AMERICAN AXLE & MANUFACTURING HOLDINGS INC - Quarter Report: 2020 September (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

			For the quarterly period ended September 30, 2020

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 October 27, 2020, the latest practicable date, the number of shares of the registrant's Common Stock, par value $0.01 per share, outstanding was 113,272,990 shares.

Internet Website Access to Reports

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

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2020

TABLE OF CONTENTS


			Page Number

FORWARD-LOOKING STATEMENTS			1

Part I		FINANCIAL INFORMATION	2

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

	Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	32

	Item 3	Quantitative and Qualitative Disclosures About Market Risk	45

	Item 4	Controls and Procedures	46

Part II		OTHER INFORMATION	47

	Item 1A	Risk Factors	47

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	47

	Item 6	Exhibits	48

		Signatures	49

FORWARD-LOOKING STATEMENTS

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

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

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

•global economic conditions;

•reduced purchases of our products by General Motors Company (GM), FCA US LLC (FCA), 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, FCA 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 USMCA, immigration policies, political stability, taxes and other law changes, potential disruptions of production and supply, and currency rate fluctuations);

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

•negative or unexpected tax consequences;

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

•supply shortages or price increases in raw material and/or freight, utilities or other operating supplies for us or our customers as a result of pandemics, natural disasters or otherwise;

•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;

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

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

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

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

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

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

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

•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 key associates; 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 any or all of the foregoing factors may be exacerbated by COVID-19. Further, we make no commitment to update any forward-looking statement or to disclose any facts, events or circumstances after the date hereof that may affect the accuracy of any forward-looking statement.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
	(in millions, except per share data)

Net sales	$	1,414.1	$	1,677.4	$	3,272.9	$	5,100.9

Cost of goods sold	1,164.3		1,428.7		2,926.7		4,381.7

Gross profit	249.8		248.7		346.2		719.2

Selling, general and administrative expenses	66.5		92.7		230.6		274.7

Amortization of intangible assets	21.6		23.7		65.0		73.6

Impairment charges (Note 1 and Note 3)	—		225.0		510.0		225.0

Restructuring and acquisition-related costs	9.7		11.7		38.6		36.0

Loss on sale of business	—		—		1.0		—

Operating income (loss)	152.0		(104.4)		(499.0)		109.9

Interest expense	(53.9)		(54.3)		(160.0)		(163.9)

Interest income	3.4		2.2		9.2		3.4

Other income (expense)
Debt refinancing and redemption costs	(5.2)		(5.1)		(6.7)		(7.5)

Other expense, net	(1.6)		(2.9)		(3.8)		(9.0)

Income (loss) before income taxes	94.7		(164.5)		(660.3)		(67.1)

Income tax benefit	(22.5)		(40.4)		(63.1)		(37.4)

Net income (loss)	$	117.2	$	(124.1)	$	(597.2)	$	(29.7)

Net income attributable to noncontrolling interests	—		(0.1)		(0.1)		(0.4)

Net income (loss) attributable to AAM	$	117.2	$	(124.2)	$	(597.3)	$	(30.1)

Basic earnings (loss) per share	$	0.99	$	(1.10)	$	(5.28)	$	(0.27)

Diluted earnings (loss) per share	$	0.99	$	(1.10)	$	(5.28)	$	(0.27)

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
	(in millions)
Net income (loss)	$	117.2	$	(124.1)	$	(597.2)	$	(29.7)

Other comprehensive income (loss)
Defined benefit plans, net of tax (a)	1.7		(1.3)		5.0		0.5
Foreign currency translation adjustments	14.0		(37.1)		(30.0)		(34.7)
Changes in cash flow hedges, net of tax (b)	6.7		(6.4)		(19.3)		(24.7)
Other comprehensive income (loss)	22.4		(44.8)		(44.3)		(58.9)

Comprehensive income (loss)	$	139.6	$	(168.9)	$	(641.5)	$	(88.6)

Net income attributable to noncontrolling interests	—		(0.1)		(0.1)		(0.4)
Foreign currency translation adjustments attributable to noncontrolling interests	—		—		0.3		—

Comprehensive income (loss) attributable to AAM	$	139.6	$	(169.0)	$	(641.3)	$	(89.0)


(a)			Amounts are net of tax of $(0.4) million and $(1.2) million for the three and nine months ended September 30, 2020, and $0.3 million and $(0.2) million for the three and nine months ended September 30, 2019, respectively.
(b)			Amounts are net of tax of $(0.2) million and $1.6 million for the three and nine months ended September 30, 2020, and $1.1 million and $7.3 million for the three and nine months ended September 30, 2019, respectively.

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30, 2020		December 31, 2019
	(Unaudited)
Assets	(in millions)
Current assets
Cash and cash equivalents	$	537.3	$	532.0
Accounts receivable, net	900.8		815.4
Inventories, net	315.8		373.6
Prepaid expenses and other	158.7		136.8

Total current assets	1,912.6		1,857.8

Property, plant and equipment, net	2,157.9		2,358.4
Deferred income taxes	104.6		64.1
Goodwill	183.6		699.1
Other intangible assets, net	801.5		864.5
GM postretirement cost sharing asset	221.9		223.3
Other assets and deferred charges	560.0		577.4
Total assets	$	5,942.1	$	6,644.6

Liabilities and Stockholders’ Equity
Current liabilities

Current portion of long-term debt	$	26.5	$	28.7
Accounts payable	622.0		623.5
Accrued compensation and benefits	163.5		154.4
Deferred revenue	22.8		18.9
Accrued expenses and other	189.5		200.9

Total current liabilities	1,024.3		1,026.4

Long-term debt, net	3,555.4		3,612.3
Deferred revenue	75.6		83.7
Deferred income taxes	19.7		19.6
Postretirement benefits and other long-term liabilities	923.6		922.2
Total liabilities	5,598.6		5,664.2

Stockholders' equity
Common stock, par value $0.01 per share; 150.0 million shares authorized;
121.3 million shares issued as of September 30, 2020 and 120.2 million shares issued as of December 31, 2019	1.2		1.2
Paid-in capital	1,328.3		1,313.9
Retained earnings (Accumulated deficit)	(355.8)		248.6
Treasury stock at cost, 8.0 million shares as of September 30, 2020 and 7.6 million shares as of December 31, 2019	(212.0)		(209.3)
Accumulated other comprehensive loss
Defined benefit plans, net of tax	(254.9)		(259.9)
Foreign currency translation adjustments	(130.9)		(101.2)
Unrecognized loss on cash flow hedges, net of tax	(35.0)		(15.7)
Total AAM stockholders' equity	340.9		977.6
Noncontrolling interests in subsidiaries	2.6		2.8
Total stockholders' equity	343.5		980.4
Total liabilities and stockholders' equity	$	5,942.1	$	6,644.6

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended
	September 30,
	2020		2019
	(in millions)
Operating activities
Net loss	$	(597.2)	$	(29.7)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization	393.7		411.5
Impairment charges	510.0		225.0
Deferred income taxes	(38.4)		(87.6)
Stock-based compensation	14.4		17.5
Pensions and other postretirement benefits, net of contributions	(6.5)		(10.4)

Loss on disposal of property, plant and equipment, net	16.4		1.3

Debt refinancing and redemption costs	6.7		7.5
Changes in operating assets and liabilities
Accounts receivable	(88.0)		(108.4)
Inventories	56.9		18.8
Accounts payable and accrued expenses	5.6		8.6
Deferred revenue	(6.6)		(12.9)
Other assets and liabilities	(20.6)		(62.6)
Net cash provided by operating activities	246.4		378.6

Investing activities
Purchases of property, plant and equipment	(146.3)		(335.3)
Proceeds from sale of property, plant and equipment	1.6		2.0


Investment in joint venture	—		(2.2)
Purchase buyouts of leased equipment	(0.1)		—

Final settlement on sale of business	(4.4)		—

Net cash used in investing activities	(149.2)		(335.5)

Financing activities

Proceeds from Revolving Credit Facility	350.0		—
Payments of Revolving Credit Facility	(350.0)		—
Proceeds from issuance of long-term debt	408.9		348.4
Payments of long-term debt	(482.2)		(477.7)
Debt issuance costs	(11.0)		(3.3)

Purchase of treasury stock	(2.7)		(7.5)
Other financing activities	(0.6)		—

Net cash used in financing activities	(87.6)		(140.1)

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

Net increase (decrease) in cash, cash equivalents and restricted cash	5.3		(101.3)

Cash, cash equivalents and restricted cash at beginning of period	532.0		478.9

Cash, cash equivalents and restricted cash at end of period	$	537.3	$	377.6

Supplemental cash flow information
Interest paid	$	138.0	$	136.3
Income taxes paid (refunds received), net	$	(5.2)	$	45.7

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)


	Common Stock									Accumulated		Noncontrolling
	Shares	Par		Paid-in		Retained Earnings		Treasury		Other Comprehensive		Interest
	Outstanding	Value		Capital		(Accumulated Deficit)		Stock		Income (Loss)		in Subsidiaries
Balance at January 1, 2019	111.7	$	1.2	$	1,292.6	$	703.5	$	(201.8)	$	(311.6)	$	2.4
Net income	—	—		—		41.6		—		—		0.1
Vesting of restricted stock units and performance shares	1.2	—		—		—		—		—		—
Stock-based compensation	—	—		5.5		—		—		—		—
Modified-retrospective application of ASU 2016-02	—	—		—		1.9		—		—		—
Adoption of ASU 2018-02	—	—		—		27.7		—		(27.7)		—
Purchase of treasury stock	(0.4)	—		—		—		(7.3)		—		—
Changes in cash flow hedges	—	—		—		—		—		(2.5)		—
Foreign currency translation adjustments	—	—		—		—		—		(2.5)		—
Defined benefit plans, net	—	—		—		—		—		0.7		—
Balance at March 31, 2019	112.5	$	1.2	$	1,298.1	$	774.7	$	(209.1)	$	(343.6)	$	2.5
Net income	—	—		—		52.5		—		—		0.2

Stock-based compensation	—	—		5.7		—		—		—		—
Purchase of treasury stock	—	—		—		—		(0.2)		—		—
Changes in cash flow hedges	—	—		—		—		—		(15.8)		—
Foreign currency translation adjustments	—	—		—		—		—		4.9		—
Defined benefit plans, net	—	—		—		—		—		1.1		—

Balance at June 30, 2019	112.5	$	1.2	$	1,303.8	$	827.2	$	(209.3)	$	(353.4)	$	2.7
Net income (loss)	—	—		—		(124.2)		—		—		0.1

Stock-based compensation	—	—		6.3		—		—		—		—

Changes in cash flow hedges	—	—		—		—		—		(6.4)		—
Foreign currency translation adjustments	—	—		—		—		—		(37.1)		—
Defined benefit plans, net	—	—		—		—		—		(1.3)		—

Balance at September 30, 2019	112.5	$	1.2	$	1,310.1	$	703.0	$	(209.3)	$	(398.2)	$	2.8

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)

(Unaudited)


	Common Stock									Accumulated		Noncontrolling
	Shares	Par		Paid-in		Retained		Treasury		Other Comprehensive		Interest
	Outstanding	Value		Capital		Earnings		Stock		Income (Loss)		in Subsidiaries
Balance at January 1, 2020	112.6	$	1.2	$	1,313.9	$	248.6	$	(209.3)	$	(376.8)	$	2.8
Net income (loss)	—	—		—		(501.3)		—		—		0.1
Vesting of restricted stock units and performance shares	0.8	—		—		—		—		—		—
Stock-based compensation	—	—		4.6		—		—		—		—
Modified-retrospective application of ASU 2016-13	—	—		—		(7.1)		—		—		—
Purchase of treasury stock	(0.4)	—		—		—		(2.4)		—		—
Changes in cash flow hedges	—	—		—		—		—		(34.7)		—
Foreign currency translation adjustments	—	—		—		—		—		(48.5)		(0.3)
Defined benefit plans, net	—	—		—		—		—		1.6		—

Balance at March 31, 2020	113.0	$	1.2	$	1,318.5	$	(259.8)	$	(211.7)	$	(458.4)	$	2.6
Net loss	—	—		—		(213.2)		—		—		—
Vesting of restricted stock units and performance shares	0.3	—		—		—		—		—		—
Stock-based compensation	—	—		4.7		—		—		—		—
Purchase of treasury stock	—	—		—		—		(0.3)		—		—
Changes in cash flow hedges	—	—		—		—		—		8.7		—
Foreign currency translation adjustments	—	—		—		—		—		4.8		—
Defined benefit plans, net	—	—		—		—		—		1.7		—
Balance at June 30, 2020	113.3	$	1.2	$	1,323.2	$	(473.0)	$	(212.0)	$	(443.2)	$	2.6
Net income	—	—		—		117.2		—		—		—

Stock-based compensation	—	—		5.1		—		—		—		—

Changes in cash flow hedges	—	—		—		—		—		6.7		—
Foreign currency translation adjustments	—	—		—		—		—		14.0		—
Defined benefit plans, net	—	—		—		—		—		1.7		—

Balance at September 30, 2020	113.3	$	1.2	$	1,328.3	$	(355.8)	$	(212.0)	$	(420.8)	$	2.6

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization We are a global Tier 1 supplier to the automotive industry. We design, engineer and manufacture driveline and metal forming products that are making the next generation of vehicles smarter, lighter, safer and more efficient. We employ approximately 20,000 associates, operating at nearly 80 facilities in 17 countries, to support our customers on global and regional platforms with a continued focus on delivering quality, operational excellence and technology leadership.

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, 2019 presented herein has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (GAAP) for complete consolidated financial statements.

In order to prepare the accompanying interim condensed consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts and disclosures in our interim condensed consolidated financial statements. These estimates and assumptions are impacted by risks and uncertainties, including those associated with the Novel Coronavirus (COVID-19) pandemic that began in the first quarter of 2020. While we have made estimates and assumptions based on the facts and circumstances available as of the date of this report, the full impact of COVID-19 cannot be predicted, and actual results could differ materially from those estimates and assumptions.

For further information, refer to the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Manufacturing Facility Fire and Insurance Recovery

On September 22, 2020, a significant industrial fire occurred at our Malvern Manufacturing Facility in Ohio (Malvern Fire). All associates were evacuated safely and without injury. We continue to focus on managing this disruption and protecting continuity of supply to our customers, including utilizing production capacity and resources at other AAM facilities.

Our insurance policies are expected to cover the repair, replacement or actual cash value of the assets that incurred loss or damage, less our applicable deductible of $1 million. In addition, our insurance policies are expected to provide coverage for interruption to our business, including lost or reduced profits and reimbursement for certain expenses and costs that are incurred relating to the fire. In the third quarter of 2020, we recorded $28.4 million of charges primarily related to the write-down of property, plant and equipment (PP&E) as a result of damage from the fire. We also recorded an insurance recovery receivable primarily associated with the write-down of PP&E of $19.8 million in the third quarter of 2020, which is included in Prepaid expenses and other in our Condensed Consolidated Balance Sheet as of September 30, 2020. This resulted in a net pre-tax impact to our Condensed Consolidated Statement of Operations of approximately $8.6 million in Cost of goods sold for the three and nine months ended September 30, 2020, which includes our applicable deductible. We continue to assess the extent of the damage caused by the fire. As such, we cannot estimate the total impact, including potential insurance recoveries, on our results of operations, financial position or cash flows, or the timing of such impact.

Sale of U.S. Casting - Classification of Assets and Liabilities as Held-for-Sale

In the fourth quarter of 2019, we completed the sale of the U.S operations of our former Casting segment (the Casting Sale). In conjunction with the Casting Sale, the assets and liabilities associated with this business met the criteria to be classified as held-for-sale in our Condensed Consolidated Balance Sheet as of September 30, 2019. Upon reclassification to held-for-sale in the third quarter of 2019, we recorded a pre-tax impairment charge of $225.0 million to reduce the carrying value of this business to fair value less cost to sell.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Effect of New Accounting Standards and Other Regulatory Pronouncements

Accounting Standard Update 2020-04

On March 12, 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2020-04 - Reference Rate Reform (Topic 848). This guidance provides optional expedients and exceptions that are intended to ease the burden of updating contracts to contain a new reference rate due to the discontinuation of the London Inter-Bank Offered Rate (LIBOR). This guidance is available immediately and may be implemented in any period prior to the guidance expiration on December 31, 2022. We are currently assessing which of our various contracts will require an update for a new reference rate and will determine the timing for our implementation of this guidance at the completion of that analysis.

Accounting Standard Update 2019-12

On December 18, 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740). This guidance is intended to simplify the accounting and disclosure requirements for income taxes by removing various exceptions and requires that the effect of an enacted change in tax laws or rates be included in the annual effective tax rate computation in the interim period of the enactment. This guidance becomes effective at the beginning of our 2021 fiscal year. We expect to adopt this guidance on January 1, 2021 and we do not expect that this standard will have a material impact on our consolidated financial statements.

Accounting Standards Update 2016-13

On June 16, 2016, the FASB issued 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaces the incurred loss model under previous guidance, and requires entities to consider expected credit losses, in addition to past events and current conditions when measuring credit losses. This guidance applies to certain of our financial instruments and is primarily applicable to our trade accounts receivable. We adopted this guidance on January 1, 2020, using a modified-retrospective transition method and the adoption of this standard did not have a material impact on our condensed consolidated financial statements. See the Statement of Stockholders' Equity for the implementation impact of ASU 2016-13.

Securities and Exchange Commission (SEC) Rule

In the first quarter of 2020, the SEC adopted "Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant's Securities," a rule that amends the financial disclosure requirements for guarantors and issuers of registered guaranteed securities. This rule eliminates the previous requirement to present guarantor financial statement information in the notes to the financial statements and allows for the disclosure of summarized financial information for the most recent year and interim period, as well as expanded non-financial disclosures, in Management's Discussion and Analysis (MD&A). The effective date for this rule is January 4, 2021, however, the SEC permitted voluntary compliance prior to this date and we elected to adopt the new disclosure requirements in the first quarter of 2020. As such, we no longer present guarantor financial statement information in the notes to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q, but instead present the required information within MD&A.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Coronavirus Aid, Relief, and Economic Security Act

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

•The ability to use net operating losses (NOLs) to offset income without the 80% taxable income limitation enacted as part of the Tax Cuts and Jobs Act (TCJA) of 2017, and to carry back NOLs to offset prior year income for five years. These are temporary provisions that apply to NOLs incurred in 2018, 2019 or 2020 tax years.

•The ability to claim a current deduction for interest expense up to 50% of Adjusted Taxable Income (ATI) for tax years 2019 and 2020. This limitation was previously 30% of ATI pursuant to the TCJA, and will revert to 30% after 2020.

•The ability to defer the payment of the employer portion of social security taxes incurred between March 27, 2020 and December 31, 2020, with 50% of the deferred amount to be paid by December 31, 2021 and the remaining 50% to be paid by December 31, 2022.

•The ability to claim an Employee Retention Credit (ERC), which is a refundable payroll tax credit, for 50% of qualified wages or benefits, subject to certain limitations, that are paid to an employee when they are not providing services due to COVID-19. The ERC applies to qualified wages paid or incurred during the period March 13, 2020 through December 31, 2020 and is available to eligible employers whose operations were fully or partially suspended due to COVID-19, or whose gross receipts declined by more than 50% when compared to the applicable period in the prior year.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. RESTRUCTURING AND ACQUISITION-RELATED COSTS

In the first quarter of 2019, we initiated a global restructuring program (the 2019 Program). The primary objectives of the 2019 Program were to further the integration of Metaldyne Performance Group, Inc. (MPG), align AAM's product and process technologies, and to achieve efficiencies within our corporate and business unit support teams to reduce cost in our business.

In the first quarter of 2020, we initiated a new global restructuring program (the 2020 Program) that supersedes the 2019 Program. The primary objectives of the 2020 Program are to achieve efficiencies within our corporate and business unit support teams to reduce cost in our business, and to structurally adjust our operations to a new level of market demand based on the impact of COVID-19. We expect to incur costs under the 2020 Program into 2022.

A summary of our restructuring activity for the first nine months of 2020 and 2019 is shown below:


	Severance Charges		Implementation Costs		Total
	(in millions)
Accrual at December 31, 2018	$	2.4	$	1.6	$	4.0
Charges	10.4		13.1		23.5
Cash utilization	(11.7)		(9.9)		(21.6)


Accrual at September 30, 2019	$	1.1	$	4.8	$	5.9

Accrual at December 31, 2019	$	4.8	$	7.4	$	12.2
Charges	19.9		11.9		31.8
Cash utilization	(19.9)		(11.0)		(30.9)


Accrual at September 30, 2020	$	4.8	$	8.3	$	13.1

As part of our restructuring actions, we incurred total severance charges of approximately $19.9 million and $10.4 million during the nine months ended September 30, 2020 and 2019, respectively. We also incurred total implementation costs of approximately $11.9 million and $13.1 million during the nine months ended September 30, 2020 and 2019, respectively. Implementation costs in both periods consist primarily of plant exit costs.

Approximately $22.9 million of the restructuring costs incurred during the nine months ended September 30, 2020 were under the 2020 Program. Approximately $14.4 million and $13.1 million of our total restructuring costs for the nine months ended September 30, 2020 related to our Driveline and Metal Forming segments, respectively, while the remainder were corporate costs. Approximately $2.0 million, $14.4 million and $0.7 million of our total restructuring costs for the nine months ended September 30, 2019 related to our Driveline, Metal Forming and former Casting segments, respectively, while the remainder were corporate costs. We expect to incur approximately $70 million to $80 million of total restructuring charges in 2020, including costs incurred under the 2020 Program.

During the nine months ended September 30, 2020 and 2019, we incurred the following integration charges primarily related to the integration of MPG:


	Integration Expenses
	(in millions)
Charges for the nine months ended September 30, 2020	$	6.8
Charges for the nine months ended September 30, 2019	12.5

These integration expenses primarily reflect costs incurred for information technology infrastructure and enterprise resource planning systems. 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 $9.7 million and $38.6 million for the three and nine months ended September 30, 2020, respectively, and $11.7 million and $36.0 million for the three and nine months ended September 30, 2019, respectively.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill The following table provides a reconciliation of changes in goodwill for the nine months ended September 30, 2020:


	Driveline		Metal Forming		Consolidated
	(in millions)
Balance at December 31, 2019	$	398.3	$	300.8	$	699.1



Impairment charge	(210.8)		(299.2)		(510.0)
Foreign currency translation	(3.9)		(1.6)		(5.5)
Balance at September 30, 2020	$	183.6	$	—	$	183.6

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

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.

As a result of this goodwill impairment test in the first quarter of 2020, we determined that the carrying values of both our Driveline and Metal Forming reporting units were greater than their respective fair values. As such, we recorded a goodwill impairment charge of $210.8 million associated with our Driveline reporting unit and a goodwill impairment charge of $299.2 million associated with our Metal Forming reporting unit in the first quarter of 2020. The Metal Forming impairment charge represented a full impairment of the goodwill associated with that reporting unit.

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

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

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Other Intangible Assets The following table provides a reconciliation of the gross carrying amount and associated accumulated amortization for AAM's other intangible assets, which are all subject to amortization:


	September 30,						December 31,
	2020						2019
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in millions)
Capitalized computer software	$	47.2	$	(32.3)	$	14.9	$	45.8	$	(27.6)	$	18.2
Customer platforms	856.2		(222.0)		634.2		856.2		(174.4)		681.8
Customer relationships	53.0		(12.0)		41.0		53.0		(9.4)		43.6
Technology and other	156.1		(44.7)		111.4		156.0		(35.1)		120.9
Total	$	1,112.5	$	(311.0)	$	801.5	$	1,111.0	$	(246.5)	$	864.5

Amortization expense for our intangible assets was $21.6 million and $65.0 million for the three and nine months ended September 30, 2020, respectively, and $23.7 million and $73.6 million for the three and nine months ended September 30, 2019, respectively. Estimated amortization expense for the years 2020 through 2024 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. INVENTORIES

We state our inventories at the lower of cost or net realizable value. The cost of our inventories is determined using the first-in first-out method. When we determine that our gross inventories exceed usage requirements, or if inventories become obsolete or otherwise not saleable, we record a provision for such loss as a component of our inventory accounts.

Inventories consist of the following:


	September 30, 2020		December 31, 2019
	(in millions)

Raw materials and work-in-progress	$	281.0	$	310.4
Finished goods	62.2		83.7
Gross inventories	343.2		394.1
Inventory valuation reserves	(27.4)		(20.5)
Inventories, net	$	315.8	$	373.6

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. LONG-TERM DEBT

Long-term debt consists of the following:


	September 30, 2020		December 31, 2019
	(in millions)

Revolving Credit Facility	$	—	$	—
Term Loan A Facility	337.9		340.0
Term Loan B Facility	1,188.8		1,188.8
6.875% Notes due 2028	400.0		—
6.625% Notes due 2022	—		450.0
6.50% Notes due 2027	500.0		500.0
6.25% Notes due 2026	400.0		400.0
6.25% Notes due 2025	700.0		700.0
Foreign credit facilities and other	104.5		113.4
Total debt	3,631.2		3,692.2

Less: Current portion of long-term debt	26.5		28.7
Long-term debt	3,604.7		3,663.5
Less: Debt issuance costs	49.3		51.2
Long-term debt, net	$	3,555.4	$	3,612.3

Senior Secured Credit Facilities In 2017, American Axle & Manufacturing Holdings, Inc. (Holdings) and American Axle & Manufacturing, Inc. (AAM, Inc.) entered into a credit agreement (the Credit Agreement). In connection with the Credit Agreement, Holdings, AAM, Inc. and certain of their restricted subsidiaries entered into a Collateral Agreement and Guarantee Agreement with the financial institutions party thereto. The Credit Agreement included a $100.0 million term loan A facility (the Term Loan A Facility), a $1.55 billion term loan B facility (the Term Loan B Facility) and a $932 million multi-currency revolving credit facility (the Revolving Credit Facility, and together with the Term Loan A Facility and the Term Loan B Facility, the Senior Secured Credit Facilities).

In July 2019, Holdings, AAM, Inc., and certain subsidiaries of Holdings entered into the First Amendment (First Amendment) to the Credit Agreement. The First Amendment, among other things, established $340 million in incremental term loan A commitments with a maturity date of July 29, 2024 (Term Loan A Facility due 2024), reduced the availability under the Revolving Credit Facility from $932 million to $925 million, and extended the maturity date of the Revolving Credit Facility from April 6, 2022 to July 29, 2024, and modified the applicable margin with respect to interest rates under the Term Loan A Facility due 2024 and interest rates and commitment fees under the Revolving Credit Facility. The applicable margin and the maturity date for the Term Loan B Facility remain unchanged. The proceeds of $340 million were used to repay all of the outstanding loans under the existing Term Loan A Facility and a portion of the outstanding Term Loan B Facility, resulting in no additional indebtedness. This also satisfies all payment requirements under the Term Loan B Facility until maturity in 2024.

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

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

At September 30, 2020, we had $891.4 million available under the Revolving Credit Facility. This availability reflects a reduction of $33.6 million for standby letters of credit issued against the facility. The proceeds of the Revolving Credit Facility are used for general corporate purposes.

The Senior Secured Credit Facilities provide back-up liquidity for our foreign credit facilities. We intend to use the availability of long-term financing under the Senior Secured Credit Facilities to refinance any current maturities related to such debt agreements that are not otherwise refinanced on a long-term basis in their local markets, except where otherwise reclassified to Current portion of long-term debt on our Condensed Consolidated Balance Sheet.

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

Redemption of 6.625% Notes due 2022 In the first quarter of 2020, we voluntarily redeemed a portion of our 6.625% Notes due 2022. This resulted in a principal payment of $100 million and $2.0 million in accrued interest. We also expensed approximately $0.4 million for the write-off of the unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing, and approximately $1.1 million for an early redemption premium.

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

Foreign credit facilities We utilize local currency credit facilities to finance the operations of certain foreign subsidiaries. At September 30, 2020, $104.5 million was outstanding under our foreign credit facilities, as compared to $106.0 million at December 31, 2019. At September 30, 2020, an additional $54.7 million was available under our foreign credit facilities.

Weighted-Average Interest Rate The weighted-average interest rate of our long-term debt outstanding was 5.7% at September 30, 2020 and 5.8% at December 31, 2019.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. DERIVATIVES

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

Currency derivative contracts From time to time, we use foreign currency forward contracts to reduce the effects of fluctuations in exchange rates relating to certain foreign currencies. As of September 30, 2020, we have currency forward contracts outstanding with a total notional amount of $155.8 million that hedge our exposure to changes in foreign currency exchange rates for certain payroll expenses into the second quarter of 2023 and other items into the second quarter of 2021.

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

Also in the first quarter of 2020, we entered into a new fixed-to-fixed cross-currency swap to reduce the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans. As of September 30, 2020, the notional amount of the fixed-to-fixed cross-currency swap was $234.4 million, and hedges our exposure to changes in exchange rates on the intercompany loans into the second quarter of 2024.

Variable-to-fixed interest rate swap In 2019, we entered into a variable-to-fixed interest rate swap to reduce the variability of cash flows associated with interest payments on our variable rate debt. We have the following notional amounts hedged in relation to our variable-to-fixed interest rate swap: $900.0 million through May 2021, $750.0 million through May 2022, $600.0 million through May 2023 and $500.0 million through May 2024.

The following table summarizes the reclassification of derivative gains and losses into net income from accumulated other comprehensive income (loss) for those derivative instruments designated as cash flow hedges under ASC 815 - Derivatives and Hedging:


	Location	Gain (Loss) Reclassified During								Total of Financial		Gain (Loss) Expected
	of Gain (Loss)	Three Months Ended				Nine Months Ended				Statement		to be Reclassified
	Reclassified into	September 30,				September 30,				Line Item		During the
	Net Income	2020		2019		2020		2019		2020		Next 12 Months
		(in millions)

Currency forward contracts	Cost of Goods Sold	$	(1.3)	$	0.9	$	(2.3)	$	1.8	$	2,926.7	$	(2.6)
Fixed-to-fixed cross-currency swap	Other Income (Expense), net	(9.3)		7.6		(9.3)		7.6		(3.8)		1.7
Variable-to-fixed interest rate swap	Interest Expense	(4.1)		(1.7)		(10.1)		0.2		(160.0)		(15.9)

See Note 12 - Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (AOCI) for amounts recognized in other comprehensive income (loss) during the three and nine months ended September 30, 2020 and 2019.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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


		Gain (Loss) Recognized During								Total of Financial
	Location of Gain (Loss)	Three Months Ended				Nine Months Ended				Statement Line
	Recognized in	September 30,				September 30,				Item
	Net Income	2020		2019		2020		2019		2020
		(in millions)

Currency forward contracts	Cost of Goods Sold	$	0.9	$	(0.5)	$	(6.7)	$	1.3	$	2,926.7
Currency forward contracts	Other Income (Expense), net	—		0.1		(0.5)		(0.5)		(3.8)

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. FAIR VALUE

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

•Level 1: Observable inputs such as quoted prices in active markets;

•Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

•Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Financial instruments The estimated fair value of our financial assets and liabilities that are recognized at fair value on a recurring basis, using available market information and other observable data, are as follows:


	September 30, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Input
	(in millions)
Balance Sheet Classification
Cash equivalents	$	216.0	$	216.0	$	271.3	$	271.3	Level 1
Prepaid expenses and other
Cash flow hedges - currency forward contracts	0.5		0.5		5.0		5.0		Level 2
Cash flow hedges - variable-to-fixed interest rate swap	5.6		5.6		0.9		0.9		Level 2
Nondesignated - currency forward contracts	—		—		1.9		1.9		Level 2

Other assets and deferred charges
Cash flow hedges - currency forward contracts	0.7		0.7		3.4		3.4		Level 2
Cash flow hedges - fixed-to-fixed cross-currency swap	—		—		1.1		1.1		Level 2
Cash flow hedges - variable-to-fixed interest rate swap	10.5		10.5		2.2		2.2		Level 2
Accrued expenses and other
Cash flow hedges - currency forward contracts	3.1		3.1		—		—		Level 2
Cash flow hedges - variable-to-fixed interest rate swap	19.1		19.1		7.9		7.9		Level 2
Nondesignated - currency forward contracts	0.1		0.1		—		—		Level 2
Postretirement benefits and other long-term liabilities
Cash flow hedges - currency forward contracts	2.9		2.9		—		—		Level 2
Cash flow hedges - fixed-to-fixed cross-currency swap	8.6		8.6		—		—		Level 2
Cash flow hedges - variable-to-fixed interest rate swap	36.9		36.9		18.4		18.4		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.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

We estimated the fair value of the amounts outstanding on our debt using available market information and other observable data, to be as follows:


	September 30, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Input
	(in millions)

Revolving Credit Facility	$	—	$	—	$	—	$	—	Level 2
Term Loan A Facility	337.9		323.1		340.0		337.9		Level 2
Term Loan B Facility	1,188.8		1,129.4		1,188.8		1,174.0		Level 2



6.875% Notes due 2028	400.0		388.0		—		—		Level 2
6.625% Notes due 2022	—		—		450.0		455.4		Level 2
6.50% Notes due 2027	500.0		482.5		500.0		516.3		Level 2
6.25% Notes due 2026	400.0		386.0		400.0		409.0		Level 2
6.25% Notes due 2025	700.0		676.6		700.0		716.6		Level 2

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				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
	(in millions)

Service cost	$	0.5	$	0.4	$	1.5	$	1.1
Interest cost	5.4		7.1		16.2		21.3
Expected asset return	(9.6)		(10.3)		(28.9)		(30.9)
Amortized loss	2.1		1.5		6.4		4.7


Settlement	—		0.4		—		0.4
Net periodic benefit credit	$	(1.6)	$	(0.9)	$	(4.8)	$	(3.4)

	Other Postretirement Benefits
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
	(in millions)

Service cost	$	0.1	$	—	$	0.3	$	0.2
Interest cost	2.6		3.3		7.7		9.7
Amortized loss	0.3		—		0.8		0.1
Amortized prior service credit	(0.4)		(0.4)		(1.2)		(1.2)


Net periodic benefit cost	$	2.6	$	2.9	$	7.6	$	8.8

The noncurrent liabilities associated with our pension and other postretirement benefit plans are classified as Postretirement benefits and other long-term liabilities on our Condensed Consolidated Balance Sheets. As of September 30, 2020 and December 31, 2019, we have a noncurrent pension liability of $105.4 million and $118.2 million, respectively. As of September 30, 2020 and December 31, 2019, we have a noncurrent other postretirement benefits liability of $515.7 million and $520.0 million, respectively.

Due to the availability of our pre-funded pension balances (previous contributions in excess of prior required pension contributions) related to certain of our U.S. pension plans, we expect our regulatory pension funding requirements in 2020 to be approximately $1.5 million. We expect our cash payments for other postretirement benefit obligations in 2020, net of GM cost sharing, to be approximately $17 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				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
	(in millions)

Beginning balance	$	63.9	$	55.7	$	62.0	$	57.7
Accruals	4.4		5.3		9.2		14.7
Payments	(3.8)		(0.9)		(5.8)		(8.2)
Adjustment to prior period accruals	(0.1)		0.7		(0.6)		(3.6)
Foreign currency translation	0.2		(0.5)		(0.2)		(0.3)
Ending balance	$	64.6	$	60.3	$	64.6	$	60.3

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. INCOME TAXES

We adjust our effective tax rate each quarter based on our estimated annual effective tax rate. We also record the tax impact of certain discrete, unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur. In addition, jurisdictions with a projected loss for the year or a year-to-date loss where no tax benefit can be recognized are excluded from the estimated annual effective tax rate. The impact of such an exclusion could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings versus annual projections.

Income tax was a benefit of $22.5 million for the three months ended September 30, 2020, an effective income tax rate of (23.8)%, as compared to a benefit of $40.4 million for the three months ended September 30, 2019, an effective income tax rate of 24.6%. Income tax was a benefit of $63.1 million for the nine months ended September 30, 2020, an effective income tax rate of 9.6%, as compared to a benefit of $37.4 million for the nine months ended September 30, 2019, an effective income tax rate of 55.7%.

In accordance with the guidance in ASC 740 - Income Taxes, we review the likelihood that we will realize the benefit of deferred tax assets and estimate whether recoverability of our deferred tax assets is "more likely than not" based on the available evidence. During the previous three month period ended June 30, 2020, we determined that a portion of our deferred tax assets related to U.S. interest expense carryforwards were not more likely than not to be realized and, as such, we recorded a valuation allowance resulting in tax expense of approximately $36.0 million during the second quarter of 2020.

As enacted under the TCJA on December 22, 2017, and as amended by the the CARES Act, section 163(j) of the Internal Revenue Code generally limits the deductibility of net business interest expense to 30% (or for certain years as provided under the CARES Act, 50%) of “adjusted taxable income” for taxable years beginning after December 31, 2017. On July 28, 2020, the Internal Revenue Service and the U.S. Department of Treasury issued final regulations (the Final Regulations) and concurrently issued new proposed regulations (the New Proposed Regulations) under section 163(j) that provide a number of important additional changes and clarifications to the Final Regulations. Based upon the Final Regulations and New Proposed Regulations, which were issued during the three months ended September 30, 2020, as well as the amendments to section 163(j) made by the CARES Act, we have determined that our deferred tax assets related to U.S. interest expense carryforwards are more likely than not to be realized and, as such, we have released the valuation allowance recorded during the second quarter of 2020 resulting in approximately $36.0 million of income tax benefit during the three month period ended September 30, 2020.

Due to the uncertainty associated with the extent and ultimate impact of COVID-19 on global automotive production volumes, we may experience lower than projected earnings in certain jurisdictions in future periods, and it is reasonably possible that changes in valuation allowances could be recognized in the next twelve months as a result.

During the nine months ended September 30, 2020, we finalized an advance pricing agreement in a foreign jurisdiction, which resulted in a tax benefit of approximately $6.8 million, and we recognized a tax benefit of approximately $7.0 million related to our ability to carry back projected current year losses under the CARES Act to years with the previous 35% tax rate. This is in addition to a net tax benefit of approximately $7.5 million that we recognized in the first quarter of 2020 related to our ability to carry back losses from prior years under the CARES Act. See Note 1 - Organization and Basis of Presentation for additional detail regarding the CARES Act.

Our effective income tax rates for the three and nine months ended September 30, 2020 vary from our effective income tax rates for the three and nine months ended September 30, 2019, as a result of the items discussed above. Further, our effective income tax rate for the nine months ended September 30, 2020 varies from our effective income tax rate for the nine months ended September 30, 2019 as a result of the impact of the goodwill impairment charge recorded during the first nine months of 2020, which had no corresponding income tax benefit. In addition, in the first nine months of 2019, we recognized an income tax benefit of $9.3 million related to final regulations issued by the Department of Treasury and Internal Revenue Service in the first quarter of 2019. The final regulations changed the manner in which we were required to compute the one-time transition tax under the TCJA that was imposed on certain foreign earnings for which U.S. income tax was previously deferred.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the three and nine months ended September 30, 2020 and 2019, our effective income tax rates vary from the U.S. federal statutory rate primarily due to favorable foreign tax rates, the impact of tax credits, and the effect of the items described above.

We operate in multiple jurisdictions throughout the world and the income tax returns of several subsidiaries in various tax jurisdictions are currently under examination. We are currently under a U.S. federal income tax examination for the years 2015 through 2018. Generally, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2013. In the second quarter of 2020, we finalized an advance pricing agreement in a foreign jurisdiction, which resulted in a cash payment to the tax authorities of $18.5 million and a reduction of our liability for unrecognized tax benefits and related interest and penalties of $25.3 million.

Based on the status of ongoing tax audits, and the protocol of finalizing audits by the relevant tax authorities, it is not possible to estimate the impact of changes, if any, to previously recorded uncertain tax positions. 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 September 30, 2020 and December 31, 2019, we have recorded a liability for unrecognized income tax benefits and related interest and penalties of $23.3 million and $52.6 million, respectively.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. EARNINGS (LOSS) PER SHARE (EPS)

We present EPS using the two-class method. This method allocates undistributed earnings between common shares and non-vested share based payment awards that entitle the holder to non-forfeitable dividend rights. Our participating securities include non-vested restricted stock units.

The following table sets forth the computation of our basic and diluted EPS available to shareholders of common stock (excluding participating securities):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
	(in millions, except per share data)
Numerator
Net income (loss) attributable to AAM	$	117.2	$	(124.2)	$	(597.3)	$	(30.1)
Less: Net income attributable to participating securities	(5.1)		—		—		—


Net income (loss) attributable to common shareholders - Basic and Dilutive	$	112.1	$	(124.2)	$	(597.3)	$	(30.1)

Denominators
Basic common shares outstanding -
Weighted-average shares outstanding	118.4		115.8		117.7		115.6
Less: Participating securities	(5.1)		(3.3)		(4.7)		(3.3)
Weighted-average common shares outstanding	113.3		112.5		113.0		112.3

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

Diluted shares outstanding -
Adjusted weighted-average shares after assumed conversions	113.3		112.5		113.0		112.3

Basic EPS	$	0.99	$	(1.10)	$	(5.28)	$	(0.27)

Diluted EPS	$	0.99	$	(1.10)	$	(5.28)	$	(0.27)

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (AOCI)

Reclassification adjustments and other activity impacting accumulated other comprehensive income (loss) during the three months ended September 30, 2020 and September 30, 2019 are as follows (in millions):


	Defined Benefit Plans			Foreign Currency Translation Adjustments		Unrecognized Gain (Loss) on Cash Flow Hedges			Total
Balance at June 30, 2020	$	(256.6)		$	(144.9)	$	(41.7)		$	(443.2)

Other comprehensive income (loss) before reclassifications	—			14.0		(7.8)			6.2

Income tax effect of other comprehensive income (loss) before reclassifications	—			—		2.6			2.6

Amounts reclassified from accumulated other comprehensive loss	2.1		(a)	—		14.7		(b)	16.8

Income taxes reclassified into net income	(0.4)			—		(2.8)			(3.2)

Net change in accumulated other comprehensive loss	1.7			14.0		6.7			22.4

Balance at September 30, 2020	$	(254.9)		$	(130.9)	$	(35.0)		$	(420.8)


	Defined Benefit Plans			Foreign Currency Translation Adjustments		Unrecognized Gain (Loss) on Cash Flow Hedges			Total
Balance at June 30, 2019	$	(239.8)		$	(94.2)	$	(19.4)		$	(353.4)

Other comprehensive income (loss) before reclassifications	(2.9)			(37.1)		(0.7)			(40.7)

Income tax effect of other comprehensive income (loss) before reclassifications	0.6			—		(0.1)			0.5

Amounts reclassified from accumulated other comprehensive loss	1.3		(a)	—		(6.8)		(b)	(5.5)

Income taxes reclassified into net income	(0.3)			—		1.2			0.9

Net change in accumulated other comprehensive loss	(1.3)			(37.1)		(6.4)			(44.8)

Balance at September 30, 2019	$	(241.1)		$	(131.3)	$	(25.8)		$	(398.2)


(a)			These amounts were reclassified from AOCI to Other income (expense), net for the three months ended September 30, 2020 and September 30, 2019.

(b)			The amounts reclassified from AOCI included $1.3 million in cost of goods sold (COGS), $4.1 million in interest expense and $9.3 million in Other income (expense), net for the three months ended September 30, 2020 and $(0.9) million in COGS, $1.7 million in interest expense and $(7.6) million in Other income (expense), net for the three months ended September 30, 2019.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Reclassification adjustments and other activity impacting accumulated other comprehensive income (loss) during the nine months ended September 30, 2020 and September 30, 2019 are as follows (in millions):


	Defined Benefit Plans			Foreign Currency Translation Adjustments		Unrecognized Gain (Loss) on Cash Flow Hedges			Total
Balance at December 31, 2019	$	(259.9)		$	(101.2)	$	(15.7)		$	(376.8)

Other comprehensive income (loss) before reclassifications	—			(29.7)		(42.6)			(72.3)

Income tax effect of other comprehensive income (loss) before reclassifications	—			—		5.7			5.7

Amounts reclassified from accumulated other comprehensive loss	6.2		(a)	—		21.7		(b)	27.9

Income taxes reclassified into net income	(1.2)			—		(4.1)			(5.3)

Net change in accumulated other comprehensive loss	5.0			(29.7)		(19.3)			(44.0)

Balance at September 30, 2020	$	(254.9)		$	(130.9)	$	(35.0)		$	(420.8)


	Defined Benefit Plans			Foreign Currency Translation Adjustments		Unrecognized Gain (Loss) on Cash Flow Hedges			Total
Balance at December 31, 2018	$	(213.9)		$	(96.6)	$	(1.1)		$	(311.6)

Other comprehensive income (loss) before reclassifications	(30.8)		(c)	(34.7)		(22.4)			(87.9)

Income tax effect of other comprehensive income (loss) before reclassifications	0.6			—		5.7			6.3

Amounts reclassified from accumulated other comprehensive income (loss)	3.8		(a)	—		(9.6)		(b)	(5.8)

Income taxes reclassified into net income	(0.8)			—		1.6			0.8

Net change in accumulated other comprehensive income (loss)	(27.2)			(34.7)		(24.7)			(86.6)

Balance at September 30, 2019	$	(241.1)		$	(131.3)	$	(25.8)		$	(398.2)


(a)			These amounts were reclassified from AOCI to Other income (expense), net for the nine months ended September 30, 2020 and September 30, 2019.

(b)			The amounts reclassified from AOCI included $2.3 million in COGS, $10.1 million in interest expense and $9.3 million in Other income (expense), net for the nine months ended September 30, 2020 and $(1.8) million in COGS, $(0.2) million in interest expense and $(7.6) million in Other income (expense), net for the nine months ended September 30, 2019.

(c)			ASU 2018-02 became effective on January 1, 2019, and we elected to reclassify the stranded tax effects caused by the 2017 Tax Cuts and Jobs Act, resulting in a decrease in Accumulated other comprehensive income (loss) of $27.7 million at January 1, 2019.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. REVENUE FROM CONTRACTS WITH CUSTOMERS

Net sales recognized from contracts with customers, disaggregated by segment and geographical location, are presented in the following table for the three and nine months ended September 30, 2020 and 2019. Net sales are attributed to regions based on the location of production. Intersegment sales have been excluded from the table.

In the fourth quarter of 2019, we completed the Casting Sale. The Casting Sale did not include the entities that conduct AAM's casting operations in El Carmen, Mexico, which are now included in our Driveline segment. The Casting Sale did not qualify for classification as discontinued operations, as it did not represent a strategic shift in our business that has had, or will have, a major effect on our operations and financial results. As such, we continue to present Casting as a segment in the table below for the three and nine months ended September 30, 2019, and the reported amounts are now comprised entirely of the U.S. casting operations that were included in the sale. The amounts previously reported in our Casting segment for the retained operations in El Carmen, Mexico have been reclassified to our Driveline segment for the three and nine months ended September 30, 2019.


	Three Months Ended September 30, 2020
	Driveline		Metal Forming		Casting		Total
North America	$	870.8	$	252.1	$	—	$	1,122.9
Asia	116.7		12.2		—		128.9
Europe	94.1		53.4		—		147.5
South America	12.3		2.5		—		14.8
Total	$	1,093.9	$	320.2	$	—	$	1,414.1

	Three Months Ended September 30, 2019
	Driveline		Metal Forming		Casting		Total
North America	$	917.0	$	296.9	$	155.4	$	1,369.3
Asia	131.0		10.3		—		141.3
Europe	77.9		61.1		—		139.0
South America	26.5		1.3		—		27.8
Total	$	1,152.4	$	369.6	$	155.4	$	1,677.4


	Nine Months Ended September 30, 2020
	Driveline		Metal Forming		Casting		Total
North America	$	1,922.5	$	597.4	$	—	$	2,519.9
Asia	307.9		28.3		—		336.2
Europe	239.3		139.1		—		378.4
South America	32.7		5.7		—		38.4
Total	$	2,502.4	$	770.5	$	—	$	3,272.9

	Nine Months Ended September 30, 2019
	Driveline		Metal Forming		Casting		Total
North America	$	2,688.9	$	903.7	$	509.1	$	4,101.7
Asia	419.3		25.7		—		445.0
Europe	270.3		201.0		—		471.3
South America	78.2		4.7		—		82.9
Total	$	3,456.7	$	1,135.1	$	509.1	$	5,100.9

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Contract Assets and Liabilities

The following table summarizes our beginning and ending balances for accounts receivable and contract liabilities associated with our contracts with customers:



	Accounts Receivable, Net		Contract Liabilities (Current)		Contract Liabilities (Long-term)
December 31, 2019	$	815.4	$	18.9	$	83.7
September 30, 2020	900.8		22.8		75.6
Increase/(decrease)	$	85.4	$	3.9	$	(8.1)

Contract liabilities relate to deferred revenue associated with various settlements and commercial agreements for which we have a future performance obligation to the customer. We recognize this deferred revenue into revenue over the life of the associated program as we satisfy our performance obligations to the customer. We do not have contract assets as defined in ASC 606. During the three and nine months ended September 30, 2020, we amortized $5.4 million and $17.3 million, respectively, of previously recorded contract liabilities into revenue as we satisfied performance obligations with our customers.

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. In the fourth quarter of 2019, we completed the Casting Sale, which did not include the entities that conduct AAM's casting operations in El Carmen, Mexico, which are now included in our Driveline segment. The Casting Sale did not qualify for classification as discontinued operations, as it did not represent a strategic shift in our business that has had, or will have, a major effect on our operations and financial results. As such, we continue to present Casting as a segment in the table below for the three and nine months ended September 30, 2019, and the reported amounts are now comprised entirely of the U.S. casting operations that were included in the sale. The amounts previously reported in our Casting segment for the retained operations in El Carmen, Mexico have been reclassified to our Driveline segment for the three and nine months ended September 30, 2019.

The results of each segment are regularly reviewed by the chief operating decision maker to assess the performance of the segment and make decisions regarding the allocation of resources to the segments.

Our product offerings by segment are as follows:

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

•Metal Forming products consist primarily of axle and transmission shafts, ring and pinion gears, differential gears and assemblies, connecting rods and variable valve timing products for Original Equipment Manufacturers and Tier 1 automotive suppliers.

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, gain (loss) on the sale of a business, impairment charges, pension settlements and non-recurring items.

The following tables represent information by reportable segment for the three months ended September 30, 2020 and 2019 (in millions):


	Three Months Ended September 30, 2020
	Driveline		Metal Forming		Casting		Total
Sales	$	1,094.5	$	433.2	$	—	$	1,527.7
Less: intersegment sales	0.6		113.0		—		113.6
Net external sales	$	1,093.9	$	320.2	$	—	$	1,414.1

Segment Adjusted EBITDA	$	207.4	$	89.7	$	—	$	297.1

	Three Months Ended September 30, 2019
	Driveline		Metal Forming		Casting		Total
Sales	$	1,186.8	$	476.6	$	168.4	$	1,831.8
Less: intersegment sales	34.4		107.0		13.0		154.4
Net external sales	$	1,152.4	$	369.6	$	155.4	$	1,677.4

Segment Adjusted EBITDA	$	181.0	$	79.3	$	5.5	$	265.8

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following tables represent information by reportable segment for the nine months ended September 30, 2020 and 2019 (in millions):


	Nine Months Ended September 30, 2020
	Driveline		Metal Forming		Casting		Total
Sales	$	2,529.9	$	1,005.8	$	—	$	3,535.7
Less: intersegment sales	27.5		235.3		—		262.8
Net external sales	$	2,502.4	$	770.5	$	—	$	3,272.9

Segment Adjusted EBITDA	$	315.5	$	142.8	$	—	$	458.3

	Nine Months Ended September 30, 2019
	Driveline		Metal Forming		Casting		Total
Sales	$	3,534.6	$	1,444.1	$	541.6	$	5,520.3
Less: intersegment sales	77.9		309.0		32.5		419.4
Net external sales	$	3,456.7	$	1,135.1	$	509.1	$	5,100.9

Segment Adjusted EBITDA	$	485.9	$	250.2	$	40.7	$	776.8

The following table represents a reconciliation of Total Segment Adjusted EBITDA to consolidated income (loss) before income taxes for the three and nine months ended September 30, 2020 and 2019 (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Total segment adjusted EBITDA	$	297.1	$	265.8	$	458.3	$	776.8
Interest expense	(53.9)		(54.3)		(160.0)		(163.9)
Depreciation and amortization	(125.0)		(134.2)		(393.7)		(411.5)
Restructuring and acquisition-related costs	(9.7)		(11.7)		(38.6)		(36.0)

Loss on sale of business	—		—		(1.0)		—

Debt refinancing and redemption costs	(5.2)		(5.1)		(6.7)		(7.5)
Impairment charges	—		(225.0)		(510.0)		(225.0)
Non-recurring items:
Malvern Fire charges, net of recoveries	(8.6)		—		(8.6)		—


Income (loss) before income taxes	$	94.7	$	(164.5)	$	(660.3)	$	(67.1)

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, 2019.

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

We are a global Tier 1 supplier to the automotive industry. We design, engineer and manufacture driveline and metal forming products that are making the next generation of vehicles smarter, lighter, safer and more efficient. We employ approximately 20,000 associates, operating at nearly 80 facilities in 17 countries, to support our customers on global and regional platforms with a focus on quality, operational excellence and technology leadership.

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 in the first nine months of 2020, 38% in the first nine months of 2019, and 37% for the full year 2019.

We also supply driveline system products to FCA US LLC (FCA) for heavy-duty Ram full-size pickup trucks and its derivatives, the AWD Jeep Cherokee, and a passenger car driveshaft program. In addition, we sell various products to FCA from our Metal Forming segment. Sales to FCA were approximately 18% of our consolidated net sales in the first nine months of 2020, 16% in the first nine months of 2019, and 17% for the full year 2019.

We are also a supplier to Ford Motor Company (Ford) for driveline system products on certain vehicle programs, and we sell various products to Ford from our Metal Forming segment. Sales to Ford were approximately 12% of our consolidated net sales in the first nine months of 2020, and were approximately 9% for both the first nine months of 2019 and the full year of 2019.

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

Impact of Novel Coronavirus (COVID-19)

COVID-19 Operational Impact and AAM Actions

In March of 2020, COVID-19 was designated by the World Health Organization as a pandemic illness and began to significantly disrupt global automotive production. In an effort to mitigate the spread of COVID-19, many governmental and public health agencies in locations in which we operate implemented shelter-in-place orders or similar measures. The majority of our customers temporarily ceased or significantly reduced production near the end of March, which continued into the second half of the second quarter. As a result, substantially all of our manufacturing facilities either temporarily suspended production or experienced significant reductions in volumes during this period.

At AAM, safety is our top responsibility and that includes the health and wellness of our associates globally. In response to COVID-19, we instituted several operational measures to ensure the safety of our associates, which included the following:

•Assembled a COVID-19 Task Force comprised of AAM's senior leadership working closely with associates across several functions and regions to coordinate decision making and communication related to actions taken by AAM to mitigate the impact of COVID-19;

•Suspended or reduced production at manufacturing facilities and directed associates who could do so to work remotely;

•Maintained communication with customers, including planning for business resumption and monitoring announcements regarding new program deferrals or other changes;

•Initiated thorough cleaning and decontamination procedures at many of our manufacturing facilities in preparation for resuming production; and

•Designed additional safety measures to further protect associates as production is restored and our associates resume working in our global facilities.

By the end of the first quarter of 2020, our manufacturing locations in Asia, which were impacted by COVID-19 earlier than other global regions, were beginning to stabilize and return to more normalized levels of production. We restarted operations in North America and Europe in May 2020, and we have continued to ramp up production, along with our customers and supply base, through the third quarter of 2020. Continuing to maintain more normalized levels of production will depend on future developments, including the potential extension of shelter-in-place orders and increased levels of production by our customers, which are outside of our control. We continue to monitor the impact of COVID-19 on our suppliers, as well as on our customers and their suppliers.

Financial Impact of COVID-19

We estimate that the impact of COVID-19 on net sales was approximately $87 million and $1,203 million for the three and nine months ended September 30, 2020, respectively. Further, we estimate that the impact to gross profit of this reduction in net sales was approximately $16 million and $362 million for the three and nine months ended September 30, 2020, respectively. Due to the significant uncertainty associated with the extent of the impact of COVID-19, including the possibility of a resurgence of COVID-19 cases and our ability to sustain more normalized levels of production, we cannot estimate the ultimate impact of COVID-19 on our results of operations and financial condition.

In order to mitigate the financial impact of COVID-19, we have continued our emphasis on cost management, and have implemented additional measures to adjust to our customers’ revised production schedules, including:

•Continuing to flex our variable cost structure;

•Continuing to manage our controllable expenses, net of costs to ensure the health and safety of our associates;

•Reducing the annual cash retainer for each non-employee director by 40% through September 30, 2020;

•Reducing salaries for executive officers by 30% and for certain other associates by various percentages depending on level through September 30, 2020;

•Reducing our projected capital expenditures for the year;

•Amending our Credit Agreement to, among other things, revise our financial maintenance covenants to provide additional financial flexibility; and

•Pursuing options to defer and reduce tax payments through the CARES Act and similar global initiatives.

The measures we are taking to address the impact of COVID-19 are expected to remain in place until further clarity can be achieved regarding the recovery and stabilization of the global economy, as well as the resulting impact of COVID-19 on the global automotive industry. We expect to adjust our use of these measures, to the extent possible, based on production volumes and customer demand.

RESULTS OF OPERATIONS –– THREE MONTHS ENDED SEPTEMBER 30, 2020 AS COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2019

Net Sales Net sales were $1,414.1 million in the third quarter of 2020, as compared to $1,677.4 million in the third quarter of 2019. Our change in sales in the third quarter of 2020, as compared to the third quarter of 2019, primarily reflects an estimated reduction of approximately $87 million associated with the decline in global automotive production as a result of COVID-19, and a reduction of approximately $155 million as a result of the sale of the U.S. operations of our Casting business that was completed in the fourth quarter of 2019 (the Casting Sale). Net sales in the third quarter of 2020, as compared to the third quarter of 2019, also decreased by approximately $15 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 Cost of goods sold was $1,164.3 million in the third quarter of 2020, as compared to $1,428.7 million in the third quarter of 2019. The change in cost of goods sold principally reflects an estimated reduction of approximately $71 million associated with the decline in global automotive production as a result of COVID-19, and a reduction of $153 million as a result of the Casting Sale. Cost of goods sold was also impacted by a decrease of approximately $15 million related to metal market pass-through costs and the impact of foreign exchange, as well as the impact of improved operating performance and lower launch costs and our emphasis on cost management, including the additional measures that we implemented in response to the impact of COVID-19.

For the three months ended September 30, 2020, material costs were approximately 58% of total cost of goods sold, as compared to approximately 55% for the three months ended September 30, 2019.

Gross Profit Gross profit was $249.8 million in the third quarter of 2020, as compared to $248.7 million in the third quarter of 2019. Gross margin was 17.7% in the third quarter of 2020, as compared to 14.8% in the third quarter of 2019. 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) SG&A (including research and development (R&D)) was $66.5 million or 4.7% of net sales in the third quarter of 2020, as compared to $92.7 million or 5.5% of net sales in the third quarter of 2019. R&D expense, net of customer engineering, design and development (ED&D) recoveries, was approximately $18.0 million in the third quarter of 2020, as compared to $37.4 million in the third quarter of 2019. The decrease in SG&A expense in the three months ended September 30, 2020, as compared to the three months ended September 30, 2019, was primarily attributable to lower net R&D expense, which includes a customer ED&D recovery of approximately $15 million. The decrease in SG&A also reflects lower compensation-related expense due, in part, to our restructuring initiatives and the impact of our emphasis on cost management, including the additional measures that we implemented in response to the impact of COVID-19.

Amortization of Intangible Assets Amortization expense related to intangible assets was $21.6 million for the three months ended September 30, 2020 and $23.7 million for the three months ended September 30, 2019. The reduction in amortization expense related to intangible assets reflects the Casting Sale and the disposal of the intangible assets associated with this business.

Impairment Charge In conjunction with the Casting Sale, the assets and liabilities associated with this business met the criteria to be classified as held-for-sale in our Condensed Consolidated Balance Sheet as of September 30, 2019. Upon reclassification to held-for-sale in the third quarter of 2019, we recorded a pre-tax impairment charge of $225.0 million to reduce the carrying value of this business to fair value less cost to sell.

Restructuring and Acquisition-Related Costs Restructuring and acquisition-related costs were $9.7 million in the third quarter of 2020 and $11.7 million in the third quarter of 2019. See Note 2 - Restructuring and Acquisition-Related Costs for additional detail.

Operating Income (Loss) Operating income was $152.0 million in the third quarter of 2020, as compared to operating loss of $104.4 million in the third quarter of 2019. Operating margin was 10.7% in the third quarter of 2020, as compared to (6.2)% in the third quarter of 2019. The changes in operating income (loss) and operating margin were primarily due to factors discussed in Net Sales, Cost of Goods Sold, SG&A and Impairment Charge above.

Interest Expense and Interest Income Interest expense was $53.9 million in the third quarter of 2020, as compared to $54.3 million in the third quarter of 2019. Interest income was $3.4 million in the third quarter of 2020, as compared to $2.2 million in the third quarter of 2019. The weighted-average interest rate of our long-term debt outstanding was 5.6% in the third quarter of 2020 and 5.8% in the third quarter of 2019.

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

In the third quarter of 2019, Holdings, AAM, Inc., and certain subsidiaries of Holdings entered into the First Amendment to the Credit Agreement. As a result, we expensed $5.1 million for the write-off of the unamortized debt issuance costs related to the existing Term Loan A Facility and a portion of the unamortized debt issuance costs related to our Term Loan B Facility that we had been amortizing over the expected life of the borrowings.

Other Expense, Net Other expense, net includes the net effect of foreign exchange gains and losses, our proportionate share of earnings from equity in unconsolidated subsidiaries, and all components of net periodic pension and postretirement benefit costs other than service cost. Other expense, net was $1.6 million in the third quarter of 2020, as compared to $2.9 million in the third quarter of 2019.

Income Tax Benefit Income tax was a benefit of $22.5 million for the three months ended September 30, 2020, as compared to a benefit of $40.4 million for the three months ended September 30, 2019. Our effective income tax rate was (23.8)% in the third quarter of 2020, as compared to 24.6% in the third quarter of 2019.

We review the likelihood that we will realize the benefit of deferred tax assets and estimate whether recoverability of our deferred tax assets is "more likely than not" based on the available evidence. During the previous three month period ended June 30, 2020, we determined that a portion of our deferred tax assets related to U.S. interest expense carryforwards were not more likely than not to be realized and, as such, we recorded a valuation allowance resulting in tax expense of approximately $36.0 million during the second quarter of 2020.

As enacted under the Tax Cuts and Jobs Act (TCJA), on December 22, 2017, and as amended by the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), section 163(j) of the Internal Revenue Code generally limits the deductibility of net business interest expense to 30% (or for certain years as provided under the CARES Act, 50%) of “adjusted taxable income” for taxable years beginning after December 31, 2017. On July 28, 2020, the Internal Revenue Service and the U.S. Department of Treasury issued final regulations (the Final Regulations) and concurrently issued new proposed regulations (the New Proposed Regulations) under section 163(j) that provide a number of important additional changes and clarifications to the Final Regulations. Based upon the Final Regulations and New Proposed Regulations, which were issued during the three months ended September 30, 2020, as well as the amendments to section 163(j) made by the CARES Act, we have determined that our deferred tax assets related to U.S. interest expense carryforwards are more likely than not to be realized and, as such, we have released the valuation allowance recorded during the second quarter of 2020 resulting in approximately $36.0 million in tax benefit during the three month period ended September 30, 2020.

Our effective income tax rate for the three months ended September 30, 2020 varies from our effective income tax rate for the three months ended September 30, 2019 as a result of the items described above. For the three months ended September 30, 2020 and 2019, our effective income tax rates vary from the U.S. federal statutory rate of 21% primarily due to favorable foreign tax rates, as well as the impact of tax credits and the effect of the items described above.

Net Income (Loss) Attributable to AAM and Earnings (Loss) Per Share (EPS) Net income (loss) attributable to AAM was income of $117.2 million in the third quarter of 2020, as compared to a loss of $124.2 million in the third quarter of 2019. Diluted earnings per share was $0.99 in the third quarter of 2020, as compared to diluted loss per share of $1.10 in the third quarter of 2019. Net income (loss) attributable to AAM and EPS for the third quarters of 2020 and 2019 were primarily impacted by the factors discussed above.

RESULTS OF OPERATIONS –– NINE MONTHS ENDED SEPTEMBER 30, 2020 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2019

Net Sales Net sales were $3,272.9 million in the first nine months of 2020 as compared to $5,100.9 million in the first nine months of 2019. Our change in sales in the first nine months of 2020, as compared to the first nine months of 2019, primarily reflects an estimated reduction of approximately $1,203 million associated with the decline in global automotive production as a result of COVID-19, and a reduction of $509 million as a result of the Casting Sale. Net sales for the first nine months of 2020, as compared to the first nine months of 2019, also decreased by approximately $88 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments.

Cost of Goods Sold Cost of goods sold was $2,926.7 million in the first nine months of 2020 as compared to $4,381.7 million in the first nine months of 2019. The change in cost of goods sold principally reflects an estimated reduction of approximately $841 million associated with the decline in global automotive production as a result of COVID-19, and a reduction of $492 million as a result of the Casting Sale. Cost of goods sold was also impacted by a decrease of approximately $88 million related to metal market pass-through costs and the impact of foreign exchange, as well as the impact of improved operating performance and lower launch costs and our emphasis on cost management, including the additional measures that we implemented in response to the impact of COVID-19.

For the nine months ended September 30, 2020, material costs were approximately 54% of total costs of goods sold as compared to approximately 56% for the nine months ended September 30, 2019. Material costs as a percentage of cost of goods sold declined as a result of lower product shipments caused by COVID-19, which drove lower material costs and caused fixed costs to be a greater component of cost of goods sold.

Gross Profit Gross profit was $346.2 million in the first nine months of 2020 as compared to $719.2 million in the first nine months of 2019. Gross margin was 10.6% in the first nine months of 2020 as compared to 14.1% in the first nine months of 2019. Gross profit and gross margin were impacted by the factors discussed in Net Sales and Cost of Goods Sold above. While we were able to significantly reduce our variable costs during the nine months ended September 30, 2020, the sharp decline in sales that began during the first quarter and extended into the second quarter, as well as the magnitude of the decline in sales, resulted in a reduction of both gross profit and gross margin.

SG&A SG&A (including R&D) was $230.6 million or 7.0% of net sales in the first nine months of 2020 as compared to $274.7 million or 5.4% of net sales in the first nine months of 2019. R&D expense, net of ED&D recoveries, was approximately $86.3 million in the first nine months of 2020 as compared to $104.9 million in the first nine months of 2019. The decrease in SG&A in the first nine months of 2020, as compared to the first nine months of 2019, was primarily attributable to lower net R&D expense, which includes a customer ED&D recovery of approximately $15 million. The decrease in SG&A also reflects lower compensation-related expense due, in part, to our restructuring initiatives and the impact of our emphasis on cost management, including the additional measures that we implemented in response to the impact of COVID-19.

The increase in SG&A as a percentage of sales during the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019, was primarily attributable to the decline in sales as a result of COVID-19.

Amortization of Intangible Assets Amortization expense related to intangible assets for the nine months ended September 30, 2020 was $65.0 million as compared to $73.6 million for the nine months ended September 30, 2019. The reduction in amortization expense related to intangible assets reflects the Casting Sale and the disposal of the intangible assets associated with this business.

Impairment Charges In the first nine months of 2020, the reduction in global automotive production volumes caused by the impact of COVID-19 represented an indicator to test our goodwill for impairment. As a result of this goodwill impairment test, we determined that the carrying values of our Driveline and Metal Forming reporting units were greater than their respective fair values. As such, we recorded a total goodwill impairment charge of $510.0 million in the first nine months of 2020. See Note 3 - Goodwill and Other Intangible Assets for further detail.

In conjunction with the Casting Sale, the assets and liabilities associated with this business met the criteria to be classified as held-for-sale in our Condensed Consolidated Balance Sheet as of September 30, 2019. Upon reclassification to held-for-sale in the third quarter of 2019, we recorded a pre-tax impairment charge of $225.0 million to reduce the carrying value of this business to fair value less cost to sell.

Restructuring and Acquisition-Related Costs Restructuring and acquisition-related costs were $38.6 million for the nine months ended September 30, 2020, as compared to $36.0 million for the nine months ended September 30, 2019. We expect to incur approximately $70 million to $80 million of total restructuring charges in 2020 and we expect to incur integration charges of $10 million to $15 million in 2020 as we finalize the integration of ERP systems at legacy MPG locations. See Note 2 - Restructuring and Acquisition-Related Costs for additional detail regarding our restructuring and integration activity.

Loss on Sale of Business In the first nine months of 2020, we finalized certain customary post-closing calculations associated with the Casting Sale, resulting in an additional loss on sale of $1.0 million.

Operating Income (Loss) Operating income (loss) was a loss of $499.0 million in the first nine months of 2020 as compared to income of $109.9 million in the first nine months of 2019. Operating margin was (15.2)% in the first nine months of 2020 as compared to 2.2% in the first nine months of 2019. The changes in operating income (loss) and operating margin were due primarily to the factors discussed in Net Sales, Cost of Goods Sold, Gross Profit, SG&A, and Impairment Charges above.

Interest Expense and Interest Income Interest expense was $160.0 million in the first nine months of 2020 as compared to $163.9 million in the first nine months of 2019. Interest income was $9.2 million in the first nine months of 2020 as compared to $3.4 million in the first nine months of 2019. The weighted-average interest rate of our long-term debt outstanding was 5.6% for the nine months ended September 30, 2020 and 5.9% for the nine months ended September 30, 2019. We expect our interest expense for the full year 2020 to be approximately $205 million to $215 million.

Debt Refinancing and Redemption Costs In the first quarter of 2020, we voluntarily redeemed $100 million of our 6.625% Notes due 2022. As a result, we expensed approximately $0.4 million for the write-off of the unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing, and approximately $1.1 million for the payment of an early redemption premium.

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

In the first nine months of 2019, Holdings, AAM, Inc., and certain subsidiaries of Holdings entered into the First Amendment to the Credit Agreement. As a result, we expensed $5.1 million for the write-off of the unamortized debt issuance costs related to the existing Term Loan A Facility and a portion of the unamortized debt issuance costs related to our Term Loan B Facility that we had been amortizing over the expected life of the borrowings.

Also in the first nine months of 2019, we voluntarily redeemed the remaining balance outstanding under our 7.75% Notes due 2019. This resulted in a principal payment of $100 million and $0.3 million in accrued interest. We expensed approximately $0.1 million for the write-off of the unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing, and approximately $2.2 million for an early redemption premium.

Other Expense, Net Other expense, net includes the net effect of foreign exchange gains and losses, our proportionate share of earnings from equity in unconsolidated subsidiaries, and all components of net periodic pension and postretirement benefit costs other than service cost. Other expense, net was $3.8 million in the first nine months of 2020 as compared to $9.0 million in the first nine months of 2019.

Income Tax Benefit Income tax was a benefit of $63.1 million for the nine months ended September 30, 2020 as compared to a benefit of $37.4 million for the nine months ended September 30, 2019. Our effective income tax rate was 9.6% in the first nine months of 2020 as compared to 55.7% in the first nine months of 2019.

During the nine months ended September 30, 2020, we recognized the impact of the items discussed under Income Tax Benefit in the "Results of Operations - Three Months Ended September 30, 2020 as Compared to Three Months Ended September 30, 2019" section of this MD&A. Additionally, we recognized a tax benefit in the second quarter of 2020 of approximately $7.0 million related to our ability to carry back projected current year losses under the CARES Act to years with the previous 35% tax rate. Further, during the nine months ended September 30, 2020, we recognized a net tax benefit of approximately $7.5 million related to our ability to carry back losses from prior years under the CARES Act and finalized an advance pricing agreement in a foreign jurisdiction, which resulted in a tax benefit of approximately $6.8 million.

Our effective income tax rate for the nine months ended September 30, 2020 varies from our effective income tax rate for the nine months ended September 30, 2019, as a result of the items described above, and also as a result of the impact of the goodwill impairment charge recorded during the first nine months of 2020, which had no corresponding income tax benefit. In addition, in the first nine months of 2019, we recognized an income tax benefit of $9.3 million related to final regulations issued by the Department of Treasury and Internal Revenue Service in the first quarter of 2019. The final regulations changed the manner in which we were required to compute the one-time transition tax under the Tax Cuts and Jobs Act that was imposed on certain foreign earnings for which U.S. income tax was previously deferred.

For the nine months ended September 30, 2020 and 2019, our effective income tax rates vary from the U.S. federal statutory rate of 21% primarily due to favorable foreign tax rates, as well as the impact of tax credits and the effect of the items described above.

Net Income (Loss) Attributable to AAM and Earnings (Loss) Per Share (EPS) Net income (loss) attributable to AAM was a loss of $597.3 million in the first nine months of 2020 as compared to a loss of $30.1 million in the first nine months of 2019. Diluted EPS was a loss of $5.28 per share in the first nine months of 2020 as compared to a loss of $0.27 per share in the first nine months of 2019. Net income (loss) attributable to AAM and EPS for the first nine months of 2020 and 2019 were primarily impacted by the factors discussed above.

SEGMENT REPORTING

Our business is organized into Driveline and Metal Forming segments, with each representing a reportable segment under ASC 280 Segment Reporting. In the fourth quarter of 2019, we completed the Casting Sale. The Casting Sale did not include the entities that conduct AAM's casting operations in El Carmen, Mexico, which are now included in our Driveline segment. The Casting Sale did not qualify for classification as discontinued operations, as it did not represent a strategic shift in our business that has had, or will have, a major effect on our operations and financial results. As such, we continue to present Casting as a segment in the tables below for the periods prior to the sale, and the reported amounts are now comprised entirely of the U.S. casting operations that were included in the sale. The amounts previously reported in our Casting segment for the retained operations in El Carmen, Mexico have been reclassified to our Driveline segment for the periods presented.

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 and nine months ended September 30, 2020 and 2019 (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Driveline	$	1,094.5	$	1,186.8	$	2,529.9	$	3,534.6
Metal Forming	433.2		476.6		1,005.8		1,444.1
Casting	—		168.4		—		541.6
Eliminations	(113.6)		(154.4)		(262.8)		(419.4)
Net Sales	$	1,414.1	$	1,677.4	$	3,272.9	$	5,100.9

The change in Driveline sales for the three and nine months ended September 30, 2020, as compared to the three and nine months ended September 30, 2019, primarily reflects estimated reductions of approximately $73 million and $992 million, respectively, associated with the impact of the decline in global automotive production as a result of COVID-19. These estimated reductions include approximately $73 million and $934 million, respectively, related to external customers. The

change in Driveline sales also reflects a reduction of approximately $11 million and $47 million, respectively, associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments.

The change in net sales in our Metal Forming segment in the three and nine months ended September 30, 2020, as compared to the three and nine months ended September 30, 2019, primarily reflects estimated reductions of approximately $15 million and $380 million, respectively, associated with the impact of the decline in global automotive production as a result of COVID-19. These estimated reductions include approximately $14 million and $269 million, respectively, related to external customers. Also for the three and nine months ended September 30, 2020, as compared to the three and nine months ended September 30, 2019, Metal Forming sales were impacted by a reduction of approximately $4 million and $41 million, respectively, associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments.

The change in net sales in our Casting segment in the three and nine months ended September 30, 2020, as compared to the three and nine months ended September 30, 2019, is the result of the Casting Sale that was completed in the fourth quarter of 2019 as AAM no longer operates in this business.

The amounts for Segment Adjusted EBITDA for the three and nine months ended September 30, 2020 and 2019 are as follows (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Driveline	$	207.4	$	181.0	$	315.5	$	485.9
Metal Forming	89.7		79.3		142.8		250.2
Casting	—		5.5		—		40.7
Total segment adjusted EBITDA	$	297.1	$	265.8	$	458.3	$	776.8

For the three months ended September 30, 2020, as compared to the three months ended September 30, 2019, the increase in Segment Adjusted EBITDA for the Driveline segment was primarily attributable to improved operating performance and lower launch costs, as well as the impact of a customer ED&D recovery of approximately $15 million during the third quarter of 2020. The increase in Driveline Segment Adjusted EBITDA also reflects our continued emphasis on cost management, and the additional measures that we implemented in response to COVID-19. These favorable factors were partially offset by lower net global automotive production volumes as a result of COVID-19.

For the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019, the change in Segment Adjusted EBITDA for the Driveline segment was primarily attributable to lower net global automotive production volumes as a result of the impact of COVID-19. This was partially offset by improved operating performance and lower launch costs, as well as the impact of a customer ED&D recovery of approximately $15 million. The change in Driveline Segment Adjusted EBITDA also reflects the impact of our continued emphasis on cost management, and the additional measures that we implemented in response to the impact of COVID-19.

The increase in Metal Forming Segment Adjusted EBITDA for the three months ended September 30, 2020, as compared to the three months ended September 30, 2019, was primarily attributable to improved operating performance, as well as the impact of our continued emphasis on cost management, and the additional measures that we implemented in response to COVID-19. These favorable factors were partially offset by lower net global automotive production volumes as a result of COVID-19.

The change in Metal Forming Segment Adjusted EBITDA for the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019, was primarily attributable to the impact of the decline in global automotive production as a result of the impact of COVID-19. This was partially offset by improved operating performance, as well as the impact of our continued emphasis on cost management, and the additional measures that we implemented in response to the impact of COVID-19.

The change in Segment Adjusted EBITDA for our Casting segment in the three and nine months ended September 30, 2020, as compared to the three and nine months ended September 30, 2019, was the result of the Casting Sale that was completed in the fourth quarter of 2019 as AAM no longer operates in this business.

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, gain (loss) on the sale of a business, impairment charges, pension settlements, 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. These non-GAAP financial measures are not and should not be considered a substitute for any GAAP measure. Additionally, non-GAAP financial measures as presented by AAM may not be comparable to similarly titled measures reported by other companies.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net income (loss)	$	117.2	$	(124.1)	$	(597.2)	$	(29.7)
Interest expense	53.9		54.3		160.0		163.9
Income tax benefit	(22.5)		(40.4)		(63.1)		(37.4)
Depreciation and amortization	125.0		134.2		393.7		411.5
EBITDA	$	273.6	$	24.0	$	(106.6)	$	508.3
Restructuring and acquisition-related costs	9.7		11.7		38.6		36.0
Debt refinancing and redemption costs	5.2		5.1		6.7		7.5
Impairment charges	—		225.0		510.0		225.0
Loss on sale of business	—		—		1.0		—
Non-recurring items:
Malvern Fire charges, net of recoveries	8.6		—		8.6		—
Total segment adjusted EBITDA	$	297.1	$	265.8	$	458.3	$	776.8

LIQUIDITY AND CAPITAL RESOURCES

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

COVID-19 Considerations Related to Liquidity and Capital Resources

In order to mitigate the financial impact of COVID-19, we have implemented measures to conserve cash and protect our liquidity position, including:

•Continuing to flex our variable cost structure;

•Continuing to manage our controllable expenses, net of costs to ensure the health and safety of our associates;

•Reducing the annual cash retainer for each non-employee director by 40% through September 30, 2020;

•Reducing salaries for executive officers by 30% and for certain other associates by various percentages depending on level through September 30, 2020;

•Reducing our projected capital expenditures for the year;

•Amending our Credit Agreement to, among other things, revise our financial maintenance covenants to provide additional financial flexibility; and

•Pursuing options to defer and reduce tax payments through the CARES Act and similar global initiatives.

At September 30, 2020, we had nearly $1.5 billion of liquidity consisting of approximately $537 million of cash and cash equivalents, approximately $891 million of available borrowings under our Revolving Credit Facility and approximately $55 million of available borrowings under foreign credit facilities. We have no significant debt maturities before 2024. Based on our cash and cash equivalents, together with available borrowings under credit facilities, and the measures we are taking to conserve cash, we believe that our current liquidity position and projected operating cash flows will be sufficient to meet our primary cash needs for the next 12 months.

Operating Activities In the first nine months of 2020, net cash provided by operating activities was $246.4 million as compared to $378.6 million in the first nine months of 2019. The following factors impacted cash from operating activities in the first nine months of 2020, as compared to the first nine months of 2019:

Impact of COVID-19 We experienced lower earnings and cash flows from operating activities as a result of the significant reduction in production volumes during the nine months ended September 30, 2020 due to the impact of COVID-19.

Income taxes Income taxes paid (refunds received), net was a refund of $5.2 million in the first nine months of 2020 as compared to taxes paid of $45.7 million in the first nine months of 2019. During the third quarter of 2020, we received an income tax refund of approximately $31 million related to the utilization of net operating losses under the provisions of the CARES Act. See Note 1 - Organization and Basis of Presentation for additional detail regarding the CARES Act.

Also in the first nine months of 2020, we finalized an advance pricing agreement in a foreign jurisdiction, which resulted in a cash payment to the tax authorities of $18.5 million, and a reduction of our liability for unrecognized tax benefits and related interest and penalties of $25.3 million. As of September 30, 2020 and December 31, 2019, we have recorded a liability for unrecognized income tax benefits and related interest and penalties of $23.3 million and $52.6 million, respectively.

Restructuring and acquisition-related costs For the full year 2020, we expect restructuring and acquisition-related payments in cash flows from operating activities to be between $55 million and $70 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) related to certain of our U.S. pension plans, we expect our regulatory pension funding requirements in 2020 to be approximately $1.5 million. We expect our cash payments for other postretirement benefit obligations in 2020, net of GM cost sharing, to be approximately $17 million.

Investing Activities In the first nine months of 2020, net cash used in investing activities was $149.2 million as compared to $335.5 million for the nine months ended September 30, 2019. Capital expenditures were $146.3 million in the first nine months of 2020 as compared to $335.3 million in the first nine months of 2019. We expect our capital spending in 2020 to be up to $250 million.

Financing Activities In the first nine months of 2020, net cash used in financing activities was $87.6 million, as compared to $140.1 million in the first nine months of 2019. The following factors impacted cash from financing activities in the first nine months of 2020 as compared to the first nine months of 2019:

Senior Secured Credit Facilities In 2019, Holdings, AAM, Inc., and certain subsidiaries of Holdings entered into the First Amendment (First Amendment) to the Credit Agreement. The First Amendment, among other things, established $340 million in incremental term loan A commitments with a maturity date of July 29, 2024 (Term Loan A Facility due 2024), reduced the availability under the Revolving Credit Facility from $932 million to $925 million and extended the maturity date of the Revolving Credit Facility from April 6, 2022 to July 29, 2024, and modified the applicable margin with respect to interest rates under the Term Loan A Facility due 2024 and interest rates and commitment fees under the Revolving Credit Facility. The applicable margin and the maturity date for the Term Loan B Facility remained unchanged. The proceeds of $340 million were used to repay all of the outstanding loans under the existing Term Loan A Facility and a portion of the outstanding Term Loan B Facility, resulting in no additional indebtedness. This also satisfies all payment requirements under the Term Loan B Facility until maturity in 2024.

At September 30, 2020, we had $891.4 million available under the Revolving Credit Facility. This availability reflects a reduction of $33.6 million for standby letters of credit issued against the facility. The borrowings under the Revolving Credit Facility are used for general corporate purposes.

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

Redemption of 6.625% Notes due 2022 In the first quarter of 2020, we voluntarily redeemed a portion of our 6.625% Notes due 2022. This resulted in a principal payment of $100.0 million and $2.0 million in accrued interest. We expensed approximately $0.4 million for the write-off of the unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing, and approximately $1.1 million for the payment of an early redemption premium.

Redemption of 7.75% Notes due 2019 In May 2019, we voluntarily redeemed the remaining balance outstanding under our 7.75% Notes due 2019. This resulted in a principal payment of $100 million and $0.3 million in accrued interest. We expensed approximately $0.1 million for the write-off of the unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing, and approximately $2.2 million for an early redemption premium.

Treasury stock Treasury stock increased by $2.7 million in the first nine months of 2020 to $212.0 million as compared to $209.3 million at year-end 2019, due to the withholding and repurchase of shares of AAM stock to satisfy employee tax withholding obligations due upon the vesting of performance shares and restricted stock units.

Subsidiary Guarantees of Registered Debt Securities Our 6.875% Notes, 6.50% Notes, 6.25% Notes (due 2026), and 6.25% Notes (due 2025) (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;

•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)
	Nine Months Ended September 30, 2020		Year Ended December 31, 2019
Net sales	$	2,538.9	$	3,043.3
Gross profit	157.6		192.0
Loss from operations	(486.3)		(793.3)
Net loss	(528.8)		(718.0)

Balance Sheet Information	(in millions)
	September 30, 2020		December 31, 2019
Current assets	$	1,177.9	$	699.5
Noncurrent assets	2,780.1		3,120.4

Current liabilities	1,099.4		551.9
Noncurrent liabilities	4,253.5		4,281.3

Redeemable preferred stock	—		—
Noncontrolling interest	—		—

At September 30, 2020 and December 31, 2019, amounts owed by the Combined Entities to non-guarantor entities totaled approximately $640 million and $125 million, respectively, and amounts owed to the Combined Entities from non-guarantor entities totaled approximately $710 million and $630 million, respectively.

CRITICAL ACCOUNTING ESTIMATES

Subsequent to the goodwill impairment charge that was recorded for our Driveline reporting unit in the first quarter of 2020, the fair value of this reporting unit approximated its carrying value. Fair value of the 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 the 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 unit, and appropriate discount and long-term growth rates.

A decline in the actual cash flows of the Driveline reporting unit in future periods, as compared to the projected cash flows used in the valuation, could result in the carrying value of this reporting unit exceeding its fair value. Further, a change in market comparables, discount rate or long-term growth rate, as a result of a change in economic conditions or otherwise, including those resulting from the impact of COVID-19, could result in the carrying value of this reporting unit exceeding its fair value, which would result in an additional impairment charge.

AAM's critical accounting estimates are included in our Annual Report on Form 10-K for the year ended December 31, 2019 and did not materially change during the nine months ended September 30, 2020.

CYCLICALITY AND SEASONALITY

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

LITIGATION AND ENVIRONMENTAL MATTERS

We are involved in, or potentially subject to, various legal proceedings or claims incidental to our business. These include, but are not limited to, matters arising out of product warranties, tax or 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 are subject to various federal, state, local and foreign environmental and occupational safety and health laws, regulations and ordinances, including those regulating air emissions, water discharge, waste management and environmental cleanup. We will continue to closely monitor our environmental conditions to ensure that we are in compliance with all laws, regulations and ordinances. We have made, and anticipate continuing to make, capital and other expenditures (including recurring administrative costs) to comply with environmental requirements at our current and former facilities. Such expenditures were not significant in the third quarter of 2020.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

MARKET RISK

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

Currency Exchange Risk From time to time, we use foreign currency forward contracts to reduce the effects of fluctuations in exchange rates relating to certain foreign currencies. At September 30, 2020, we had currency forward contracts with a notional amount of $155.8 million outstanding. The potential decrease in fair value of foreign exchange contracts, assuming a 10% adverse change in the foreign currency exchange rates, would be approximately $14.2 million at September 30, 2020 and was approximately $16.5 million at December 31, 2019.

In 2019, we entered into a fixed-to-fixed cross-currency swap to reduce the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans. In the first quarter of 2020, we

discontinued this cross-currency swap, which was in an asset position of $9.8 million on the date that it was discontinued. Also in the first quarter of 2020, we entered into a new fixed-to-fixed cross-currency swap to reduce the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans. At September 30, 2020, the notional amount of the fixed-to-fixed cross-currency swap was $234.4 million. The potential decrease in fair value of the fixed-to-fixed cross-currency swap, assuming a 10% adverse change in the foreign currency exchange rates, would be approximately $23.4 million at September 30, 2020 and was approximately $22.4 million at December 31, 2019.

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

Interest Rate Risk We are exposed to variable interest rates on certain credit facilities. From time to time, we have used interest rate hedging to reduce the effects of fluctuations in market interest rates. In 2019, we entered into a variable-to-fixed interest rate swap to reduce the variability of cash flows associated with interest payments on our variable rate debt. We have the following notional amounts hedged in relation to our variable-to-fixed interest rate swap: $900.0 million through May 2021, $750.0 million through May 2022, $600.0 million through May 2023 and $500.0 million through May 2024.

The pre-tax earnings and cash flow impact of a one-percentage-point increase in interest rates (approximately 18% of our weighted-average interest rate at September 30, 2020) on our long-term debt outstanding, would be approximately $7.3 million at September 30, 2020 and was approximately $6.3 million at December 31, 2019, on an annualized basis.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) were effective as of September 30, 2020.

Changes in Internal Control over Financial Reporting

On January 1, 2019, we began the implementation of our global enterprise resource planning (ERP) systems at certain of the locations that were acquired as part of the MPG acquisition. As part of these implementations, we have modified the design and documentation of our internal controls processes and procedures, where appropriate. We will continue to implement these ERP systems at certain locations into 2021.

As a result of temporarily closing certain of our global facilities due to the impact of COVID-19, a significant number of our associates have continued to work remotely during the third quarter of 2020. This has not had a material effect on our internal control over financial reporting as we have maintained our existing controls and procedures over financial reporting during this period.

Except as described above with regard to implementation of ERP systems at certain legacy MPG locations, there were no changes in our internal control over financial reporting during the quarter ended September 30, 2020 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

In addition to the risk factors that are included in Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2019 and in Item 1A "Risk Factors" in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, the following was identified as a significant risk to AAM during the nine months ended September 30, 2020.

Our business and financial condition have been, and may continue to be, adversely affected by the impact of COVID-19.

Our business is subject to risks associated with public health issues, including pandemics such as COVID-19. During the nine months ended September 30, 2020, COVID-19 has disrupted global economic markets and has led to significant reductions in global automotive production volumes. As a result of COVID-19, governmental and public health officials in substantially all of the locations in which we operate had mandated certain precautions to mitigate the spread of the disease, including shelter-in-place orders or similar measures. As such, we temporarily suspended production, or experienced a significant reduction in production volumes, in substantially all of our manufacturing facilities during this period.

Our results of operations and financial condition have been, and may continue to be, adversely impacted by the actions taken to contain the impact of COVID-19, and the ultimate extent of such impact will depend on future developments, such as the duration and extent of the pandemic, the imposition or reimposition of shelter-in-place or similar measures and its impact on: consumers and sales of the vehicles we support, our customers and our and their suppliers, how quickly economic conditions and our and our customers’ operations can return to more normalized levels, and sustain such levels, and whether the pandemic leads to recessionary conditions and the duration of any such recession. In addition, government sponsored economic stimulus programs in response to the pandemic may not be available to our customers, our suppliers or us, or be expanded, renewed or otherwise sufficient to achieve their economic goals. Our supply chain also may be disrupted due to supplier closures or bankruptcies. Our operations may also be impacted by interruptions due to the direct impact of, or precautionary measures associated with, COVID-19 at our locations or those of our customers or suppliers.

Further, COVID-19 could exacerbate other risks disclosed in Item 1A. "Risk Factors" as included in our Annual Report on Form 10-K for the year ended December 31, 2019. These risks include, but are not limited to, dependency on certain customers, dependency on certain global automotive market segments, risks and uncertainties associated with our company’s global operations, dependency on certain key manufacturing facilities, cyclicality in the automotive industry, disruptions in our supply chain and our customers’ supply chain, and compliance with our debt covenants.

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

The following table provides information about our equity security purchases during the quarter ended September 30, 2020:

ISSUER PURCHASES OF EQUITY SECURITIES

Period

Total Number of Shares (or Units) Purchased

Average Price Paid per Share (or Unit)

Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs

Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs

(in millions)

July 1 - July 31, 2020

—

August 1 - August 31, 2020

—

September 1 - September 30, 2020

—

Total

—

Item 6. Exhibits


Number						Description of Exhibit

*10.1						American Axle & Manufacturing Holdings, Inc. Executive Officer Severance Plan

*10.2						American Axle & Manufacturing Holdings, Inc. Executive Retirement Savings Plan

*22						Subsidiary Guarantors and Issuers of Guaranteed Securities

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

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

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

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

**101.SCH						XBRL Taxonomy Extension Schema Document

**101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

**101.LAB						XBRL Taxonomy Extension Label Linkbase Document

**101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

**101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

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

October 30, 2020