ended June 30, 2023, as compared to $3.6 million for the six months ended June 30, 2022. Our effective income tax rate was 64.6% in the first six months of 2023 as compared to 13.1% in the first six months of 2022.

During the sixthree months ended June 30, 2023, we recognized an income tax benefit of approximately $3.2 million related to the release of a valuation allowance in a foreign jurisdiction. For the six months ended June 30,March 31, 2024 and 2023, in computing our estimated annual effective tax rate, we recorded a full valuation allowance against the deferred tax asset on the current year estimated disallowed interest expense in the U.S. In addition, during the three months ended March 31, 2023, we recorded a valuation allowance against a portion of the deferred tax asset on prior year disallowed interest expense in the U.S. and reduced our liability for unrecognized income tax benefits and related interest and penalties as a result of a change in estimate on previously recorded unrecognized tax benefits in certain jurisdictions, resulting in net tax expense of $3.4 million during the sixthree months ended June 30,March 31, 2023.

Our effective income tax rate for the sixthree months ended June 30, 2023March 31, 2024 varies from our effective income tax rate for the sixthree months ended June 30, 2022March 31, 2023 primarily as a result of the mix of earnings on a jurisdictional basis and the impact of the discrete items noted above, the $11.6 million gain on bargain purchase of business that was recognized in the six months ended June 30, 2022, which was not subject to income tax, and the mix of earnings on a jurisdictional basis.above.

DueFor the three months ended March 31, 2024, our effective income tax rate varies from the U.S. federal statutory rate primarily due to the uncertainty associated withunfavorable impact related to the extentdisallowed interest expense deductions in the U.S. and ultimatetax expense related to global intangible low-taxed income (GILTI), net of the favorable impact of certain foreign tax rates and the impact of tax credits. For the three months ended March 31, 2023, our effective income tax rate varies from the U.S. federal statutory rate primarily due to the unfavorable impact related to the disallowed interest expense deductions in the U.S. and tax expense related to GILTI, net of the impact of the significant supply chain constraints affectingreduction in unrecognized tax benefits, favorable foreign tax rates and the automotive industry, including volatility in metal, commodity and utility costs, increased transportation costs, higher labor costs and labor shortages, 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 and such changes could be material to our financial statements.impact of tax credits.

Net Income (Loss) and Earnings (Loss) Per Share (EPS) NetOur net income was $2.9$20.5 million in the first sixthree months of 20232024, as compared to $23.9a net loss of $5.1 million in the first sixthree months of 2022.2023. Diluted EPS was $0.02earnings of $0.17 per share in the first sixthree months of 20232024, as compared to $0.20a loss of $0.04 per share in the first sixthree months of 2022.2023. Net income (loss) and EPS for the first sixthree months of 20232024 and 20222023 were primarily impacted by the factors discussed above.
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SEGMENT REPORTING

Our business is organized into Driveline and Metal Forming segments, with each representing a reportable segment under ASC 280 - Segment Reporting. 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, SUVs, crossover vehicles, passenger cars and commercial vehicles; and
Metal Forming products consist primarily of engine, transmission, driveline and safety-critical components for traditional internal combustion engine and electric vehicle architectures including light vehicles, commercial vehicles and off-highway vehicles, as well as products for industrial markets.

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. In the first quarter of 2023, we moved a plant location that was 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 six months ended June 30, 2022 have been recast to reflect this reorganization.

The following table represents sales by reportable segment for the three and six months ended June 30,March 31, 2024 and 2023 and 2022 (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
202420242023
DrivelineDriveline$1,086.5 $1,024.7 $2,100.3 $2,070.1 
Metal FormingMetal Forming634.2 557.7 1,253.3 1,082.8 
EliminationsEliminations(150.0)(144.1)(289.0)(278.4)
Eliminations
Eliminations
Net salesNet sales$1,570.7 $1,438.3 $3,064.6 $2,874.5 

The increase in both Driveline and Metal Forming sales for the three and six months ended June 30, 2023,March 31, 2024, as compared to the three and six months ended June 30, 2022,March 31, 2023, is primarily the result of increased production volumes on certain vehicle programs that we support, including those associated with program launchessupport. Metal Forming sales also increased by approximately $6 million in 2023 from our new and incremental business backlog. For the first three and six months ended June 30, 2023,of 2024, as compared to the first three and six months ended June 30, 2022, there wasof 2023, as a reduction in Driveline salesresult of approximately $25 million and $62 million, respectively, associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange translation.

The increase in Metal Forming sales for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, primarily reflects approximately $69 million associated with the acquisition of Tekfor and the impact of increased production volumes on certain vehicle programs that we support, partially offset by a reduction of approximately $13 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange translation.

The increase in Metal Forming sales for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, primarily reflects approximately $170 million associated with the acquisition of Tekfor and the impact of increased production volumes on certain vehicle programs that we support, partially offset by a reduction of approximately $24 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange translation.


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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. The amounts for Segment Adjusted EBITDA for the three and six months ended June 30,March 31, 2024 and 2023 and 2022 are as follows (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Driveline$152.1 $132.4 266.2 $255.2 
Metal Forming39.5 62.7 100.8 136.0 
Total segment adjusted EBITDA$191.6 $195.1 $367.0 $391.2 

Three Months Ended March 31,
20242023
Driveline$157.4 $114.1 
Metal Forming48.2 61.3 
Total segment adjusted EBITDA$205.6 $175.4 

For the three and six months ended June 30, 2023,March 31, 2024, as compared to the three and six months ended June 30, 2022,March 31, 2023, the increasesincrease in Segment Adjusted EBITDA for the Driveline segment were primarily reflects approximately $24 million attributable to the impact of increased production volumes on certain vehicle programs that we support, as well aswith the remainder primarily related to improved operating performance and lower metal costs and the favorable impact of our metal market pass-throughs. These favorable impacts were partially offset by increased labor costs and program launch costs.

For the three and six months ended June 30, 2023,March 31, 2024, as compared to the three and six months ended June 30, 2022, the change inMarch 31, 2023, Segment Adjusted EBITDA for the Metal Forming segment was attributable toimpacted by increased manufacturing costs, primarily labor costs, as well as the impact of production inefficiencies at certain of our locations due, in part, to labor shortages. These decreases in Segment Adjusted EBITDAcost increases were partially offset by lower metal costs and the favorable impact of increased production volumes on certain vehicle programs that we support.


3929


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, pension settlements, unrealized gains or losses on equity securities, pension curtailment and settlement charges 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 June 30,Six Months Ended June 30,
2023202220232022
Net income$8.0 $22.9 $2.9 $23.9 
Interest expense50.2 42.7 100.7 87.4 
Income tax expense5.3 0.6 5.3 3.6 
Depreciation and amortization120.5 121.9 245.4 242.3 
EBITDA$184.0 $188.1 $354.3 $357.2 
Restructuring and acquisition-related costs7.9 9.6 12.7 18.5 
Debt refinancing and redemption costs 0.2  5.8 
Unrealized loss (gain) on equity securities(0.3)3.7  21.7 
Non-recurring items:
Malvern Fire charges (insurance recoveries), net 0.1  (5.4)
     Gain on bargain purchase of business— (11.6) (11.6)
Acquisition-related fair value inventory adjustment— 5.0  5.0 
Total segment adjusted EBITDA$191.6 $195.1 $367.0 $391.2 
Three Months Ended March 31,
20242023
Net income (loss)$20.5 $(5.1)
Interest expense49.0 50.5 
Income tax expense15.9 — 
Depreciation and amortization117.8 124.9 
EBITDA$203.2 $170.3 
Restructuring and acquisition-related costs2.5 4.8 
Unrealized (gain) loss on equity securities(0.1)0.3 
Total segment adjusted EBITDA$205.6 $175.4 

30





40


LIQUIDITY AND CAPITAL RESOURCES

Our primary liquidity needs are to fund debt service obligations, capital expenditures, R&D spending, including further development of our electrification product portfolio, 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 June 30, 2023,March 31, 2024, we had nearly $1.5over $1.4 billion of liquidity consisting of approximately $511$470 million of cash and cash equivalents, approximately $891$892 million of available borrowings under our Revolving Credit Facility and approximately $73$83 million of available borrowings under foreign credit facilities. We have no significant debt maturities before 2026.

Operating Activities  In the first sixthree months of 2023,2024, net cash provided by operating activities was $164.9$17.8 million as compared to $215.2$32.1 million in the first sixthree months of 2022.2023. The following factors impacted cash from operating activities in the first sixthree months of 2023,2024, as compared to the first sixthree months of 2022:

Impact of Supply Chain Constraints During the first six months of 2023 and 2022, the automotive industry experienced significant disruptions in the supply chain, including volatility in metal, commodity and utility costs, shortages of certain raw materials and components, including semiconductor chips, increased transportation costs, higher labor costs and labor shortages. We expect these supply chain constraints and the associated volatility in our operations to continue through 2023.2023:

Accounts receivable For the sixthree months ended June 30, 2023,March 31, 2024, we experienced an increasea decrease in cash flow from operating activities of approximately $50$79 million related to the change in our accounts receivable balance from December 31, 20222023 to June 30, 2023,March 31, 2024, as compared to the change in our accounts receivable balance from December 31, 20212022 to June 30, 2022.March 31, 2023. This change was primarily attributable to the timing of sales to customers in the applicable periods. The change was also the result of timing of collections on customer receivables as we participate in an early payment program offered by our largest customer, which allows us to sell certain of our North American receivables from this customer to a third party at our discretion. We utilize this program from time to time.

Accounts payable and accrued expenses For the sixthree months ended June 30, 2023,March 31, 2024, we experienced a decreasean increase in cash flow from operating activities of approximately $47$26 million related to the change in our accounts payable and accrued expenses balance from December 31, 20222023 to June 30, 2023,March 31, 2024, as compared to the change in our accounts payable and accrued expenses balance from December 31, 20212022 to June 30, 2022.March 31, 2023. This change was primarily attributable to the timing of production and the associated purchases from suppliers within the applicable periods.

Income taxes Income taxes paid, net was $40.6$11.5 million in the first sixthree months of 2023,2024, as compared to $20.5$26.0 million in the first sixthree months of 2022.2023. During the first sixthree months of 2023, we paid $10.1 million as a result of the Notice of Tax Due that was received from the Internal Revenue Service in the fourth quarter of 2022. See Note 1012 - Income Taxes for additional detail regarding the Notice of Tax Due. In the first six months of 2022, we received an income tax refund of $5.4 million related to the utilization of net operating losses under the provisions of the CARES Act.

Interest paid Interest paid was $88.8$47.8 million for the sixthree months ended June 30, 2023,March 31, 2024, as compared to $86.5$41.6 million for the sixthree months ended June 30, 2022.March 31, 2023. The change in interest paid was primarily the result of increased interest rates on our variable rate debt partially offset by lower interest payments on our 6.25% Notes due 2026 as a result of voluntarily redeeming a portion of the principal amount related to these notes in March 2022.

Malvern Fire In the first six months of 2023 and 2022, we received $24.0 million and $11.7 million of cash, respectively, as reimbursements and advances under our insurance policies, of which $7.0 million and $7.1 million, respectively, were associated with operating expenses incurred as a result of the Malvern Fire and have been presented as operating cash inflows in our Condensed Consolidated Statement of Cash Flows for these periods. See Note 15 - Manufacturing Facility Fire and Insurance Recovery for additional detail.debt.

Restructuring and acquisition-related costs For the full year 2023,2024, we expect restructuring and acquisition-related payments in cash flows from operating activities to be between $20$15 million and $30$25 million, and we expect the timing of cash payments to approximate the timing of charges incurred.


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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 20232024 to be less than $1 million. We expect our cash payments for other postretirement benefit obligations in 2023,2024, net of GM cost sharing, to be approximately $14.6$11.0 million.


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Investing Activities  In the first sixthree months of 2023,2024, net cash used in investing activities was $77.9$48.2 million as compared to $150.2$30.5 million for the sixthree months ended June 30, 2022.March 31, 2023. Capital expenditures were $90.7$48.0 million in the first sixthree months of 20232024 as compared to $71.2$46.6 million in the first sixthree months of 2022.2023. We expect our capital spending in 20232024 to be 3.5%4.0% to 4%4.5% of sales.

In the first sixthree months of 2023, and 2022, in addition to the $7.0 million and $7.1 million, respectively, of cash reimbursements received under our insurance policies associated with operating expenses incurred as a result of the Malvern Fire, we received $17.0 million and $4.6 million, respectively, of cash reimbursements under our insurance policies associated with machinery and equipment that was damaged or destroyed as a result of the Malvern Fire.Fire that occurred in 2020. This cash received has been classified as an investing cash flow based on the nature of the associated loss incurred.

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 six 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 six months ended June 30, 2022.

Financing Activities  In the first sixthree months of 2023,2024, net cash used in financing activities was $87.4$16.0 million, as compared to $86.7$49.1 million in the first sixthree months of 2022.2023. The following factors impacted cash from financing activities in the first sixthree months of 2023,2024, as compared to the first sixthree months of 2022:2023:

Senior Secured Credit Facilities Our Senior Secured Credit Facilities are comprised of the Revolving Credit Facility, Term Loan A Facility and Term Loan B Facility. The Revolving Credit Facility and Term Loan A Facility mature in the first quarter of 2027 and the Term Loan B Facility matures in the fourth quarter of 2029. At June 30, 2023,March 31, 2024, we had $891.2$892.3 million available under the Revolving Credit Facility. This availability reflects a reduction of $33.8$32.7 million primarily for standby letters of credit issued against the facility. In the first quarter of 2023, we paid $25.0 million on our Revolving Credit Facility that had been drawn in the fourth quarter of 2022.

On June 28, 2023, Holdings and AAM, Inc. entered into the First Amendment to the Amended and Restated Credit Agreement (the First Amendment), which covers the period from June 28, 2023 through the filing of our second quarter 2024 results, or earlier at AAM's option, subject to certain conditions (the Amendment Period). The First Amendment, among other things, increased the maximum levels of the total net leverage ratio covenant and reduced the minimum levels of cash interest expense coverage ratio covenant during the Amendment Period, modified certain categories of the applicable margin (determined based on the total net leverage ratio of Holdings) for the duration of the Amendment Period with respect to interest rates under the Term Loan A Facility and the Revolving Credit Facility, and modified certain covenants restricting the ability of Holdings, AAM, Inc. and certain subsidiaries of Holdings to create, incur, assume, or permit to exist certain additional indebtedness and liens and to make or agree to pay or make certain restricted payments, voluntary payments and distributions. The terms of the Term Loan B Facility under the Amended and Restated Credit Agreement, including maturity dates, interest rates and their applicable margins, remain unchanged. We paid debt issuance costs of $3.1 million in the three months ended June 30, 2023 related to the First Amendment.

As of June 30, 2023,March 31, 2024, we have prepaid $23.0$19.5 million of the outstanding principal on our Term Loan A Facility and $18.6 million of the outstanding principal on our Term Loan B Facility. These payments satisfy our obligation for principal payments under the Term Loan A Facility through the end of 2024 and under the Term Loan B Facility forthrough the next four quarters.

In March 2022, Holdings and AAM, Inc. entered into the Amended and Restated Credit Agreement. The Amended and Restated Credit Agreement, among other things, increased the principal amountend of the Term Loan A Facility to $520.0 million, extended the maturity date of the Term Loan A Facility and the Revolving Credit Facility each to March 11, 2027, and established the use under the Term Loan A Facility and Revolving Credit Facility of the Secured Overnight Financing Rate (SOFR) and the minimum Adjusted Term SOFR Rate for Eurodollar-based loans denominated in U.S. Dollars and the Sterling Overnight Index Average (SONIA) and the minimum adjusted daily simple SONIA for loans denominated in Sterling. 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 six months ended June 30, 2022 related to the Amended and Restated Credit Agreement.

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In the first six months of 2022, we made voluntary prepayments totaling $50.0 million on our Term Loan B Facility. As a result, 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 this borrowing.2026.

Redemption of 6.25% Notes dueDue 2026In the first six monthsquarter of 2022,2024, we used the proceeds from the upsized Term Loan A Facility to voluntarily redeem a portioncompleted an open market repurchase of our 6.25% Notes due 2026. This resulted in a principal payment2026 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.$1.7 million.

Repayment of Tekfor Group Indebtedness UponIn the first quarter of 2024, we repaid $6.6 million of the outstanding indebtedness that we assumed upon our acquisition of Tekfor in June 2022, we assumed $23.4 million of existing Tekfor indebtedness, of which we repaid $10.7 million in the second quarter of 2022.

Foreign credit facilities We utilize local currency credit facilities to finance the operations of certain foreign subsidiaries. At June 30, 2023, $73.3March 31, 2024, $42.4 million was outstanding under our foreign credit facilities, as compared to $72.7$51.8 million at December 31, 2022.2023. At June 30, 2023,March 31, 2024, an additional $72.8$83.4 million was available under our foreign credit facilities.

Treasury stock Treasury stock increased by $14.7$2.7 million in the first sixthree months of 20232024 to $232.9$235.6 million as compared to $218.2$232.9 million at year-end 2022,2023, due to the withholding and repurchase of shares of AAM stock to satisfy employee tax withholding obligations due upon the vesting of stock-based compensation.


32


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 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.



43


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 Income Information(in millions)
Six Months Ended June 30, 2023Year Ended December 31, 2022
Statement of Operations InformationStatement of Operations Information(in millions)
Three Months Ended March 31, 2024Three Months Ended March 31, 2024Year Ended December 31, 2023
Net salesNet sales$2,233.8 $4,429.5 
Gross profitGross profit182.4 445.2 
Income (loss) from operationsIncome (loss) from operations(40.8)25.1 
Net lossNet loss(92.1)(59.7)
Balance Sheet InformationBalance Sheet Information(in millions)
June 30, 2023December 31, 2022
Balance Sheet Information
Balance Sheet Information(in millions)
March 31, 2024March 31, 2024December 31, 2023
Current assetsCurrent assets$1,092.8 $1,061.9 
Noncurrent assetsNoncurrent assets2,294.1 2,317.9 
Current liabilitiesCurrent liabilities1,478.6 1,360.4 
Current liabilities
Current liabilities
Noncurrent liabilitiesNoncurrent liabilities3,325.6 3,345.3 
Redeemable preferred stockRedeemable preferred stock — 
Redeemable preferred stock
Redeemable preferred stock
Noncontrolling interestNoncontrolling interest — 

At June 30, 2023March 31, 2024 and December 31, 2022,2023, amounts owed by the Combined Entities to non-guarantor entities totaled approximately $1,045$20 million and $945$1,090 million, respectively, and amounts owed to the Combined Entities from non-guarantor entities totaled approximately $630$465 million and $620$580 million, respectively.

The reduction in the amounts owed by the Combined Entities to non-guarantor entities, and the associated reduction in Current liabilities at March 31, 2024, as compared to December 31, 2023, was the result of the implementation of certain actions to reorganize our global operating structure effective at the end of 2023 and a corresponding change to our Subsidiary Guarantors effective in the first quarter of 2024.

4433


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 the month of 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. 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. See Note 12 - Income Taxes for additional discussion regarding examinations and audits of our tax returns and pending litigation.

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 secondfirst quarter of 2023.2024.

We are subject to risks of environmental issues, including impacts of climate-related events, that could result in unforeseen disruptions or costs to our operations. We did not experience any climate-related events in the secondfirst quarter of 20232024 that we believe could have a material adverse impact on our results of operations, financial condition and cash flows.

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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. As of June 30, 2023March 31, 2024 and December 31, 2022,2023, we had currency forward contracts outstanding with a total notional amount of $197.6$227.3 million and $179.9$206.9 million, 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 $18.0$20.7 million at June 30, 2023March 31, 2024 and was $16.4$18.8 million at December 31, 2022.2023.

In 2022, 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. We had notional amounts outstanding under fixed-to-fixed cross-currency swaps of €200.0 million at both June 30, 2023March 31, 2024 and December 31, 2022,2023, which waswere equivalent to $218.0$215.8 million and $213.9$220.7 million, respectively. The fixed-to-fixed cross-currency swap hedges our exposure to changes in exchange rates on the intercompany loans intothrough 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 $21.8$21.6 million at June 30, 2023March 31, 2024 and was approximately $21.4$22.1 million at December 31, 2022.2023.

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 2022, and in the first quarter of 2023, we entered into variable-to-fixed interest rate swaps to reduce the variability of cash flows associated with interest payments on our variable rate debt. As of June 30, 2023,March 31, 2024, we have $700.0 million notional amount hedged in relation to our variable-to-fixed interest rate swaps into the third quarter of 2027, $200.0 million of which continues into the fourth quarter of 2029.

The pre-tax earnings and cash flow impact of a one-percentage-point increase in interest rates (approximately 15%14% of our weighted-average interest rate at June 30, 2023)March 31, 2024) on our long-term debt outstanding, would be approximately $4.9$4.3 million at June 30, 2023March 31, 2024 and was approximately $7.5$4.4 million at December 31, 2022,2023, on an annualized basis.

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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 June 30, 2023.March 31, 2024.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting for the quarter ended June 30, 2023March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Our acquisition of Tekfor Group became effective on June 1, 2022. We are currently integrating policies, processes and operations for the combined company and will continue to evaluate our internal control over financial reporting as we develop and execute our integration plans. The acquired entities will be included in our assessment of AAM's internal control over financial reporting for the year ended December 31, 2023.


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PART II.  OTHER  INFORMATION

Item 1A. Risk Factors

There were no material changes from the risk factors previously disclosed in our December 31, 20222023 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 June 30, 2023:March 31, 2024:

ISSUER PURCHASES OF EQUITY SECURITIES
PeriodTotal Number of Shares (or Units) PurchasedAverage Price Paid per Share (or Unit)Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
(in millions)
April 1 - April 30, 202321,086 $7.81 — $— 
May 1 - May 31, 2023— — — — 
June 1 - June 30, 2023— — — — 
Total21,086 $7.81 — $— 
PeriodTotal Number of Shares (or Units) PurchasedAverage Price Paid per Share (or Unit)Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
(in millions)
January 1 - January 31, 20245,076 $8.02 — $— 
February 1 - February 29, 2024— — — — 
March 1 - March 31, 2024384,781 6.87 — — 
Total389,857 $6.88 — $— 

Item 5. Other Information

During the quarterly period ended June 30, 2023,March 31, 2024, our directors and officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended)Act) did not adopt, terminate or modify Rule 10b5-1 or non-Rule 10b5-1 trading arrangements (as defined in Item 408 of Regulation S-K).

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Item 6.  Exhibits

Number Description of Exhibit
101.INSXBRL 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.SCHXBRL Taxonomy Extension Schema Document
**101.CALXBRL Taxonomy Extension Calculation Linkbase Document
**101.LABXBRL Taxonomy Extension Label Linkbase Document
**101.PREXBRL Taxonomy Extension Presentation Linkbase Document
**101.DEFXBRL Taxonomy Extension Definition Linkbase Document
** 104Cover Page Interactive Data File (formatted in Inline XBRL contained in Exhibit 101)
 
*Filed herewith
**Submitted electronically with this Report.


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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
August 4, 2023May 3, 2024

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