SEC Form 10-Q filed by American Axle & Manufacturing Holdings Inc.

5/3/24 12:47:13 PM ET

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axl-20240331

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 March 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)


Delaware						38-3161171
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

One Dauch Drive, Detroit, Michigan						48211-1198
(Address of Principal Executive Offices)						(Zip Code)

(313) 758-2000

(Registrant's Telephone Number, Including Area Code)

_______________________________________________________________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	AXL	New York Stock Exchange

As of 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 117,553,022 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 MARCH 31, 2024

TABLE OF CONTENTS


			Page Number

FORWARD-LOOKING STATEMENTS			1

Part I		FINANCIAL INFORMATION	2

	Item 1	Financial Statements	2
		Condensed Consolidated Statements of Operations	2
		Condensed Consolidated Statements of Comprehensive Income	3
		Condensed Consolidated Balance Sheets	4
		Condensed Consolidated Statements of Cash Flows	5
		Condensed Consolidated Statements of Stockholders' Equity	6
		Notes to Condensed Consolidated Financial Statements	7

	Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	25

	Item 3	Quantitative and Qualitative Disclosures About Market Risk	35

	Item 4	Controls and Procedures	36

Part II		OTHER INFORMATION	37

	Item 1A	Risk Factors	37

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	37

	Item 5	Other Information	37

	Item 6	Exhibits	38

		Signatures	39

FORWARD-LOOKING STATEMENTS

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

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

•global economic conditions, including the impact of inflation, recession or recessionary concerns, or slower growth in the markets in which we operate;

•reduced purchases of our products by General Motors Company (GM), Stellantis N.V. (Stellantis), Ford Motor Company (Ford) or other customers;

•our ability to respond to changes in technology, increased competition or pricing pressures;

•our ability to develop and produce new products that reflect market demand;

•lower-than-anticipated market acceptance of new or existing products;

•our ability to attract new customers and programs for new products;

•reduced demand for our customers' products (particularly light trucks and sport utility vehicles (SUVs) produced by GM, Stellantis and Ford);

•risks inherent in our global operations (including tariffs and the potential consequences thereof to us, our suppliers, and our customers and their suppliers, adverse changes in trade agreements, such as the United States-Mexico-Canada Agreement (USMCA), compliance with customs and trade regulations, immigration policies, political stability or geopolitical conflicts, taxes and other law changes, potential disruptions of production and supply, and currency rate fluctuations);

•supply shortages and the availability of natural gas or other fuel and utility sources in certain regions, labor shortages, including increased labor costs, or price increases in raw material and/or freight, utilities or other operating supplies for us or our customers as a result of pandemic or epidemic illness such as COVID-19, geopolitical conflicts, natural disasters or otherwise;

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

•risks inherent in transitioning our business from internal combustion engine vehicle products to electric vehicle products;

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

•negative or unexpected tax consequences, including those resulting from tax litigation;

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

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

•cost or availability of financing for working capital, capital expenditures, research and development (R&D) or other general corporate purposes including acquisitions, as well as our ability to comply with financial covenants;

•our customers' and suppliers' availability of financing for working capital, capital expenditures, R&D or other general corporate purposes;

•an impairment of our goodwill, other intangible assets, or long-lived assets if our business or market conditions indicate that the carrying values of those assets exceed their fair values;

•liabilities arising from warranty claims, product recall or field actions, product liability and legal proceedings to which we are or may become a party, or the impact of product recall or field actions on our customers;

•our ability or our customers' and suppliers' ability to successfully launch new product programs on a timely basis;

•risks of environmental issues, including impacts of climate-related events, that could result in unforeseen issues or costs at our facilities, or risks of noncompliance with environmental laws and regulations, including reputational damage;

•our ability to maintain satisfactory labor relations and avoid work stoppages;

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

•our ability to achieve the level of cost reductions required to sustain global cost competitiveness or our ability to recover certain cost increases from our customers;

•price volatility in, or reduced availability of, fuel;

•our ability to protect our intellectual property and successfully defend against assertions made against us;

•adverse changes in laws, government regulations or market conditions affecting our products or our customers' products;

•our ability or our customers' and suppliers' ability to comply with regulatory requirements and the potential costs of such compliance;

•changes in liabilities arising from pension and other postretirement benefit obligations;

•our ability to attract and retain qualified personnel in key positions and functions; and

•other unanticipated events and conditions that may hinder our ability to compete.

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

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended
	March 31,
		2024		2023
		(in millions, except per share data)

Net sales		$	1,606.9	$	1,493.9

Cost of goods sold		1,408.4		1,333.3

Gross profit		198.5		160.6

Selling, general and administrative expenses		98.3		98.3

Amortization of intangible assets		20.7		21.4



Restructuring and acquisition-related costs		2.5		4.8



Operating income		77.0		36.1

Interest expense		(49.0)		(50.5)

Interest income		8.3		5.9

Other income (expense)


Unrealized gain (loss) on equity securities		0.1		(0.3)
Other income (expense), net		—		3.7

Income (loss) before income taxes		36.4		(5.1)

Income tax expense		15.9		—

Net income (loss)		$	20.5	$	(5.1)

Basic earnings (loss) per share		$	0.17	$	(0.04)

Diluted earnings (loss) per share		$	0.17	$	(0.04)

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended
	March 31,
		2024		2023

		(in millions)
Net income (loss)		$	20.5	$	(5.1)

Other comprehensive income (loss)
Defined benefit plans, net of tax (a)		(0.6)		(0.7)
Foreign currency translation adjustments		(15.3)		8.8
Changes in cash flow hedges, net of tax (b)		10.8		2.5
Other comprehensive income (loss)		(5.1)		10.6

Comprehensive income		$	15.4	$	5.5


(a)			Amounts are net of tax of $0.3 million for the three months ended March 31, 2024 and $0.5 million for the three months ended March 31, 2023.
(b)			Amounts are net of tax of $(3.0) million for the three months ended March 31, 2024 and $1.8 million for the three months ended March 31, 2023.

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	March 31, 2024		December 31, 2023
	(Unaudited)
Assets	(in millions)
Current assets
Cash and cash equivalents	$	469.8	$	519.9
Accounts receivable, net	960.5		818.5
Inventories, net	476.8		482.9
Prepaid expenses and other	186.1		185.3

Total current assets	2,093.2		2,006.6

Property, plant and equipment, net	1,700.3		1,760.9
Deferred income taxes	165.3		169.4
Goodwill	181.4		182.1
Other intangible assets, net	512.2		532.8
GM postretirement cost sharing asset	113.2		111.9
Operating lease right-of-use assets	111.2		115.6
Other assets and deferred charges	494.3		477.0
Total assets	$	5,371.1	$	5,356.3

Liabilities and Stockholders’ Equity
Current liabilities

Current portion of long-term debt	$	25.0	$	17.0
Accounts payable	830.1		773.9
Accrued compensation and benefits	174.9		200.1
Deferred revenue	15.0		16.6
Current portion of operating lease liabilities	22.3		21.9
Accrued expenses and other	168.3		172.1

Total current liabilities	1,235.6		1,201.6

Long-term debt, net	2,735.0		2,751.9
Deferred revenue	69.9		70.4
Deferred income taxes	16.1		16.5
Long-term portion of operating lease liabilities	91.2		95.5
Postretirement benefits and other long-term liabilities	601.9		615.5
Total liabilities	4,749.7		4,751.4

Stockholders' equity
Common stock, par value $0.01 per share; 150.0 million shares authorized;
128.2 million shares issued as of March 31, 2024 and 127.4 million shares issued as of December 31, 2023	1.3		1.3
Paid-in capital	1,386.4		1,382.6
Accumulated deficit	(262.7)		(283.2)
Treasury stock at cost, 10.7 million shares as of March 31, 2024 and 10.3 million shares as of December 31, 2023	(235.6)		(232.9)
Accumulated other comprehensive income (loss)
Defined benefit plans, net of tax	(145.9)		(145.3)
Foreign currency translation adjustments	(157.6)		(142.3)
Unrecognized gain on cash flow hedges, net of tax	35.5		24.7


Total stockholders' equity	621.4		604.9
Total liabilities and stockholders' equity	$	5,371.1	$	5,356.3

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended
	March 31,
	2024		2023
	(in millions)
Operating activities
Net income (loss)	$	20.5	$	(5.1)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization	117.8		124.9

Deferred income taxes	2.4		(15.4)
Stock-based compensation	3.8		3.4
Pensions and other postretirement benefits, net of contributions	(1.0)		(4.0)

Loss on disposal of property, plant and equipment, net	2.7		0.5
Unrealized loss (gain) on equity securities	(0.1)		0.3


Changes in operating assets and liabilities
Accounts receivable	(147.3)		(68.4)
Inventories	1.9		2.9
Accounts payable and accrued expenses	51.1		25.2
Deferred revenue	(0.8)		(6.9)
Other assets and liabilities	(33.2)		(25.3)
Net cash provided by operating activities	17.8		32.1

Investing activities
Purchases of property, plant and equipment	(48.0)		(46.6)
Proceeds from sale of property, plant and equipment	3.1		0.4






Acquisition of business, net of cash acquired	(0.6)		(0.6)
Proceeds from insurance claim	—		17.0
Other investing activities	(2.7)		(0.7)
Net cash used in investing activities	(48.2)		(30.5)

Financing activities


Payments of Revolving Credit Facility	—		(25.0)
Proceeds from issuance of long-term debt	—		5.4
Payments of long-term debt	(10.1)		(11.3)


Purchase of treasury stock	(2.7)		(14.5)
Other financing activities	(3.2)		(3.7)

Net cash used in financing activities	(16.0)		(49.1)

Effect of exchange rate changes on cash	(3.7)		1.7

Net decrease in cash and cash equivalents	(50.1)		(45.8)

Cash and cash equivalents at beginning of period	519.9		511.5

Cash and cash equivalents at end of period	$	469.8	$	465.7

Supplemental cash flow information
Interest paid	$	47.8	$	41.6
Income taxes paid, net	$	11.5	$	26.0

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)


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

Balance at January 1, 2023	114.6	$	1.3	$	1,369.2	$	(249.6)	$	(218.2)	$	(275.4)
Net loss	—	—		—		(5.1)		—		—
Vesting of stock-based compensation	4.0	—		—		—		—		—
Stock-based compensation	—	—		3.4		—		—		—

Purchase of treasury stock	(1.6)	—		—		—		(14.5)		—
Changes in cash flow hedges	—	—		—		—		—		2.5
Foreign currency translation adjustments	—	—		—		—		—		8.8
Defined benefit plans, net	—	—		—		—		—		(0.7)

Balance at March 31, 2023	117.0	$	1.3	$	1,372.6	$	(254.7)	$	(232.7)	$	(264.8)


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

Balance at January 1, 2024	117.1	$	1.3	$	1,382.6	$	(283.2)	$	(232.9)	$	(262.9)
Net income	—	—		—		20.5		—		—
Vesting of stock-based compensation	0.8	—		—		—		—		—
Stock-based compensation	—	—		3.8		—		—		—

Purchase of treasury stock	(0.4)	—		—		—		(2.7)		—
Changes in cash flow hedges	—	—		—		—		—		10.8
Foreign currency translation adjustments	—	—		—		—		—		(15.3)
Defined benefit plans, net	—	—		—		—		—		(0.6)

Balance at March 31, 2024	117.5	$	1.3	$	1,386.4	$	(262.7)	$	(235.6)	$	(268.0)

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 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, 2023 presented herein has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (GAAP) for complete consolidated financial statements.

In order to prepare the accompanying interim condensed consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts and disclosures in our interim condensed consolidated financial statements. Actual results could differ materially from those estimates.

For further information, refer to the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Effect of New Accounting Standards and Other Regulatory Pronouncements

Accounting Standards Update 2023-07

On November 27, 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2023-07 - Improvements to Reportable Segment Disclosures (Topic 280). ASU 2023-07 enhances existing annual segment requirements to include disclosure of significant segment expenses and other segment items by reportable segment that are regularly used by the Chief Operating Decision Maker (CODM) to evaluate segment performance. This guidance also requires annual disclosure of the title and position of the CODM. ASU 2023-07 also expands interim segment disclosure requirements to include all existing annual segment disclosures in addition to the new disclosure requirements for significant segment expenses and other segment items. 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.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Securities and Exchange Commission (SEC) Rule

In the first quarter of 2024, the SEC adopted "The Enhancement and Standardization of Climate-Related Disclosures for Investors," a rule that expands disclosure requirements, including climate-related risks and financial statement impacts, as well as disclosures related to greenhouse gas (GHG) emissions. The annual disclosures related to climate-related risks and financial statement impacts are required beginning with our 2025 fiscal year and the disclosures related to GHG emissions are required beginning with our 2026 fiscal year. The GHG emissions disclosures are also subject to limited assurance requirements by 2029 and reasonable assurance requirements by 2033. We are currently assessing the impact that this rule will have on our consolidated financial statements. In April 2024, the SEC issued an order staying the rule pending legal review of the petitions challenging the rule. This order does not amend the compliance dates required by the rule.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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:


	March 31, 2024		December 31, 2023
	(in millions)

Raw materials and work-in-progress	$	413.2	$	411.5
Finished goods	96.6		103.5
Gross inventories	509.8		515.0
Inventory valuation reserves	(33.0)		(32.1)
Inventories, net	$	476.8	$	482.9

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. GOODWILL AND INTANGIBLE ASSETS

Goodwill The following table provides a reconciliation of changes in goodwill for the three months ended March 31, 2024:


	Consolidated
	(in millions)
Balance at December 31, 2023	$	182.1




Foreign currency translation	(0.7)
Balance at March 31, 2024	$	181.4

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 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:


	March 31,						December 31,
	2024						2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in millions)
Capitalized computer software	$	54.3	$	(50.1)	$	4.2	$	54.2	$	(49.2)	$	5.0
Customer platforms	856.2		(444.0)		412.2		856.2		(428.2)		428.0
Customer relationships	53.0		(23.9)		29.1		53.0		(23.1)		29.9
Technology and other	154.0		(87.3)		66.7		154.3		(84.4)		69.9
Total	$	1,117.5	$	(605.3)	$	512.2	$	1,117.7	$	(584.9)	$	532.8

Amortization expense for our intangible assets was $20.7 million for the three months ended March 31, 2024 and $21.4 million for the three months ended March 31, 2023. Estimated amortization expense for the years 2024 through 2028 is expected to be in the range of approximately $80 million to $85 million per year.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. LONG-TERM DEBT

Long-term debt consists of the following:


	March 31, 2024		December 31, 2023
	(in millions)

Revolving Credit Facility	$	—	$	—
Term Loan A Facility	484.3		484.3
Term Loan B Facility	648.0		648.0
6.875% Notes due 2028	400.0		400.0
6.50% Notes due 2027	500.0		500.0
6.25% Notes due 2026	125.9		127.6
5.00% Notes due 2029	600.0		600.0
Foreign credit facilities and other	42.4		51.8
Total debt	2,800.6		2,811.7

Less: Current portion of long-term debt	25.0		17.0
Long-term debt	2,775.6		2,794.7
Less: Debt issuance costs	40.6		42.8
Long-term debt, net	$	2,735.0	$	2,751.9

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 March 31, 2024, we had $892.3 million available under the Revolving Credit Facility. This availability reflects a reduction of $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.

As of March 31, 2024, we have prepaid $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 through the end of 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 Due 2026 In the first quarter of 2024, we completed an open market repurchase of our 6.25% Notes due 2026 of $1.7 million.

Repayment of Tekfor Group Indebtedness In the first quarter of 2024, we repaid $6.6 million of outstanding indebtedness that we assumed upon our acquisition of Tekfor in June 2022.

Foreign credit facilities and Other We utilize local currency credit facilities to finance the operations of certain foreign subsidiaries. At March 31, 2024, $42.4 million was outstanding under our foreign credit facilities, as compared to $51.8 million at December 31, 2023. At March 31, 2024, an additional $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 7.1% at both March 31, 2024 and December 31, 2023.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. DERIVATIVES

Our business and financial results are affected by fluctuations in global financial markets, including currency exchange rates and interest rates. Our hedging policy has been developed to manage these risks to an acceptable level based on management’s judgment of the appropriate trade-off between risk, opportunity and cost. We do not hold financial instruments for trading or speculative purposes.

Currency derivative contracts From time to time, we use foreign currency forward contracts to reduce the effects of fluctuations in exchange rates relating to certain foreign currencies. As of March 31, 2024 and December 31, 2023, we had currency forward contracts outstanding with a total notional amount of $227.3 million and $206.9 million, respectively, that hedge our exposure to changes in foreign currency exchange rates for certain payroll expenses into the fourth quarter of 2026 and the purchase of certain direct and indirect inventory and other working capital items into the fourth 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 March 31, 2024 and December 31, 2023, which were equivalent to $215.8 million and $220.7 million, respectively. The fixed-to-fixed cross-currency swap hedges our exposure to changes in exchange rates on the intercompany loans through the second quarter of 2024.

Variable-to-fixed interest rate swaps In 2023, we entered into variable-to-fixed interest rate swaps to reduce the variability of cash flows associated with interest payments on our variable rate debt. As of 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:


	Location		Gain (Loss) Reclassified During				Total of Financial		Gain Expected
	of Gain (Loss)	Three Months Ended			Statement		to be Reclassified
	Reclassified into	March 31,			Line Item		During the
	Net Income		2024		2023		2024		Next 12 Months
			(in millions)

Currency forward contracts	Cost of Goods Sold		$	4.7	$	3.3	$	1,408.4	$	17.0
Fixed-to-fixed cross-currency swap	Other Income (Expense), net		5.0		(2.7)		—		0.4
Variable-to-fixed interest rate swap	Interest Expense		0.3		0.6		(49.0)		4.3

See Note 7 - Reclassifications out of Accumulated Other Comprehensive Income (Loss) (AOCI) for amounts recognized in other comprehensive income during the three months ended March 31, 2024 and 2023.

The following table summarizes the amount and location of gains and losses recognized in the Condensed Consolidated Statements of Operations for those derivative instruments not designated as hedging instruments under ASC 815:


	Location		Gain Recognized During				Total of Financial
	of Gain	Three Months Ended			Statement
	Recognized in	March 31,			Line Item
	Net Income		2024		2023		2024
			(in millions)


Currency forward contracts	Other Income (Expense), net		$	1.1	$	2.1	$	—

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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
	March 31, 2024		December 31, 2023		Input
	(in millions)
Balance Sheet Classification
Cash equivalents	$	222.2	$	328.3	Level 1
Prepaid expenses and other
Cash flow hedges - currency forward contracts	17.0		15.9		Level 2

Nondesignated - currency forward contracts	1.0		0.8		Level 2
Other assets and deferred charges
Cash flow hedges - currency forward contracts	6.0		5.4		Level 2


Investment in equity securities	0.9		0.8		Level 1
Accrued expenses and other

Cash flow hedges - fixed-to-fixed cross-currency swap	4.5		9.4		Level 2
Cash flow hedges - variable-to-fixed interest rate swap	2.0		5.0		Level 2

Postretirement benefits and other long-term liabilities


Cash flow hedges - variable-to-fixed interest rate swap	5.9		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, which are measured at fair value each reporting period with changes in fair value reported through an unrealized holding gain or loss within Other income (expense), net in our Condensed Consolidated Statement of Operations. As of March 31, 2024, our investment in REE shares was valued at $0.9 million based on a closing price on that date of $5.84 per share.

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:


	March 31, 2024				December 31, 2023
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Input
	(in millions)

Revolving Credit Facility	$	—	$	—	$	—	$	—	Level 2
Term Loan A Facility	484.3		482.4		484.3		483.6		Level 2
Term Loan B Facility	648.0		648.8		648.0		649.6		Level 2



6.875% Notes due 2028	400.0		396.0		400.0		387.0		Level 2

6.50% Notes due 2027	500.0		495.0		500.0		501.9		Level 2
6.25% Notes due 2026	125.9		124.6		127.6		126.3		Level 2

5.00% Notes due 2029	600.0		538.5		600.0		529.5		Level 2

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 Plans			Foreign Currency Translation Adjustments		Unrecognized Gain (Loss) on Cash Flow Hedges			Total
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 Plans			Foreign Currency Translation Adjustments		Unrecognized Gain (Loss) on Cash Flow Hedges			Total
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.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. EMPLOYEE BENEFIT PLANS

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


		Pension Benefits
	Three Months Ended
	March 31,
		2024		2023
		(in millions)

Service cost		$	0.3	$	0.3
Interest cost		5.8		6.0
Expected asset return		(7.2)		(7.2)
Amortized loss		1.7		1.0



Net periodic benefit cost		$	0.6	$	0.1

		Other Postretirement Benefits
	Three Months Ended
	March 31,
		2024		2023
		(in millions)

Service cost		$	—	$	—
Interest cost		2.1		2.5
Amortized gain		(2.5)		(2.1)
Amortized prior service credit		(0.1)		(0.1)


Net periodic benefit cost (credit)		$	(0.5)	$	0.3

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

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. PRODUCT WARRANTIES

We record a liability for estimated warranty obligations at the dates our products are sold. These estimates are established using sales volumes and internal and external warranty data where there is no payment history and historical information about the average cost of warranty claims for customers with prior claims. We estimate our costs based on the contractual arrangements with our customers, existing customer warranty terms and internal and external warranty data, which includes a determination of our warranty claims and actions taken to improve product quality and minimize warranty claims. We continuously evaluate these estimates and our customers' administration of their warranty programs. We monitor actual warranty claim data and adjust the liability, as necessary, on a quarterly basis.

The following table provides a reconciliation of changes in the product warranty liability:


	Three Months Ended
	March 31,
		2024		2023
		(in millions)

Beginning balance		$	66.3	$	54.1
Accruals		3.9		8.7
Payments		(2.2)		(1.8)

Foreign currency translation		(0.4)		0.4
Ending balance		$	67.6	$	61.4

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)

















	Driveline		Metal Forming		Total
North America	$	828.0	$	345.9	$	1,173.9
Asia	142.7		8.0		150.7
Europe	121.5		124.3		245.8
South America	14.2		22.3		36.5
Total	$	1,106.4	$	500.5	$	1,606.9

	Three Months Ended March 31, 2023
	Driveline		Metal Forming		Total
North America	$	783.0	$	328.5	$	1,111.5
Asia	105.8		6.7		112.5
Europe	99.8		122.9		222.7
South America	25.2		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, Net		Contract Liabilities (Current)		Contract Liabilities (Long-term)
December 31, 2023	$	818.5	$	16.6	$	70.4
March 31, 2024	960.5		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.

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 Charges		Implementation Costs		Total
	(in millions)
Accrual at December 31, 2022	$	2.4	$	1.4	$	3.8
Charges	0.3		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
Charges	0.2		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, 2023	0.8

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.

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 months ended March 31, 2024 and 2023 are as follows:


	Three Months Ended
	March 31,
		2024			2023
		(in millions)

Income tax expense		$	15.9		$	—
Effective income tax rate		43.7		%	—		%

During the three months ended 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 three months ended March 31, 2023.

Our effective income tax rate for the three months ended March 31, 2024 varies from our effective income tax rate for the three months ended March 31, 2023 primarily as a result of the mix of earnings on a jurisdictional basis and the impact of the discrete items noted above.

For the three months ended March 31, 2024, 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 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 reduction in 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. If we experience lower than projected earnings in certain jurisdictions in future periods, it is reasonably possible that changes in valuation allowances could be recognized and such changes could be material to our financial statements.

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 filed a claim for refund for the amount of tax and interest paid related to this matter for the 2015 tax year and, in 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 months ended, 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 2023. As of 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 2023, is estimated to be in the range of approximately $300 million to $350 million.

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 March 31, 2024 and December 31, 2023, we have recorded a liability for unrecognized income tax benefits and related interest and penalties of $30.4 million and $38.1 million, respectively.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 Ended
	March 31,
		2024		2023
		(in millions, except per share data)
Numerator
Net income (loss)		$	20.5	$	(5.1)
Less: Net income attributable to participating securities		(0.6)		—


Net income (loss) attributable to common shareholders - Basic and Dilutive		$	19.9	$	(5.1)

Denominators
Basic common shares outstanding -
Weighted-average shares outstanding		120.9		119.8
Less: Weighted-average participating securities		(3.7)		(4.6)
Weighted-average common shares outstanding		117.2		115.2

Effect of dilutive securities -
Dilutive stock-based compensation		0.1		—

Diluted shares outstanding -
Adjusted weighted-average shares after assumed conversions		117.3		115.2

Basic EPS		$	0.17	$	(0.04)

Diluted EPS		$	0.17	$	(0.04)

Basic and dilutive loss per share are the same for the three months ended March 31, 2023 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.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. 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, unrealized gains or losses on equity securities, pension curtailment and settlement charges and non-recurring items.

The following tables represent information by reportable segment for the three months ended March 31, 2024 and 2023 (in millions):


	Three Months Ended March 31, 2024
	Driveline		Metal Forming		Total
Sales	$	1,106.4	$	644.1	$	1,750.5
Less: Intersegment sales	—		143.6		143.6
Net external sales	$	1,106.4	$	500.5	$	1,606.9

Segment Adjusted EBITDA	$	157.4	$	48.2	$	205.6

	Three Months Ended March 31, 2023
	Driveline		Metal Forming		Total
Sales	$	1,013.8	$	619.1	$	1,632.9
Less: Intersegment sales	—		139.0		139.0
Net external sales	$	1,013.8	$	480.1	$	1,493.9

Segment Adjusted EBITDA	$	114.1	$	61.3	$	175.4

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table represents a reconciliation of Total Segment Adjusted EBITDA to consolidated income (loss) before income taxes for the three months ended March 31, 2024 and 2023:


	Three Months Ended March 31,
		2024		2023
		(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 securities		0.1		(0.3)






Income (loss) before income taxes		$	36.4	$	(5.1)

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, 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 40% of our consolidated net sales for the first three months of 2024 and 39% for both the first three months of 2023 and the full year 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. In addition, we sell various products to Stellantis from our Metal Forming segment. Sales to Stellantis were approximately 14% of our consolidated net sales for the first three months of 2024, 17% for the first three months of 2023 and 16% for the full year 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 13% of our consolidated net sales for the first three months of 2024, 11% for the first three months of 2023 and 12% for the full year 2023.

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

Commercial Matters

In 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 termination of these purchase orders reflects, in part, the significant uncertainty currently underlying the electric vehicle environment, including volatility in estimated volumes and the timing of production. We have submitted a cancellation claim to recover certain costs incurred in connection with the terminated purchase orders. As of March 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 development costs and other commercial amounts. As of the date of this filing, we believe we are entitled to claim 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 Condensed Consolidated Balance Sheet.

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

Net Sales


	Three Months Ended March 31,
(in millions)	2024		2023		Change		Percent Change
Net sales	$	1,606.9	$	1,493.9	$	113.0	7.6	%

The increase in the first three months of 2024, as compared to the first three months of 2023, primarily reflects increased production volumes on certain vehicle programs that we support, as well as approximately $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 March 31,
(in millions)	2024		2023		Change		Percent Change
Cost of goods sold	$	1,408.4	$	1,333.3	$	75.1	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 increased production volumes on certain vehicle programs that we 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 March 31, 2024, material costs were approximately 58% of total costs of goods sold as compared to approximately 56% for the three months ended March 31, 2023.

Gross Profit


	Three Months Ended March 31,
(in millions)	2024		2023		Change		Percent Change
Gross profit	$	198.5	$	160.6	$	37.9	23.6	%

Gross margin was 12.4% in the first three months of 2024 as compared to 10.8% in the first three months of 2023. Gross profit and gross margin were impacted by the factors discussed in Net Sales and Cost of Goods Sold above.

Selling, General and Administrative Expenses (SG&A)


	Three Months Ended March 31,
(in millions)	2024		2023		Change		Percent Change
Selling, general & administrative expenses	$	98.3	$	98.3	$	—	—	%

SG&A as a percentage of net sales was 6.1% in the first three months of 2024 as compared to 6.6% of net sales in the first three months of 2023. Research and development (R&D) expense, net of customer engineering, design and development recoveries, was approximately $36.7 million in the first three months of 2024, as compared to $42.8 million in the first three months of 2023. The decrease in R&D expense in the first quarter of 2024, as compared to the first quarter of 2023, was offset by increased compensation-related expense.

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

Restructuring and Acquisition-Related Costs Restructuring and acquisition-related costs were $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 2024 associated with our acquisition of Tekfor. See Note 11 - Restructuring and Acquisition-Related Costs for additional detail regarding our restructuring, acquisition and integration activity.

Operating Income Operating income was $77.0 million in the first three months of 2024 as compared to $36.1 million in the first three months of 2023. Operating margin was 4.8% in the first three months of 2024, as compared to 2.4% in the first three months of 2023. The changes in operating income and operating margin were due primarily to the factors discussed in Net Sales and Cost of Goods Sold.

Interest Expense and Interest Income Interest expense was $49.0 million in the first three months of 2024 as compared to $50.5 million in the first three months of 2023. The weighted-average interest rate of our long-term debt outstanding was 7.1% for the three months ended March 31, 2024 and 6.6% for the 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 first three months of 2023.

Unrealized Gain (Loss) on Equity Securities We have an investment in the equity securities of REE Automotive, which are measured at fair value each reporting period with changes in fair value reported through an unrealized holding gain or loss within Other income (expense), net in our Condensed Consolidated Statement of Operations. We recognized an unrealized gain on our investment in REE Automotive of $0.1 million in the first quarter of 2024, as compared to an unrealized loss of $0.3 million 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 de minimis in the first three months of 2024, and was income of $3.7 million in the first three months of 2023.

Income Tax Expense Income tax expense was $15.9 million for the three months ended March 31, 2024, and we had no income tax expense for the three months ended March 31, 2023. Our effective income tax rate was 43.7% in the first three months of 2024 as compared to 0.0% in the first three months of 2023.

Net Income (Loss) and Earnings (Loss) Per Share (EPS) Our net income was $20.5 million in the first three months of 2024, as compared to a net loss of $5.1 million in the first three months of 2023. Diluted EPS was earnings of $0.17 per share in the first three months of 2024, as compared to a loss of $0.04 per share in the first three months of 2023. Net income (loss) and EPS for the first three months of 2024 and 2023 were primarily impacted by the factors discussed above.

SEGMENT REPORTING

Our product offerings by segment are as follows:

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

The following table represents sales by reportable segment for the three months ended March 31, 2024 and 2023 (in millions):


	Three Months Ended March 31,
		2024		2023
Driveline		$	1,106.4	$	1,013.8
Metal Forming		644.1		619.1

Eliminations		(143.6)		(139.0)
Net sales		$	1,606.9	$	1,493.9

The increase in both Driveline and Metal Forming sales for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, is primarily the result of increased production volumes on certain vehicle programs that we support. Metal Forming sales also increased by approximately $6 million in the first three months of 2024, as compared to the first three months of 2023, as a result of the effect of metal market pass-throughs to our customers and the impact of foreign exchange translation.

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 months ended March 31, 2024 and 2023 are as follows (in millions):


	Three Months Ended March 31,
		2024		2023
Driveline		$	157.4	$	114.1
Metal Forming		48.2		61.3

Total segment adjusted EBITDA		$	205.6	$	175.4

For the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, the increase in Segment Adjusted EBITDA for the Driveline segment primarily reflects approximately $24 million attributable to the impact of increased production volumes on certain vehicle programs that we support, with the remainder primarily related to improved operating performance and lower program launch costs.

For the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, Segment Adjusted EBITDA for the Metal Forming segment was impacted 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 cost increases were partially offset by the favorable impact of increased production volumes on certain vehicle programs that we support.

Reconciliation of Non-GAAP and GAAP Information

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

We define EBITDA to be earnings before interest expense, income taxes, depreciation and amortization. Total Segment Adjusted EBITDA is defined as EBITDA for our reportable segments excluding the impact of restructuring and acquisition-related costs, debt refinancing and redemption costs, 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 March 31,
		2024		2023

Net income (loss)		$	20.5	$	(5.1)
Interest expense		49.0		50.5
Income tax expense		15.9		—
Depreciation and amortization		117.8		124.9
EBITDA		$	203.2	$	170.3
Restructuring and acquisition-related costs		2.5		4.8

Unrealized (gain) loss on equity securities		(0.1)		0.3
Total segment adjusted EBITDA		$	205.6	$	175.4

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 March 31, 2024, we had over $1.4 billion of liquidity consisting of approximately $470 million of cash and cash equivalents, approximately $892 million of available borrowings under our Revolving Credit Facility and approximately $83 million of available borrowings under foreign credit facilities. We have no significant debt maturities before 2026.

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

Accounts receivable For the three months ended March 31, 2024, we experienced a decrease in cash flow from operating activities of approximately $79 million related to the change in our accounts receivable balance from December 31, 2023 to March 31, 2024, as compared to the change in our accounts receivable balance from December 31, 2022 to 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 three months ended March 31, 2024, we experienced an increase in cash flow from operating activities of approximately $26 million related to the change in our accounts payable and accrued expenses balance from December 31, 2023 to March 31, 2024, as compared to the change in our accounts payable and accrued expenses balance from December 31, 2022 to 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 $11.5 million in the first three months of 2024, as compared to $26.0 million in the first three months of 2023. During the first three 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 12 - Income Taxes for additional detail regarding the Notice of Tax Due.

Interest paid Interest paid was $47.8 million for the three months ended March 31, 2024, as compared to $41.6 million for the three months ended March 31, 2023. The change in interest paid was primarily the result of increased interest rates on our variable rate debt.

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

Pension and other postretirement benefits Due to the availability of our pre-funded pension balances (previous contributions in excess of prior required pension contributions), we expect our regulatory pension funding requirements in 2024 to be less than $1 million. We expect our cash payments for other postretirement benefit obligations in 2024, net of GM cost sharing, to be approximately $11.0 million.

Investing Activities In the first three months of 2024, net cash used in investing activities was $48.2 million as compared to $30.5 million for the three months ended March 31, 2023. Capital expenditures were $48.0 million in the first three months of 2024 as compared to $46.6 million in the first three months of 2023. We expect our capital spending in 2024 to be 4.0% to 4.5% of sales.

In the first three months of 2023, we received $17.0 million of cash reimbursements under our insurance policies associated with machinery and equipment that was damaged or destroyed as a result of the Malvern 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.

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

Redemption of 6.25% Notes Due 2026 In the first quarter of 2024, we completed an open market repurchase of our 6.25% Notes due 2026 of $1.7 million.

Repayment of Tekfor Group Indebtedness In the first quarter of 2024, we repaid $6.6 million of the outstanding indebtedness that we assumed upon our acquisition of Tekfor in June 2022.

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

Treasury stock Treasury stock increased by $2.7 million in the first three months of 2024 to $235.6 million as compared to $232.9 million at year-end 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.

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.

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


Statement of Operations Information	(in millions)
	Three Months Ended March 31, 2024		Year Ended December 31, 2023
Net sales	$	1,129.3	$	4,376.7
Gross profit	143.5		339.2
Income (loss) from operations	31.5		(91.4)
Net loss	(7.3)		(182.4)

Balance Sheet Information	(in millions)
	March 31, 2024		December 31, 2023
Current assets	$	1,242.6	$	1,009.2
Noncurrent assets	2,571.1		2,723.4

Current liabilities	590.2		1,512.2
Noncurrent liabilities	3,254.7		3,252.2

Redeemable preferred stock	—		—
Noncontrolling interest	—		—

At March 31, 2024 and December 31, 2023, amounts owed by the Combined Entities to non-guarantor entities totaled approximately $20 million and $1,090 million, respectively, and amounts owed to the Combined Entities from non-guarantor entities totaled approximately $465 million and $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.

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 first quarter of 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 first quarter of 2024 that we believe could have a material adverse impact on our results of operations, financial condition and cash flows.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

MARKET RISK

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 March 31, 2024 and December 31, 2023, we had currency forward contracts outstanding with a total notional amount of $227.3 million and $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 $20.7 million at March 31, 2024 and was $18.8 million at December 31, 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 March 31, 2024 and December 31, 2023, which were equivalent to $215.8 million and $220.7 million, respectively. The fixed-to-fixed cross-currency swap hedges our exposure to changes in exchange rates on the intercompany loans through 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 $21.6 million at March 31, 2024 and was approximately $22.1 million at December 31, 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 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 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 14% of our weighted-average interest rate at March 31, 2024) on our long-term debt outstanding, would be approximately $4.3 million at March 31, 2024 and was approximately $4.4 million at December 31, 2023, on an annualized basis.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) were effective as of 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 March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A. Risk Factors

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

ISSUER PURCHASES OF EQUITY SECURITIES


Period	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
					(in millions)
January 1 - January 31, 2024	5,076	$	8.02	—	$	—
February 1 - February 29, 2024	—	—		—	—
March 1 - March 31, 2024	384,781	6.87		—	—
Total	389,857	$	6.88	—	$	—

Item 5. Other Information

During the quarterly period ended March 31, 2024, our directors and officers (as defined in Rule 16a-1(f) of the Exchange 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).

Item 6. Exhibits


Number						Description of Exhibit

*10.1						Form of Performance Share Award (Free Cash Flow) for Executive Officers

*10.2						Form of Performance Unit Award (Free Cash Flow) for Executive Officers

*22						Subsidiary Guarantors and Issuers of Guaranteed Securities

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

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

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

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

**101.SCH						XBRL Taxonomy Extension Schema Document

**101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

**101.LAB						XBRL Taxonomy Extension Label Linkbase Document

**101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

**101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

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

Filed herewith

Submitted electronically with this Report.

SIGNATURES

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

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

(Registrant)

/s/ James G. Zaliwski

James G. Zaliwski

Chief Accounting Officer

May 3, 2024

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Date	Price Target	Rating	Analyst
9/10/2024	$6.00	Hold	Deutsche Bank
2/28/2024	$7.00	Sell → Neutral	UBS
1/17/2024	$8.00 → $6.50	Neutral → Sell	UBS
11/28/2023	$9.00 → $8.00	Neutral → Underperform	BofA Securities
9/13/2023	$9.00	Neutral	UBS
2/15/2023	$10.00	Equal Weight	Barclays
9/9/2022	$16.00 → $13.00	Buy → Neutral	BofA Securities
8/18/2022		Outperform → Peer Perform	Wolfe Research

SEC Form 10-Q filed by American Axle & Manufacturing Holdings Inc.

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B of A Securities Maintains Underperform on American Axle & Mfg Hldgs, Raises Price Target to $8

UBS Maintains Neutral on American Axle & Mfg Hldgs, Raises Price Target to $8

Citigroup Maintains Neutral on American Axle & Mfg Hldgs, Raises Price Target to $8

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Deutsche Bank resumed coverage on American Axle with a new price target

American Axle upgraded by UBS with a new price target

American Axle downgraded by UBS with a new price target

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Arrow Announces AGM Voting Results

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AAM Reports Third Quarter 2024 Financial Results

AAM to Announce Third Quarter Financial Results on November 8

AAM Announces Sale of Commercial Vehicle Axle Business in India

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SEC Form SC 13G filed by American Axle & Manufacturing Holdings Inc.

SEC Form SC 13G/A filed by American Axle & Manufacturing Holdings Inc. (Amendment)

SEC Form SC 13G filed by American Axle & Manufacturing Holdings Inc.

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Kozyra William Lawrence was granted 20,492 shares (SEC Form 4)

Valenti Samuel Iii was granted 20,492 shares, increasing direct ownership by 39% to 72,425 units (SEC Form 4)

Parker Herbert K was granted 20,492 shares, increasing direct ownership by 17% to 140,479 units (SEC Form 4)

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